The importance of facilitating the increase of Internet diffusion has become widely recognized by the policymakers in transition and developing countries. A wider use of the Internet will foster both economic and political development. Based on the case studies of Estonia and Slovenia, this article finds that Internet diffusion in transition and developing economies is encouraged through the privatization of an incumbent telecom company and the opening of a telecom market. To secure maximum openness and fair play in the telecom sector a truly independent telecom regulatory agency has to be established and regulators need to stay free of political interventions. In order for this to be successful, this article argues that these policies have to be combined with a liberal trade and a foreign direct investment regime.