RESEARCH ARTICLES 
 

Ágnes Gulyás

In the slow lane on the information superhighway:
Hungary and the information revolution
 

Abstract

This article examines Hungary’s response to the opportunities of the information revolution since the end of communism from an economic point of view reflecting on cultural aspects as well. It will argue that there have been significant advances in the development of the information sector in the country. However, because of the legacy of communism, economic difficulties and the unclear policies and disconcerted efforts of the first post-communist governments, the information revolution has made limited progress.
 

Introduction

The close of the century has brought substantial opportunities in Hungary and in East Central Europe. 1989 saw the end of the communist system and the establishment of democracy. However, such political system change has not been a rare event in the turbulent history of the region. For example, in 1989 Hungary had her eighth political system change of the 20th century. What makes 1989 different, in the context of this article, is that the end of communism coincided with the information revolution in developed countries. This convergence opened the door for the former communist countries in Eastern and Central Europe as the opportunities of a new democratic political and economic system paralleled with those of an information revolution. Because of this convergence these countries now have a chance of fulfilling their century-long desire to ‘catch up’ with the West. 

The global information revolution will greatly influence the future of East Central Europe. The question is what kind of role the former communist countries will take in this development. They can either be mere followers of the global information revolution, or take advantage of their late entry into the revolution and become forerunners in it. At the time of the industrial revolution in the 19th century Eastern European countries faced a similar type of development opportunity. However, then they did not manage to leapfrog out of their economic backwardness. The information revolution now provides a second chance.

A developed information sector is important for countries like Hungary for different reasons. First, it is important from a political point of view. It is usually envisaged that on the basis of new media, a more free, participatory and flexible democratic communication system could arise (see for example McQuail, 1991; Jankowski et al, 1992), which could strengthen democratic traditions and enhance civil society. The importance of such developments are obvious in the former communist countries, where democratic traditions have been weak and democracy is still in its infancy. Second, a developed information sector is also important from an economic point of view. It can contribute to the modernisation of the economy and much needed economic growth and development. A modern information sector and the development of an information society would be suitable and advantageous for a country like Hungary, which lacks natural resources but has a well-trained work force and a good education system.

There are two basic requirements for advancing towards an information society. First, a modern integrated telecommunication network is required in order to provide the physical infrastructure for the information market. Second, a developed informatics industry is essential for equipping the information society. In both areas Hungary inherited a poor state of affairs from the communist system. This meant that in 1989 the country stepped into the global information age with a large degree of informational backwardness.
 

The Telecommunication Network

One of the favourite topics of Hungarian jokes in the 1980s was the country’s telecommunication system. At the end of the 1980s telephone line failures were everyday events; people had to wait on average 12 years for a line to be installed; around 10 percent of the exchanges were still operated manually; and as many as 30 percent of villages had no private telephone lines at all (Canning, 1996). During the communist period Hungary’s telecommunication network was even poor by East Central European standards. In 1990, there were 23 main lines per 100 inhabitants in Bulgaria, 21 per 100 in Slovenia, 16 per 100 in the Czech Republic, and only 10 per 100 in Hungary. The picture was bleaker when the Hungarian telecommunications network was compared to Western European countries, where there was an average of 40 telephone lines per 100 inhabitants.

With the political and economic changes at the end of the 1980s the country’s telecommunication industry and network entered a new phase of development. Politicians and business leaders recognised the need for rapid development in the field and the importance of telecommunications in contributing to general economic development. The main actor in improving the telecommunication network was the Hungarian Telecommunications Company (Matáv), which had a monopoly in the sector and faced a very challenging and expensive task in modernising the telecommunications network. According to estimates by the International Telecommunication Union the costs of modernising the Hungarian telecommunications network was about US$ 3.3 billion for the period 1992-2000. The task seemed especially daunting when general economic problems arose from the communist legacy and the transformation from a command to a market economy were taken into account. The country’s GDP, for example, fell by 3.5 percent in 1990 and it further decreased by 11.9 percent in 1991. Hungary has also had a considerable problem with foreign debt, as the country with the highest per capita external debts in the region. All these factors placed constraints on longterm and infrastructural investments, such as telecommunications.

