COSTA RICA DIGITAL. Costa Ricans in the Knowledge-Based Economy SERIE. Infrastructure, skills, use of and access to ICTs

Transcription

1 1 01 SERIE 4 Comisión Asesora en Alta Tecnología (CAATEC) COSTA RICA DIGITAL 1 01 Costa Ricans in the Knowledge-Based Economy Infrastructure, skills, use of and access to ICTs Ricardo Monge John Hewitt F U N D A C I Ó N wwwcaatecorg Tel: (506) / 3324 Fax: (506)

2 M743c Monge González, Ricardo Los Costarricenses en la economía basada en el conocimiento: Infraestructura, destrezas, uso y acceso a las TICs / Ricardo Monge González, John S Hewitt - 1 ed San José, CR : Jessfrank, p :grafs ; 22 X 28 cm (Serie Costa Rica Digital ; n4) ISBN: Tecnología de la Comunicación 2 Tecnología de la información 3 Economía - TICs I Hewitt, John S II Título 1 INFORMATION AND COMMUNICATION TECHNOLOGIES 2 TELECOMMUNICATIONS 3 INTERNET 4 KNOWLEDGE ECONOMIES 5 INFORMATION SOCIETY 6 HOUSEHOLDS 7 DIGITAL DIVIDE FORMATTING: JESSFRANK, SA PRINT Jorge Delgado Jimenez CAATEC Foundation CAATEC Foundation First Edition 2006 Legal Deposit Made Printed by: Group Power Print, CORP Reproduction of this work in whole or in part is prohibited without the written consent of CAATEC

3 Costa Ricans in the Knowledge-Based Economy Infrastructure, skills, use of and access to ICTs Ricardo Monge 1 John Hewitt 2 This document was written by Ricardo Monge and John Hewitt of the Costa Rican High Technology Advisory Commission (Comision Asesora en Alta Tecnología [CAATEC]), with the financial assistance of AMNET, Cisco Systems, Estratégia Siglo XXI, Fundacion CRUSA, Procter & Gamble, Promotora de Comercio Exterior de Costa Rica (PROCOMER) and TPE Business (Radio Mensajes) The writing of this document was made possible thanks to valuable information provided by the National Institute of Statistics and Censuses (Instituto Nacional de Estadísticas y Censos [INEC]) specifically, the results of the 2000, 2003 and 2005 Multiple Purpose Household Surveys and the Revenues and Expenses Survey as well as secondary information from sources such as the Fundación Omar Dengo and the Ministry of Public Education The permission of the Costa Rican Institute of Electricity (Instituto Costarricense de Electricidad [ICE]) was necessary to allow INEC to give us access to the Internet module of the 2005 Household Survey We want to specifically thank all of the companies and institutions without whose support this work could not have been carried out We also want to thank Cindy Alfaro for her excellent work as investigative assistant The results, interpretations and conclusions expressed in this document are those of the authors and do not necessarily reflect the points of view of CAATEC, nor the companies, organizations and institutions which supported this initiative; any errors or omissions are those of the authors 1 Economist, Executive director of CAATEC and professor of economics at the Instituto Tecnológico de Costa Rica (rmonge@caatecorg) 2 Anthropologist, technical advisor in ICTs and associate researcher of CAATEC ((jhewitt@caatecorg)

4 The creation of digital opportunities is not something that should be promoted after facing the main challenges of development; it is a fundamental part of a strategy to face the challenges of the 21st Century (G-8 Creating Opportunities for All: Meeting the Challenge, 2001) Digitally enabled societies will be the best prepared to lead and to benefit from what is no longer a phenomenon, but the real context of the current world realignment of development opportunities (Alejandro Cruz and Gabriel Macaya eds, 2006)

5 Table of Contents LIST OF FIGURES LIST OF TABLES ABBREVIATIONS AND ACRONYMS X XII XII 1 INTRODUCTION 2 THE KNOWLEDGE-BASED ECONOMY AND ICTs ICTs IN COSTA RICAN HOUSEHOLDS: a ICTs in Costa Rican households b The Digital Divide and income levels c The Digital Divide by region d The Digital Divide by education levels and occupations of heads of households e Who uses the Internet, where do they use it, and what do they use it for? 4 POLICIES IMPLEMENTED TO REDUCE THE DIGITAL DIVIDE a Infrastructure and Internet access policies b Development of skills for creative ICT use c Local Internet content d Affordable access to ICTs 5 COSTA RICAN INTERNET USERS a Users and connectivity type b Users and age c Full-Time workers i Users and educational levels iiusers, occupation and activity iiiknowledge workers 6 THE IMPORTANCE OF BROADBAND INTERNET FOR COSTA RICA a What is broadband internet? b Why is it important to have access to broadband Internet? c Growth of world broadband penetration d Is telework possible in Costa Rica? 7 PRINCIPAL FINDINGS AND POLICY RECOMMENDATIONS a Principal findings b Policy recommendations BIBLIOGRAPHY STATISTICAL APPENDIX IX

6 Figures pags Figure 21 Knowledge Economy Index and Income per capita, 2004 Figure 22 Knowledge Economy Index and Human Development, 2004 Figure 2 3 Knowledge Economy Index and Degree of Individual Preparation for ICT Use, 2004 Figure 2 4 Knowledge Economy Index and Degree of Individual ICT Use, 2004 Figure 3 1 Evolution of ICT penetration in homes, Figure 32 ICT penetration in urban and rural areas, Figure 33 Evolution of residential telephony by income level (quintiles), Figure 34 Evolution of cellular telephony by income level (quintiles), Figure 35 Evolution of computer penetration in homes by income level (quintiles), Figure 36 Evolution of Internet penetration in homes by income level (quintiles), Figure 37 Evolution of residential telephony penetration by region, Figure 38 Evolution of cellular telephony penetration by region, Figure 39 Evolution of computer penetration in homes by region, Figure 310 Evolution of Internet penetration in homes by region, Figure 311 Evolution of residential telephony penetration by educational level, Figure 312 Evolution of cellular telephony penetration by educational level of the head of the household, Figure 313 Evolution of home computer penetration by educational level of the head of the household, Figure 314 Evolution of Internet penetration in the household by educational level of the head of the household, Figure 41 Penetration of residential telephone, computer and ADSL Internet connectivity in Costa Rican homes by income quintiles, 2005 Figure 42 Cable television and cable Internet in Costa Rican homes by income quintiles, 2005 Figure 43 Distribution of broadband connections by type of technology, 2002 Figure 44 Penetration of broadband Internet in a selected group of countries, 2001 and 2004 Figure 45 PRONIE coverage, by number of students reached in elementary and high schools, Figure 46 Internet use by elementary and high school students, by household income level, 2005 Figure 47 Elementary school and high school enrollment by income quintiles, 2005 Figure 48 ICT costs as a percentage of Costa Rican household incomes, by quintiles of household incomes, 2005 Figure 49 ADSL Internet connectivity as a percentage of household income by ADSL penetration and income quintiles, X

7 pags Figure 410 Cable Internet connectivity as a percentage of household income by cable Internet penetration and income quintiles, Figure 51 Knowledge Worker office Internet use by sector, Figure 52 Knowledge Worker Internet use by sector, Figure 61 Download times for a 3MB file using different connection technologies 37 Figure 62 Broadband Internet growth by technology, June 2003 March Figure 63 Penetration of Broadband Internet technologies in a selected group of countries, Figure 64 Growth of Broadband Internet penetration in a selected group of countries, Figure 65 Broadband Internet penetration in Costa Rican homes by technology type, Figure 66 Percentage of knowledge workers that have broadband Internet in their home, Figure 67 Percentage of knowledge workers that have broadband Internet in their home in 2005, plus those which hope to have the service in Gráfico 68 Household broadband Internet penetration in a selected group of countries, Gráfico 69 Percentage of households with broadband Internet in 2005 and expected percentages for Tables Table 51 Internet users by type of connectivity, 2005 Table 52 Internet users by age, 2005 Table 53 Full-Time Workers who use the Internet, by educational level, 2005 Table 54 Full-Time Workers who use the Internet, by occupation, 2005 Table 55 Full-Time Workers who use the Internet, by sector, XI

8 Abbreviations and Acronyms ADSL Asymmetric Digital Subscriber Line B2C Business-to-Consumer electronic commerce DSL Digital Subscriber Line FOD Fundación Omar Dengo ICTs Information and Communications Technologies INEC Insituto Nacional de Estadísticas y Censos (National Statistics and Census Institute) ISDN Integrated Services Digital Network ITU International Telecommunications Union KBE Knowledge-Based Economy KEI Knowledge-Based Economy Indicator MEP Ministerio de Educación Pública (Ministry of Public Education) MHS Multi-purpose Household Survey (carried out by INEC) OECD Organization for Economic Cooperation and Development PDA Personal Digital Assistant PRONIE Programa Nacional de Informática Educativa (National Program for Educational Informatics) UNCTAD United Nations Conference on Trade and Development UNDP United Nations Development Program VPN Virtual Private Network XII

