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Trends and developments in the telecommunication environment

The global market for telecommunications is expanding rapidly. It is not a question of “demand pull” or “supply push”. Both are happening. The interaction of these two forces has made telecommunications one of the leading growth sectors in the world economy. It has also made telecommunications one of the most important components of social, cultural and political activity.

On the demand side, growth is pulled by an increasing reliance on telecommunications and information technology in every area of human life – in all sectors of economic and social activity; in government, in the provision of public services, and in the management of public infrastructures; in the pursuit of knowledge and the expression of culture; in the control of the environment; and in response to emergencies, whether natural or man-made.
On the supply side, growth is pushed by rapid technological developments which continuously improve the efficiency of existing products, systems and services, and provide the foundation for a continuing stream of innovations in each of these areas. Particularly noteworthy is the convergence of telecommunication, information, broadcasting and publishing technologies, which has greatly enriched the communication choices available to consumers.

 The effect of the fundamental forces driving demand and supply has been amplified by the worldwide trend to liberalize markets for telecommunication and information technology goods and services. As a result of this trend, the majority of telecommunication networks are now privately owned and operated. Significant developments have also taken place to introduce competition at the national, regional and international levels. Of particular importance is the World Trade Organization (WTO) agreement to liberalize trade in basic telecommunication services which was concluded in February 1997 by 69 countries which together account for more than 90% of global telecommunication revenues. The agreement entered into force on 5 February 1998.

The new framework developed by WTO to govern trade and regulation of telecommunication services will facilitate further globalization of the telecommunication equipment and services industries, as well as the closely-related information technology industry.

  In the 1995-1999 planning period, "globalization" was more a slogan than a reality, since it referred mainly to alliances between major operators to provide end-to-end services to multinational enterprises. Public networks and residential customers were relatively unaffected by this kind of globalization, although various forms of "alternative calling procedures" provided consumers in countries which allowed such practices a "poor-man's version" of the benefits enjoyed by big business users.
   In the 1999-2003 planning period, globalization is likely to become much more of a reality. The WTO agreement will make it possible for foreign operators to have direct access through interconnection and interoperability to public networks in most of the world's major telecommunication markets, as well as to make direct investments in the development of those networks.

Five years ago, few would have predicted that the Internet would emerge so rapidly as a serious competitive force in telecommunications. However, today's Internet is only a precursor to the new competitive forces that are likely to emerge in the next five to ten years in the new "communications and information sector" which will result from technological convergence.

The essential lesson to be learned from the Internet phenomenon is that competition is no longer a public policy tool which can be introduced in a completely controlled fashion and regulated within the confines of the traditional telecommunication sector. Competition in telecommunications is rapidly becoming a true market force whose evolution cannot be planned by policy-makers, a force which increasingly is seen as best regulated on the basis of principles that are not specific to telecommunications, but derived from a broader economic, social and cultural perspective.

Although far from universally accepted, the sweeping changes in telecommunications described above have broad support among many countries, including a number of developing countries who see it as the best way forward in developing their telecommunication networks and services to the benefit of their overall economic and social development.

The liberalization of telecommunications does not mean an end to regulation – but it has changed both the role of government and the nature of telecommunication regulation:

   In the past, most administrations of ITU Member States tended to be "all-purpose" creatures — policy-makers and operators which both provided and regulated telecommunications on the basis of a "public utility" model.
   The liberalization of telecommunications has been accompanied by a separation of these functions. The trend now is for administrations of ITU Member States to be policy-makers, nested within a general department of government (e.g. industry and trade); for telecommunications to be operated by corporations — whether public, private or mixed; and for "the public interest" in telecommunications to be protected by an independent regulatory authority.
    In countries that have introduced partial or full competition, the model for regulating telecommunications is changing. Principles derived from competition law are taking their place alongside the classical precepts of public utility regulation. In some jurisdictions, sector-specific telecommunication regulation has been abandoned.
    Again, the WTO agreement will amplify these regulatory trends. More than 60 signatories accounting for more than 90% of global telecommunication revenues have made commitments to apply in whole or in part a set of regulatory principles including interconnection, transparency and anti-competitive safeguards. These regulatory commitments, and indeed all other commitments, are subject to the WTO dispute resolution mechanism. They are therefore more than a voluntary code of conduct. They are binding commitments which are enforceable under the WTO dispute resolution mechanism.

