Regulation and Internet use in developing countries

Scholars and policy makers have expressed concern over a gap between rich and poor countries in the diffusion of information technology (IT), especially Internet access. The essence of their concern is that, while low incomes cause low IT penetration, low penetration may also perpetuate low incomes. This belief has led some to conclude that developing countries require donations of facilities and training in order to spark faster Internet growth. Bur it is also possible that the public policies and regulations in developing countries are hindering Internet diffusion. This article investigates the extent to which regulatory policy has inhibited Internet growth in developing countries. Controlling for income and other factors that affect demand, I find that regulation has a substantial effect on Internet services. Countries that regulate entry by Internet service providers (ISPs) have fewer Internet hosts and users, while countries that regulate Internet pricing have higher prices for Internet access. © 2005 by The University of Chicago. All rights reserved.