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International Economic Law and the Digital Divide : a New Silk Road? Kariyawasam, Rohan

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International Economic Law and the Digital Divide : a New Silk Road? Kariyawasam, Rohan International economic law and the digital divide : a new silk road? Kariyawasam, Rohan The copyright of this thesis rests with the author and no quotation from it or information derived from it may be published without the prior written consent of the author For additional information about this publication click this link. http://qmro.qmul.ac.uk/jspui/handle/123456789/2683 Information about this research object was correct at the time of download; we occasionally make corrections to records, please therefore check the published record when citing. For more information contact [email protected] INTERNATIONAL ECONOMIC LAW AND THE DIGITAL DIVIDE: A NEW SILK ROAD? A thesis submitted for the degree of PhD ROHAN KARIYAWASAM Queen Mary College University of London ABSTRACT The failure of the trade negotiations at Seattle, and the collapse of the negotiations at Doha have bought increased attention to the issue of development, aid, and the implementation of special and differential rights in favour of developing countries. This thesis looks to examine one aspect of the many issues facing developed and developing countries in the negotiations that lie ahead, specifically how international economic law can be used in the application of technological processes to help address the Digital Divide. At present, there is an emphasis on development and the needs of developing countries, and that such development needs to be sustainable. Research reviewed in Chapter 2 indicates that growing information technology levels leads to growth of GDP. Importantly the use of ICT‘s will foster growth in the trade of electronic goods and services (electronic intangibles). By making positive attempts to reduce the Digital Divide, DCs and LDCs will be in a better position to access the necessary ICTs required to help grow GDP and facilitate sustainable development. The thesis sets out various measures to help reduce the digital divide and founded in international economic law. Central to the thesis is a new Layering Theory that the Author argues will assist operators (both incumbents and Independent Service Providers) in the developing world to gain access to international backbone Internet networks at cost price, one of the main impediments to reducing the international digital divide. The Layering Theory sets out a procedure for accurately identifying the relevant market for providers of Next Generation Networks (NGNs) and services so that those operators who abuse their dominance by refusing to supply an interconnection service or access to a digital network can be compelled to interconnect their networks to those smaller domestic or third country Internet Service Providers (ISP) operators who require access. By gaining access/interconnection in this way, operators in DCs and LDCs will be in a much better position to take advantage of cheaper production costs to export electronic intangibles overseas. Also, the thesis sets out recommendations for reform of international telecommunications, new provisions on technology transfer to help DCs and LDCs access the ICTs needed to address the Digital Divide, including provisions on technology transfer found in the increasing take-up of bilateral and regional trade agreements—and if there is to be free trade in e-commerce—recommendations for reform of current WTO rules on the classification of electronic goods and services. However, the thesis also argues that the digital divide cannot be addressed without strengthening the human capital base in developing and least developed countries, and that this cannot happen without such states also giving greater effect to the enforcement of civil and political, and economic, social and cultural rights ―at home‖. The thesis asks whether it is possible to define a relationship in IEL between civil and political, and economic social and cultural rights as a collective for example in the form of the much debated and somewhat controversial Right to Development (the ―RTD‖ as defined in this thesis) on the one hand, with economic indicators, such Gross Domestic Product (GDP) and Foreign Direct Investment (FDI) on the other? And if so, how the RTD can be operationalised. I declare that this thesis is my own work: Signed: Dated: 1st July 2012 Rohan Kariyawasam 2 TABLE OF CONTENTS Contents…………………………………………………………………………….…3 Table of Cases, National Acts, Treaties and Other International Measures……………………………………..