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The Internet in Argentina: Study and Analysis of Government Policy

By Thierry Chaumeil
thierry_chaumeil@negri.com.ar

As in the rest of the world, the Internet has found a receptive audience in South America. The firm Nazca, in a recently released document, says that although South America currently has only 8.5 million Internet users, usage of the Internet increased by 788 percent from 1995 to 1997.1 It also speculates that the number of Latin American Web sites soon should reach 500,000, and the number of users, 34 million. PricewaterhouseCoopers is calling Latin America "the next frontier on the Internet.2

The trends are registering in Argentina, where the number of Internet subscriptions is growing at a high rate. Recent figures provided by the Argentine secretary of communications indicate that the number of commercial Internet accounts grew 100 percent during the past year.

However, behind the percentage points and forecasting is another story of the Internet in Argentina. At the end of 1998, only 230,000 people had Internet accounts,3 of which 40-50 percent were connected through academic institutions. Commercial subscribers, whether individual or organizational, represented only 120,000 accounts, making for a total population of approximately 35 million people.

It is worth mentioning that Internet subscriptions often are shared between several users or families of users--which means the actual number of people with access to the Internet is higher than the number of subscribers--but the number of Argentine Internet users remains relatively low--far from the connectivity goal of 20 percent of the population4 put forward by professionals and well under the forecasts of pessimistic analysts who believe the market in Argentina is at about 900,000 subscriptions.

The Argentine government is well aware of the need for its citizens and businesses to become part of the global information society, and important efforts are made to reach that goal. However, the disappointing development of the commercial Internet in Argentina leads us to point out the reasons for such failure that, in turn, will help us understand why the government's efforts are not yet crowned with success.

OBSTACLES TO DEVELOPMENT OF THE INTERNET IN ARGENTINA

Development of the Internet in Argentina is impaired by two categories of obstacles. The first set of obstacles is societal, and it is linked to Argentina's status as an emerging economy and thus can be remedied only in the long term. The second obstacle is the Argentine telecom legal framework, which can be modified easily in the short term.

Societal Factors

With a per capita gross domestic product (GDP) of $9,071, Argentina is the richest country in Latin America, surpassing Brazil, Chile, and Mexico.5 However, the global wealth of Argentina remains far behind other, more advanced countries such as those of the European Union, whose per capita GDP reached an average of $21,873 in 1996.

Although it has been growing at an impressive rate since the early 1990s, Argentina's economy remains fragile. The rate of unemployment is high--at about 14 percent--and the external public debt of the country still strongly limits the government's budgetary freedom.

The status of the emerging economy of Argentina has direct and indirect adverse effects on development of the Internet in the country.

Direct obstacles

The first direct obstacle is the ability of the people--either economically or technically--to actually access the Internet. For example, the average monthly per-capita wage in Argentina is $500, whereas the price of the least expensive computer is about $1,000. The ratio of telephone lines per inhabitants is 18.9 percent,6 which is low compared with more advanced countries, where it is usually well above 50 percent.7 In addition, in spite of the telcos' efforts in the past few years, available bandwidth remains insufficient due to underdevelopment of the telecommunications networks.

The second direct obstacle to development of the Internet lies in the capacity of the people to manage and take advantage of new technological tools. People must receive proper training to gain the minimum required skills. As a point of comparison, on average, whereas the most developed countries already spend $115,200 per year per pupil on education and training,8 the Argentine state spends only $12,966. There exists within the country a fear that future generations may not today be receiving the proper training to have access to--and take advantage of--the information society.

Indirect obstacles

In order to truly understand the obstacles that are indirectly impeding growth of the Internet in Argentina, one must take into account both the absence of a developed Argentine capital market and the high cost of credit, both of which limit growth of technology start-ups.

If the U.S. technology-development model teaches us anything, it is that the success of the Internet is due in large part to the synergy between innovation and venture capital--or the ability to finance or find adequate funding for technology start-ups. In Argentina the dearth of financially strong technology start-ups may be at the heart of the slow growth of the Internet.

Argentine Internet service providers (ISPs) also are important to look at in an examination of indirect obstacles to Internet growth. In Argentina they are divided into two categories. The first is a group of five companies associated with the telcos or with important multimedia groups, and it has more than two-thirds of the ISP market. The other is a group of approximately 200 small ISPs, which share the rest of the market. Without proper financial backing, the small ISPs are not able to compete directly with the main providers because they cannot mobilize enough capital to either finance their growth or keep up with the constant technological change in order to provide state-of-the-art access to the Internet.

