Wednesday, November 3, 2010
On the margins of Europe lie a number of micro-states and micro-territories. Global best practice in telecommunications fits them poorly ‒ it does not scale down to the necessary level. The problems are aggravated by geographical remoteness and (except for Iceland) not being part of the EU’s common legal framework and policy processes. On the other hand, not being members of the European Union (EU) allows much greater flexibility.
Jersey and Guernsey comprise the Channel Islands, British Crown Dependencies in the English Channel, off the coast of France, a legacy of William the Conqueror, Duke of Normandy. The Isle of Man, another British Crown Dependency, lies between England and Ireland. The Faroe Islands lie between Great Britain and Iceland, part of the Kingdom of Denmark, but not of the EU. The other Danish territory is Greenland, a vast icy expanse located in North America, but more closely connected to Europe. Iceland has been independent from Denmark for decades and is a member of the European Economic Area (EEA), with an outstanding application to join the EU.
While telecommunications is generally scalable, this eventually breaks down. There are too few people for parliaments, for ministries, for competition authorities, for regulators, for operators and for markets. While expertise can be bought in, the scale of markets cannot be adjusted.
One of the constraints of small island developing states (SIDS) is the high cost and limited access to undersea cables. By comparison, the European islands are very well provided for high capacity and even redundancy. This allows relatively affordable access for telephony and for Internet access.
The small sizes mean a lack of economic diversity. For example, Greenland is heavily dependent on fisheries. Jersey, Iceland and the Isle of Man have relied on financial services, with complaints that the British territories are tax havens. Heavy dependence of employment by government.
The heavy burden of the contemporary regulatory state is not easily borne by small islands. There are severe constraints on the people available to serve as judges, in competition authorities and in regulators. These institutions can be afforded, but add to the costs for citizens and businesses.
Iceland, through its membership of the EEA, has to transpose most of the EU regulatory framework, as do Cyprus and Malta. Not designed for micro-states, and not easily or at least legally customisable.
Small markets. Greenland has elected to have a monopoly in telecommunications, while the others have tried for competition. They have been more successful in mobile than fixed, typically with two GSM operators, migrating to 3G.
Download the paper from SSRN at the link.