Despite these difficulties the Hungarian telecommunications industry and network have come long way from its communist past. Since 1991 the average annual growth rate of the telecommunications network has exceeded 14 percent. By 1996, the number of telephone lines per 100 inhabitants reached 26, which was a huge increase from the mere 10 lines six years earlier. In fact this increase was the highest amongst the former communist countries, although Hungary is still only seventh in relation to telephone density in the region. Behind the dry figures a more important development took place. Digitisation became a priority reflecting the aim of establishing a modern national network infrastructure. A high capacity digital backbone network interconnecting 54 regional exchanges was set up. Since 1991, only digital exchanges were installed, which meant that by the mid-1990s Hungary had the highest proportion of digitisation of the telecommunication infrastructure in East Central Europe. The degree of digitisation in the Hungarian network increased from 5.3 percent in 1990 to 39.8 in 1994 (National Information Infrastructure Development Programme, 1996). 

It was not only the wired telecommunication network which showed substantial improvement since the late 1980s. The mobile phone network developed from basic non-existence to become the most rapidly-growing segment of the telecommunications market. The East Central European cellular telephone market has been the fastest growing in the world since the early 1990s. The number of mobile subscribers in Hungary increased from 2 per thousand inhabitants in 1990 to 56 in 1997 (Business Central Europe, 9/1997). By 1993 a nationwide cellular network was in operation, and in 1994 GSM mobile phones services were started. The phenomenal growth can be partly explained by the backwardness of the wired telecommunication network, where modernisation obviously takes longer because of the physical work involved building and improving the network. New businesses, which mushroomed with the advent of market economy, did and could not wait until new wires were laid down. For them, mobile telephones provided the only opportunity even if both the equipment and the subscription charge were more expensive. In addition, the success of mobile telephone network in Hungary and in other East Central European countries can be attributed to the role of mobile phones as status symbols of the new era.

The two main factors which contributed to the evident improvement of the Hungarian telecommunication since 1990 were the privatisation of Matáv, the state-owned monopoly, and the partial liberalisation of the market. Already in 1990 there was a consensus on the necessity to improve the Hungarian telecommunications network in business and political circles. There were, however, disagreements about how to finance the task. In its ambitious programme Matáv set out the aim of achieving 38 percent penetration of telephone lines by the end of century. The capital investment for only the first three years of the programme, from 1990 to 1993, was 160 billion HUF. It was clear that the huge capital requirements for modernising the telecommunication network could not be financed by the cash-starved central budget or by Hungarian investors. Hence, there was a consensus on the need to involve foreign capital in the form of privatising a stake in the state-owned Matáv. The privatisation of Matáv was not regarded as a simple financial transaction, given its magnitude and far-reaching impact. Prior to privatisation a new law on telecommunication was adopted which provided the legal framework for privatisation and the future development of the industry. After a parliamentary and public debate about the extent of privatisation, 30 percent of Matçv was sold to a German-US consortium of Deutsche Telekom and Ameritech for US$ 875 million in 1993. The price paid exceeded expectations especially considering the inferior state of the Hungarian telecommunication network and the poor financial results of Matáv. One reason behind the high price and considerable foreign interests in the privatisation was the excitement among powerful multinational telecommunication companies about the opportunities the opening up of the Eastern European markets could provide. The Hungarian telecom privatisation was the first major sell-off in the region and, given its geographic location, Hungary was also regarded as a possible starting point to penetrate other larger markets east of the Elbe.

Another reason why the Hungarian telecommunication company was so attractive was that Matáv kept its monopoly in its main services, which gave confidence to foreign investors. The privatisation deal included a concession for the provision of public international and domestic long-distance services, and local services in 29 areas (Canning, 1996). The privatisation of Matçv to foreign investors brought two main advantages. First, foreign partners injected the most needed capital for modernising the network. Second, they brought expertise and helped Matçv to make maximum use of new digital technologies. 

