UNION INTERNATIONALE DES TELECOMMUNICATIONS INTERNATIONAL TELECOMMUNICATION UNION UNIÓN INTERNACIONAL DE TELECOMUNICACIONES New York, September 14, 1992 Refereeing the Telecom Revolution: A High-Definition ITU? Presentation by Pekka Tarjanne Secretary-General to the Economic Policy Council United Nations Association of the United States of America Ladies and Gentlemen, I would like to thank the United Nations Association of the United States of America for having invited me to be with you today, to share the good food we have just eaten, and some thoughts which I hope you will find just as nourishing. Following the principles of "la nouvelle cuisine", which hold that less is more, I will try to keep my remarks brief and to the point, so that we can have plenty of time to exchange views on the role of the United Nations in general, and the International Telecommunication Union in particular, in the new world which is being created by the telecommunications revolution. If you will bear with me, I would like to continue with my gastronomic metaphor for a minute or two, and tell you a bit about what is on the menu for discussion today. The International Telecommunication Union is the oldest international organization. It was founded in Paris in 1865 when it was realized that telegraph service would be improved if all countries used the same standards. As new technologies were developed, the role of the ITU was steadily expanded, always with the aim of promoting the development and accessibility of telecommunications on a world-wide basis. In 1947, the ITU became part of the United Nations system. Today's ITU has three main functions: developing telecommunications standards; allocating radio spectrum frequencies to different services and regulating the use of these frequencies; and promoting the world-wide development of telecommunications facilities and services, particularly in third-world countries. To complete this picture of the ITU, I should also mention that it now 172 member countries, a budget of about 150,000,000 Swiss francs, 700 employees, offices all over the world, and extensive participation from private and other non-governmental organizations. This is perhaps enough about the ITU. As to the rest of the menu, I think I probably need to say very little about the telecommunications revolution, except that it is changing everything. I am personally convinced that in the foreseeable future, telecommunications will have a greater impact on the global economy, on relations between peoples, and on prospects for peace than any other human activity. The general question before us is therefore clear: how does a 127- year old organization cope with the revolutionary force of telecommunications, today and into the twenty-first century? But if this general question is clear, the specific one is somewhat opaque. I must tell you that I was frankly puzzled when your distinguished Chairman proposed that I address the following topic: "Refereeing the Telecom Revolution: A High Definition ITU?" My first reaction was to wonder what exactly the Chairman wanted me to talk about, and what you, the audience, might expect to hear. Did this question mean that you want to know whether the ITU is going to set more rules and regulations for the telecommunications industry, and become more actively involved in refereeing an increasingly competitive marketplace? If this was our plan, it would require an act of courage on my part to say so, given the present world-wide trend towards competition and de-regulation in the telecommunications industry. And it would be a double act of courage to say so in the United States, the country where the telecommunications revolution began - as well as one or two other revolutions of almost equal importance. Let me set your minds at ease. I am not about to swim against the tides of history, or commit any other acts of comparable courage. The ITU has no plans to replace the ancien régime of highly regulated national telecommunication systems with a "new world order" of highly regulated international telecommunication systems. In fact, we are moving in quite the opposite direction. In the past, it is probably not unfair to say that the ITU was a "closed shop", or an "old boys' club", composed essentially of government owned or controlled monopolies. In this cozy environment, the ITU did not think of itself as a referee, whose job would be to arbitrate between contending interests and to maintain order in a competitive marketplace. Instead, the ITU Constitution speaks of the organization's role in "facilitating" the development of telecommunications systems and services, and in "harmonizing" the interests of its members. In the past decade and a half, the nature of the telecommunications industry has changed dramatically. Governments in all parts of the world are taking action to separate telecommunications from the direct control of public administrations. The experiment that began with the AT&T Consent Decree has turned into a global wave of privatization and de-regulation. Competition and the demands of the marketplace are replacing the dictates of engineers and bureaucrats as the forces driving the industry today. At the same time as these structural reforms are taking place, technological forces are blurring the boundaries that used to separate telecommunications from other industries. As a recent cover story in Business Week illustrated, the networks of the future will be open to all comers. A wide range of players - including companies as diverse as IBM, Time-Warner, Apple and AT&T - will be competing to provide voice, data and video services to business and residential customers. Technology and market forces are also giving users an ever stronger role in the development of the industry, particularly the global companies found among the ranks of