9 1 Introduction The present document analyzes the preparedness of Costa Rican society to participate in a Knowledge-Based Economy (KBE) during the period , investigating access, use, skills and the ability of Costa Rican households to purchase Information and Communications Technologies (ICTs) The study is based mainly on the results of the Multipurpose Household Surveys (MHS) carried out by the National Institute of Statistics and Census of Costa Rica (INEC) during the years 2000, 2003 and 2005, making special use of the survey modules pertaining to access to, and use of, ICTs Secondary information was also provided by organizations including the Fundacion Omar Dengo (FOD), the Ministry of Public Education (MEP), the World Bank, the International Telecommunications Union (ITU), the United Nations Conference on Trade and Development (UNCTAD) and the United Nations Development Program (UNDP) The choice of Costa Rican households as a unit of analysis is due not only to the availability of excellent information in this area, but also because most children, adolescents and adults spend an important part of their time educating themselves in their homes It is important to know not only the level of ICT (fixed-line and cellular telephony, cable television, computers and Internet) access in Costa Rican households, but also the level of digital literacy of household members according to their ages, levels of education and occupations; how they use this technology; and how affordable the technology is for Costa Rican households The concept of affordable access is especially important because widespread ICT use is one of the foundations of modern societies in the areas of business, government, entertainment, and formal and informal education If Costa Ricans do not achieve near-universal access to ICTs and do not have the necessary skills to use these tools creatively, they will be at an increasing comparative disadvantage in this century Universal ICT access is vitally necessary for knowledge workers to take advantage of the possibility of working remotely (outside the office) The ability to work remotely has very important secondary implications for Costa Rica, such as decreased demand for transport infrastructure, less traffic congestion, less environmental contamination, less fuel consumption and therefore less need for foreign currencies to pay fuel bills It also has implications for the ability of Costa Ricans to work in the globalized telework market; serving clients in other countries (offshoring / outsourcing) has a strong potential to improve the quality of life of Costa Rican workers This document is organized in seven sections: the first is the introduction; in the second, the foundations of the Knowledge-Based Economy (KBE) and the importance of moving towards an economy of this type are discussed as a means to improve quality of life, along with the necessity of having appropriate access to and use of ICTs, and the means to provide necessary skills for the creative use of these tools In the third section, the evolution of the digital divide in Costa Rican households between the years 2000 and 2005 is analyzed, with reference to variations in income level, rural and urban zones, geographical region, education level and occupation of the head of the household The relative levels of Internet use of different types of household members is presented, as well as information about where they use it and what they use it for In the fourth section, the major policies that Costa Rica has implemented to reduce the digital divide between 1

10 Los Costarricenses en la Economía Basada en el Conocimiento the years 2000 and 2005 are presented, grouped in four categories: (i) infrastructure and policies to improve Internet access, (ii) development of skills for the creative use of ICTs, (iii) local Internet content; and (iv) affordable access to ICTs Thanks to a special module that was included for the first time in the 2005 MHS, the behavior of individual Internet users in Costa Rica could be studied in some detail; frequency of use and specific types of Internet use could be compared and contrasted between groups of different ages and educational levels, between homes with different types of Internet connectivity, between different patterns of access and use within and outside the home, and between users with different occupations, working in different sectors of the economy This analysis concludes with a discussion of the possibility for increasing the use of ICTs by knowledge workers The recent evolution of traditional dial-up Internet access towards broadband access offers the advantage of permanent, as opposed to temporary, connectivity and a greatly increased capacity to transmit data, images, video and voice; in the sixth section of this document, the importance of this kind of access for Costa Rican households is discussed, with particular reference to its power to facilitate participation in KBE activities including telework In the seventh, final, section we summarize our principal findings and make policy recommendations based on the results of our analysis 2

11 2 The Knowledge-Based Economy and ICTs Various transformational events occurred during the second part of the Twentieth Century, including reduction of international trade barriers (beginning in the 1960s), the green revolution (in the 1960s and 1970s), deregulation of air transportation costs and the growth of container shipping, and the every-day use of computers and the Internet (the Digital Revolution) These events have facilitated an impressive expansion in not only the exchange of goods and services, but also in the transmission and generation of knowledge 3, especially of useful knowledge In fact, the growth of scientific and technological knowledge during the last two centuries has been one of the most important and dynamic elements in human economic and social history, producing what we now know as the Knowledge- Based Economy (Mokyr, 2002) an economy where what is most important is not to have better-educated people per se, but to have citizens that, in general terms, know more and apply that knowledge in all of the areas of their daily life (in the productive, family, and academic spheres, etc) 4 According to the World Bank and a major OECD study (2000), there are four principal pillars upon which a KBE rests: (i) an economic regime and an institutional framework 5 which provide incentives for efficient use of knowledge, the creation of new knowledge, and the development of a new type of business person, (ii) a population characterized by high educational levels and with sufficient skills to create new knowledge and to use available This term was used for the first time by Simon Kuznets (1965) in discussing knowledge that was useful in improving the productive processes Machlup (1980) used it in a similar fashion when referring to the concept of useful knowledge as practical knowledge capable of helping to improve material well-being For a better explanation of this concept refer to Mokyr (2005) 5 By Institutional Framework we mean the rules of the game of a society, or the restrictions created by humans which shape the interaction between the members of a society For discussions of the importance of the institutional framework in economic growth and development, see Douglas North (1990) and Dani Rodrik ed (2003) knowledge creatively, (iii) a dynamic information infrastructure that can facilitate effective communication, dissemination and processing of information and knowledge (access to ICTs, especially to computers and Internet) and (iv) a network of institutes, universities, consultants, companies and other organizations that can take advantage of the growing wealth of global knowledge, assimilate it, and adapt it to its own necessities to create new knowledge (an innovation system) 6 Figures 21 and 22 show that the countries with the best performance related to the four pillars of a KBE (those with the highest Knowledge Economy Indicator [KEI] score) 7 enjoy higher per capita income levels and human development that is, independent of the causality relationship between these two variables and the KEI, those countries with a higher income level (and human development) are the economies with greater strengths in terms of the KEI, and vice versa It is vitally important to position our society to take best advantage of the opportunities provided by the KBE s global re-alignment of development opportunities 6 For a detailed discussion of this subject, see Ferranti et al (2002) An analysis of the Costa Rican case can be found in Monge (2006) For a detailed description of the methodology used to calculate the Knowledge Economy Index (KEI), see wwwworldbankorg/etools/kam2005/html/methodologyhtm 3

12 Los Costarricenses en la Economía Basada en el Conocimiento Figure 2 1 Knowledge-Based Economy Index and Income per capita for a selected group of countries, 2004 GDP per capita 2002 US$ PPP 45,00000 Norway 40,00000 Irleland y = 35, e 04253x Canadá Switzerland 30,00000 R 2 = Denmark 25,00000 Korea Sweden 20,00000 Finland 15,00000 México 10,00000 Chile 5,00000 Costa Rica El Salvador Knowlwdge Economy Index (KEI) Source: CAATEC, based on World Bank figures As shown in Figure 21, Costa Rica occupies an intermediate position in the transition towards a KBE, with a per capita income level in keeping with this position, which implies that the country can achieve higher levels of economic wellbeing through a successful transition towards a KBE Figure 22 shows that Costa Rica s human development is also in keeping with its KEI scores, again suggesting that the country can greatly profit by a successful transition towards a KBE Figure 22 Knowledge-Based Economy Index and Human Development a for a selected group of countries, 2004 Human Development Undex, y = 04829e 00844x R 2 = El Salvador Costa Rica México Chile Canada Irleland Korea Norway Switzerland Finland Suiza Dinamarca Knowledge Economy Index (KEI) Source: CAATEC, based on World Bank and UNDP figures 4

13 The Knowledge-Based Economy and ICTs ICTs, especially computers, fixed-line and mobile telephony, and the Internet, constitute essential tools for the generation and transmission of useful knowledge in any society, allowing its members to achieve higher levels of well-being as they move towards a KBE They facilitate the processing and transmission of data and information for decision-making and improve communication among citizens in the academic, public and private sectors; they promote learning and the provision of vital services in health and education; they reduce the natural fragmentation of the economy (through decreased transaction costs); they permit telework, thus reducing traffic congestion and pollution while opening new markets for international sales of services; and they facilitate the inclusion of all citizens in decision-making and in policy design (democracy, transparency, and accountability) Better access to ICTs will accomplish little if people do not have the skills necessary to take advantage of the opportunities these tools offer to improve their lives There is a twoway relationship between ICTs and education: education and training, both formal and informal, can be used to create digitally literate societies, so that citizens can use ICTs with confidence in both their personal lives and their work; and ICTs can be used in the educational and training systems to assist in learning about subjects other than ICTs, to provide citizens with better abilities to innovate and build societies that are able to create, acquire, transmit and use knowledge more efficiently (useful knowledge) As pointed out in the Century XXI Strategy report (Cruz and Macaya, 2006), citing Nicholas Carr (2004), access to ICTs will only produce competitive advantages for a society if their use assists its citizens to develop the necessary capacities to create, add value and innovate There is empirical evidence to support the argument about the complementarity of having ICT access (level of preparation) and the necessary capacities to make efficient use of these tools (usage level) as necessary conditions for moving successfully towards a KBE As is shown in Figure 23, a strong positive relationship exists between the level of individual preparation for the use of ICTs 8 and the performance of a country in its transition towards a KBE (measured by KEI scores) 8 We are referring to the Individual Readiness sub-index of the Index of the Level of Preparation to Participate and Benefit from ICTs (the Network Readiness Index - NRI), created by the World Economic Forum, INSEAD and the infodev Program 5

14 Los Costarricenses en la Economía Basada en el Conocimiento Figure 23 Knowledge Economy Index and Degree of Individual Preparation for ICT Use for a selected group of countries, 2004 Degree of Individual Readiness y = 29929e 00718x R 2 = El Salvador Costa Rica México Korea Norway Denmark Canadá Sweden Switzerland Grado de preparación individual sobre TICs Knowledge Economy Index (KEI) Chile Irleland Finland Source: CAATEC, based on World Economic Forum figures Figure 24 also shows a positive and significant relationship between the level of ICT use by individuals 9 and the degree of their country s transition towards a KBE Figure 2 4 Knowledge Economy Index and Degree of Individual ICT Use for a selected group of countries, Norway Degree of Individual ICT use, y = 06589e 01915x R 2 = El Salvador México Costa Rica Korea Chile Irleland Canadá Switzerland Denmark Sweden Finland Knowledge Economy Index (KEI), 2004 Source: CAATEC, based on World Economic Forum figures 9 We are referring to the Individual Usage sub-index of the NRI 6

15 The Knowledge-Based Economy and ICTs According to economic theory, the quality of people s lives or their material well-being depends primarily on their capacity to consume goods and services That capacity is determined by the level of domestic production, possibilities of commerce with foreign countries and consumers tendencies to postpone present consumption in favor of future consumption (saving and investment) We face the necessity of expanding the productive capacity of the country in a sustained way, leading to economic growth and thence to economic development; while the level of consumption determines the current economic well-being of a society, its productive capacity will determine its future economic well-being (Sciadas, 2003) In this context, ICTs have a dual function: they can be seen as productive assets and as consumer goods and services In the analysis of the importance of ICTs for the successful transition of a society towards a KBE, it is therefore necessary to study the wealth represented by ICTs (eg, network infrastructure and computers), the labor force that is able to use ICTs, and the use that citizens make of these tools Based on the previous discussion, and given the importance of ICTs for the successful transition of Costa Rica towards a KBE, the following section will analyze the evolution of access to, and use of, ICTs by Costa Rican citizens in the period , using data from the Multipurpose Household Surveys (MHS) carried out in the years 2000, 2003 and 2005 Among other things, this will involve an analysis of what is usually referred to in the literature as the digital divide in Costa Rica differences in levels of access to ICTs, in the levels of the skills necessary to use them, in the way ICTs are used, and how these differences are related to material well-being As is described in the following pages of this document, Costa Rica has important strengths and weaknesses in this regard, and confronts significant opportunities and threats as it attempts to move successfully towards a KBE 7