The access and cost difficulties that are keeping people off the Internet, combined with lack of proper financing for innovative technology start-ups, may explain why the number of Web sites featuring Argentine-specific content is low. The last available figures indicate there are only 4,000 Argentine Web sites.9

The flourishing of local content is critical to development of the Internet in Argentina, just as it is in any country. The absence of local content has a negative impact on the curiosity of the people and therefore limits their interest in the Internet as a whole. In addition, when desired information is available only in a different language, the value of the Internet as an information provider becomes limited. Finally, lack of region-specific content renders the country dependent on its international connections for access to information.

In many instances, however, those international connections are managed by a national telecom company, which traditionally enjoys a monopoly situation. As a consequence, prices are well above those market prices available in competitive systems. Thus, the state of telecom regulation in a country becomes a relevant factor in an analysis of growth of the Internet, and as far as Argentina is concerned, it certainly is one of the most important reasons for the limited development.

The Negative Impact of Telecom Regulation

Argentine telecom regulation

Until the end of the 1980s, the Argentine telecom system was in the hands of a state-owned company called Entel. Plagued by inefficiency, overstaffed, and unable to provide the country with telecom facilities suitable for the needs of the citizens and businesses, the company was privatized by the government in November 1990.

For privatization purposes, Entel was spun off into two companies, each in charge of half of the Argentine territory: the North Company, including the northern part of Buenos Aires, and the South Company, integrating the southern part of Buenos Aires.

Following an international bidding process, 60 percent of the shares of the North Company were sold to a group of investors led by France Telecom and STET of Italy and later renamed Telecom Argentina (Telecom). Sixty percent of the shares of the South Company were sold to another group of investors, led by Telefónica de España, and subsequently renamed Telefónica de Argentina (Telefónica).

In exchange for their commitment to invest in modernization of the country's telephone system, the Argentine government granted the telcos a monopoly over basic voice telephony in their respective territories of activity. The government also granted a monopoly over international inbound and outbound data and voice traffic to a joint subsidiary of Telecom and Telefónica called Telintar.

The telcos' monopolies are scheduled to end on November 8, 1999, when the Argentine government will award two additional licenses for the provision of local, long-distance, and international voice services. One year later, three other licenses will be granted for the provision of local, long-distance, and international services. And it is not before November 2001 that the international telephone services will be totally liberalized.

As of today, Argentina's international connections with the rest of the world are managed by Telintar, which is in the process of being spun off between its two shareholders and already operates under the names Telintar Norte and Telintar Sur--known as the Telintars.

Under the privatization law, data services--including provision of Internet services--have been under a regime of free competition since 1990. That free-competition status is nonetheless subject to the obtaining of a prior license from the National Communications Commission and to the respect of Telintar's monopoly position as gatekeeper of transborder data flows. Since January 1, 1999, the international connections toward the countries of Mercosur10 are totally liberalized.

As a consequence, and with the exception already mentioned, until further liberalization of the telecom services, the ISPs are not allowed to choose international-connection providers other than the Telintars.

The negative consequences of a monopolistic regime

The ISPs' access to international connections is subject to the monopolistic behavior of the Telintars. Not surprisingly, the first consequence is the artificially high prices the Telintars charge their clients, the ISPs, which also suffer from limited access to international bandwidth.

Prior to the 1997/98 reforms, Telintar charged up to $32,000 a month for a 64 kbps international link. For the same bandwidth, the price today is approximately $2,000. However, compared with the price of international links available in a free-market environment, the price for an equivalent bandwidth is still six to eight times higher in Argentina.11 The high prices prejudice not only the financial wealth of ISPs, which are obliged to limit their profit margins to offer Internet services at a price acceptable to the consumers, but also the financial wealth of universities and other nonprofit entities, which cannot afford the international bandwidth necessary for their purposes.

The absence of competition at the local level is also prejudicial to Internet development in Argentina, where the vast majority of users are connected through dial-up systems. The Argentine telephone system has not yet adopted a flat-fee system for local calls, which still are being charged on a pulse basis. The price of the pulse is 49 cents, and according to the hour of the day, a pulse corresponds to one to four minutes.

