BOLD 2003: Development and the Internet
ICT and Entrepreneurship:
|Area of legal practice||Public interest||Conflicts that arise in the emergence of digital ecosystems||Examples of actions that may be considered to resolve conflicts and protect the public interest|
|Civil Liberties||Support free speech, privacy, freedom of the press, freedom of assembly, freedom from persecution||States may desire to censor speech and commerce, and prevent political organizing in cyberspace; states may desire to pursue surveillance in cyberspace; private parties may seek to pursue “commercial surveillance” in the form of behavior tracking and target marketing. Defamation, libel, and intellectual property claims may challenge free speech and press rights.||Lawyers may take action to preserve rights already available under the law, as well as work to advocate new laws that provide stronger protections. In addition, lawyers may are argue the case for rights “in the court of public opinion” in order to build public support. In cases where the local legal situation does not protect rights, lawyers may also appeal to international organizations for assistance. A clear understanding of the nature of these civil liberties by the public and the entrepreneurs who rely upon these civil liberties may emerge and become important to pre-empting disputes before they escalate in a costly manner.|
|Antitrust and competition||Protect consumers, promote economic innovation, level the playing field for entrepreneurs||Established companies, especially telcos, may impose monopoly pricing, thus rendering many applications non-economic, and thus slowing digital development. Dominant firms may pursue predatory and anti-competitive behavior, slowing the growth of other members of the digital ecosystem and preventing the introduction of new products and services.||Complaints can be brought before regulators of competition policy. Civil suits can be filed on the part of companies hurt by anti-competitive behavior, seeking relief. Suits may also be filed on behalf of classes of consumers who believe themselves to be injured. Regulators may also monitor and investigate major transactions before they are finalized if they could have substantial impact on the emergence of the marketplace and on consumers.|
|Intellectual Property||Create economic incentives for creators and innovators by establishing property rights, while also maintaining broad access to ideas and expressions of ideas as public goods||Overly restrictive intellectual property rules and enforcement may prevent the diffusion of innovative ideas to those who might apply them to the problems of society; lack of sufficient support for intellectual property rights may cause innovators to turn away from investing in creating innovations that could have broad applicability to social problems and have other forms of utility.||
Civil action can be taken against pirates, and lawyers can seek to encourage the government to take criminal action, assuming the relevant statutes are in place.
On the other side, lawyers can join with activists seeking broader access to intellectual property. This might include for example clarifying the status of open source software, as well as making available mechanisms for individuals to increase the availability of their intellectual property, along the lines of Creative Commons (www.creativecommons.org). In the case of AIDS drugs, activists have pushed governments to invoke clauses in WTO agreements that allow for emergency compulsory licensing of drug patents.
|Communi-cations||Establishment of telecommunications access as a public good||Monopoly or oligopoly telcos may maintain extortive prices, thus rendering many applications uneconomic, and “cream skimming” from those few businesses and individuals who can afford such prices; incumbent telcos prevent the emergence of rivals, either in the form of competitive telcos or in the form of “self-provisioning” by users through such means as VSAT (satellite) connections, cooperative Internet exchange points and peering agreements, and home-grown ISPs and WANs—including WIFI wireless WANS.||
In developing countries that have privatized or partially privatized their telcos—which is most of them—the telecom laws on paper are quitethorough and well-conceived. This is because law reform was built into the World Bank/IFC process that most of the countries used. Unfortunately, in many cases these laws are not enforced. In such instances lawyers might consider actions to try to compel enforcement, particularly where these laws include a “private right of action” that allows parties to sue the government if harmed.
In addition, there are some options for seeking relief outside counties. There are efforts for example in West Africa to create a legally binding telecom appeal process that is regional in nature and part of the ECOWAS treaty organization. In addition, in the case of foreign investment, sometimes the country of residence of the investors, such as the US, can be encouraged to complain to the developing country government. In some cases this may stimulate action, though in others it can be seen as inappropriate meddling by one nation in the affairs of another, and can harden resistance.
|Enterprise, Tax, e-commerce, and Labor law||Maintain open access to the commercial and labor markets and facilitate low-cost transactions among participants||
States may use business licensing rules to exclude some entrepreneurs, and may also charge high licensing fees that have the effect of drawing excessive rents from those who can afford the fees, and blocking participation of those who cannot. Both effects reduce investment and entrepreneurial participation, and slow the development of the ecosystem.