16 3 ICTs in Costa Rican households: The literature points out that while digital divides are defined at the most basic level by differences in access to digital tools, differences in training, knowledge and the skills that allow creative use of these tools are what finally determine where people fall within the range of the digital divide (Villasuso, 2006) Variations in factors such as income, development and levels of education have important impacts on the creation of digital divides within a country, or between countries 10 Because the existence of a digital divide can increase social divides in the future, it is useful to analyze the evolution of the digital divide in Costa Rica in terms of possession of, access to, and use of ICTs by Costa Rican households during the period (the study of political attempts to reduce the digital divide in this country will be analyzed in section 4 of this document) The digital divide among households is analyzed in this section with respect to differences in income level, region, education, and occupation of the head of the household a ICTs in Costa Rican households Monge and Hewitt (2004) analyzed access to and use of ICTs in Costa Rican households in the period They identified the existence of important digital divides, measured with reference to differences in geographical zones (urban-rural) and regions, income levels, education levels and occupation of the head of the household, with special reference to access to computers and the Internet; the study also 10 See, eg, wwweconomistcom/printedition/displaystorycfm?story_id= As Noble (1997) points out, new information and communication technologies usually tend to benefit principally better educated and wealthier individuals in a society also showed that there had been important improvements in the penetration of rural telephony, especially cellular telephony, in that period Table A1 of the Statistical Appendix shows basic information about the penetration of ICTs in Costa Rican homes for the years 2000, 2001, 2003 and 2005 The figures are presented for the country as a whole, by income quintiles, and for urban and rural areas At the level of the entire country, in 2005 Costa Rica showed significant household penetration of residential telephony (656%), color television (928%) and cellular telephony (4983%) The penetration of computers is much lower (270%), as is that of cable television (221%) and Internet (102%) Costa Rican households show a very significant growth in the possession of ICTs between 2000 and 2005, especially in the case of cellular telephony, where penetration increases from 129% to 498% at a national level (Figure 31) Lesser, although important, growth is seen in the case of cable television (from 146% to 221%), computers (from 139% to 270%) and Internet (from 40% to 102%) The growth in ICT penetration during the last two years ( ) is far less, with the exception of cellular telephony In fact, coverage of residential telephony and Internet were almost the same in these two years, growing from 635% to 656% in the first case, and from 93% to 102% in the second These figures should be taken into account by the authorities involved in Costa Rica s successful transition to a KBE, as discussed in Section 2 of this document 9

17 Los Costarricenses en la Economía Basada en el Conocimiento Figure 3 1 Costa Rica: Evolution of ICT penetration in homes, Source: CAATEC, based on INEC Multipurpose Household Survey figures, It is important to note that the small increase in coverage of Internet in Costa Rican households (only 087% between the year 2003 and 2005), was achieved almost exclusively through the growth of low-speed dial-up access (772% of total Internet connectivity) and, to a lesser degree the use of cable modems (160% of total Internet connectivity) The importance of significantly increasing the coverage of highspeed broadband Internet (using ADSL, cable modems, and ISDN) is discussed in detail in the next-to-last section of the present study There is a clear digital divide between households in urban and rural areas of Costa Rica in 2005 (Table A1) With regard to residential telephones, for example, 758% of urban households had at least one telephone, but in rural areas the corresponding figure is 505% It is important to note that ICT penetration grew faster in urban areas than in rural ones, with the exception of residential telephony (Figure 32); this has done little or nothing to close the digital divide between these zones identified in the year 2000 by Monge and Chacon (2002) This goal must be seriously pursued in the coming years Figure 32 ICT penetration in urban and rural areas, Source: CAATEC, based on INEC Multipurpose Household Survey figures,

18 ICTs in Costa Rican households: b The Digital Divide and income levels It is interesting to analyze ICT coverage in Costa Rica according to quintiles of household income (in which the first quintile contains the poorest households and the last quintile the wealthiest) There has been an important increase in the coverage of residential telephony in the lowest quintiles of income distribution; in the year 2000 only 259% of the households of quintile 1 and 461% of the households of quintile 2 had at a residential phone line (Figure 33), but these percentages increase to 418% and 604% respectively, in 2005, which confirms a tendency observed by Monge and Hewitt (2004) towards increased coverage of residential telephony in lower-income homes between the years 2000 and 2003 In the case of cellular telephony there has been a significant increase in coverage at all income levels between 2003 and 2005 (Figure 34) The importance of good cellular telephony coverage in Costa Rica assumes particular importance when we consider that wireless Internet access is becoming increasingly important in other areas of the world (ITU, 2003) Figure 34 Evolution of cellular telephony by income level (quintiles), Figure 33 Evolution of residential telephony by income level (quintiles), Source: CAATEC, based on INEC Multipurpose Household Survey figures, Investigating access to computers between 2000 and 2005, we found an important digital divide among Costa Rican households according to income levels while 589% of the households of the wealthiest quintile had computers in the home (Figure 35), only 57% of the poorest households have them Source: CAATEC, based on INEC Multipurpose Household Survey figures,

19 Los Costarricenses en la Economía Basada en el Conocimiento Figure 35 Evolution of computer penetration in homes by income level (quintiles), Source: CAATEC, based on INEC Multipurpose Household Survey figures, In the case of Internet penetration in Costa Rican households (Figure 36), we once again observe an important digital divide: 315% of the richest households have such access, but the Internet is almost absent in the poorest households (11% in quintile 1 and 14% in quintile 2) Figure 36 Evolution of Internet penetration in homes by income level (quintiles), The data in Figures show a deepening of the digital divide, with increases in coverage taking place almost exclusively in the richest households (quintiles 4 and 5) This makes it important to consider the government policies that have been developed in Costa Rica to combat this issue a topic that will be discussed in detail in Section 4 of this document Finally, it is interesting to note the existence of an important digital divide within equivalent income quintiles, when urban and rural areas are compared We can see in Table A1 of the Statistical Appendix that in the poorest households (quintile 1), 613% of households in the urban area have at least one phone line, but the corresponding percentage is less than half of that (298%) in rural areas; a similar result is seen when comparing the penetration of other ICTs, especially computers, in equivalent quintiles in rural and urban areas c The Digital Divide by region Costa Rica can be divided into six regions, as shown in Table A2 of the Statistical Appendix During the five-year span covered in our study, the Central region (which contains the major metropolitan areas of the country) had the highest ICT coverage in Costa Rica in the case of 2005, much higher than the coverage in other regions In the case of residential telephony, for example, the coverage was 747% in the Central region, compared to 468% in the sparsely-populated Huetar Atlantic region (see Figure 37) Source: CAATEC, based on INEC Multipurpose Household Survey figures,

20 ICTs in Costa Rican households: Figure 37 Evolution of residential telephony penetration by region, In the case of computers, the digital divide is wider - 352% of homes in the Central region have a computer, while only 106% of homes in the Huetar Atlantic region do (Figure 39) Figure 39 Evolution of computer penetration in homes by region, Source: CAATEC, based on INEC Multipurpose Household Survey figures, In the case of cellular telephony, the coverage was once again highest in the Central region (582%), while the lowest cellular coverage was found in the mostly rural Brunca region, with 327% of households having a cell phone account (Figure 38) However, we also note that cellular coverage has greatly increased in all regions Figure 38 Evolution of cellular telephony penetration by region, Source: CAATEC, based on INEC Multipurpose Household Survey figures, With regard to Internet access, the Central Region once again has the highest penetration (14%), while the lowest figures are seen for the primarily rural Brunca and Chorotega regions 32% in both cases (Figure 310) Source: CAATEC, based on INEC Multipurpose Household Survey figures,

21 Los Costarricenses en la Economía Basada en el Conocimiento Figure 310 Evolution of Internet penetration in homes by region, Figure 311 Evolution of residential telephony penetration by educational level, Source: CAATEC, based on INEC Multipurpose Household Survey figures, d The Digital Divide by education levels and occupations of heads of households Table A3 of the Statistical Appendix shows ICTs in Costa Rican households according to the level of education of heads of households; it can clearly seen that in general ICT penetration increases with increases in the level of education of the head of household In the particular case of residential telephony (Figure 311), as opposed to the situation for other ICTs, coverage has grown very little or is actually at a standstill, a situation which may be in part due to the growth in the use of cellular telephones as a substitute for fixed-line telephones Source: CAATEC, based on INEC Multipurpose Household Survey figures, Cellular telephony is present in 836% of the households whose head of household has a university degree, while only 360% of the households whose head of the household has a primary school education and 149% of the households whose head have not completed any major level of formal education have cell phones (Figure 312) Figure 312 Evolution of cellular telephony penetration by educational level of the head of the household, Source: CAATEC, based on INEC Multipurpose Household Survey figures,

22 ICTs in Costa Rican households: Similar asymmetries are observed when analyzing access to cable television while 536% of households whose head has a university degree have this service, this is true of only 31% of the households whose head has not completed primary education (Table A3) Figure 314 Evolution of Internet penetration in the home by educational level of the head of the household, In the case of computers, there is 691% penetration in households whose head has a university degree, and 29% in households whose head has not completed primary education (Figure 313) Figure 313 Evolution of home computer penetration by educational level of the head of the household, Source: CAATEC, based on INEC Multipurpose Household Survey figures, Source: CAATEC, based on INEC Multipurpose Household Survey figures, In the case of Internet access, penetration levels vary from 360% in households whose head has a university degree to 01% in households whose head has not completed primary education (Figure 314) Further consideration of the data for ICT penetration in homes, according to the level of education of the head of the household, shows very little growth for residential telephony (Figure 311) and a significant spurt in cellular telephony (Figure 312) The most important growth in cable television, computer and Internet access penetration is seen in households whose head has a university degree It is interesting to see that growth in cable Internet is seen in all households whose head has completed some level of formal education (Table A3), and it is especially important to note that Internet access is almost completely absent in households whose head has not completed any level of formal education 15