………………………………………..6 Abbreviations………………………………………………………………………...10 1. INTRODUCTION AND THESIS OVERVIEW………………………………………………………….......................14 1.1 Introduction………………………………………………………………14 1.2 Methodology and Overview structure……………………………………23 1.3 Limitations……………………………………………………………….38 2. THE RISE OF INTERNATIONAL DIGITAL NETWORKS: DEFINING THE DIGITAL DIVIDE……………………………………………………………41 2.1 Introduction………………………………………………………………41 2.2 A brief overview of the evolution of the infrastructure of the internet……………………………………………………………………….42 2.3 The Digital Divide……………………………………………………….50 2.3.1 Internet Diffusion/Access……………………………………………...55 2.3.2 IT Penetration………………………………………………………….59 2.3.3 Alternative Development………………………………………………61 2.3.4 Human Capital Base……………………………………………………63 2.3.5 Competition and Telecommunications Policy…………………………65 2.3.6 Innovation, Technology Transfer and Trade…………..………………69 2.4 Conclusion: Defining the Divide……..…………………………………71 3. INTERNATIONAL TELECOMMUNICATIONS…………………………….78 3.1 Introduction………………………………………………………………....78 3.2 The ITU……………………………………………………………………..82 3.2.1 Cooperation Agreement between the ITU and WTO…………………….84 3.2.2 Accounting rates and New Modes of Operation………………………….85 3.2.3 Interconnection……………………………………………………………90 3.2.4 VoIP………………………………………………………………………94 3.3 The WTO……………………………………………………………….. 96 3.3.1 Classification of Telecommunication issues…………………………….102 3.3.2 Network-based transactions and complementary services………….…...106 3.3.3 Electronic intangibles……………………………………………………108 3.4 Developments in multilateral telecommunications measures……………..109 3.4.1 Annexe on Telecommunications and the Reference Paper……………..109 3.4.2 The Reference Paper in light of Mexico-Telmex………………………...114 3.4. Conclusion………………………………………………………………..119 4. INTERNET INTERCONNECTION 4.1 Introduction………………………………………………………………..120 4.2 Overview of internet peering and transit………………………………….123 4.3 Overview of the players in the internet market and structural breakdown of a typical international backbone operator…………………………………...127 4.4 Anticompetitive effects of internet interconnection……………………….131 4.4.1 Further anticompetitive practices………………………………………..134 4.4.2 Abuse of market position………………………………………………..136 4.4.3 Settlements………………………………………………………………142 4.5 Internet Interconnection under the WTO………………………………….151 4.6 ITU Recommendation D.50 and the APEC Principles……………………155 3 4.7 Conclusion………………………………………………………………..157 5. OVERVIEW OF THE EUROPEAN FRAMEWORK FOR ELECTRONIC COMMUNICATIONS MARKETS………………..………………………….161 5.1 Introduction………………………………………………………………..161 5.2 The European Commission's (EC‘s) new regulatory framework for electronic networks and services (―New Framework‖)……………………..…………………163 5.2.1 Objectives………………………………………………………………..163 5.2.2 Instruments……………………………………………………………...163 5.2.3 Significant Market Power………………………………………………..165 5.3 Conclusion…………………………………………………………………168 6. A NEW LAYERING THEORY FOR REGULATING COMMUNICATIONS NETWORKS AND SERVCES?………………………………………… ..171 6.1 Introduction……………………………………………………………………..171 6.2 The Layered Policy Model……………………………………………………..173 6.2.1 The United States……………………………………………………………..174 6.3 A New Regulatory Framework for TCP/IP networks?…………………………178 6.3.1 How does the Commission define markets?………………………………….184 6.3.2 Market Share………………………………………………………………….187 6.3.2.1 Collective dominance/interdependent markets……………………………..188 6.3.3 Weaknesses in current test of Market Definition in Internet Cases…………..189 6.4. Applying the Layering Theory at the Multilateral Level………………………200 6.5 Conclusion………………………………………………………………………201 7. DEVELOPING COUNTRIES AND TELECOMMUNICATIONS………..206 7.1 Introduction……………………………………………………………………206 7.1.1 Background…………………………………………………………………..208 7.2 Developing Countries, the Reference Paper, and the Layering Theory……….210 7.3 Using the New Modes of Operation in reverse…………………………………219 7.4 ITU Recommendation D.50 and packet-switched networks…………………..223 7.5 Classification of Telecommunication Services in the next trade round……….226 7.6 World Summit on the Information Society……………………………………229 7.7 Conclusion……………………………………………………………………..241 8. TECHNOLOGY TRANSFER …………………………………….…………243 8.1 Introduction…………………………………………………………………….243 8.2 The position of developing countries………………………………………….245 8.3 Foreign Direct Investment……………………………………………………..249 8.3.1 FDI Internalised/Externalised transfers………………………………………250 8.3.2 FDI horizontal/vertical…………………………………………….…………253 8.4 Spillover……………………………………………………………………….257 8.5 Technology transfer at the multilateral level…………………………………..259 8.6 International investment agreements and technology transfer………………..265 8.7 Conclusion……………………………………………………………………..267 9. THE CLASSIFICATION OF ELECTRONIC INTANGIBLES IN THE WTO………………………………………………………………………………279 9.1 Introduction……………………………………………………………………279 9.2 Why be concerned with Classification?……………………………………….281 9.3 Structural differences between the GATS, GATT, and TRIPS………………..285 9.4 Establishing a legal framework…………………………………………………288 9.4.1 Legal/Economic rules for distinguishing between goods/services……………288 9.4.2
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