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Traditional Telecommunications Networks

The International Handbook of Telecommunications Economics, Volume I

Edited by Gary Madden

This major reference work provides a thorough and up-to-date survey and analysis of recent developments in the economics of telecommunications. The Handbook serves both as a source of reference and technical supplement for the field of telecommunications economics.
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Chapter 10: Telecommunications infrastructure and economic development

M. Ishaq Nadiri and Banani Nandi


M. Ishaq Nadiri and Banani Nandi INTRODUCTION The term ‘infrastructure’ generally describes large social overhead capital such as roads, bridges, sewer facilities, electricity generation and distribution, and communications networks. These infrastructures provide the basic framework for a nation to support essential public services in order to achieve higher economic growth and a better quality of life. The general characteristics of such infrastructural capital are such that the development and upgrading of infrastructure systems require large amounts of long-term investment and that they generate network externality benefits as the number of users connected to the infrastructure network increases. These infrastructure systems can be owned either by the public or private sector. Since investments in such systems are highly risky, public financing is the more common. Therefore, the existing econometric studies in this area focus primarily on publicly owned infrastructure systems. Numerous studies (Holz-Eakin, 1988; Aschauer, 1989a, 1989b, 1990; Munnell, 1990a, 1990b, 1992; Tatom, 1991; Berndt and Hansson, 1992; Morrison and Schwartz, 1994, 1996; Nadiri and Mamuneas, 1994, 1996), have measured the contribution of publicly funded infrastructure capital to economic growth. In general the results show a positive contribution but its magnitude and degree of significance vary among the studies. Telecommunications infrastructure capital is highly dynamic, embodying new technologies, and has pervasive effects on society. It not only provides facilities for communications but saves time, energy, labor and capital by condensing the time and space required for production, consumption, market activities, governmental operation, educational and health services.1 The quality...

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