23 Los Costarricenses en la Economía Basada en el Conocimiento In keeping with previous results, the figures in Table A4 of the Statistical Appendix show that access to ICTs in Costa Rican households is strongly associated with the occupation of the head of household The coverage of residential and cellular telephony is very high (944% and 896% respectively) for households whose head of household occupies a position in high-level administration in public or private organizations On the other hand, as we move towards occupations demanding less education and training, the coverage of residential and cellular telephones decreases significantly Very similar results are observed when the penetration of other ICTs are analyzed with respect to variations in the occupational level of the head of household; in the cases of computers and Internet access, there is a significant difference in penetration between households whose heads occupy higher administrative positions, or work as scientists or intellectuals, and other households whose heads of households work in occupation requiring less formal education, such as commercial sales, services provision, agriculture and fishing, handicrafts, construction, and equipment installation and repair When analyzing the evolution of household ICT coverage with respect to the occupations of heads of households, the only technology whose penetration has increased significantly in all occupational categories is cellular telephony In the case of Internet access, on the other hand, the digital divide has increased in Costa Rica between the years 2000 and 2005 (Table A4 of the Statistical Appendix); in households whose head works in higher administration, science and other intellectual activities, and other technical pursuits, Internet access increased by 12, 11 and 10 percentage points, respectively, while in households whose heads work in activities demanding less education, growth in coverage ranges between 1% and 5% In households whose head provides unskilled non-qualified labor, Internet coverage increased from 04% to 195% during the five years covered in this study e Who uses the Internet, where do they use it, and what do they use it for? An important area to study to better understand the evolution of ICT access and use by citizens is that of who, precisely, uses the Internet in a household, where they use it and what they use it for The data that help us to answer these questions for the years 2000, 2001, 2003 and 2005 are presented in Table A5 of the Statistical Appendix 12 The figures are shown for all Costa Rican households for those households with direct access to Internet through phone lines (dial-up, ISDN and ADSL) or cable modems, and those households without direct access to Internet in their homes Who uses the Internet? The data in the first line of Table A5 show that the number of households with at least one Internet user has grown appreciably in Costa Rica between 2000 and 2005; while in 2001, 194,161 Costa Rican households had at least one member who used Internet, in 2005 this figure had increased to 436,040 households an annual growth rate of 224% In other words, approximately 385% of Costa Rican households are participating in the KBE through the use of the Internet by one or more their members, in the home or outside it Unfortunately, the 2000 MHS did not contain certain questions that were later included in the 2001, 2003 and 2005 surveys, which made it impossible to directly compare 2000 results with those of later years, as was done in the previous sections We therefore principally compare 2001 and 2003 results with those of According to the National Institute of Statistics and Censuses (INEC), there were 1,132,019 Costa Rican households in

24 ICTs in Costa Rican households: The number of households in Costa Rica with at least one Internet user is almost three times higher in the group of households without connectivity (321,583) as that for the group of households with direct Internet access (111,482) This shows the existence of a very strong demand for Internet access which would not be visible if we considered only figures for access in Costa Rican households, where, as mentioned previously, only 102% of homes had Internet access in When we ask who the most frequent Internet users are in Costa Rican households, the overall figures for 2001, 2003 and 2005 uniformly indicate that children occupy this position (659%, 660% and 677% of households, respectively, had children using the Internet in those years) The presence of the National Educational Informatics Program (Programa Nacional de Informatica Educativa [PRONIE]) of the Ministry of Public Education and the Fundacion Omar Dengo, which will be discussed in the following section, undoubtedly contributes to this finding, as does the possibility of access in locations such as Internet Cafés It is interesting to observe that the relative importance of children as the principal Internet users does not vary greatly between households with and without home Internet connectivity (for example, for the years 2001 and 2005, the percentages in homes with connectivity are 704% and 698%, while the figures for homes without connectivity are 644% and 674%, respectively) In 2005 heads of households used the Internet less than their children only in homes without connectivity, which has clear implications for the relative ease with which those children encounter other means of accessing the Internet The primacy of younger Internet users in Costa Rican households is emphasized even more when we consider all homes in which there is only one Internet user; in this case 395% of all those single users are children This percentage is even higher in the case of households without connectivity (466%), but far lower in the case of households with connectivity (199%) Where do they use the Internet? Table A5 of the Statistical Appendix shows, for all households with at least one user, where household members most frequently use the Internet In general terms, Internet Cafés rate highest, followed by workplaces, educational centers and homes (558%, 422%, 270% and 248% respectively) Internet Cafés are especially important as the principal place to use the Internet in homes without connectivity (687%), while in homes with connectivity the home itself is the overwhelmingly most popular place to use the Internet (966%), followed by the workplace (513%); overall, Internet Café use has steadily increased through the years, but notably more so in the case of members of households without Internet connectivity in the home 14 Of course, part of the demand for Internet access outside the home may be due to the higher costs of home connectivity - a subject that is explored in section 4 of this document 17

25 Los Costarricenses en la Economía Basada en el Conocimiento What do they use the Internet for? The figures of Table A5 of the Statistical Appendix show that that the most frequent activities carried out through the Internet are searching for information (800%) and communication through electronic mail, international calls or chatting (783%) This is consistent with Heeks comments (2002) concerning the importance of ICTs in facilitating information transmission and communication The relative importance of Internet activities does not vary significantly between homes with and without Internet connectivity, except in the case of electronic mail It may be concluded from the foregoing that children in Costa Rican households are the most frequent users of the Internet, and that Internet Cafés are increasing in importance as a means to access the Internet, especially for members of households without connectivity Connecting homes to the Internet seems to result in a wider range of users, a wider range of uses, and a wider range of places in which the Internet is accessed (this last finding is not due simply to the addition of another place to access the Internet the home to the list of possible alternatives) Table A6 of the Statistical Appendix shows the same type of results as Table A5, this time dividing households into those with and without connectivity in urban and rural areas This shows children to be the most frequent Internet users in both urban and rural households It also shows that in the case of households with connectivity, the percentage of heads of households that use the Internet is similar to the percentage of their children that use Internet, for both rural and urban areas Internet Cafes are also shown to be an important location for Internet access by members of homes without connectivity in both urban and rural areas We may conclude that home connectivity, and not geographical zones, is the principal factor that creates differences in the type of user, the uses of the Internet, and the places in which the Internet is accessed in Costa Rica Data in the Statistical Appendix show that income level (Table A7) and educational levels of heads of households (Table A8) are also very strongly related to variations in types of Internet users, location of Internet use, and types of Internet use; since we previously saw that presence or absence of home connectivity was also strongly related to income and education, these new findings are not surprising 18

26 4 Policies implemented to reduce the digital divide As has been the case in many other countries, Costa Rica has during the last years designed and implemented policies intended to reduce the digital divide These can be divided into four areas: i) development of infrastructure and facilitation of access to ICTs (mostly residential and cellular telephony, but also the Internet); ii) development of skills needed to creatively use ICTs; iii) development of local Internet content; and iv) affordable access to ICTs (especially telephony, computers and Internet) by all citizens We discuss these areas individually below a Infrastructure and Internet access policies As shown in Section 3, the penetration of residential and cellular telephony in Costa Rican homes is higher than that of computers, cable television and Internet This is especially interesting given the high level of penetration of residential telephony and computers in the highest-income families (quintiles 4 and 5) in the country (Figure 41), since Internet access can be quickly provided to many people over these same phone lines using ADSL (Asymmetric Digital Subscriber Line) technology especially in areas with high population densities Costa Rica has the potential to significantly promote Internet use through this type of technology 15 Figure 41 Penetration of residential telephone, computer and ADSL Internet connectivity in Costa Rican homes by income quintiles, 2005 Source: CAATEC, based on INEC Multipurpose Household Survey figures, A similar situation was found when we considered the possibility of Internet access through cable modems while a significant percentage of higher-income Costa Rican households have cable television, very few of them have Internet service provided over these cables (Figure 42) When we investigated why more cable TV clients had not chosen to obtain Internet access from their cable providers, we found that in some cases this situation was due to conflicts between cable providers and organizations that own the local electrical power infrastructure A technology which allows high-speed data transmission over the copper cables used to provide residential telephony; asymmetric indicates that the speeds at which data are received are typically lower than those at which a client can send data (text, data, images and voice) 16 In a situation that was brought to our attention by Mr Manuel Mendez, Administrative Financial Manager of the Amnet cable company, cable companies cannot provide cable TV clients with cable Internet in the city of Cartago because they cannot obtain permission from the board of directors of the Electrical Services company of Cartago (JASEC) This prevents an important increase in Internet access in one of the major cities in the country, and therefore significantly impedes the overall transition of the country towards a KBE 19

27 Los Costarricenses en la Economía Basada en el Conocimiento Figure 42 Cable television and cable Internet in Costa Rican homes by income quintiles, 2005 Figure 43 Distribution of broadband connections by type of technology, 2002 Source: CAATEC, based on INEC Multipurpose Household Survey figures, The technologies that are most frequently used to provide high-speed broadband Internet access at a world level are exactly these DSL and cable modem technologies that we have just finished discussing, as shown in Figure Other types of broadband technology are rapidly increasing in popularity as well, but they are not in extensive use in Costa Rica, and are therefore are not objects of analysis in this document The most important are these new technologies are various types of wireless connectivity, including WiFi short range connectivity used in households, airports and other public places, as well as the more modern and longer-range WiMax technology, which can be used to offer Internet connectivity over much wider areas at significantly lower costs Source: Taken from Figures 1 and 4 of Cox (2006, pages 5 and 8) Costa Rican authorities who were aware of the potential of high-penetration residential telephony to promote broadband access created the Advanced Internet Project in , which was intended to promote use of ADSL technology, which allows the simultaneous transmission of high-frequency data signals and low-frequency voice signals over copper phone lines to homes, companies, hospitals, schools, and other public institutions The Project was intended to connect up to 100,000 broadband Internet users by the end of 2001, and 50,000 more in each succeeding year If the goal had actually been reached, Costa Rica would have had a penetration rate of 27 broadband Internet users for every 100 inhabitants - the unquestionable leader in Latin America, and more connected in terms of broadband than even countries like Finland and Ireland at that time The real result, however, was a penetration rate of almost zero, as shown in Figure The importance of having broadband Internet access is discussed in the penultimate section of this document 18 For a detailed description of the Advanced Internet Project see the seminar Costa Rica in the Digital World Final version, CAATEC, November 2001 (wwwcaatec org) 20