Similarly, states may use taxation as a way to extract excessive rents from those who participate in the digital ecosystem, thus slowing investment and reducing participation.
Lack of effective commercial courts and alternative dispute resolution may cause private parties to become ensnarled in conflicts that otherwise could be resolved, and/or to avoid such conflicts by vertical integration—thus creating excessive bureaucracy within the ecosystem.
Lack of specialized enabling laws covering e-commerce, such as laws clarifying the status of digital signatures, may slow the adoption of commercial applications.
An over-restrictive labor law regime, e.g. allowing extensive non-competition agreements and restrictive labor contracts, may be regarded as barriers to job mobility. Facing the rapid transformation of digital economy, it might be crucial to reduce such barriers, since job mobility contributes, among other things, to a competitive wage market for workers with ICT skills, and ensures the diffusion of high-tech knowledge between different groups and legal entities.
Lawyers can take action to assure that their clients are fairly treated in instances where existing law is consistent with client interests. Unfortunately commercial law often lags in developing countries, either because it simply has not been modernized, or because the ideology of the nation is unsupportive or confiscatory toward business. In other instances, ill-fitting commercial laws on topics such as e-commerce have been adopted without proper customization to the local ecosystem and require reform.
There are a variety of international organizations, many funded by the US or European governments, that help nations improve their commercial laws and procedures. In addition, the US is currently negotiating a large number of bi-lateral trade agreements—and these agreements include requirements for commercial law reform. Local lawyers can get involved in these efforts, to help the process forward, to tailor laws effectively to the local ecosystem, and to learn how particular reforms might be used to support client interests.
|International||Maintain and “condition” the exchanges among nations, including information and communication, trade and investment, and immigration||States may discourage interchange with the outside world based on a variety of policy objectives. Closed, authoritarian societies attempt to restrict communication. Many societies restrict trade and investment, based on various theories of economic development, as well as on the realpolitik of protecting powerful private interests. Finally, immigration restrictions can be used to protect local workers and also to retain local workers and prevent “brain drain”—on the other hand, such restrictions limit the exchange of ideas, and may be detrimental to the development of the digital business ecosystem.||
By its nature, international law is strongly dictated by the foreign policy and globalization theories of the nation. As such, to have an impact, a lawyer or a group of entrepreneurs must find a way to have a voice in the policy process.
In recent years there have been many “ICT policy” projects in developing nations, aimed at bringing together business, government and civil society. In a few cases, such as Senegal where tariffs on telecommunications equipment were reduced, such projects have led to important policy shifts.
More promising, as ICT is seen as an important contributor to trade and economic development, government leaders are becoming more informed about how to promote it, and more receptive to the involvement of entrepreneurs. Often the most receptive government officials then become those concerned with trade and development—rather than those concerned with ICT per se, such as the departments of communications. Entrepreneurs and lawyers can seek to make common purpose with those with the most progressive agendas.
The law also is a kind of “ecosystem”, and is dependent for its functioning on a variety of complementary contributions. The foundations of an effective legal system are in the processes of law, in addition to the substance. In many developing countries the substance of law is—on paper—well developed. What is missing is the foundation of practice. The following chart introduces the sorts of process deficiencies that may be present in developing countries, and that impinge on the development of digital business ecosystems. This list of deficiencies, inverted into competencies, provides an idea of the capabilities that need to be assembled at the roots of a legal ecosystem. A major challenge in developing countries is stimulation of the growth of such capabilities.
|Legal process deficiency||Example|
|Lack of an established ethos of “rule of law”||
Limited experience with binding business contracts, no expectation that contracts will be enforced if a conflict arises; the result is that cooperation among members of the digital ecosystem can be impaired—and that the expertise of the community in using contracts is not developed.
Willingness of the state to abrogate agreement made by previous governments, willingness of the state to appropriate assets without the due process afforded in more developed nations. A result is that investors are reluctant to bring capital to projects that might be helpful to the digital ecosystem.
|Corruption of officials||
Government contracts go to local favorites, creating unfair competition for competent members of the ecosystem, and often causing essential functions not to be performed effectively.
Corrupt election processes may reinforce corrupt regimes and disallow meaningful legal reform.