Along with the privatisation of Matáv partial liberalisation of the telecommunications market also helped to improve services. In those sectors where the markets were freed, private companies appeared and competition had a beneficial effect. There were three areas in which market competition was allowed: local service provision regional franchises, mobile telecommunications and alternative infrastructure. However, liberalisation only effected a small part of the market. Full liberalisation of the Hungarian telecommunication markets is due in 2002, which will probably result in a shake-up of the industry. In preparation for this free market, alliances have already been formed between different domestic infrastructural companies, such as the national oil, railway and electricity utilities, and foreign investors. Beside residential services, competitors in the post-2002 liberalised market are already paying special interest to telecommunications services to the business sector. Servicing the business sector constitutes only a small part of the turnover of the market now: from the 13.6 billion HUF revenue of Matáv monopoly only 10 percent came from those services in 1995 (Heti Világgazdaság, 2/8/1997). It is, however, estimated that this segment of the market can be worth 35 billion HUF by the end of the decade as a result of the growth of the Hungarian economy and the gradual participation of the business sector in the information revolution.

Similar to Matáv, a feature of the new private telecommunication companies is that they are increasingly allied with powerful foreign investors, which provide vital injections of capital and technical expertise. In the mobile telephone sector, for example, there is a foreign investor behind every major company and foreign investment in the cordless telecommunication network exceeded US$ 0.5 million. This feature reflects the fundamental nature of the telecommunication industry: because of the huge capital requirements, only powerful companies with the backing of foreign investors can achieve success and reach a strategic market share. Although one can argue about the possible negative effects of foreign dominance in the long run, it is certain that without foreign investment in the Hungarian telecommunication sector both in the case of Matáv and the new private companies, the significant improvement in the network and services could not have been achieved. The other positive aspect of foreign investment was that by the end of the 1990s the Hungarian telecommunication network has become closely integrated into the Western European and global telecommunications industry. Indeed, Hungary has become more integrated into European telecommunications sector than some European Union member countries on the fringes of the European Union such as Greece or Portugal (Business Central Europe, 9/1997). 
 

Informatics industry

Similar to telecommunications at the time of the political system change in 1989 the Hungarian informatics industry lagged behind Western European standards. Nevertheless, there existed an informatics industry, large part of which relied on illegal copying of Western hardware and software products. In economic terms the market was very small. The use of computers spread only slowly, and ownership of a computer remained a remote possibility for most Hungarians. However, especially in the software sector there were some success stories, and some of the Eastern European computer experts were regarded as very skilful even in the West. During the communist era the sector did not get much support from the authorities. The slow development was also reinforced by an international ban on importing new technologies. Until 1989, communist countries were deprived of importing modern technologies, such as IT under the NATO’s export ban, called COCOM (Coordinating Committee for Multilateral Export Controls). The attitude of communist regime towards new technologies coupled with general economic problems and the COCOM ban inhibited Hungary from participating in the early stage of the information revolution. 

Since 1989 the informatics industry has developed significantly. While most of the sectors in the economy experienced a decline due to the general economic recession and structural problems of the immediate post-communist period, the informatics market grew by an annual 20 percent between 1989 and 1993. The market was worth US$ 598 million in 1993, in 1995 it reached US$ 700 million. In 1989 0.81 percent of GDP was spent on computer technology, in 1993 it reached 1.3 percent (Heimer, 1995). Usage and ownership of computers increased as well and computer culture made considerable progress. By the second part of the 1990s most companies and state offices used computers. Computer science was also included in the national curriculum. The technological level and the type of computer equipment used in Hungary have improved significantly. Compared to Western European countries, computers in Hungary have always been of lower technological standards. Even in 1996 only 4 percent of computers used in Hungarian households had Pentium processors. However a year later the percentage was 17 percent (Heti Világgazdaság, 11/10/1997), a huge increase which is evidence of the rapid development of hardware technology. Computers are also better equipped, while in 1996 12 percent of home computers had a modem and Internet access; in 1997 the percentage increased to 22 percent. Similar improvements occurred with CD-ROM players, in 1996 32 percent of home computers were able to utilise CD-ROMs, which increased to 44 percent by a year later (Heti Világgazdaság, 11/10/1997). 