28 Policies implemented to reduce the digital divide Figure 44 Penetration of broadband Internet in a selected group of countries, 2001 and 2004 Source: CAATEC, based in figures in Table 15 of UNCTAD (2005) Source: CAATEC, based in figures in Table 15 of UNCTAD (2005) In the year 2001, countries like Korea, the United States, Denmark, Finland, Sweden, Norway, Switzerland and Canada had low broadband Internet penetration because they were only beginning to understand the importance of this tool for their economic growth and development The Advanced Internet Project shows that Costa Rican authorities had as clear a vision as those other countries clearer than those of other Latin American countries, if broadband penetration at the time is any indicator, since broadband Internet penetration in countries such as Argentina, Brazil, Colombia, Chile and El Salvador was practically nonexistent in the year 2001 Figure 44 allows the advances made in broadband Internet penetration (ADSL and cable modem) in Costa Rica between the years 2001 and 2004 While other countries in the group shown moved significantly towards higher broadband penetration, Costa Rica was left behind, outperforming only Colombia Broadband Internet penetration in Costa Rica in the year 2004 hardly reached 07 broadband Internet users per 100 inhabitants (instead of the 55 broadband Internet users per 100 inhabitants goal set by the Advanced Internet project) This figure compares unfavorably to those of other countries such as Chile (57), Argentina (13) and Brazil (12), while the increase in broadband Internet penetration in the Nordic countries (Sweden, Denmark, Norway and Finland), Korea, the United States, Canada, Ireland and Switzerland was even more impressive during those three years 21

29 Los Costarricenses en la Economía Basada en el Conocimiento The execution of the Advanced Internet project was obviously not carried as was foreseen in , but Costa Rica still has the strengths in terms of telephone and computer penetration pointed out by the authorities in 2001 when the Advanced Internet project was launched A new version of The Advanced Internet project should be strongly promoted, not only to significantly increase the penetration of broadband Internet in the short and medium term, but also to reduce the divide that is being generated between Costa Rica and an important group of countries which are its competitors in different areas at a global level It is also vitally necessary to support private initiatives aimed at promoting the penetration of broadband Internet access through cable television infrastructure The results discussed in this section clearly show the absence of well-implemented initiatives to effectively promote broadband Internet access in Costa Rican homes It is necessary for this country to have well-designed programs with the same aims as the original Advanced Internet project, as well as any other initiative which promotes the successful transition of Costa Rica towards a KBE through increased availability of broadband Internet access b Development of skills for creative ICT use Costa Rica has been a pioneer in promoting the development of skills for creative use of ICTs, first in primary schools and now in secondary schools as well Figure 45 shows the coverage of the training offered by the Programa Nacional de Informatica Educativa (PRONIE) of the Ministry of Public Education (MEP) and the Fundacion Omar Dengo (FOD) in primary schools since 1988 (with coverage increasing from 145% of all primary students to 534% in ), and beginning in 2002 in secondary schools, where currently slightly more than twothirds of all students are exposed to training in ICT use Figure 45 PRONIE coverage, by number of students reached in elementary and high schools, Source: CAATEC, based in figures provided by the Fundación Omar Dengo 19 For a brief description of the problems related to the implementation of the Advanced Internet project, refer to the article Cuatro años perdidos (Ricardo Monge) La Nacion, October 2nd, 2005, nacioncom/ln_ee/2005/octubre/02/opinion4html PRONIE has not reached all elementary school students in Costa Rica, but it has strongly promoted the creative use of ICTs since its creation, principally in the areas of computer and Internet use for Costa Rican children, adolescents and adults In fact, this program could be one of the main reasons for the relatively high percentage of Internet users in Costa Rica, in spite of the low penetration of Internet use (102%) in Costa Rican households in the year Percentage of elemantary school students who recieve PRONIE services 22

30 Policies implemented to reduce the digital divide With this in mind, we need to ask if PRONIE has promoted the creative use of ICTs (especially Internet) in all types of Costa Rican households The information in the Internet module of the 2005 MHS allows us to investigate this question When we analyzed the percentage of students using Internet in that year, taking into account the level of their studies and their household income level, we found that while 471% of the children from the richest households who were attending elementary school use the Internet, only 34% of the children from the poorest households who were also attending school do so (Figure 46) Figure 46 Internet use by elementary and high school students, by household income level, 2005 Source: CAATEC, based on INEC Multipurpose Household Survey figures, This finding is consistent with Hewitt s (2004) findings that PRONIE programs have been mainly concentrated in larger (enrollments of 500 or more students) primary schools, which tend to be located in middle- and upper income areas a strategy which was pursued to try to reach the largest possible number of elementary school students We see no reason to criticize this strategy, which is in large part responsible for the extraordinary results of the MEP and FOD programs; however, we do feel that the authorities should make all possible efforts to provide the resources necessary to extend the programs to more of the smaller schools in the country, many of which are in poorer and more rural areas Turning to Internet access by high school students, a situation similar to that of the elementary students is seen While 812% of young people from the wealthiest households that attend high school were Internet users, only 23% of young people from the poorest households also attending high school are Internet users (Figure 46) It is important to remember here that while in elementary education enrollment of children of school age is almost total, a high percentage of poorer Costa Ricans of high school age do not pursue their studies, as shown in Figure 47 This helps us to understand why the percentage of students from poor households attending high school and using the Internet is higher than the percentage of students from poor households attending elementary education who are Internet users 23

31 Los Costarricenses en la Economía Basada en el Conocimiento Figure 47 Elementary school and high school enrollment by income quintiles, 2005 * * Including children from 6 to 11 years old as of elementary school age and from 12 to 17 years as of high school age Source: CAATEC, based on INEC Multipurpose Household Survey figures, These results should be of great interest to Costa Rican authorities, since Cespedes and Jimenez (2006), and a recent World Bank 21 study have both pointed out that the lack of education within the members of the poorest households in Costa Rica is one of the main determinants of their continuing poverty In addition to the program that authorities are currently implementing to retain students in high school 22, it would be appropriate to design and implement a strategy which guarantees the total coverage of PRONIE not only in public primary schools, but also in public secondary schools This is the best way to guarantee appropriate education in the creative use of ICTs by all Costa Ricans, an indispensable condition for a successful transition to a KBE In planning this strategy, care should be taken to take advantage of advances in wireless Internet access technologies to be able to extend access to even single-teacher schools, which are in general located in more rural and poorer areas far away from major population centers 21 See the Costa Rican Poverty Study, «Recovering momentum in the fight against poverty», Executive Summary, August 23rd, 2006, World Bank Document (Mimeo) 22 The Growing Together, Building Opportunities program, recently announced and in execution (2006) by the Ministry of Public Education c Internet local content To stimulate the use of ICTs by the majority of citizens, it is necessary to make sure that these citizens can clearly see the importance of their use One of the best strategies to achieve this goal is to design and implement electronic government services which not only facilitate citizens financial transactions with the government, but also their interactions with other public institutions, such as hospitals, health care enters, libraries, ministries, and municipal governments Costa Rica has not been successful in moving strongly towards true digital government, as has been demonstrated in several studies Montes de Oca (2002) found that less than one-third (31%) of Costa Rican public institutions offered on-line services to citizens, for instance, while Monge et al (2005) point out that in the case of micro-, small and medium-sized Costa Rican companies, less than 20% have used on-line services from any public institution in Costa Rica, and a recent study carried out by the University of Costa Rica showed that lack of Internet access in public organizations and their low level of interconnection, as well as their lack of information about citizen needs and preferences, are serious obstacles to achieving digital government in the country See Nacioncom/ln_ee/2006/septiembre/08/economia821300html 24

32 Policies implemented to reduce the digital divide d Affordable access to ICTs Access to ICTs primarily computers and the Internet is relatively more difficult from a financial point of view for low-income households than for wealthier ones Accordingly, since the end of the 1990s, the Costa Rican government has been implementing a series of programs to make the acquisition of these tools by less well-off citizens financially possible These initiatives have included the Internet Ready project and, more recently, the Acceso 24 program Unfortunately, these efforts have not produced the results that were expected, primarily because the financing mechanisms used in these programs generated final costs to potential buyers that were impossible to pay for many Costa Rican families 25 In addition, none of these projects have had the kind of monitoring and results-analysis mechanisms that are necessary to evaluate and improve ongoing implementation efforts Perhaps the main lesson to be learned from these efforts is that it is not possible to manage what cannot be measured; in the design and implementation of this type of project, not only should objectives and activities be clearly established, but also desired final products and results, and a series of verifiable milestones which can be used to evaluate progress and final results Figure 48 ICT costs as a percentage of Costa Rican household income, by quintiles of household income, 2005 Source: CAATEC, based on 2005 INEC MHS figures In the specific case of broadband Internet connectivity for Costa Rican households, it is clear that this service was not affordable in 2005 for Costa Rican households in the lowest three quintiles of income distribution Figure 49 demonstrates that while the cost of basic ADSL Internet service only represented 25% of the monthly income of the richest households in the country, it represented 289% of monthly income for the poorest 27 The importance of successful projects of this sort is emphasized when we look at concrete figures for the relative cost of ICT access in Costa Rica for poorer households and wealthier ones (Figure 48) This information does much to explain why, as discussed in Section 3 of this document, higher-income households have far more access to ICTs such as cable television, computers and Internet access For a detailed description of these programs, see Monge and Chacon (2002) 25 For example, in the Acceso program, financing depended on the use of a credit card, which implies much higher overall costs than the alternative strategy of providing personal loans 26 A detailed analysis of the items included by INEC under the heading of expenditures on ICTs allows one to see the wide range of articles and services including under this heading, many of which are not present in lower-income households 27 The estimate was made with official numbers from ICE for the monthly cost of a 256/128 kpbs ADSL connection (US$41) in 2005 In addition, the cost of installation (a prorated US$351 per month over one year) was included, plus the minimum cost of residential telephone service (US$387 per month) The figures for the average monthly income of each quintile of the income distribution for 2005 of Costa Rican households come from INEC 25