The monopolistic regime the telcos enjoy is also the source of various anticompetitive behaviors regularly denounced by the ISPs. For example, the telcos are prohibited from participating in activities other than basic telephony. However, they created subsidiaries with adequate financing, technology, and personnel skills dedicated to the provision of Internet services against which the smaller ISPs are not able to compete. More generally, in their relation with the powerful telcos, the small ISPs complain that they do not enjoy the same treatment as that granted by each telco to its in-house ISP company.

As mentioned earlier, the Argentine telecom legal framework was designed in 1990 for the purpose of privatization of the state-owned telecom monopoly. The Internet and all of its applications certainly were not contemplated by the regulator back then. The Argentine telecom legal regime is a rigid framework based on a contractual guaranty granted to the telcos that their monopoly will be protected over a certain period of time. As of today, that rigid structure is not adapted to development of the Internet and can even be considered as counter-productive for two reasons. First, the monopoly of the Telintars triggers artificially high prices and unnecessary limitation of bandwidth. Second, the monopoly over basic voice telephony enjoyed by the telcos prohibits the growth of Internet telephony.

It is understandable that in consideration for their investment, the telcos' privileges had to be protected, but that protection--already considered by many experts as no longer necessary--turned out to be an important obstacle on the way to growth of the Internet, and it presents a threat to integration of Argentina's citizens and businesses into the new global information society.

The obstacles mentioned earlier were among the problems brought to light at the First National Hearing on the Internet held on August 6, 1997, and strongly criticized again at the Second National Hearing. In the aftermath of the First National Hearing, the Argentine government defined more clearly the scope of its global policy toward the Internet and took several measures designed to encourage its growth.

THE ARGENTINE GOVERNMENT'S INTERNET POLICY

The Argentine government's policy toward the Internet is based on two declarations of principles and is organized around three axes: constant monitoring of the Internet, enactment of specific regulations and the implementation of programs designed to help the growth of the Internet, and reflection over the future challenges.

Two Declarations of Principles

The first declaration is that the Internet is a matter of national interest.

Decree 554/97, dated June 19, 1997, declares of "national interest the access to the Internet by the Argentine people, in equitable social and geographic conditions, with reasonable costs, and with quality standards in accordance with modern multimedia applications."

The decree also entrusts the secretary of communications (SECOM) with broad powers to:

  • develop a strategic plan for expansion of the Internet in Argentina that achieves several public policy objectives, such as creation of Web sites for Argentine public libraries, promotion of access to the Internet by the educational system, and promotion of a national telemedicine network
  • analyze incorporation of the Internet within an analysis of the definition of universal service
  • analyze and propose alternative price policies in order to stimulate and diversify use of the Internet
  • encourage use of the Internet to support activities related to education, culture, information, entertainment, and health

The second declaration says regulation of Internet content should be hands-off. The Argentine government took note of the 1997 U.S. Supreme Court decision of Reno v. ACLU,12 in which the Court held that the federal statutory prohibition of so-called indecent language on the Internet violates the freedom-of-speech protection guaranteed by the U.S. Constitution. Thereupon the Argentine government adopted a liberal position regarding the content of information available on the Internet and access to that information by users.

Presidential decree 1279/97, enacted November 25, 1997, states that the Internet is a valuable modern medium allowing the mass diffusion of ideas. Therefore, the government expressed its wishes to assist and participate in development of that medium--especially by removing the barriers prejudicing its growth. It also expressed its refusal to interfere with the production, creation, and diffusion of the information circulating via the Internet.

Decree 1279/97 also states that the Internet is a medium protected by the provisions of the Constitution that have to do with the freedom of expression--like the press, radio, and television--and, as such, shall not be subject to prior censorship or restriction.

In consideration of decree 1279/97, resolution 1235/98 dated May 22, 1998, requires ISPs to insert the following text into invoices sent to users: "The National State does not control or regulate information available on the Internet. Parents are recommended to exercise reasonable control over the content accessed by their children. It is advisable to consult your ISP to obtain suitable advice on programs designed to prohibit access to undesirable sites."

Monitoring the Internet

The SECOM tries to obtain continuous feedback from the country's Internet users as well as its Internet professionals. As part of that effort, resolution 81/96, dated September 6, 1996, created the Internet Commission, in charge of drafting the regulatory framework of the Internet. The commission "takes into account" the opinions and advice of interested professionals.