Successful entrepreneurs who are not willing to play along with corrupt officials, or who play with officials who fall out of power, may find their businesses threatened in a variety of ways.
|Lack of documentation, lack of access to documents and records. This may pertain to official government decisions, laws and rulings, and results of hearings and other administrative or enforcement processes.||It is often very difficult to know what action has been taken by government, even in official actions of cabinet or the President. Laws are not available on-line, nor are court cases. Records of hearings are often not kept, or are not available. The public is not empowered by a right to access the information that the government retains.|
|Legal process issues|
|An ability to set and shape the law||In many instances citizens do not have full democratic ability to make the laws. In some cases constitutions as well as specific laws have been determined by colonial tradition, dictatorships, or the intervention or requirements of international organizations. In cases the legislative system or the judiciary does not function effectively|
|Absence of relevant laws regarding substantive issues||In some cases, there is no relevant law. Example is that securities laws in some countries make it difficult to create certain classes of shares, or to protect shareholder rights.|
|Lack of effective civil and criminal procedure. “Good laws” but little corresponding process, limited translation into administrative organizations, monitoring, and enforcement||In other case, laws exist but are not made operational. The prime example is that in privatizations of telcos, typically the World Bank (who assists with financing and expertise) insists on the adoption of model telecom laws. The laws are in some cases adopted but not acted upon. For example, an independent regulator may be mandated in statute, but not organized and staffed.|
|Lack of effective means of enforcement and relief||Even when a judgment can be obtained, it can be very difficult to enforce it or to gain relief either in the form of monetary compensation, in the form of rectifying a past harm, or in the form of changing the behavior of the parties.|
|Conflicting processes with no clear path to appeal or reconciliation||For example, a court may provide one remedy, and an administrative body another—but with no way of reconciling the decisions in cases of conflict between the outcomes.|
|Policy-based overrides to the legal system|
|Official policies and practices that distort the market||
In all countries the working of the market may be distorted to achieve social ends. In doing so, nations also sometimes make laws to support such policies, and overturn existing statues and conditions, in a manner that undermines the consistency of law that enables rational business investment.
These sorts of policy and legal actions may be taken to a degree or in a form that is unfamiliar in the developed world. For example, affirmative action and black empowerment in South Africa mandate that substantial portions of ownership of major businesses be set aside for specially mandated, racially-based community organizations.
In the case of nations that are highly dependent on outside aid (e.g. Ghana, which receives three-fifths of its national budget from the World Bank and similar organizations), aid money often goes into businesses that compete with privately funded companies. This is particularly an issue with respect to state-owned or partially state-owned utilities. The result can be the undermining of the market, and slowing the rate of growth and diversity in the digital business ecosystem.
As a result of the chronological evolution of information and communication technologies, the term “ICT” has—in so-called developed countries, at least—largely been used as a reference to the basic elements (e.g. telephone network) of an information and communication system (for further discussion see module 1), but much less with regard to advanced IC technologies such as the Internet. In the context of developing countries, where communication systems often have to be built from scratch, it seems easier and more appropriate to conceptualize “ICT” in a broader sense, and to include every information and communication technology available as one single set of opportunity. The following two examples of digital business, one concerning mobile commerce, the other dealing with Voice over Internet Protocol (VoIP) (For a review of the Internet Protocol, click here), illustrate this comprehensive approach.
Please choose either the Mobile Commerce case study or the Voice over IP assignment. In both cases, the assignment is to write a short memorandum (maximum 500 words) mapping the regulatory and legal issues which arise onto the analytical framework introduced in this module.
E-commerce is one of the most recognized examples of digital business in which information and communication technologies (ICT) can promote economic growth. A new form of E-commerce, brought up by the rapid growth of wireless technologies, is mobile commerce. In the UNCTAD Electronic Commerce and Development Report 2002 , M-commerce is introduced under the heading “M-Commerce: Wireless communication opportunities for developing countries”. Skim pp. 90-101 of the Report and read the case study on China (pp. 102-105).
An African Telecommunications Company and some foreign investors are working on a long-term strategy to implement wide-spread mobile phone service and to promote M-commerce applications in Africa. As a legal counsel, you are invited to write a short memorandum (500 words) from the viewpoint of a key advisor to an entrepreneur stating clearly which of the basic legal and regulatory issues that are most important to you. Please make use of the analytical framework provided above, where appropriate.