33 Los Costarricenses en la Economía Basada en el Conocimiento Thanks to the substantial reduction in the cost of ADSL connectivity in the middle of 2006, the percentages of ADSL use for the year 2005 changed significantly and positively 28 In fact, with the new rates for ADSL Internet service, the percentage of the poorest households incomes needed for connectivity was reduced to 167% for the first quintile and 85% for the second quintile, as can be seen in Figure 49 However, in spite of the significant reduction in the cost of ADSL connectivity, it continues to be high for most Costa Rican households, especially when the cost of obtaining a computer is considered Figure 49 ADSL Internet connectivity as a percentage of household income* by ADSL penetration in the home and income quintiles, 2005 In the case of cable modem access to the Internet, the relative costs are similar to those for ADSL connectivity: for the richest households the cost of cable Internet access only represents 27% of monthly income in 2005, while for the poorest households the cost represents 307% of monthly income (Figure 10) 29 Although the price of cable modem access has also decreases in 2006, it did not decrease as much as the cost of ADSL access 30 Figure 410 shows the impact of such reductions in terms of the buying power of different quintiles of Costa Rican households; the cost of cable access to the Internet, although lower, continues to be inaccessible for many Costa Rican households Figure 410 Cable Internet connectivity as a percentage of household income* by cable Internet penetration in the home and income quintiles, 2005 * Estimate based on data from the MHS, 2005 Source: CAATEC, based on 2005 INEC MHS figures, and figures from ICE * Estimation based on data from the MHS, 2005 Source: RACSA and CAATEC, based on 2005 INEC MHS figures 28 The new monthly rate approved by the Regulating Authority for Public Services (ARESEP) for a 256/128 kpbs ADSL connection is US$19, instead of US$41 29 The estimate was based on official RACSA figures for the monthly cost of a 256/128 Kbps cable Internet connection (US$25) in 2005 The minimum monthly cost of cable television (US$265) was also included The figures for the average monthly income of each quintile of the income distribution for 2005 of Costa Rican households come from INEC 30 The new monthly rate approved by RACSA for a 256/64 Kbps cable Internet connection Is US$17 instead of US$25, a reduction of 32% It is important to point out that the upstream speed in the new basic package is lower than that of the previous basic package 26

34 Policies implemented to reduce the digital divide From the analysis of the data in Figures 49 and 410, we can conclude that broadband Internet access continues to be financially inaccessible for most Costa Rican households, calling for reductions in the costs of these services The constantly falling prices of basic desktop personal computers 31 brings them every day more within the reach of poorer Costa Rican households, contributing to a promising drop in the overall costs of providing widespread broadband Internet access to Costa Rican homes The main conclusion that emerges from the analysis in this section is that although Costa Rica has created major initiatives to reduce the digital divide, their implementations have not been efficiently organized, and their results have not been impressive in spite of the fact that a substantial part of the necessary infrastructure for broadband Internet access already exists In addition, incomplete coverage of the national program for computer and Internet education persists in primary and secondary public education, while the development of local Internet content, especially as it relates to digital government initiatives, is still incipient Finally, the programs intended to promote the acquisition of computers and Internet access by Costa Rican households have not provided the expected results, due, among other things, to unacceptably high final costs to the target ICT users It is necessary to coordinate the different policies and programs that have been discussed here, and for Costa Rican authorities to constantly monitor the implementation and results of the initiatives that these policies and programs produce we again emphasize the dictum that it is not possible to manage that which cannot be measured We also believe that a responsible party should be designated at the highest levels of the government to coordinate the actions of the different entities in charge of implementing these and other policies aimed at the reduction of digital divides within Costa Rica, and between Costa Rica and other countries 31 Personal computers can now be obtained for US$ 400 in the local market 27

35 5 Costa Rican Internet Users Thanks to the information gathered through a special module in the 2005 MHS devoted to Internet use by each one of the members of Costa Rican households, it is possible to study individual users from different points of view the different types of connectivity that they use within and outside the home, their ages, the frequency with which they use the Internet, and the use that different types of individuals make of the Internet for communication, study, searching for information, entertainment, electronic banking and on-line purchases We are also able to study the use of the Internet by full-time workers, and see variations in this use according to education levels, occupations and the specific sectors of the economy in which these individuals work The percentage of Costa Ricans that use the Internet is significantly higher in households with connectivity, either dial-up or broadband (680% and 820%, respectively) that in those households whose members must go outside their homes to use the Internet (164%) Moreover, the percentage of Internet users that use this tool daily is significantly higher in the case of households with broadband connectivity (780%) that those with dial-up connectivity (438%) or with no connectivity in the home (240%) These results clearly show the importance of having broadband Internet access in the home to promote Internet use, thus facilitating the insertion of Costa Ricans into the KBE We conclude this section with a discussion of the degree of digital literacy of Costa Rican knowledge workers, as a preliminary to the study of the potential for telework in Costa Rica, which is presented in Section 6 of this document a Users and connectivity type The second column of Table 51 presents the percentages of Internet users in three different types of households with no household connectivity, with dial-up connectivity, and with broadband connectivity The third column shows the percentage of those Internet users which use the Internet on a daily basis We can see that less than one-fourth (221%) of Costa Ricans are Internet users, and that approximately onethird (336%) of these users are daily Internet users 32 This means that there are more than 865,000 Costa Rican users of the Internet, and approximately 290,000 daily Internet users 32 The reader should keep in mind that the first column of Table 51 refers to percentages of all Costa Ricans while the succeeding columns of the same Table refer to percentages of Internet users 29

36 Los Costarricenses en la Economía Basada en el Conocimiento Table 51 Internet users by type of connectivity, 2005 Internet Use (% of Internet users) Types of homes % Users % Daily Users Send & Receive Mail, Calls Study or Do Homework Search for Information Entertainment Electronic Banking Purchase Services or Products Without connectivity in home 1637% 2405% 6917% 6350% 7069% 4235% 1415% 418% With dial-up connectivity in home 6796% 4377% 7952% 6078% 7819% 5261% 2698% 1080% With dedicated connectivity in home 8162% 7799% 9184% 5900% 8825% 7143% 3943% 2670% TOTAL 2208% 3359% 7385% 6240% 7418% 4757% 1970% 788% Source: CAATEC, based on 2005 INEC MHS figures Table 51 shows that Costa Ricans with broadband connectivity in the household use the Internet more to carry out on-line commercial transactions such as electronic banking (394%) or purchases of products and services (267%) 33 than Costa Ricans that use dial-up Internet access in their households (270% e-banking and 108% online purchasing) or those Costa Ricans that must access the Internet outside their homes (in the office or educational centers, Web cafés, etc) (141% e-banking and 42% online purchasing) This result should immediately alert Costa Rican financial institutions to the advisability of designing credit programs that can make home Internet access more affordable, since doing so would promote the use of electronic banking services, whose use is highly beneficial for financial institutions 34 b Users and age Table 52 shows that the main users of the Internet in Costa Rica are between 12 and 35 years old a finding which is consistent with the results discussed in Section 3 of this document, which showed that children were almost always the Internet main users in the Costa Rican households Slightly more than 33% of youths of high school age (12 to 17 years), 377% of young adults between 18 and 25 years old and 276% of adults between 26 and 35 years old are Internet users It is interesting to see that daily Internet users tend to be older most notably, adults more than 26 years old As is to be expected, this same group uses the Internet more frequently to carry out commercial transactions (electronic banking and on-line purchases) Almost invariably the three major uses of the Internet are searching for information (742%), sending/receiving mail and making Internet telephone calls (738%) and studying or doing homework (624%) Entertainment is also an important activity of all the users of the Internet in Costa Rica, especially those with access to broadband Internet (714%) 33 Business-to-consumer or B2C electronic commerce 34 National and international evidence demonstrates the important reductions in costs for financial Institutions which make use of electronic banking (Monge et al, 2005) 30

37 Costa Rican Internet Users Table 52 Internet users by age, 2005 Hogares % Users % Daily Users Send & Receive Mail, Calls Study or Do Homework Search for Information Entertainment Less than 5 years old 368% 3150% 4812% 6753% 3708% 9256% 6-11 years old 1076% 1545% 3235% 8716% 4963% 6327% 153% 027% years old 3315% 1515% 6116% 9158% 6549% 5774% 217% 088% years old 3774% 3081% 7879% 7713% 7378% 5162% 1297% 646% years old 2760% 4549% 8265% 4847% 8224% 4248% 3148% 1270% years old 1923% 4578% 8060% 3069% 8317% 3200% 3704% 1213% More than 51 years old 736% 5252% 8828% 1400% 7759% 4233% 3742% 1766% TOTAL 7384% 6243% 7417% 4761% 1971% 788% Source: CAATEC, based on 2005 INEC MHS figures Internet Use (% of Internet users) Electronic Banking Purchase Services or Products Intensive use of the Internet for searching for information is common in all users more than 12 years old There are high percentages of persons that use the Internet to assist in studying in the age groups between 6 and 25 years of age - that is to say, during the ages in which a great majority of them should be enrolled in the formal educational system For those persons older than 12 years of age, the Internet is a valuable tool for communicating with others Finally, the use of the Internet for entertainment is highest among younger users, but substantial at all ages c Full-time workers i Users and educational levels When analyzing the level of Internet use of full-time workers according to their educational level, we see that those with higher educational levels use the Internet more While 746% of full-time workers with a university degree use the Internet, only 286% of those with a high school education and 34% of those with a primary school education use the Internet (Table 53) The frequency of daily users of the Internet is also higher among more educated workers Fulltime workers who have not completed primary education are not Internet users in Costa Rica In Costa Rica the economically active population is formally divided into two major categories: (i) Occupied and (ii) Unoccupied; the Occupied category can be divided into two subcategories (a) Full-Time and (b) Underemployed The full-time category includes people that work more than 47 hours per week, as well as those who decide to work a lesser number of hours, although it would be possible for them to work more if they so choose This group also includes independent workers (who do not have fixed wages), as well as those who have fixed wages at or above the minimum wage level established by law The group of full-time workers constitutes 740% of the economically active population in Costa Rica, and is the focus of interest of this chapter That is, we exclude the underemployed from our analysis 31