As in the telecommunications sector, foreign companies play an important role in the informatics markets. In almost every area of the industry sales are headed by big multinational companies (Heimer, 1995). All the major multinational IT firms are present in the Hungarian market. IBM, for example, has a disk-drive plant in Hungary, which is the largest European factory of the multinational company in this field (Business Central Europe, 3/1997). The software market is dominated by major foreign programs. Most of the top hardware suppliers, for example, have software agreements with Microsoft. Local software companies had a head start over foreign companies, because the country’s relatively small population and its peculiar language made local adaptation of international software programs not profitable enough for foreign firms, but this has changed. Sharp competition from foreign companies and brand-conscious customers have made the future bleak for many local firms. The exception from complete foreign dominance is the hardware market, where a local company, Albacomp has the biggest market share of more than 14 percent (Business Central Europe, 11/1996). 

Despite the significant developments the Hungarian informatics industry still lags behind the Western European industries in its importance in the economy and its technological level. Sales per capita for the information industry was US$ 60.6 in Hungary in 1994, while in similarly small countries, like Austria it was US$ 371 and in Finland US$ 371 (Heimer, 1995). Investment in information technology is far behind the desirable amount. Only 10 percent of R&D investment is spent in the field of information technology, while this percentage is on average 35 percent in developed countries (Heti Világgazdaság, 2/1995). Although hardware sales have shown double-digit growth throughout the 1990s, the use of computers has increased only gradually. Figures about computer ownership and usage have improved, however we cannot speak of a boom. According to a survey conducted by one of the public opinion company, Medián, in 1997 only 18 percent of the Hungarian population had access to computer, while a year earlier the figure was 16 percent (Heti Világgazdaság, 10/1997). Computer ownership is even lower. Nearly half of those with access to computers can use computers only at their workplace. Merely 10 percent of Hungarian households have a computer, which is far lower than in developed countries, such as Germany or Britain. Computer and IT literacy, an important factor in developing an information society, is also lower than in the West.

There are two main factors why the Hungarian informatics industry has not expanded to its maximum potential and been unable to leapfrog so far its Western European counterparts. First, both the internal and the external markets of the industry have been hampered with problems. Second, the development of the informatics industry did not get priority and the desirable attention from the post-communist governments. There have been problems in the internal market with the price conscious demand. Although there has been significant growth in demand, cash-starved business and private customers tend to choose on the basis of price and less on the technological level of the product. There is no difficulty in finding the most up-to-date computer hardware or software in the Hungarian market today, but finding money to buy it is a problem for many local companies and individuals. Prices are at Western European levels, while company revenues and wages are much lower. Probably the biggest obstacle to the more rapid development of the informatics sector and advance of an information society has been the lack of capital in the private sector to invest in modern information technology.

Because of the price conscious customers and small size of the internal market it is essential to obtain export markets for the Hungarian informatics industry, if it wants to reach Western European levels. It is clear that Hungarian informatics companies, given their small size and their low capital force cannot compete with powerful multinational firms. What they can do is to specialise on niche markets with knowledge-intensive products. Hungary has good capabilities in computer engineering, especially in the software fields thanks to the country’s human resources and good education system. Hungarian software engineers did have some success in the international market. For example, in 1995 a software package developed by a Hungarian company, Graphisoft for designing buildings won the American magazine MacUser’s Eddy Prize, which is referred to by many as the Oscar of the international software industry (Heimer, 1995). The programme has been translated into 15 languages and sold 16 thousands copies in some 60 countries. This kind of success, however, is rare. Although the potential is there, substantial export markets for the Hungarian software industry have not materialised yet. One main problem is that many Hungarian software engineers lack and are slow to learn managerial skills, which are necessary for market success. 

The second factor why the Hungarian informatics industry has not swung into maximum potential was the lack of a national strategy and concerted effort for developing an information society on the part of the post-communist governments. The policy declaration of the NIID programme - described below - identified the role of the state in advancing information society as: the state as a user of information technologies, as a law-maker and regulatory body, as an information supplier, and as a promoter of information society through subsidising research and development projects and the use of informatics in society, especially in education (National Information Infrastructure Development Programme, 1996). The successive post-communist governments did manage to fulfil some of these roles, however it can be argued that these efforts lagged behind what the governments could have done for the information revolution. One indication of the relatively low profile of the information revolution is that none of the major political parties included the information society and sector in their national modernisation programmes.