The following materials and websites might be of help:
IT Matters: Inexpensive Mobile Phones Can Push Back Rural Poverty, Business Times Column
m-Commerce in Africa – Innovation Overcoming Barriers, by Paul Hamilton
M-commerce – regulatory and commercial legal issues, by Mark Haftke
For background information on m-commerce, see Durlacher Report M-Commerce
Voice over Internet Protocol (VoIP) provides another example to illustrate the connection between the design of a legal framework and the emergence of digital entrepreneurship. A transmission of digitalized and packetized voice over an IP network has many advantages. For instance, it can offer low cost of service delivery, universal access to the service, simplicity of user interface, and high quality and functionality of service offered. From an economic perspective, VoIP not only drives down the costs of calls, but lowers barriers of entry since both capital and operating costs are significantly lower. However, certain regulatory trade-offs might exist.
Please read the following reports from countries at different stages of development, but both claiming restrictions on the use of VoIP:
Voice over IP in Africa: For different reasons, a significant number of African countries have placed restriction of the use of VoIP.
Please analyze both the regulatory and legal issues at stake and potential trade-offs, using the analytical framework introduced in this module. Write a short (maximum 500 words) memorandum, taking the perspective of a policy advisor to a developing country with a very poor network infrastructure which seeks to establish an appropriate policy related to use of VoIP. Please emphasize those elements of the legal infrastructure that you deem to be most critical to resolving the problems you and your country face. Please also highlight the tensions that you find most difficult to resolve as you seek to set VoIP policy.
The following materials and websites might be of help or interest:
International Telecommunication Union on IP telephony
Voice-over-IP: The Future of Communications, Global Internet Policy Initiative
Internet Telephony - The Regulatory Issues, by Hank Intven, Mark Zohar and Jay Howard
The discussion section this week covers two different issues: The first set of questions is related to the BusyInternet case study presented above. The second set focuses on a particular aspect of a broader issue generally discussed under the heading “Gender and Digital Divide”, namely on Women and Digital Entrepreneurship.
With regard to the discussion of the following issues, you are invited to present your personal viewpoints and to share your own experiences, thoughts, and visions with the other participants of this online course. However, please feel encouraged to use the frameworks and tools provided in this module for your analysis.
The following five questions refer to the case study BusyInternet Ghana presented above. While discussing these issues, please make references to the analytical framework provided in this module, if convenient and appropriate.
1. From the standpoint of promoting economic and social development in Ghana, what are the most important aspects of what BusyInternet is doing, and how do they contribute to development?
2. What dimensions of the law are likely to be most critical to the near term success of BusyInternet? How about longer term?
3. You are an attorney representing BusyInternet. On what expertise and relationships are you most likely to draw? Where are you likely to face the most difficult challenges?
4. You are an advisor to the President of Ghana, John Kufuor, who has asked you to suggest improvements in laws and legal procedure to promote the development and expansion of businesses like BusyInternet in the nation. What sorts of special conditions might you hope to establish in the legal system—for example, fast-track special courts, liberalized licensing, in order to promote such development?
5. You are a Ghanaian living in the United States, considering returning to your country to form a business based on information and communication technologies, and bringing with you substantial capital to invest. What aspects of the law are most important to you?
(Please note: If you have signed up for H2O, please discuss question set 1 above rather than the following questions).
Please skim the following report and think about the fundamental role of women in establishing a digital economy (for additional links to background materials on Gender and Digital Divide, please click here):E-commerce training with small-scale entrepreneurs in developing countries: some findings; by Nidhi Tandon, July 2002
The report discusses, among other issues, in what specific manner women and women-led enterprises contribute to the emergence of a digital business ecosystems, and makes it clear that women’s entrepreneurial spirit is crucial for economic growth and sustainability. Against this background and using the frameworks provided in this module, please discuss the following questions:
1. According to the findings in this and other reports, women are leading an entrepreneurial wave in many parts of the world. What are the characteristics of women-run businesses? In what way might these characteristics shape the landscape of a digital business ecosystem?
2. The report suggests that women structure their enterprises differently than men do. Please review the analytical frameworks provided in this module. Do you think that the differences in the way women-led business are structured require an adjustment of any particular legal institutions? If yes, what substantive areas of law should be reviewed or re-designed? In what way?
3. More generally, how can law foster the development of women-led digital businesses? Is it appropriate for the law to set such a goal?
4. This module has focused on a particularly important part of the digital business ecosystem: its legal ecosystem. Beyond that, other social subsystems are crucial for the emergence and sustainability of digital business ecosystems. Consider the structural conflicts female business operators are facing according to the report quoted above. What other subsystems and (social) norms, beside law, require adjustments in order to foster women-led entrepreneurship?