In the 1999-2003 planning period, it is likely that the trends noted above with respect to liberalization, competition and globalization will begin to combine in new ways that may ultimately change the way the telecommunication industry sees itself and is seen by its regulator(s) and customers.

   Countries that began permitting competition in telecommunications 10 or 20 years ago generally introduced it in a planned and orderly manner: first in terminal equipment; then in value-added services; then in the long-distance service; and finally in local and international services. In addition, competition was generally permitted among different service providers using the same infrastructure before being allowed between different infrastructure providers. Even today, most countries that permit competition do so on a highly regulated basis
   In this environment, the regulator must implement competitive safeguards, nurture competition, ensure interconnection/interoperability and ensure broad and affordable access to necessary services
     As a result of technological progress, convergence and market liberalization, countries only now beginning to introduce competition are less likely to be in a position to plan an evolution of this kind
    Even in those countries that have experience with competition, service providers and regulators that have based their respective plans on an orderly evolution of this kind are finding that the "rules of the game" are suddenly changing, that competition is coming from unforeseen directions, and that it cannot be regulated as it was in the past
    More than any other phenomenon, the Internet symbolizes the changing nature of telecommunications. It is based on different technologies, network architectures, standardization and addressing schemes. Its economic foundations and charging principles are diametrically opposed to those of public telecommunication operators. It has experienced phenomenal growth and it has largely been outside government regulation. Yet it is emerging as a serious alternative to the traditional services provided by the telecommunication industry in every market segment, from intra-corporate communications to public voice

From one point of view, encouraging progress has been made in the 1995-1999 period in certain countries and some regions in forging the "missing link" identified by the Maitland Commission. Overall, the gap between developed and developing countries in access to basic telecommunication services is closing. However, from other points of view, new gaps are beginning to appear:

   In general, the majority of the least developed countries (LDCs) have made little progress in the past five years in closing the gap in access to basic telecommunication services. In some cases, teledensity (the number of telephone lines per 100 people) has fallen, as population growth has outstripped telecommunication growth. New technologies such as global mobile personal communications by satellite (GMPCS) may help close the "telecommunication gap". This will only be possible, however, if their services are affordable to inhabitants of the LDCs.
   There is currently an enormous gap between developed and developing countries in access to the Internet. Even as the telecommunication gap which has preoccupied the Union for so many years is beginning to close, an "information gap" of even greater proportions is opening up.
    A difference in regulatory practices is emerging between countries which have decided to liberalize their telecommunication markets under the WTO agreements, and those that have not. If competition brings the first group of countries the anticipated benefits in terms of investment, technology transfer, innovative services and lower prices, these regulatory differences may become a new development gap. In this regard, it is important to recall that although the 119 ITU Member States that are not yet part of the WTO basic telecommunications agreement generate less than 10% of global telecommunication revenues, they include more than 45% of the world's people.

On the eve of the 21st century, the Union thus finds itself in a dynamic situation. On the one hand, the goal established by the Maitland Commission of achieving universal access to basic telecommunications will be technically achieved, and the overall gap between developed and developing countries is steadily narrowing. However, at the same time, new differences are developing, for example within the developing world, between the LDCs and other developing countries, between liberalized and non-liberalized countries which may be either developed or developing, and between countries that are moving rapidly towards competition and those moving at a slower pace.

This raises important questions in relation to the vision of the global information society (GIS). This vision was the subject of considerable discussion during the 1995 — 1999 period, initially in the G-7 group of advanced industrial economies, then in the broader international community. Today, the basic ideas behind the concept of the GIS have been broadly accepted and indeed endorsed. In this vision, all forms of economic, social, cultural and political activity will increasingly depend on access to the telecommunication and information services provided by the global information infrastructure (GII). The rapid development of electronic commerce on the Internet is one tangible example of how the GIS is becoming a reality. The challenge facing the international community is to find ways to ensure that the GIS is truly global, and that people everywhere are able to share in its benefits.


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Updated : 2004-01-14