the "Fortune 500". If they are not satisfied with the offerings of their traditional suppliers, major users can turn to competitive suppliers, to resellers and value-added service providers - or can even build their own private networks. In response to these threats, some of the traditional telecommunications giants are changing their business strategies. They are diversifying into new product and service areas. Some want to get involved in broadcasting and other content services. Others are trying to "go global" so that they can provide the one-stop, end- to-end connectivity demanded by their biggest customers. There is no doubt that these changes have brought many benefits to the telecommunications industry and its customers, particularly in developed countries. They have made it one of the most exciting and dynamic industries in the world - the key to our future economic and social development. However, to use your Chairman's metaphor, these developments have greatly changed the picture of the telecommunications industry, as it is seen from the ITU. To ITU members and bureaucrats, the old picture may have lacked definition, but it was at least reasonably clear, pleasant and predictable to watch, with no great surprises, no strong contrasts, the colours more or less in harmony. The new picture, on the other hand, is filled with noise. On some channels, there is outright interference from competing services. Contrasts have become much stronger than they used to be. The picture is jumpy and unstable - both the vertical and the horizontal holds need adjustment. The problem of course, is not really with the information source. The problem is with the ITU. We need a new transmission system and a receiver, one that will give us a good, high quality, high definition picture of the changing telecommunications industry and its changing environment. To remain relevant in the new telecommunications environment, the ITU must clearly change in a number of fundamental ways. The ITU is in the process of completing the first stage of a reform process that began almost four years ago, and has led to proposals to restructure the organization. While this is a worthwhile and necessary first step, it is clearly not the end of the process. A number of important issues remain to be resolved. One of the most important challenges facing the ITU concerns its membership. Like the other members of the UN family, the ITU is founded on the principle of national sovereignty. Although we have always had significant participation from the private sector in our standardization and regulatory activities, the affairs of the ITU have been directed by its member governments. This is still the case today. As long as telecommunications was a government business, this was not really a problem. But it is becoming a problem today. In the future, we want our membership to be open to the entire telecommunications community. The question our member administrations must face is whether they are willing to share the power they have traditionally exercised over the ITU with the private operators and companies that now control the industry - and if so, on what terms and conditions. A second fundamental challenge concerns the ITU's role. Are we still a facilitator? Should we become more of a referee? Or should we adopt some other role? There is no simple answer to this question. My senior colleagues and I recently spent a day and a half at a wonderful old chateau near Geneva discussing the future role of the ITU and other strategic questions. We concluded that the goals which have guided the ITU in the past - goals such as the global development of telecommunications systems and universal access to services - should continue to serve as our "moral compass" in the future. However, as the industry changes, we foresee the need for the ITU to review its portfolio of products and services in light of our members' and clients'changing needs. We will have to be prepared to stop activities that are no longer of value to our customers, to streamline operations so that we can keep up with the pace of change in the environment, and to develop new offerings for which there is a demand and a willingness to pay. In other words, the ITU must begin to operate more like a business. In the future, we see the ITU's mission in the following terms: "to provide the products and services needed by the global telecommunications community that are best provided by an international organization". Before concluding, I would like to touch briefly on a third important issue which is closely related to the question of the values that should guide the ITU and its members. Whatever its drawbacks, the ancien regime had certain virtues, first and foremost that it achieved universal telecommunications service at prices almost everyone could afford, at least in a certain number of countries. One of the objectives of the ITU is to facilitate the achievement of this goal at the global level. This is an essential condition if mankind as a whole it to benefit from the telecommunications revolution. However, as the industry changes, as services proliferate, and as the role of the public sector steadily declines, there is a danger that the telecommunications industry, and the global community, will lose sight of this most basic goal of all - the universal right to communicate. I have already challenged the leaders of the telecommunications industry to consider this problem, and to see if they can devise a vision of how to reconcile the technology and market forces now driving the industry with the aspirations of humanity, and the universal goals that lie at the heart of the United Nations system. In conclusion, Mr. Chairman, I would like to lay the same challenge before the distinguished members of this audience, and invite your comments and suggestions. ***