5. As a policy advisor to the Government of Fantasyland, you have to present an action plan in order to strengthen digital economy. What are the three major actions you propose to build a regulatory framework that includes incentives for women to engage as entrepreneurs?
International action plans and efforts can focus on information and communication technologies (ICT) in order to promote economically, socially, and environmentally sustainable development in developing countries. These plans may include various initiatives and activities at different levels. To get an impression of the diversity of such initiatives and their promoters, please browse some of the following websites (as you browse, consider how the initiatives and actions presented could be structured and categorized systematically):
Now visit bridges.org, which supplies a well structured link-list detailing initiatives of different sorts and provides references for further readings and research. For further links to ICT related materials—structured by organizations working with ICTs, and by region—visit United Nations Centre for Regional Development.
Finally, read Parts I-II and skim Part III of the white paper Digital Entrepreneurship and Innovation . This paper provides both a systematic overview of initiatives that promote the incorporation of ICT in economic development and a comprehensive framework for policy, legal and regulatory actions.
The following link list provides references to a few interesting case studies and some practical examples with regard to selected legal issues addressed in the analytical framework introduced above. Obviously, this small selection of materials is intended for illustrative purposes only.
- Antitrust and Competition Law: Anti-competitive strategies might block innovation and are likely to raise costs of information and communication services. A restrictive legal regime can hinder competition between ISPs and, thus, the development of Internet illustrates, for instance, the struggle over internet access in Uzbekistan.
- Intellectual Property Law: The development of an adequate local intellectual property regime is a crucial element in order to set incentives for digital entrepreneurs to develop and trade in information-and-technology-rich goods and services. Developing nations are facing various challenges in the process of reviewing and re-defining their IP laws (listen, for instance, to the following audio clip). The following statement illustrates some areas of concerns from a Nigerian perspective with regard to the design of an appropriate IP regime: New Developments and Challenges in the Protection of Intellectual Property Rights (IPRS) – A Nigerian Perspective, by C.T. Owoseni. Please note: Module IV on Policy will provide further discussion on IP Law & Policy.
- Communications Law: It has been discussed that an effective interconnection regulation, as central part of communications law, is key to fostering digital entrepreneurship and bridging the Digital Divide. More specifically, interconnection is crucial for the development of the Internet. Specific interconnection issues arise, for instance, in the context Internet backbones and with regard to Internet Exchange Points (IXP). With reference to the latter question, please read the following article: Internet Exchange Points. Their Importance to Development of the Internet and Strategies for their Development – The African Example and this section of Module I.
- Enterprise Law: As discussed earlier in this module, enterprise law can become important to level the playing field between public and private sectors, to protect property rights, to limit entrepreneur’s liability, and to reduce administrative procedures. Regarding new business formation, the existence of an expedited path to obtain permissions, certificates, etc. as well as streamlined formation procedures, might be a strong incentive for enterprises in general and for digital businesses in particular. However, consider the fact that the value of a law depends more on its acceptance (and implementation) than on the fact of its enactment; read in this context Viet Nam Needs More and Better Laws.
- Tax Legislation: As previously discussed, sector specific taxation can hinder the emergence of digital businesses and can have a negative impact on innovation. Consider, for instance, that Panama blocked VoIP for tax reasons.
- International Law: International law plays, as described in the framework, a crucial role in a digital and globalized economy. For developing countries particularly important are, for instance, international conventions of copyrights. Assume a country has not signed a basic international convention of copyright. The effect of the resulting lack of protection could be that domestic authors are not willing to export their works. In turn, foreign authors of intellectual property would not get guarantees for protection of their rights in the developing country. Exactly this situation, which hinders the emergence of ICT, and has a negative effect on international trade, occurred in Uzbekistan; please read p. 27 of the UNDP Report.
- Anti-corruption: The importance of anti-corruption measures has been discussed earlier in this module. In this connection, it seems noteworthy that the UN Development Programme is involved in a number of pioneering initiatives. In Bulgaria, for instance, UNPD is concerned in bringing non-governmental organizations and municipalities together across a common network as part of a major anti-corruption initiative.
- Access to Legal Information: As discussed above, not only is the creation of a comprehensive legal regime essential, but it is also important that enterprises have access to legal information. Here, too, digital technology plays an important role. To see a success story, visit the Zambia Legal Information Institute.