Framework for legal ecosystem for ICT entrepreneurship in developing countries

I had the good fortune to present this morning on a panel at MIT on the issue of how to create a local “habitat” in developing countries for the successful growth of entrepreneurial activity in the information and communications technologies sector.  (The event is called “Workshop on Global ICT Education Program,” with a stellar list of sponsors and some very high-level participants from a diverse series of backgrounds and disciplines; I was clearly among the junior-most people in the room.  My friend and colleague Colin Maclay is our primary representative at the event.)  At the Berkman Center, we often talk about the need to create a legal “ecosystem” — not far from this notion of “habitat.”  I start from the premise that no single solution can work for all countries, whether developing or otherwise.  And I think of the legal regime as impossible to isolate from policy, business, technology, etc., which, I think, is why the Berkman Center has people from those disciplines among our community, despite the fact that we’re based at a law school.  I post these ideas here to invite further comment and refinement, as they are clearly just a starting point.

Here’s a stab at a series of four basic tenets that link the most successful legal ecosystems, from least controversial to most controversial (with the caveats that 1) these are much more easily said than done and 2) in order to have broad applicability the ideas must necessarily be pretty abstract):

I.  Basic Tenets, or Goals.

A) Rule of Law.  The ecosystem must have a certain commitment to the establishment and the perpetuation of the rule of law.  For instance, a business — or any other economic actor — needs to be able to rely upon the notion that their contracts will be enforced, that they can go to the legal system for recourse, and that a series of “wise constraints that set us free.”

B) Consistency, or at least Predictability, of the Regime without Imposition of Excessive Costs to Participate.  Any economic actor needs to be able to rely, to some extent, upon a set of assumptions before making an investment decision.  One aspect of this predictability: laws and policies that are written down and easy to access, and processes for approvals that can be understood.  The cost of this consistency, though, cannot be that costs to participate in economic activity related to ICT for development become too high.  Put another way, it’s important to seek to keep transaction costs with respect to the legal regime low, if at all possible, rather than setting up excessively high hurdles for participation in the economy.  (Dr. Hans Hoyer, my co-panelist, Executive Director of WorldLinks, noted that waiting periods for licenses can’t be too long, for instance.)

C) Limits on Corruption.  Over and over again, we hear that economic actors cannot succeed in one or another developing country ecosystem because those in positions of power are not making decisions on the merits.  Here, the legal regime needs to have both negative and positive aspects.  It’s negative in the sense that you don’t want the legal regime to get in the way, (i.e., you don’t want a legal regime that forces economic actors to have to pay in the form of bribery for approvals; it’s positive in the sense that you want an ecosystem that protects whistleblowers and punishes wrong-doers).  I know it’s not fully “PC” to say as much, but I’ve heard enough times that it’s essential to keep raising the problem and calling it what it is.  The idea here might also be about having a participatory regime – one where people can play a role in the decision-making process, to speak out and have an effect on legal and political outcomes — and about paying public officials sufficiently that they do not feel compelled to turn to “misallocating public resources” as a means of salary supplement.

D) Commitment to Competition.  This idea is the most controversial of the four tenets.  The pipes, for instance, that bring Net access to a country ought to be seen as a public good, a public throughway, on which people can compete, rather than choke-points that allow for centralized control and extraction of profits for one or a few actors.

[One good comment from the audience is that the order in which you tackle these four tenets matters a lot, and it may well be that their implementation relies upon the establishment of a tax base from which to pay qualified, neutral state actors and to establish the institutions to uphold the tenets.  It’s a point well-taken.]

II. Specific Issues to Address as First-Order Priorities.

Against this back-drop of four tenets, there are a series of specific decisions that have to be made with respect to the law as it relates to ICTs.  These decisions have to be made in the context of, and responsive to, the local environment.  I would be reluctant to proscribe any outcome on the following specifics, but highlight them as key problems to grapple with as first-order priorities:

A) Telecommunications regulation.  How do you deal with telecomms convergence?  Do you regulate telecomms differently from Internet?  How do you foster the development of new technologies, like wireless and VoIP, without excess disruption of the economy?  How do you regulate, if at all, VSAT terminals set up in urban – or rural – areas, as Dr. Hans Hoyer, my co-panelist and executive director of WorldLinks, mentioned?  Dr. Hoyer argued in favor of “progressive telecommunications policy,” which is certainly a laudable goal, depending, of course, upon what “progressive” means precisely in any given ecosystem. 

B) Pricing controls (closely related to point A). How do you make the access to the Net affordable?  How do you use the legal infrastructure to regulate pricing?  Is it just a matter of creating an environmental that fosters competition and, as such, that makes pricing affordable?  Or are limits on pricing (e.g., regulation of the sort that the state often does for utilities like electricity) a necessary step?

C) Intellectual property regime.   As Dr. Lee-in Chen Chiu, another co-panelist, mentioned, it’s critical to think through the balance between the interests of creators and the rights of the public.  This issue is about creators of all forms of media: digital media in the sense of music, movies, art, books, but also about software.  A variant: how do you deal with the question of whether the government should promote either open or proprietary software?  No one answer is right; harmonization is good, but it should not be the end-all, be-all.

III. A Few Things to Avoid.

A) There is no one-size-fits-all solution to most (any?) of these specific issues.  Certain lessons can be gleaned from broad experience, but there must always be sensitivity to local variation.  In particular, it’s a mistake simply to look to the US or EU model and adopt.  Likewise, it’s important to resist the wholesale export of US policies, especially on matters of intellectual property.  We don’t have it right yet, particularly with respect to digital media, software, pharmaceuticals and the like.  It’s a bad idea for us to be seeking to impose our current framework on other countries through various means of export (multilateral and bilateral treaties, e.g.).

B) It’s a tactical mistake to start by just adopting an “e-commerce law.”  There are important aspects of an e-commerce law, but the development of Net businesses rely on a much broader sense of the legal regime, and it should be on aspects of that goal that we focus right from the outset.

I should note by way of attribution that much of this basic framework is derived from conversations with lots of people around the Berkman Center and far beyond.  In particular, we worked on thoughts of this sort for last year’s BOLD series on Internet and Development, for which I wrote with Jim Moore and Urs Gasser a module on Entrepreneurship.

On a pedagogical note: I’m posting these thoughts also because they’re on the general topic that we’ll be discussing in our team-taught course on Digital Democracy at HLS later this term.  Thoughts, refinements, specific examples for or against are strongly encouraged. 

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