There also has been established National Internet Inquiries, which are directed toward individual users of the Internet. The inquiry consists of an online form, available on the secretary of communications' Web site,13 listing approximately 50 questions that address access to and use of the Internet by each individual. The secretary of communications currently is conducting the Second National Inquiry.

Partial statistical results of the Second Inquiry, based on 4,384 forms submitted from May 29 to June 16, 1998, were recently made available to the public.14

In addition, the SECOM organized two National Public Hearings on the Internet that took place August 6, 1997, and September 24, 1998. The hearings brought together panels composed of authorized representatives from every sector associated with the Internet, such as the telcos, the ISPs, the universities, the government, the provinces, and the users. The first hearing provided the government with useful comments and information on the state of the Internet in Argentina and served as a starting point for the wave of subsequent reforms initiated by the SECOM.

Regulations and Programs Designed to Help the Internet Grow

Taking into account the obstacles to development of the Internet brought to light by the First National Hearing, the SECOM enacted several regulatory provisions and set up several public utility proj-ects in order to facilitate access to the Internet by the largest number of people.

The Internet Regulatory Framework

From 1997 to 1998, the SECOM approved several regulations that, taken as a whole, constitute a comprehensive regulatory framework.

1. Reduction of costs of connecting to the Telintars

With the goal of bringing the costs of international connections to a level closer to the standards applied in comparable or more advanced countries, resolution 2765/97 of September 17, 1997, imposed on Telintar a reduction of approximately 50 percent of its prices billed to the ISPs for international connections.

2. Decrease of dial-up connection costs

Resolution 2814/97 dated September 18, 1997, established a special, dedicated number--0610--named Call Internet, through which telephone calls between the end user and ISPs are dialed.

By means of connection of the ISPs via that number, users may save up to 50 percent on their dial-up cost.
The resolution also establishes a Register of International Connections Requests to monitor strict compliance with its terms.

By means of resolution 499/98, dated February 20, 1998, the SECOM approved the current promotional scheme of tariffs proposed by Telecom and Telefónica for dial-up connections between Internet users and their ISPs via the 0610 number. The prices--in force until January 1, 2000--apply to the whole territory of Argentina. Schools, national universities, and popular libraries benefit from an additional discount of 50 percent.

Resolution 1617/98, dated July 13, 1998, obliges ISPs to send to all clients an e-mail message informing them of the existence of the 0610 number and its corresponding discount. The resolution also creates a database register of 0610 number requests submitted by schools, national universities, and popular libraries.

3. Contractual relations between ISPs and telcos

ISPs and the Telintars: Resolution 97/96, dated September 16, 1996, obliges Telintar to provide international Internet access connection for every ISP requesting such service.

Resolution 194/96, dated November 7, 1996, adds that Telintar must provide international Internet access pursuant to the technical conditions requested by the ISP, provided they are reasonable, technically feasible, and adequate for development of the ISP's services.

Resolution 194/96 also indicates that the ISP applicant is free to ask for a transparent, exclusive, and dedicated link and that it is not necessary to be an actual holder of a license to start negotiating with Telintar.

ISPs and Telefónica/Telecom: The aforementioned resolution 499/98 approved a document called Access to the Internet, which is the model contract that must be used between the telcos and the ISPs until January 1, 2000. The two-page document defines the economic and technical relations between the parties, such as prices of lines, conditions of interconnection in the metropolitan area of Buenos Aires, and the offer of migration from analog to digital lines.

Public interest projects

In the past few months, the government has taken several initiatives to develop the Internet in areas considered important to the country.

1. Access to Internet through nonprofit services

By resolution 1246/98, dated May 22, 1998, the government gives the opportunity for any governmental or nongovernmental organization to provide Internet access services when such services are provided without intention of profit.

2. The Internet 2 Argentina project

Inspired by development of a high-speed data network in the United States called Internet 2, resolution 999/98, dated April 6, 1998, approved development of a similar network called Internet 2 Argentina.

Pursuant to the resolution, the new network will have educational and scientific purposes and will be oriented toward development and use of advanced applications for scientific and technologic research, academic activities, telemedicine, and multimedia digital libraries. The technology standards used will correspond to those elected by the most advanced countries for their scientific and academic networks.

