Entry 2

Entry 2

Entry 2
A weeklong electronic journal.
June 10 2003 2:33 PM

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Statue of Lenin, in front of my hotel
Statue of Lenin, in front of my hotel

Watching the sun rise over Ulaanbaatar early this morning, it was impossible not to feel a slight twinge of disappointment. Seen through my window, the city is a bland throng of Soviet-era office piles and run-down concrete apartment blocks. Dented minivans putter along the street below, the drivers hollering out destinations to the gathering crowds of commuters. Completing the sense of Stalinist desolation is the brooding statue of Lenin that looms over the small park in front of the hotel.

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But as I walk to my first appointment, my initial impressions are overturned. I catch the bright smiles and lively chatter of the Mongolians. The sidewalks bustle with sharply dressed men in suits and wingtips and well-groomed women in sunglasses and funky jeans, nearly all of them clutching mobile phones. Ulaanbaatarians are a strikingly fashionable lot.

Today, amid back-to-back meetings with Mongolian tech executives, I got an earful about what's going wrong with Mongolia's Internet policy. Here's an example: In most parts of the world, the 2.4 ghz portion of the radio spectrum is set aside for unlicensed use by low-power, short-range devices—like Wi-Fi (aka 802.11b) wireless Internet cards and cordless telephones—without government permission. The result has been an astounding explosion in the deployment of wireless Internet connections, from home networks to the T-Mobile hotspot at each of the 17 Starbucks on your block. In Mongolia, however, the regulatory authority has ruled that companies and users must obtain official licenses (and pay costly licensing fees) to use the 2.4 ghz range for any purpose. Even to set up a wireless home network requires government permission and the payment of fees. This policy can best be described as bonkers. As a practical matter, it forces Mongolians either to forgo the benefits of wireless networking or to go ahead and deploy wireless networks illegally. Predictably, many Mongolian companies are pursuing the latter tack, which gives rise to the kind of black-market activity that, over time, feeds corruption: Enforcement of the licensing requirement will tend to become arbitrary and subject to the payment of bribes.

Another example: The state-owned telecom company owns and operates most of the telecommunications infrastructure in Mongolia. Internet service providers (or ISPs) must pay for the use of some of its network. In rural areas, Mongolia Telecom charges higher prices—sometimes as much as 20 times more—for dial-up connections to its competitors than it does for access to its own ISP unit. The government's telecommunications regulator has the authority (and legal obligation) to prevent this sort of anti-competitive pricing by the monopoly, but it has failed to do so.

What's so sad about this kind of government behavior is that it damages the competitiveness of Mongolia's economy across the board, from software to mining to cashmere to yak butter. Higher communication costs hurt everybody. Properly understood, the role of a regulator should be to reduce risk by following open and transparent procedures, generating clear and certain rules, and eliminating barriers to market participation.

As in many developing countries, part of the problem is that the government views Mongolia's communications sector as a zero-sum game: If the independent Internet providers do well, the telecom companies will suffer. Hooked on the revenues that flow from Mongolia Telecom and mesmerized by the potential of a big windfall from its sale, the government seeks to boost the value of its asset by hobbling its competitors. But this view misses the synergy of connectedness: As Mongolians get more wired, they will send more e-mail and make more phone calls and host more Web pages, and so forth. Under a more enlightened regulatory regime, Mongolia's Internet companies could drop the cost of communication dramatically, expand the network to every corner of the Mongolian market, and make the whole country vastly more competitive.

In the short term, the government might take a hit in the form of reduced revenues from Mongolia Telecom; but in the long term, every sector of the economy will benefit from cheap communications. Ultimately, it's not a battle between Internet and telecom inside Mongolia; it's a battle between Mongolia and China, South Korea, Norway, Bolivia, and, well, everywhere else in the world.

Open manhole
Open manhole

Between the day's meetings, I ran errands around Ulaanbaatar, rounding up a local mobile phone, bottles of water, and some snacks from a Korean-oriented supermarket called La Belle France—most notably, the appealingly misnamed Crunky chocolate bar and the enigmatic Mr. Big rice treat (slogan: "When you're this big, they call you Mister"). A word to the wise: The city is riddled with open manholes. Three times, I nearly plunged to grievous bodily harm. As a lawyer, I can't help but speculate that Mongolia has yet to evolve much of a plaintiff's personal injury bar. Indeed, centuries ago the Mongolians seem to have embraced their hazardous environment: The traditional greeting upon entering a ger (the round tent in which even today most Mongolians, from nomadic yak herders to suburbanites, dwell) is "Nokhoi khor!" which literally means: "Hold the dog!"