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214 WORLD DEVELOPMENT REPORT 2016
• Technological solutions are emerging that promise a fresh
approach to rural broadband. From drones to balloons
to nanosats, there is no shortage of inventive solutions
to providing wide area coverage. But these
new technologies will need to leverage the physical
and market infrastructure that the cellular mobile
industry has built in order to become commercially
viable and achieve scale. And efforts to bring new
technology will have to be complemented by more
efficient use of spectrum, such as spread spectrum
and digital dividend spectrum, which releases for
cellular commercial use the highly valuable spectrum
(for instance, in the 700 MHz band previously
used for terrestrial TV broadcasts), and in the “white
spaces” between digital channels. These spectrum
bands have wider coverage and are therefore ideal
for rural areas.
Managing spectrum and other scarce
resources
Managing scarce resources—such as numbers, rightsof-way,
and especially spectrum—presents regulatory
challenges. Policy makers are turning to market
mechanisms, such as auctions, to deliver the best outcomes,
and this can result in lower prices and higher
growth, as in Guatemala (see box 4.6). More flexible
approaches to spectrum sharing between services, use
of spectrum-hopping technologies, and refarming of
spectrum will also help. But demand for bandwidth,
and thus also for spectrum, continues to grow rapidly,
especially as video entertainment shifts from television
sets to mobile devices. By 2020, around 2 GHz
of total spectrum will be needed in major markets
for cellular services. 59 Today, most developing countries
have only around 500 MHz allocated, and some
have less than 300 MHz. 60 Spectrum availability and
allocation is one of the factors determining the future
wealth of nations, and governments will have a vital
role in maximizing the benefits from this resource.
The internet brings new challenges for allocating
scarce resources, including domain names and the
transition to longer (IPv6) addresses. While spectrum
and numbers are regulated primarily by the public
sector—internationally by the ITU and nationally by
government ministries or regulators—domain names
and IP addresses are controlled almost entirely by the
Internet Corporation for Assigned Names and Numbers
(ICANN), a California not-for-profit corporation,
and the entities to which it subcontracts. The management
of top-level domain names, such as .org and
.com, IP addresses, and even country code domains,
such as .za (South Africa), generally is not the provenance
of government regulation. Their regulation
is a complex matter, involving contract rights with
private parties and not administrative fiat. But the
natural shortage of attractive, or easy to remember,
domain names creates opportunities for profiteering.
ICT prices are falling . . .
The trend toward declining prices in the ICT sector
has been a long-term and predictable driver of
growth. For hardware, it is encapsulated in the prediction
made by Gordon Moore, the cofounder of
Intel, in a 1965 paper that the number of transistors
in an integrated circuit would double about every two
years, with consequent improvement in price and
performance. 61 For memory storage, this means that,
in 2014, a typical price to store a gigabyte of data was
just 3 U.S. cents, whereas 20 years earlier it was more
than US$500. 62 Similar rates of progress are observable
in the unit price of computer processing power
and in the availability and price of bandwidth 63 (figure
4.1). Manufacturers have, to some extent, compensated
for this by building greater functionality into
devices for the same price. But as they have started to
chase mass markets, device prices have also started to
fall—since 2011 for smartphones, and earlier for older
technologies such as laptops and televisions. Smartphones,
with more computing power than NASA had
at the time of the moonshots, can now be purchased
for less than US$40 (although the typical cost is much
higher), and it is forecast that, by 2020, 80 percent of
adults around the world will own one. 64
Predictable, rapid price declines create an interesting
dynamic: it is possible to foresee, with reasonable
accuracy, at what point services and devices will flip
from narrow to mass markets, as the price of ownership
and use falls. But there is a tendency to overestimate
the effect of a technology in the short term and
to underestimate its effects in the long. 65 This may
in part explain why the initial impact of the internet
caused a catastrophic swing in the markets, starting
around 1997 and peaking in March 2000, since known
as the dot-com bubble. The aspirations of many of the
startups of the time—like Broadcast.com, an internet
radio company, or Pets.com, an e-commerce supplier—
simply could not be met by the slow-speed dial-up
internet access available, and their business models
were often unrealistic. The value of stock markets
worldwide fell by some US$5 trillion in the 18 months
that followed. 66 But that period of creative destruction
also saw the birth of many of the giants that dominate
the internet today, including Google and Tencent
(both founded in 1998) and Alibaba (in 1999).
Perhaps the most sustained example of how
falling prices drive market expansion comes with