This resolution also establishes the Committee for the Promotion of the Consortium Internet 2 Argentina in charge of implementing a pilot program.

Resolution 1550/98, dated July 13, 1998, creates the General Coordination Board of the Committee for the Promotion of Internet 2 Argentina. The board is in charge of several organization, promotion, and administration tasks, including negotiations with the U.S. Internet 2 network.

The General Coordination Board will be composed of various persons appointed by the resolution itself, a representative of the minister of culture and education, and individuals representing public and private universities, centers for scientific research, telecom companies, and computer companies.

3. The telemedicine project

Resolution 1357/97 creates the telemedicine area in order to drive nationwide development of experimental applications of the Internet in the field of telemedicine. The project consists in the connection, through videoconference systems, of several main hospitals and medical schools in isolated locations in the country.

The experimental network, based mainly on integrated-services-digital-network (ISDN) technology, contemplates both educational and practical, real-time telemedicine applications.

4. The argentin@internet.todos program

Decree 1018/98, dated September 1, 1998, sets up a program for the development of communications. It is called argentin@internet.todos and has a budget of 12 million pesos ($12 million).

The objectives of the program are:

  • to promote development of the telecom infrastructure throughout the country in order to provide universal access to that infrastructure in equitable geographic and social conditions
  • to stimulate development of national and regional telecommunications networks
  • to promote universal access to the Internet and to information technology
  • to promote, on a national scale, creation of community technology centers (CTCs).

The SECOM will be responsible for the planning, direction, and evaluation of the program--in coordination with the National Communications Commission.

The SECOM also signed an agreement with the International Telecommunication Union for the study, design, execution, and administration of the first 500 CTCs. CTCs are technology units that are located in areas isolated from urban centers or those that have low-income populations. The units are designed to be public resources giving local citizens access to such services as e-mail, fax, teleconferences, virtual libraries, and public telephone.

At present, a handful of pilot programs already have been implemented. For example, the Villa Angelelli Program, near the city of Córdoba, provides a technology center with a virtual library, Internet access, and a videoconference system for a community of 500 people with low income, among whom 60 percent are children.

5. Internet in the educational system

Initiatives concerning connection of the educational system are, for the most part, under the responsibility of the Ministry of Education.

In 1994 the Ministry of Education implemented successfully the RIU15 program linking Argentina's national universities through a dedicated network. Through that network, it is estimated that about 100,000 members of the academic community have access to the Internet, representing the largest group of Internet users in the country.16

Argentina's research centers also are connected together, and a project named Intersur currently is under development with the objective of linking the main research centers of the Mercosur countries.

It is anticipated that the Ministry of Education will release a project aimed at linking 44,000 Argentine schools--private and public--through the REDES network.17 Such a network should enable users to take advantage of all of the education services available online and will be managed at the provincial level.18 The SECOM also is developing programs with the goal of connecting public schools to the Internet for free.

In opposition to the rather disappointing growth of the commercial Internet, development of the Internet in the education community may be considered successful.

Reflection on Future Challenges

In the next few years, but to a certain extent already today, the Argentine government will confront new regulatory challenges concerning the Internet and, more generally, the ever-changing world of telecommunications, although some of those obstacles are not exclusive to the Argentine government and must be faced also by the world community as a whole.

Issues related to convergence of technologies

The main source of difficulty during the coming years will lie in the challenge arising from the convergence of technologies. The digitalization of every communications activity--voice, data, video, and audio--and the transmission of such information via any kind of media--copper line, fiber-optic, or microwave--eventually will blur the lines between the traditional communications businesses--phone, data transmission, audio, and video--because any communications operator will be able to provide a full panel of services.

As an example of that convergence, satellite digital TV recently entered into the Argentine market, and in order to prepare Argentina for the global transition from analog to digital TV, the SECOM organized a Public Hearing over terrestrial digital TV,19 which took place in Buenos Aires on September 22, 1998.20 The provision of Internet services by digital TV operators is among the critical issues concerning the new medium.

