What May the WTO Telecommunication Agreement Mean for Emerging Nations?

press-larry-1b.jpg Larry Press

OnTheInternet, Vol. 3, No. 3, May/June, 1997, pp 36-38.


In February 69 World Trade Organization (WTO) member nations {footnote 1} agreed to open their telecommunication services markets [1]. The agreement was signed by a mix of industrialized and emerging nations, which, according to the International Telecommunications Union (ITU), accounted for over 91% of global telecommunication revenues and 82% of the world’s telephone main lines in 1995; however, notable nations like fast-growing China and Russia are not on the list. This agreement focuses on telecommunication services like voice telephony, data transmission, telex, telegraph, facsimile, leased circuits, fixed and mobile satellite systems and services, cellular telephony, mobile data services, paging and personal communication systems. Equipment and value added services like email, voice mail, and Electronic Data Interchange, were often covered under previous agreements.While most signatories will open to foreign companies wishing to interconnect with existing networks and buy or build their own networks on January 1, 1998, some have stipulated delays of from 1 to 8 years. A few nations have also restricted foreign ownership levels. France and the U. S. will allow only 20% foreign ownership of companies with radio licenses and services. There are general equity limits in Portugal (25%), Canada (46.7%) and Singapore (49%), and Japan will limit foreign ownership of Nippon Telephone and Telegraph and Kokusai Denshin Denwa, their leading domestic and overseas carriers with close government ties, to 20%.

The WTO agreement is a significant step along the already well- worn path toward global telecommunication privatization and competition, and we should ask how it may impact networking in emerging nations.

There is little doubt that this act will encourage the already burgeoning global investment in telecommunication infrastructure, that it will help attract capital. Large, international telecommunication companies are happy. They will have an easier time negotiation for access rights, laying cable, and so forth. Bernard J. Ebbers, president and CEO of WorldCom, summed it up by stating “The successful conclusion of the agreement will accelerate the world wide development of telecommunication services and infrastructure, and thereby accelerate global economic growth.” In other words, to paraphrase Charles Wilson, what is good for WorldCom is good for the world.

While Europe, North America and Japan dominate today’s installed infrastructure, investment rates in emerging nations are higher. According to the (ITU), from 1990-1995, the number of main lines rose 3.5% in industrialized nations and 13.8% in developing nations and telecommunication revenue grew by 4.2% in industrial nations and 9.7% in developing nations. The marginal impact of increased infrastructure investment will be greatest in developing nations.

Satellite companies like Motorola/Iridium were also enthusiastic about the WTO accord since it will enable them to interface with terrestrial networks and install ground equipment. Satellite companies are pointing toward emerging nations where terrestrial facilities are poor. Furthermore, store-and-forward networks are common in emerging nations, and are not effected by satellite latency times.

The increased competition is expected to reduce rates. Reed Hundt, Chairman of the U. S. Federal Communications Commission, predicts a decline of international call costs from an average of a dollar a minute to ten cents. Renato Ruggiero, WTO Director General, predicts “lower costs for consumers” and “very significant” price reductions. He stated that “it is difficult to be precise in these matters, but telcomms liberalization could mean global income gains of some one trillion dollars over the next decade or so. That represents about 4 percent of world GDP at today’s prices.”

Lower rates would be a boon for networkers in developing nations. A 1995 survey of Latin American academic and research networks revealed that the cost of their international links ranged from 10-53% of their budgets with an average of 32.25% [1]. These costs will hopefully fall sharply as competition opens. For example, the Pan-American Undersea cable connecting Chile, Peru, Ecuador, Columbia, Panama, Venezuela, the Caribbean, and the U. S. will open in 1998, providing an alternative to existing links. The WTO agreement will encourage such investment and competition.

Intranational leased lines and switched phone charges are also major hindrances to network growth in many emerging nations. (Something as simple as unmetered local calls in the U. S. is a major incentive to network growth). Increased competition within nations should reduce the cost of network backbones and user access in emerging nations.

One can also expect less government control. That bodes well for those in nations where the government has viewed telecommunication and networks as a cash cows, but it may not be so in nations where the government sees telecommunication and networking as strategic infrastructure in service of national goals. In those nations, the shift of control from governments to international telecommunication companies focused on profit may be problematical in the long run. For example, there could be concentration on reducing rates and supplying connectivity to profitable urban business at the expense of universal service in rural areas. Infrastructure planning is social planning, whether it is done explicitly or inadvertently.

This agreement is the latest step in a global shift toward privatization and competition in telecommunication, which is, in turn, occurring in the context of a move toward open, market economies throughout the world.{footnote 2} It will be many years before historians understand the effects of these changes. Will they see ubiquitous, equitably distributed infrastructure, low cost networks, and good times for all, despotic international telecommunication empires overseeing “1984,” or something in between? No doubt the latter.

While we will not be here for the historian’s evaluation, we can look at the situation in our nations today, and speculate on shorter term implications for our emerging networks. Was there discussion of this agreement within your nation? How do you feel it will affect your networks? When might that impact be felt? Do you foresee any negative impacts or is it all rosy?


References

  1. http://www.wto.org/.
  2. Press, Larry and Rodgriguez, Luis G., “Toward an Internet Census for Developing Nations,” Proceedings of INET ’96, International Conference of the Internet Society, Montreal, June, 1996. http://som1.csudh.edu/fac/lpress/devnat/general/conluis.htm.

Footnotes

  1. Antigua & Barbuda, Argentina, Australia, Bangladesh, Belize, Bolivia, Brazil, Brunei Darussalam, Bulgaria, Canada, Chile, Colombia, Ctte d’Ivoire, Czech Republic, Dominica, Dominican Republic, Ecuador, El Salvador, European Communities and its Member States, Ghana, Grenada, Guatemala, Hong Kong, Hungary, Iceland, India, Indonesia, Israel, Jamaica, Japan, Korea, Malaysia, Mauritius, Mexico, Morocco, New Zealand, Norway, Pakistan, Papua New Guinea, Peru, Philippines, Poland, Romania, Senegal, Singapore, Sri Lanka, Switzerland, Slovak Republic, South Africa, Thailand, Trinidad & Tobago, Tunisia, Turkey, United States and Venezuela.
  2. The Telecommunication Agreement was one of several industry- specific agreements the WTO hopes to achieve. They are also working toward an agreement on the removal of tariffs for information technology (IT) products, and, as of March 3, 1997, have agreement from nations representing 90% of the world IT market.

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