38 Los Costarricenses en la Economía Basada en el Conocimiento Table 53 Full-Time Workers who use the Internet, by educational level, 2005 Internet Use (% of Internet users) Full Time Employees by Education Level % Users % Daily Users Send & Receive Mail, Calls Study or Do Homework Search for Information Entertainment Electronic Banking Purchase Services or Products None Elementary School 341% 1626% 6944% 2437% 6906% 3644% 1214% 362% High School 2864% 3502% 8027% 3923% 7598% 4371% 2080% 762% University 7460% 5461% 8503% 4993% 8442% 4124% 3819% 1547% TOTAL 8285% 4539% 8102% 4189% 3139% 1240% Source: CAATEC, based on 2005 INEC MHS figures The principal uses of the Internet by fulltime workers are sending and receiving mail and making Internet telephone calls (828%) and searching for information (810%) The use of the Internet for electronic banking and the purchase of goods and services is directly related to education level as well, as can be seen by inspecting the last two columns of Table 53 ii Users, occupations and sectors sector of the economy in which they work Table 54 shows that Costa Rican workers occupations indeed influence their use of the Internet The second and third columns of Table 54 show that higher-level professional workers are the most frequent users of the Internet; while 748% of management-level workers and 705% of professionals, scientific and intellectuals are users of the Internet, only 558% of the workers in the unskilled non-qualified occupations use the Internet It is important to know if there are significant differences in Internet use among full-time workers-based on their occupations and the Table 54 Full-Time Workers who use the Internet, by occupation, 2005 Occupational Group % Users % Daily Users Send & Receive Mail, Calls Study or Do Homework Internet Use (% of Internet users) Search for Information Entertainment Higher Management public and corporate administration 7479% 6935% 9249% 3825% 9146% 4211% 4440% 2267% Professional, scientific and intellectual 7055% 5371% 8348% 4703% 8586% 4185% 4091% 1728% Mid-level professional and technical 5259% 5080% 8582% 4619% 8101% 4552% 3328% 1290% Administrative support 5052% 4080% 8222% 5156% 7899% 3865% 2894% 766% Local sales and direct service provision 1752% 1952% 7913% 4947% 7490% 3852% 1478% 527% "Qualified" Farming, Agriculture & Fishing 293% 2377% 8465% 1103% 8032% 6239% 5673% 1103% Craftsmen, construction, mechanics, design 1164% 2261% 7004% 3174% 7823% 3549% 1766% 768% Assembly, facilities & equipment operation 1230% 2252% 7585% 2471% 6734% 3933% 1377% 398% Non-qualified occupations 558% 1149% 7243% 4763% 6299% 4741% 301% 110% Electronic Banking Purchase Services or Products Source: CAATEC, based on 2005 INEC MHS figures 32

39 Costa Rican Internet Users Columns 4, 6, 8 and 9 of Table 54 show that higher-level full-time workers are those that make most use of the Internet to search for information, to send or receive mail and Internet telephone calls, and to engage in e-banking and online purchases There are no significant differences between categories of full-time workers in the use of the Internet for studying or doing homework (column 5) or for entertainment (column 7) findings of Monge et al (2005) about the low level of ICT use (computer applications and Internet use) by small and medium-sized businesses in the Costa Rican agricultural sector, compared to the manufacturing and services sectors When analyzing full-time employees Internet use according to the economic sector in which they work, the data in Table 55 show that workers in the agriculture and cattle raising (43%) and fishing categories (76%) make little use of the Internet - a result that is consistent with the Table 55 Full-Time Workers who use the Internet, by sector, 2005 Sector Agriculture and cattle raising Fishing Mines and quarries Manufacturing Industry Electricity, gas and water Construction Commerce and repairs Hotels and restaurants Transportation, storage and communication Financial services Real estate and entrepreneurial activities Public administration Teaching Health and social services Community and personal services Internet Use (% of Internet users) Purchase Send & Receive Study or Search for Electronic Services % Users % Daily Users Mail, Calls Do Homework Information Entertainment Banking or Products 429% 3250% 8545% 4307% 8125% 4771% 3894% 1174% 760% 3129% 7708% 3052% 8883% 3138% 1576% 1203% 2190% 805% 3185% 7876% 9167% 2124% 1062% 1513% 2417% 3944% 8209% 4297% 8196% 4234% 2911% 1521% 4363% 5811% 8277% 4710% 8371% 3678% 4495% 1572% 1015% 3943% 8592% 3326% 7695% 4949% 4579% 1795% 2532% 3316% 8021% 3788% 7380% 4091% 2238% 950% 1721% 3236% 8767% 4286% 8598% 4079% 1579% 833% 2689% 5288% 8621% 5202% 8014% 4809% 3568% 1311% 7476% 6056% 8641% 4779% 7768% 4254% 5366% 1041% 5340% 5717% 9154% 4390% 8645% 4835% 4293% 1621% 4962% 5207% 7703% 4054% 8694% 3651% 3177% 977% 5217% 3257% 7780% 6071% 8203% 3365% 2405% 976% 4074% 3950% 8146% 4746% 7869% 4111% 2268% 1648% 3559% 4191% 8653% 4881% 8209% 4706% 3308% 1513% Source: CAATEC, based on 2005 INEC MHS figures The sectors in which Internet use is most common are those of financial services (747%), real estate and entrepreneurial activities (534%), teaching (521%) and public administration (496%) Use of the Internet to send or to receive mail and Internet telephone calls does not vary widely between sectors, except for low use for this purpose in the mining sector On the other hand, the Internet is used by all types of workers to search for general information and to a lesser degree to study or to do homework, provide entertainment, and to for e-banking and online purchases The most frequent use of the Internet for electronic banking operations is found in the financial services (537%), construction (458%), electricity, gas and water (449%) and real estate and entrepreneurial sectors (429%) The least frequent use of the Internet for full-time workers is that of online purchases, which shows the incipient level of e-commerce in Costa Rica compared to other countries with higher levels of Internet penetration 33

40 Los Costarricenses en la Economía Basada en el Conocimiento iii Knowledge workers At the end of the last decade, several studies highlighted the importance of knowledge in achieving success in the modern world As Neef (1998) pointed out, the rapid and permanent growth of high technology services and highly qualified human resources means that only those individuals, organizations and countries which stand out in these areas will be successful in the new world economic order In order to investigate the degree to which Costa Rica s workers are able to actively participate in the KBE, we turned to a consideration of the degree of use of the Internet by Costa Rican knowledge workers Although all workers that creatively use knowledge and ICTs in their daily work can be considered knowledge workers, the MHS data was not structured to reflect whether individuals were knowledge workers in this sense or not As a crude approximation to defining knowledge workers, we therefore selected from existing MHS occupational categories those individuals who worked as highlevel administrators, as professionals, scientists, and other intellectual workers, and as technical and mid-level professionals (the first three occupational categories of Table 54) to represent Costa Rican knowledge workers The percentage of knowledge workers in each economic sector is shown on the horizontal axis of Figure 51, which shows that they are most common in teaching (805%), financial services (629%), health and social services (600%) and public administration (494%) Figure 51: Knowledge Worker office Internet use by sector, 2005 Source: CAATEC, based on 2005 INEC MHS figures 34

41 Costa Rican Internet Users Workers in all productive sectors face opportunities and risks associated with their capacity to creatively use digital tools Indeed, while workers who are highly qualified in the use of ICTs encounter every day a higher demand for their services and accordingly higher wages, workers who are less qualified in the handling of these tools face the challenge of possible displacement due to the growing importance of the skilled use of these technologies This situation gives rise to the need to understand the level to which Costa Rican workers have the necessary skills to participate in the KBE We will not attempt here to discuss all of the topics related to the challenges and opportunities that knowledge workers face in Costa Rica, such as the demand for their services, pay scales, requirements for creative use of ICTs in different types of jobs, and other topics related to the supply of this kind of worker, since this would exceed the scope of this document It is, however, particularly important to ask to what degree modern knowledge workers have access to ICTs, and where they have that access Figure 51 shows that knowledge workers have substantial access to Internet in their offices especially Costa Ricans that work in the areas of financial services (768%), electricity, gas and water (675%), public administration (656%), transportation, storage and communication (544%) and real estate and entrepreneurial activities (531%) To form an idea of the degree of the digital literacy of Costa Rican knowledge workers, we turned to a consideration of Internet use, without taking into account the different locations in which it might be used (office, home, school, Internet café, etc)the results of this analysis are presented in Figure 52, which shows us that the majority of knowledge workers in each sector, except those who work in agriculture and construction, are Internet users This shows that Costa Rica s knowledge workers are indeed involved in a major transition towards Internet use, positioning the country well for a transition to the KBE Figure 52: Knowledge Worker Internet use by sector, % % of KW that use Internet 9000% 8000% 7000% 6000% 5000% 4000% 3000% 2000% Transportation, storage and communication Mines and quarries Hotels and restaurants Agriculture and cattle raising Fishing Real estate and entrepreneurial activities Financial services Electricity, gas and water Public administration Manufacturing industry Commerce and repairs Construction Community and personal services Health and social services Teaching 1000% Usuarios de Internet en la oficina Usuarios de Internet 000% 000% 1000% 2000% 3000% 4000% 5000% 6000% 7000% 8000% 9000% Percentage ok knowledge workers (KW) Source: CAATEC, based on 2005 INEC MHS figures 35