Another example of the difficulties triggered by convergence of technologies is the issue of Internet telephony, which is now provided by some operators in Argentina regardless of the monopoly over basic voice and international telephony held by the telcos. Except for the provision of article 8.1 of privatization decree 62/90 granting the above-mentioned exclusivity rights, no other regulation has addressed the issue. There is a good case to argue that IP telephony is not basic voice telephony and thus can be provided freely by ISPs without infringing on the privileges of the telcos over the traditional telephone business. Although one still may consider that the quality of Internet telephony is not yet good enough to compete directly with the incumbent telcos--and later with the new licensees--that moment certainly will occur sooner than expected.

Electronic commerce

As far as electronic commerce is concerned--and in preparation for the Second National Hearing--a recent Communication from the Internet Commission21 expresses an interesting opinion on how the Argentine government should consider and regulate commercial transactions over the Internet.

First, the commission indicates that the private sector should take the lead and suggests the government favor self-regulation of the industry.

Second, the commission states that the government should avoid unnecessary restrictions on electronic commerce, such as burdensome regulations, administrative paperwork, taxes, and tariffs.

Third, the commission declares that intervention by the government, when necessary, should be directed toward the drafting and enforcement of a simple, constant, and foreseeable legal framework.

Fourth, the government should recognize the unique features of the Internet, such as its decentralized nature and its bottom-up administration.

Finally, the commission indicates that electronic commerce on the Internet is based on a worldwide market and that no discrimination should be made pursuant to the location of the seller or of the purchaser.

For discussion purposes, the Internet Commission qualifies as an "important project" in terms of the model law on electronic commerce drafted in 1996 by the United National Commission on International Trade Law.

Regulation of competition in the telecom sector

The regulation of competition in the telecommunication sectors is another issue faced by most of the countries in the world, especially in the period of transition between the monopoly regime and the free and full competition between several operators of different size.

In Argentina the telecom sector traditionally is rooted into a monopoly regime and regulations always were directed at protecting it. From the 50-year monopoly of Entel until the period of exclusivity enjoyed by the telcos, the telephone system never has been the subject of competition. On the contrary, data have been subject to competitive status since 1990.
Another characteristic feature of Argentine legal framework is the absence of a developed antitrust law. In order to remedy that absence, resolution 1460/98, dated July 3, 1998, issued a consultation document on restrictive commercial practices with a view toward designing a regulatory framework of competition in the telecommunications sector.

Universal service

The definition and the financing of universal service raise a number of issues in various countries and in Argentina as well, where problems are more acute than in the most advanced countries because the relative number of Argentine people who don't access to telecom services is substantially higher.

Resolution 1250/98, dated May 22, 1998, issued a consultation document on universal service, but as of this writing, the Argentine authorities have not made a decision on the question.

ANALYSIS OF GOVERNMENT'S ACTION

The Second National Hearing on the Internet held in September 1998 provided the government with some interesting feedback on reforms introduced in the previous months.

As far as the 0610 number is concerned, on one hand, several speakers were of the opinion that that measure favored mainly the telecom operators because it expanded the average duration of navigation time on the Web, but did not result in a substantial increase in new users. On the other hand, figures show that in the past months, not only did the number of users grow substantially, but so did the number of ISPs willing to enter the market. As of July 1998, 25 percent of current users had started to use the Internet in the previous six months22 and 98 new licenses had been issued for the provision of value-added services after creation of the 0610 number, and 26 applications were pending.23

Other critics were to address the scheme adopted by the telcos to operate the 0610 number. The method implemented consists of dividing Internet utilization time in alternative sequences of 15 or 18 minutes each. The first sequence is billed at full telephone local price to the user, and the next is free. The scheme was designed to develop the average navigation time of users. However, an important number of Internet users are victims of frequent communications cuts that oblige them to redial to get access to their provider and to start another sequence billed at full price.

The general reduction and uniformization of costs throughout most of the territory also facilitated a geographic rebalancing of Internet access in favor of those living outside the city of Buenos Aires.24 However, those living outside the major cities do not yet have access to the 0610 discount and can be connected to the Internet only through expensive, long-distance telephone calls.

As already mentioned, ISP representatives vigorously criticized the behavior of the telco monopolies toward them as well as the frequent distortions of competition. They also complained about the high price of the rather scarce bandwidth and international connections.

The forthcoming liberalization of the telecom system, starting November 1999, will allow the entry of two new operators able to provide national and international services, thereby ending the incumbent two telcos' and Telintars' monopolies. Such competition should trigger (1) an increase in the percentage of lines per inhabitants, (2) an increase of available bandwidth at both the national and international levels, and (3) a correlative reduction in price for end users.

