Internet and e-commerce industry in Andorra

Andorra is one of the smallest countries, located in the eastern Pyrenees Mountains in southwestern Europe and bordered on Spain and France. It is the sixth smallest nation in Europe, with less than 85,000 people populated it. Andorra is a prosperous country mainly because of its tourism industry, which services an estimated 10.2 million visitors annually. Tourism, the mainstay of Andorra's tiny, well-to-do economy, accounts for roughly 80% of GDP. Tourists are mostly attracted by Andorra's duty-free status and by its summer and winter resorts. It also allures foreigners by its status as a tax haven. Andorra is not a member of the EU but it enjoys a special relationship with The European Union, such as being treated as an EU member for trade in manufactured goods (no tariffs) and as a non-EU member for agricultural products. Moreover, the currency used in the country is euro. But what about the e-commerce and ICT sector in this small European state?

Internet connection in Andorra is available since with dial-up access. Since then ADSL at a fixed speed of 2 Mbps has been rolled out throughout the country. Moreover, Fibre-Optic to the Home at a fixed speed of 100 Mbps is accessible in metropolitan areas of the country. Fibre-Optic to the Home at a minimum speed of 100 Mbps is to be available across the whole country by 2010.

There is the only main Internet services provider in the country, the national telephone company, SOM or Andorra Telecom. 

  Internet penetration level in Andorra has increased significantly, making up over 83% currently. That may be compared to just 7% of Internet subscribers registered in 2000. According to internetworldstats.com in 2006 the volume of Andorrans connected reached 31%. 

Such a steep growth is mainly supported by the government that boosts the development of the ICT sector and supplies public’s PC education. Thereby, Andorra’s tackling its digital divide problem, encouraging more ICT use in schools across the country. The Ministry of Education and Science, being supported by the United Nations, is putting together plans for a new eSchool programme giving primary and secondary students in much-needed internet and IT skills and knowledge.

Country’s Internet country code top-level domain (ccTLD) is .ad, administered by Servei de Telecomunicacions d'Andorra. Two years registration agreement is relatively expensive $295. This price is considerably higher the prices in the other European countries, $35 in UK, $89 in Spain or $139 in Denmark. (www.rwgusa.com).

Registrations under the domain must be pre-approved by Office for State Emblems and Signs. The potential registrants is any Andorran trademark, or person who has been resident over 20 years, and the number of registrations per person is limited. It’s also necessary to have local presence to be registered under the .ad domain.

Moreover, like in other European countries, names can be registered directly at the second level. Third-level registrations under .nom.ad can be used for some personal sites.

The Network Information Center (NIC.ad) meanwhile is operatin in the country to provide Andorrans with information on how to obtain an ".ad" domain.

Notably, .ad has also been affected by a domain hack by some advertising media companies as ad is also an abbreviation for the word advertisement or advert.

Speaking about e-commerce sector in Andorra, it’s important to notice Andorra'a economic policy encourages information technology operations. Besides, a number of ISPs, like AndorNet, is appearing with interest shown in country’s e-commerce development.

Andorra, being one of the ‘low-tax' jurisdictions with tens of thousands of enterprises already installed, certainly has the chance to become one of the main centers of e-commerce activity.

The country's geographical location, its good telecommunications links and its modern business infrastructure makes its suitable for e-commerce and offshore business deployment.

By locating websites in offshore jurisdictions to carry out functions previously based in high-tax jurisdictions such as sales and marketing, treasury management, supply of financial services, etc., the supply of digital goods such as music, video, training, software etc, businesses can take advantage of low rates of taxation for increasingly substantial parts of their operation in Andorra.

Nevertheless, Andorran rules, limiting the enterprises and trading ventures to be locally owned, can restrain external e-commerce operations extension, while many other competing jurisdictions have more straightforward regimes.

Meantime, some steps in a move to moderate the regime have been already taken.

In 2008, Andorra introduced the Foreign investment Law, which has opened up 200 sectors of the Andorran economy to entrepreneurs and businesses from other countries. As a result of the new legislation, foreigners can now hold 100% of a business in one of the 200 designated economic sectors, including among others, industrial production, research and development, e-commerce, audiovisual production, plastic surgery and education and training. Previously the limit was 33%, according to lowtax.net.

At the beginning of 2009, Experiencr, an online seller of extreme and adventure sport gift experiences to the Andorran, Spanish and French markets, became the first foreign investment to be received by the Andorra's e-commerce sector. This investment project has been managed by the Bureau for Business Innovation through its 'Welcome Plan,' which has been involved in almost sixty foreign projects.

Andorra, having one of the highest internet penetration level despite it has only one main ISP, also seems to succeed in e-commerce sector as well. But, that’s a question of time on the one hand. And on the other hand it depends mostly on government, which’s expected to adjust its laws to favor e-commerce development. As soon as this done, Andorra becomes one of the centers of international e-commerce and offshore business activity.