The most successful and concerted effort from the state has been the Information Infrastructure Development (IID) programme, which later became the National Information Infrastructure Development (NIID) programme. The IID programme was launched in 1986 by the Hungarian Academy of Sciences and the National Committee for Technical Development. The programmes have been subsidised by the state, but after 1989 it also got support from foreign organisations, as the World Bank and the European Union. In the first phase, between 1986 and 1990 the programme was allocated 1.3 billion HUF from the central budget, in the second phase, between 1991 and 1994, 952 million HUF and in the third phase, between 1995 and 1997, 1.6 billion HUF. The decrease in the amount of subsidies, which was quite substantial considering the high inflation rate of the period, was due to the fact that the programme had begun to be phased out in the second half of the 1990s, because of the declared aim of the state to give private capital and market forces the determining role in developing information networks. The state subsidy was supplemented with supports from the World Bank to the value of US$ 6.5 million and Phare programme provided 1.3 billion Ecu1 (Heti Világgazdaság, 2/ 1995). 

Initially the IID programme was set up to facilitate the establishment of an up-to-date information infrastructure for the entire Hungarian research and academic community. In the first phase of the programme results were hindered by the COCOM restrictions on importing modern technology. However, as a result of the programme by the end of 1990 a network-based information system was established for the academic and research community (National Information Infrastructure Development Programme, 1996). The second phase of the programme focused on acquiring up-to-date hardware equipments as well as software programs for the Hungarian network users. Also during the second phase, the Hungarian academic and research community was connected to the Internet. Between 1992 and 1994 the number of Internet hosts increased from around zero to 5,000 (National Information Infrastructure Development Programme, 1996). In 1995 the IID Programme was succeeded by the NIID programme with somewhat altered aims and a wider scope supporting the development of information technology and networks not only in the academic and research community but at a national level. The successive programmes contributed greatly to the spread of computer networks, e-mail services and international connectivity of the Hungarian academic and research community. The programmes also facilitated the development of government information infrastructure and cooperation between domestic suppliers. Also within the framework and with the support of the IID and NIID programmes, more than 150 databases and several hundreds of web-sites and gopher servers were developed by the second part of the 1990s (National Information Infrastructure Development Programme, 1996). 

Apart from supporting the IID and NIID programmes the Hungarian state has also helped the informatics industry by being one of its most important customer. In 1995 the different state institutions and organisations spent 30 billion HUF on informatics products and developing their information network (Heti Világgazdaság, 4/1996). The largest projects in recent years included an e-mail system set up by the Inter-Ministry Committee in Information Technology, a US$ 29 million investment by the tax authority aimed at modernising the tax administration system, a US$ 9.5 million project of the National Institute of Statistics, and the US$ 4.8 million tender aimed at computerising main police stations (Heimer, 1995). The fact that in only seven years the number of computers used in the state administration increased from a few thousand to more than 55,000 demonstrates the rapid technological development. During the mid-1990s orders from state administration constituted approximately 35-40 percent of the total turnover of the Hungarian informatics market every year. The dominant purchasing role of the state in the market is clear, this percentage in Western Europe is only about 8-9 percent. Considering the small size and weaknesses of the Hungarian informatics industry and the badly equipped nature of the state administration in relation to modern information technology, this might seem a natural development. However it poses questions about the future of the industry and whether in the long run, when state orders eventually decrease, it will be able to support itself solely through demand from the private sector. There is another problem with the boom in computerisation of the state administration. The intention of the post-communist governments to improve the computerisation and networking of the state administration is a positive development. However, as Heimer points out the different unconcerted and parallel projects resulted in a state information system which is divided and appears impossible to integrate (Heimer, 1995). 