As far as network infrastructure is concerned, it is worth mentioning that Argentina possesses one the most developed cable TV networks in the world, and several alternatives to dial-up connections already are available to users.25 It also is expected that in the short to medium term, several international cable systems--such as Oxygen and Global Crossing--and satellite facilities projects--such as Globalstar, Iridium, Ellipse, and Teledesic--will be completed. Some of them are already operating and are resulting in expanding the bandwidth available to ISPs.

As far as education is concerned, although one should praise the efforts made to provide children with new educational tools, the dispersion of initiatives between the Ministry of Education and the SECOM may prejudice harmonious development of the system by triggering certain inconsistent budgets and technology overlaps. Such inefficient division among government services will needlessly direct limited resources away from the Argentine public school system, which remains plagued with basic structural deficiencies.

Regarding the community and other nonprofit programs adopted by the government in order to provide Internet services for free, it is necessary that they be managed with careful attention. Although they should be encouraged because they allow people with economic difficulties to have access to the information highway, in several cases these government-subsidized initiatives may generate distortion of competition to the prejudice of commercial ISPs.

CONCLUSION

The Argentine example shows that the Internet is not a communication tool successful by reason of its own virtue. Several key condition precedents must be met prior to witnessing Internet growth and widespread use among the population of a country--especially if that country lacks the technologic tools, the economic wealth, and the financial facilities that are common in either the most developed countries of Asia or Europe or, of course, the United States.

Argentina also is a case study of how an outdated telecom reg-ulation framework may exert a negative impact on the development of a new communication tool by maintaining artificial barriers, which were designed for other purposes, preventing the business community from providing the public with good services at an affordable price.

The Argentine government's policy also may be considered as a model--positive or negative--for other countries. The SECOM's action shows that an active policy toward development of use of the Internet doesn't guarantee success--at least in the short to medium term--because it cannot always eliminate strong economic, legal, or cultural obstacles.

REFERENCES

1. Cited in TelePress Latino-américa, September 1998, p. 32.
2. PWC July 1998 International Briefings: Latin America, available at pwcglobal.com/extweb.
3. La Nación, October 5, 1998, p. 13.
4. About 7 million people.
5. Per capita GDP 1997: Brazil, 4,881; Chile, 5,244; Mexico, 3,907. Source: Warburg Dillon Read, Latin America Economics, December 1998.
6. Resolution SECOM 1250/98, annex 1.
7. In Sweden: 68.54 percent. Source: La Nación, August 24, 1998, section 5, p. 23.
8. La Nación, September 28, 1998, p. 12, referring to a report issued by UNESCO.
9. La Nación, October 5, 1998, p. 13.
10. The Mercosur is a common market established within Argentina, Brazil, Paraguay, and Uruguay.
11. Figures issued from Abel Cattaneo's speech at the Second National Hearing on the Internet.
12. U.S. Supreme Court, Reno v. American Civil Liberties Union et al., June 26, 1997.
13. The form is available at www.secom.gov.ar/formularios/encuesta2.html.
14. The results of the inquiry are available at www.secom.gov.ar/encuesta/encuesta2_199807/indice.html.
15. Red de Interconexión Universitaria (University Interconnection Network).
16. For more information, see www.riu.edu.ar.
17. .COM, August 1998, p. 48.
18. Brazil and Chile also are in the process of developing similar programs named Proinfo and Enlaces, respectively.
19. SECOM, resolution 1945/98, dated September 4, 1998.
20. Minutes not yet available.
21. Annex to resolution 1616/98.
22. Second National Inquiry, www.secom.gov.ar/encuesta/enc-esta2_199807/indice.html.
23. Resolution 1616, Annex 1: Report from the Internet Commission.
24. Before creation of the 0610 number, 70 percent of Argentina's ISPs were located in the city of Buenos Aires. As of July 1998, 50 percent of them were located in the rest of the country. Resolution 1616, Annex 1: Report from the Internet Commission.
25. The Second National Inquiry indicates that cable-modem companies already hold almost 5 percent of the Internet service provider market. See www.secom.gov.ar/encuesta/encueta2_199807/indice.html.



Thierry Chaumeil is an attorney-at-law (Paris) at the law firm Negri, Teijeiro & Incera in Buenos Aires.

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