42 6 The importance of broadband Internet for Costa Rica In the second half of the twentieth century, two important innovations arose almost simultaneously the Internet and cellular telephony They not only changed how telecommunications services were provided, but also provided a substantial boost for world economic growth As the penetration of these technologies grew especially in developed countries the telecommunications industry began to search for the next big thing which would propel new growth and fuel innovation The technology which comes closest to fitting that description at the present time is broadband Internet connectivity (ITU, 2003) a What is Broadband Internet? Compared to earlier dial-up Internet access technology, broadband Internet connectivity is significantly faster 36, is permanent rather than temporary, and is usually provided for a relatively low fixed price Broadband technologies can be divided into two main categories - those transmitting signals through physical media such as cables or wires, and those transmitting signals through the atmosphere without having to use physical media (wireless) Within the first category we find DSL (digital subscriber line) technologies, which use standard phone lines; cable modem technology that uses the fiber optic or coaxial cables of cable television providers; and power-line transmission, which the same infrastructure that brings electricity to homes 37 Wireless technologies include fixed wireless (for example, Wi-Fi and WiMAX) 38, satellite technologies, Wireless Local Area Networks (WLANs), third-generation mobile technologies, free space optic technologies, and mesh network technologies 39 b Why is it important to have access to Broadband Internet? Perhaps the simplest way to understand the benefits of faster broadband connections is to consider the reduction in time necessary to perform certain activities using this technology For example, if a user wants to download a 3 megabyte file to a computer from the Internet using dial-up connectivity, he or she would have to wait 7 minutes and 15 seconds; with a broadband connection that permits 512 kilobitper-second downloads, the wait would only be 47 seconds (Figure 61) Figure 61 Download times for a 3MB file using different connection technologies Source: ITU (2003): Figure The minimum speed for a broadband connection is usually considered to be 128 kpbs, as opposed to the 56 kbps of a standard computer modem 37 In Costa Rica this technology is being tested by JASEC and ICE (see wwwnacion com/ln_ee/2006/mayo/01/economia2html) 38 In Costa Rica a pilot project is being carried out with this technology (See www nacioncom/ln_ee/2005/noviembre/07/economia14html 39 For a detailed description of each one of these technologies, as well as other broadband technologies, See Birth of Broadband, ITU Internet Reports, chapter 2,

43 Los Costarricenses en la Economía Basada en el Conocimiento The always on aspect of a broadband connection can be as important as its increased speed When a computer can be constantly connected to the Internet without incurring additional cost for every minute of connectivity, it can become a home information appliance providing family members with information, entertainment and communication at any moment In developed countries, permanent connectivity has been show to have impacts in areas as diverse as recreation, the quantity and type of e-commerce activities, and even the growing presence of computers in kitchens, in addition to home offices 40 Broadband connectivity is also usually far cheaper than that provided by older dedicated connection technologies In Costa Rica, a 1 Megabit-per-second ADSL Internet connection costs US $38 per month; previously, a dedicated connection of similar speed cost 41 US $314 per month The greatly decreased costs of Internet connectivity using broadband technology make possible such scenarios as the following: A public health center uses a dedicated line to allow a doctor in another city to analyze x-rays taken of local patients If centers use ADSL instead of traditional dedicated lines for this purpose, the doctor can assist 8 health centers instead of one A farmers organization wants to send digital pictures of its members products to potential clients in Europe If this organization uses ADSL technology instead of traditional dedicated lines, the savings can be used to promote all members products Broadband Internet also provides a platform for network service development, generating new sources of employment in areas such as demanddriven e-commerce (music, movies, newspapers, sport events, etc), online sales of services (eg, auditing, design, data processing, publicity, research and development, etc), and much more (web sites, access to online financial services) We place particular emphasis on the ability of broadband Internet connectivity to allow knowledge workers to participate in telework, not only opening new markets for services, but also reducing demand for transportation infrastructure, decreasing traffic congestion, lowering pollution levels, decreasing fuel consumption and the need for foreign currencies to pay for this fuel Telework can be done for local employers or clients, or for employers or clients located in other countries outsourcing or offshoring employment opportunities that can provide new wealth for Costa Rican knowledge workers Without broadband connections between providers and clients, none of this is truly possible c Growth of world broadband penetration Constant, significant growth in broadband connectivity has taken place throughout the world in the present decade especially in terms of DSL connectivity (Figure 62) The advantages of broadband connectivity that we discussed in the last paragraph are obviously visible to many other people and businesses in many other countries 40With Broadband, the PC s Siren Call Is Tough to Resist <wwwnytimes com/2006/03/26/business/yourmoney/ 26counthtml>; Is Broadband Really Changing E-Business? <wwwecommercetimescom/perl/story/21658html>; If the Kitchen s Warm, It May Be the PC <wwwnytimescom/2003/12/11/technology/circuits/11kitc html> 41 Based on ICE figures, the cost of a traditional 1 mbps dedicated line varies between US$274 and US$354 per month, depending on the plan chosen (see wwwgrupoicecom/esp/serv/empresa/tele/gran/conect_nac/ lineas_dedicadas_tarifashtm), while the cost of a 1 mpbs ADSL connection is $38 per month (Accelera Premium Plan) 38

44 The importance of broadband internet for Costa Rica Figure 62: Broadband Internet growth by technology, June 2003 March 2006 Source: Cox (2006), Figure 3 Experts on the importance of Broadband Internet for economic growth (higher productivity and competitiveness) note that many countries have significantly increased their investments in this area, producing significant increases in the penetration of DSL and cable modem technologies Figure 63 shows the penetration of such technologies in a selected group of countries for 2005; comparing these penetration rates with the estimated penetration in Costa Rica for the year 2006 (slightly more than 1 connection for each 100 inhabitants) shows that the country still has far to go if it wants to achieve competitive levels of Broadband Internet penetration Figure 63 Penetration of Broadband Internet technologies in a selected group of countries, 2005 Source: CAATEC, based on figures from the OECD These results are even more significant when we consider that most of the countries included in Figure 63 continued to significantly increase broadband penetration during the last year (Q Q1 2006), as Figure 64 shows Costa Rica must not fail in carrying out initiatives or programs to promote significant, sustainable increases in broadband penetration if it wishes to move successfully towards a competitive position in the global KBE 39

45 Los Costarricenses en la Economía Basada en el Conocimiento Figure 64 Growth in Broadband Internet penetration in a selected group of countries, Source: CAATEC, based on figures from the OECD A useful strategy in this regard would be to implement a system of permanent monitoring of the growth of broadband connectivity in households, primary and secondary schools, small and medium businesses, and public institutions, The Cisco Broadband Barometer program already carries out such monitoring in countries such as Argentina, Brazil and Chile 42, and has just begun to operate in Costa Rica The results of this effort will be extremely useful in guiding future initiatives d Is telework possible in Costa Rica? Telework is one of the most important forces driving growth in broadband penetration around the world There are every day more people working from home; recent studies in Europe show that telework is not only well established in these countries but also continuously increasing in popularity 43, especially among independent workers (freelancers) and for small companies managed from the home Telework refers to the use of telecommunications to work outside a central office A traditional version of teleworking ( telecommuting ) involves employees working in their homes while connected to the offices of the companies that employ them (more exactly, to the Web site or Intranet of the company that employs them) using virtual private network (VPN) technology to protect the contents of their communications This type of work also includes connections between the company offices and mobile personnel, such as sales teams using mobile telephones, PDAs (Personal Digital Assistant) and portable computers with WiFi access 42 Eg, Argentina: wwwciscoredaccionvirtualcom/redaccion/articulodestacado/ ver_comunicadosasp?id= For more details see wwwpoint-topiccom 40

46 The importance of broadband internet for Costa Rica In addition to company employees working remotely, telework can also involve independent workers (who do not employ others) and small companies that are actually operated from a home (and which may hire other employees) These kinds of workers control their own activities, and their success may depend critically on their operating costs, In Europe, the BISER 44 program found that 221% of independent workers perform some kind of work from their homes, as compared to 65% of employees of traditional companies In a survey of broadband Internet users carried out by Point Topic 45, it was found that independent workers and smaller businesses operating from homes tend to use broadband Internet services more than employees of traditional companies working in company offices Both studies found that the number of male workers who engage in telework is twice that of women, contradicting the stereotype that working from home using the Internet is something done most frequently by women with young children in the home When considering the current situation in Costa Rica with respect to the level of skills for creative ICT use and home access to broadband Internet, it is important to ask if Costa Rica can really develop a teleworking capacity in the short and medium terms that will allow workers to receive the benefits discussed above We have already seen that knowledge workers are significant users of the Internet in most sectors, more than half of knowledge workers use the Internet (as shown in Figure 52) to communicate, to search for information and to carry out commercial transactions (e-banking and e-commerce) Figure 65 Broadband Internet penetration in Costa Rican homes by technology type, 2005 Source: CAATEC, based on 2005 INEC MHS figures However, there is little broadband penetration in Costa Rican homes (Figure 65), and only a small proportion of knowledge workers have access to broadband connectivity (ADSL, ISDN and cable modem) at home Figure 66 shows that less than 15% of knowledge workers in most sectors have access to broadband Internet at home 44 wwwbiser-eucom/ 45 wwwpoint-topiccom/search/defaultasp 41

47 Los Costarricenses en la Economía Basada en el Conocimiento Figure 66 Percentage of knowledge workers that have broadband Internet in their home, 2005 Source: CAATEC, based on 2005 INEC MHS figures On a more positive note, Costa Rican knowledge workers want to increase their access to broadband connectivity in the near future, as shown by their replies to a survey question asking if they intended to obtain such connectivity in the coming year Figure 67 shows the increase in broadband penetration that should result by the end of 2006, by sector of employment most notably in manufacturing; electricity, gas and water; hotels and restaurants; transportation, storage and communication; financial services; public administration; and teaching 42

48 The importance of broadband internet for Costa Rica Figure 67 Percentage of knowledge workers that have broadband Internet in their home in 2005, plus those which hope to have the service in 2006 Source: CAATEC, based on 2005 INEC MHS figures In general terms, it seems that the lack of home broadband penetration in Costa Rica is preventing a labor force that is capable of teleworking from their homes from actually doing so If we consider the telework opportunities that are present for Costa Ricans, both within the country and at an international level (services outsourcing/ offshoring), and the much higher penetration of home broadband in other competitor countries (Figure 68), it is obvious that Costa Rica faces an extremely serious challenge in this area 43

49 Los Costarricenses en la Economía Basada en el Conocimiento Figure 68 Household broadband Internet penetration in a selected group of countries, 2005 Source: CAATEC, based on 2005 INEC MHS figures, and data from Merrill Lynch Research In closing, it is important to note that the expected increase in ADSL and cable modem Internet access in Costa Rican households during the year , although it is significant (Figure 69), is insufficient to position Costa Rica as a regional leader in the penetration of broadband Internet in the short term Figure 69 Percentage of households with broadband Internet in 2005 and expected percentages for 2006 * Estimated penetration based in the results of the MHS of 2005 Source: CAATEC, based on 2005 INEC MHS figures 46 Based on the projection of the estimated demand from the 2005 MHS 44