Apart from the lack of capital in the private sector and the disconcerted state involvement, the development of the informatics industry and of an information society in general has also been halted by problems associated with a lack of IT skills and attitude towards new technologies. Attitudes have improved since the early 1990s, when some institutions and companies kept computers as status symbols rather than tools. Computer culture was quite poor, at some institutions - especially in state administration - computers were used as a mere substitute for typewriters. There were also examples where donated network equipments were kept under lock and key, with access denied to all but top-level administrators reflecting communist-era attitudes toward access and sharing information (Woodard, 1995). However, there have been improvements in this respect by the second part of the 1990s. There have been also problems with the lack of technical knowledge and IT management skills. As training of IT professionals has spread, there has been progress in this area as well.

One of the major problems of the Hungarian information industry has been piracy, which is still common both in the hardware and the software business. Piracy has been widespread in every former communist countries for two main reasons. First, because of the pre-1989 COCOM ban on exporting modern technology to communist countries, piracy was often the only option to obtain modern Western hardware and software. This legacy of widespread use of illegal technology and software attributed to the fact that piracy in the information markets today is accepted and not condemned in these societies. Second financially stretched companies and low-waged customers have not been able to afford Western prices, leaving piracy as the only viable option for them to venture into the new information technology. Cheap clone PCs, for example, can be half the price of branded computers, which is too big a temptation for the price conscious East European shopper. Obviously it is difficult to assess the exact extent and size of the black market for the information industry, but different estimations suggest that for the whole of the information industry the illegal market is just as big as the legal. According to the Information Enterprises Association, for example, the illegal market accounts for up to a quarter of computer sales and 90 percent of chip imports in Hungary (Business Central Europe, 3/1997). According to other estimations 80 percent of all software stock in Hungary is illegal (Heti Világgazdaság, 1996). 

Although software piracy is a criminal offence by Hungarian law, the fight to curb illegal trade has not been successful. The law is clearly not enforced, partly because there has not been a concerted effort from the authorities. The contradictory position of the authorities is shown by the fact that, as Bodoky points out, even state organisations and offices, including the police, use illegal software (Bodoky, 1996). The large foreign software companies, which dominate the market, even set up their own organisation, the Business Software Alliance, to suppress illegal trade already at the end of the 1980s. The Alliance launched a billboard campaign in 1995 and set up an anonymous hotline where callers can report illegal software use (Horváth, 1997). However BSA did not achieve much success either. Companies also try different sales strategies to curb piracy. Microsoft, for example, introduced a system, where they package software sales with hardware, partly because of their worldwide commercial strategy to dominate software markets, but partly as a mean to curb piracy. Hungarian hardware assembling companies, signed a deal with Microsoft to use this system, can only install popular applications such as Windows, together with a complete hardware system (Heimer, 1995). A major breakthrough in curbing illegal trade in the information industries, however, is not expected in the near future. For such a change would require not only a major concerted effort on the part of the authorities, but a change in the attitude of the society as well as more economic prosperity. As it was already pointed out as one of the main reasons for software piracy, the economic factor in the illegal trade is very important. As long as companies and individuals are not able to afford the prices of legally distributed software products, piracy will always be a more viable option.
 

Internet

One indicator of a developed information sector and information society is the country’s Internet connections. Hungary has made significant progress in this area and in general in networking systems, however, as Bodoky points out, there is still ten times more data travelling into the country than out of it on the information superhighway (Bodoky, 1996). The main backbone of the country’s Internet network was established in the framework of the Information Infrastructure Development programme, described above. Eastern Europe’s first Internet ‘node’ was actually established in Hungary in 1986 at the Institute of Computer Automation and Design in Budapest (Woodard, 1995). By today the Hungarian Internet network is quite developed and commensurate to those of many European countries. In the first part of the 1990s the increase was steady, 80-100 percent growth annually, but from 1995 there has been a boom in the number of Internet hosts and users. It is estimated that between 1995-1997 Internet access and subscription levels grew six-fold in the region (Business Central Europe, 9/1997). By the end of 1997 Hungary had 67,887 hosts and the annual growth in the number of hosts was 118 percent between 1994 and 1997 (Business Central Europe, 3/1998). The Hungarian hosts per million population ratio was 6,857 at the end of 1997, which was the third highest ratio after Estonia and Slovenia in the region. In international comparison Hungary’s ratio is well placed, the ratio was 13,892 in Germany, 10,261 in Slovenia, 5,521 in the Czech Republic, 2,286 in Poland, 1,031 in Russia (Business Central Europe, 3/1998). The online magazine, Internet kalauz, set up a directory for Hungarian URL addresses in March 1997 then with approximately a thousand addresses. The directory numbered more than 2200 entries in January 1998 (Internet Kalauz, 1998). Bearing in mind the obvious problems with such a voluntary directory, the growing number of addresses in it is another indication of the fast development of Internet in Hungary. The expansion of the Internet would not have been possible without the significant improvement in telecommunication services. The telecom monopoly, Matáv has been also active in developing computer networks offering different on-line services. As a result of the increased size of the Internet market, competition between suppliers also intensified. The Hungarian Internet market is still small in economic terms but growing fast. 

