ECONOMY

Internet growth slows

The growth of the Internet sector in Greece has slowed down significantly from the high rates forecast two to three years ago. The number of users is increasing, but only modestly. Nicholas Economides, professor of New York University’s Stern School of Business Management, who specializes in the economics of networks, spoke on «Competition policy in network markets» at a new economy conference organized by the Athens University of Economics and Business on June 7. He gave his views to Kathimerini on the causes of the slowdown, possible solutions and the benefits from Internet growth. «It is very important that the Internet is adopted by users of all kinds, from teenagers to the big enterprises, so that it becomes a lever for growth in the economy. It is an opportunity for Greece to catch up with the other European countries and the United States. This requires hard work,» he said. Economides explained that the important factor in the slowness of the process is the inadequate competition in fixed-line telephony services. Not only PSTN connections, which give speeds up to 56k, but even ISDN connections, 64k or 128k, are already considered slow. «The present broadband ISDN system offers little capacity and is quite expensive, both in terms of subscription and rates per minute.» He says the solution is DSL (Digital Subscriber Loop) technology, already in widespread use in the USA and many European countries. DSL connections use existing wires with one small additional apparatus and function parallel to and independently of a fixed-line telephone connection. The speed of the connection, which is open on a 24-hour basis, is a multiple of ISDN’s. In the USA, DSL connections are sold by the telephone companies at $40-50 monthly, without any initial installation costs, and include both fixed-line charges and the cost of the Internet service provider. Economides adds that «due to lower living standards in Greece, it would be useful if such a connection was available at a lower cost. «I insist on this, because it is a basic factor for growth. People need the time to explore and live on the Internet. Modern sites are not made for narrowband connections. We could say that the present connection through a modem is a counterincentive, given delays in the loading of pages.» Economic theory also lends support to the need for speeding up the growth of the Internet. «Because the Internet is a network, we know from the economic theory of networks that the greater the number of users, the greater the value of the network for each user. Due to the peculiarity of the Greek language, the value of the Web in Greece will grow with the number of users and with the growth of content in Greek portals. But it is a two-way process: The one leads to the other. It is very important not to get into a vicious circle. We know from network theory that two positive factors can result in an equilibrium. For this reason, there must be intervention and help in the form of subsidies that will lead us into the right cycle,» Economides said. How should such subsidies be channeled? They could be dispensed in different ways. There could be subsidies to create competitors to OTE in certain segments of the network, or to lower the prices which OTE offers for certain broadband connections. But again, these must be lower than the $40-50 in the USA. I think OTE now asks much more for broadband connections. How can any ordinary enterprise, which has not specialized in new technologies, tap the potential offered by the Internet? First of all, it must have computers and staff that understand computers, how to log onto the Web and search for whatever is needed, including suppliers at lower prices. Ireland, a country with about the same level of development as Greece, invested very large sums in telecoms and the Internet a few years ago, and now has one of the highest rates of Internet adoption in Europe… Many American companies, such as IBM, provide support services for software products through call centers in Ireland. These are new jobs, unrelated to Ireland’s traditional economy. Economides insists that speedier growth of the Internet in Greece requires «an opening-up of the market and wise use of the money that will be given as support. «We must consider very carefully how the market will work before we grant such support. But above all, we need broadband connections.»