The economic importance of the network is much outstripped by the development of Internet culture. Although it is still much behind the more traditional forms of mass media, the Internet already provides an important arena for disseminating information and for public discussion.2 There are a large amount of information available on cultural, political, social, economic life of the country. The number of online magazines, forums, discussion groups are also increasing fast. The growing importance of the new media was also acknowledged by Prime Minister, Gyula Horn, when he gave a live interview to the Internetto online magazine. The interests from the public, however, was so great that the server crashed. The success and popularity of online magazines, nevertheless, is evident from the growing number of their readership. There are also online services and organised events dealing with the cultural aspects of the new media. The Metaforum conferences, for example, discussing the development of the new media from different perspectives have been organised every year since 1995. The Soros Foundation maintains the Centre for Culture and Communication (C3), another example, which provides non-profit internet services.

Besides online magazines traditional media are also represented on the Internet. Every major newspaper and magazines and even broadcasters have web sites, where they not only publish, but provide different services as well. Many museums and libraries are also on the Internet. An important initiative of the NIID programme was to establish a national electronic library providing not only common services supporting fast and easy retrieval but full texts as well (National Information Infrastructure Programme, 1996). The library has been online for years now and it is regularly updated with new data and developed. As a result, for example, Hungarians today all over the world can access a vast amount of their national literature or read current research papers of Hungarian academics and scientists through the Internet. 

As in Western Europe the first users of the Internet were academic and research institutions. Most universities and research institutes now have access to the Internet. Thanks to the IID and NIID programmes, network services were provided free of charge to higher-education and research institutions. Besides the academic circles, the bulk of the Internet users are from the state administration. State administration was slower to hook up to the Internet in comparison to the academic and research community. Nevertheless by the second part of the 1990s every major state institution and organisation, such as the Parliament, governmental offices, the National Statistics Institute or the tax authority, had a website.

The use of the Internet in the business community developed more slowly and later than in the academic and research communities and the state administration. The bulk of on-line users are still academics and civil servants, while in Western Europe paying business customers dominate. The first commercial users of the Internet in Hungary were often foreign residents, foreign companies, and international institutions, and they still provide substantial share of commercial Internet hosts today. However, the number of Hungarian commercial users mushroomed in the last two years. Many companies now have their own website. For most companies having a website is still mainly a status symbol rather than a commercial tool. The commercial use of the Internet was also slow to spread in Western European countries but Hungary and other East Central European countries face additional problems in this area because on-line payment is highly problematic due to the less developed banking system and limited distribution of credit-cards.3 However, this situation will probably change in a few years time, when the technological level of the Hungarian banking system catches up with the West.

The Internet will not only expand in Hungary through increased commercial use but through further state initiatives. Realising the importance of the Internet for future generations in particular, the government announced a programme to connect all secondary schools - approximately a thousand institutions - to the Internet and provide eight computers with the connection by the summer of 1998. A number of schools are already connected to the Internet. The Soros Foundation, for example, was providing grants to schools for networking. However, most Hungarian teenagers could not access the Internet until now, thus the government’s plan must be most welcomed. The programme has a budget of over 10 billion HUF, which makes it not only the biggest state project in the area, but the biggest Internet ‘business’ the small Hungarian market has ever experienced. Internet companies are anxious to win one of the tenders for the programme and benefit from the state initiative. The provision of computers and the Internet connections of the schools were finished by the end of 1997. Also as a part of the programme in the first part of 1998 teachers are going to be trained, educational programmes written and data bases created. 

Despite further rapid growth of the Internet which can be safely predicted, there remain problems. There are still technical and non-technical obstacles preventing full development of the Internet. One of the main technical problems is that despite the improvement in telecommunications network there are still problems with the network infrastructure’s capacity to support high-speed data transfers over the telephone lines. Another problem is that the use of computer and access to computers are still relatively low. Only certain groups of society are ‘hooked up’. According to a survey carried out by Medián the majority, 61 percent, of the population had not even heard about the Internet in 1996, and from those who heard about it only 34 percent were able to give a correct definition of it (Medián, 1996). As in other countries the most probable group of society who would know and use the Internet are those who are young and have a higher education. According to the same survey only 42 percent of the 18-29 age group had never heard about the Internet, while this percentage in the 60 plus age group was 78. Education is also an important factor, 83 percent of people with higher education knew about the Internet, while only 25 percent of those with basic education heard about the network at all (Medián, 1996).
 

Conclusion

The Hungarian telecommunication and informatics sectors were underdeveloped at the end of the 1980s. Considering the very poor state of the telecommunication sector, one might argue that it was that sector, where Hungary had major disadvantages and which was one of the main obstacle to launch an information revolution. Significant achievements have been made since the fall of communism. Both sectors still - although to different degrees- lag behind Western standards, however their developmental levels are higher then those of Third World countries and many former communist countries as well. From an international comparative point of view Bodoky is right to argue that Hungary is neither a data-rich nor a data-poor country, but somewhere in the middle (Bodoky, 1997).

Despite the achievements during the post-communist period, Hungary has not managed to build up a modern information superhighway. What exists in its place is a rather bumpy road network. It would have been unreasonable to think and expect Hungary to develop a sophisticated information sector and network in a couple of years given the legacy of communism, the lack of capital and the serious economic problems of the post-communist period. Nevertheless one can argue that with the country’s potentials in the field of human resources, education, and its geographic location, Hungary could have made greater advances in the information revolution with a more pro-active state. Given the financial weaknesses of the private sector it is clear that the state has an essential role to play in advancing information society. The Hungarian state has achieved some positive results in doing this. Thus, for example, it has created the legal frameworks for the information and telecommunication industries, it has contributed to the development of the informatics sector through the IID and NIID programmes and been the most important customer for the industry. However, the authorities and political parties have failed to prioritise and provide a concerted effort in developing an information society. More considerable and concerted efforts are needed if the country wants to develop a modern information sector and if it wants to be an integral and not peripheral part of the buzzing international information superhighway of the developed countries.
 

Footnotes

1 The development of computer culture and information networks was very much helped by the fact that IT and the new media has been a favourable area for obtaining support from Western organisations. All of the main international organisations and institutions, which have been providing aid and loans to the former communist countries, such as the World Bank, EBRD, EU, the Soros Foundation or the different programmes of individual Western governments - only mentioning the biggest ones -, offered help in developing information technology. Given the number of organisations and institutions and the similarly high number of different projects, grants and funds involved it is difficult to estimate the extend of foreign help, but it can be safely argued that without it the Hungarian information infrastructure and society would not have been able to demonstrate the same development as it did.

2 An important part of Hungarian network culture and networking system is the country’s quite extensive ‘offline’ Bulletin Board Service (BBS) networks, which numbered 133 in 1996. Horváth argues that BBS networks act as alternatives to the Internet, which he views as too slow and anglocentrist (Horváth, 1997). Indeed, offline networks served well civil organisations and institutions, however it can be argued that their importance is decreasing with the development of the Internet, as is shown by the fact that their number decreased to 112 by 1998. (reference for figure - Horvath!)

3 Hungary – as other East and Central European countries – still has a cash economy. Bank cards became widespread by the mid-1990s, and by 1998 one in five people had a bank card. However, most people still use it only for cash withdrawals from ATMs.
 
 

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