UNION INTERNATIONALE DES TELECOMMUNICATIONS INTERNATIONAL TELECOMMUNICATION UNION UNIÓN INTERNACIONAL DE TELECOMUNICACIONES From International to Global Communications: The Private Sector's Role in a Restructured ITU A presentation to Intelevent 93 by Dr. Pekka Tarjanne Secretary-General, International Telecommunication Union Amsterdam, October 4, 1993 It is a great pleasure to have been invited, once again, to take part in Intelevent. Four years ago, I spoke to Intelevent 89. Last year my Deputy, Jean Jipguep, gave a keynote address on "The International Telecommunication Union as a Global Partnership". You must have liked what Jean had to say, since you have very kindly asked me to discuss a closely related theme -- the role of the private sector in the ITU, as we move from international, toward global communications. I should perhaps begin by defining what it is I am going to be talking about today. I assume that none of you have any doubts about what the private sector is. As for the International Telecommunication Union, or ITU, it is the oldest international organization, having been founded in 1865 to standardize telegraph services. Today, it is a specialized agency of the United Nations, responsible for the standardization, regulation and development of international telecommunications, within the limits prescribed by our 181 Member States. This much is clear. But what, you may ask, is a "restructured ITU"? That is a little more difficult to explain. Last December, the Members of the ITU met in Geneva at an "Additional Plenipotentiary Conference" -- the first ever held in our long history -- to consider a comprehensive proposal to reorganize the Union and completely re-write our Constitution and Convention. After deliberating for only two weeks and two days -- a new speed record for an ITU Plenipotentiary event -- they adopted these proposals and decided that the new ITU structures should be provisionally applied as of March 1 of this year, thereby establishing yet another ITU speed record, this time for implementing constitutional change. The central thrust of these proposals was to enable the ITU to adapt to the main changes that are taking place in today's international telecommunications environment. I will not attempt to describe in any detail all of the structural changes that were agreed to or the reasons they were adopted . I would refer you to Jean Jipguep's address to Intelevent last year if you want the complete picture. Instead, in my remarks today I propose to focus on one of today's key trends -- the movement from international to global telecommunications -- and on one of the key issues dealt with at last year's conference -- the expanded role of the private sector in the new ITU. From International to Global Telecommunications At a superficial level, the movement from international to global telecommunications is a move from a world in which telecommunication services between countries were jointly provided through connecting agreements between national monopolies, to a world in which these services are being offered by individual companies or by groups of companies in a number of countries, usually in competition with domestic suppliers. In other words, many of the major telecommunication service providers are in the process of extending their operations outside their national markets into other countries, either by establishing operations in other countries, through acquisitions and mergers, or by creating strategic alliances. In the process, they are changing their status. They are becoming multi-national, trans-national and even global operators. AT&T and British Telecom are examples of companies that are basically trying to transform themselves from national to global operators. France Telecom and Deutsche Telekom have formed a joint venture to provide better services beyond their national borders as have the members of Unisource, Telia of Sweden, the Swiss PTT and PTT Telecom Nederland. The emergence of global telecommunications operators reflects a number of profound changes that are taking place in telecommunications today. These forces underlie the trend we see today to globalization, not just in telecommunications, but in many areas of economic and social activity. Telecommunications is at the heart of a far-reaching revolution which is taking place, and driving the world toward the global information society of the twenty-first century. What are these trends? And what are their implications for the role of the private sector in the "new ITU"? Trend #1 - Technological Convergence The concept of "technological convergence" has gained wide acceptance as the central paradigm underlying a number of key trends in telecommunications and information technology. Computer and telecommunications technology have converged. This is reflected in a number of developments - in the digitalization of switching and transmission, in the development of computerized signalling and network management techniques, in the decentralization of network intelligence, and in the rapid growth of computer-based, value-added telecommunication and information services. Wired and wireless telecommunication systems are also converging. As a result of the "radio revolution", wireless systems are interconnecting - and in some cases beginning to compete - with networks at every level, ranging from LANs through terrestrial cellular telephone systems to satellite-based mobile communications. Telecommunication, computer, broadcasting and information technology are beginning to converge into broadband-based, multimedia and advanced personal communication systems. As well as posing new challenges for the ITU's standardization and radiocommunication functions, these patterns of technological convergence indicate the need to involve new participants, mainly from the private sector, in the work of the ITU. Trend # 2 - The Changing Structure of Telecommunications Market forces unleashed over the past two decades by the combined effect of technological developments, policy decisions by the governments of the most highly industrialized countries, and the requirements of major business users have substantially altered the structure of the telecommunications industry. Telecommunication operators have been separated from government administrations in most countries. Product and service monopolies have given way to competition; new players have entered the telecommunications industry at every network level, from local to international, and in every service category, from basic to value- added. Corporate communication systems have become an important segment of the telecommunications industry, a segment in which many significant developments have taken place outside the boundaries of the traditional public network providers. Some big business users of telecommunications have become operators of their own international private networks, out of a desire for strategic control of their information resources or out of dissatisfaction with the offerings of established carriers. Today's ITU does not fully reflect the dramatic changes that have taken place in telecommunications. The Union remains largely the preserve of dominant carriers, with little active participation by new players in the telecommunications industry or by major users. Again, this trend strongly suggests the need for greater private sector participation by the new players in the telecommunications industry Trend # 3 - The Evolving Role of Government As part of this process of structural evolution, the role of government in telecommunications has changed - in the developed countries which account for 80% of the world telecommunications traffic, as well as in many of the most dynamic economies in the developing world, particularly in South-East Asia and in Latin America. In the future, in these countries government will no longer be an operator. It will be a policy-maker and a regulator, providing public interest oversight to an industry which is increasingly private and competitive. It does not follow from this trend that the same approach to developing telecommunications can be applied in every country. Indeed, as demonstrated by a report recently published by the ITU , even among countries which have liberalized their telecommunications, there is considerable variation in regulatory arrangements. In spite of these qualifications, the trend among the world's strongest economies is clear. Although countries with liberalized telecommunications constitute a minority of ITU members, they make a preponderant contribution to the work of the ITU, both financially and through the provision of technical expertise. As well as supporting the need to involve non-governmental participants in the work of the ITU, the changing role of government in global telecommunications raises several strategic questions of vital importance for the future of the Union. What new products and services will government members require to assist them in discharging their policy and regulatory responsibilities? How can non-governmental players be given a greater voice in ITU decision- making processes without infringing on the sovereign rights of nations? How does the changing role of government affect development strategies, particularly in the Least Developed Countries (LDCs)? Trend # 4 - Globalization Questions of national sovereignty are complicated by the emergence of new telecommunication systems and services which are no longer "inter - national", but truly global. The proposed Low Earth Orbit (LEO) mobile satellite systems are one example of this new phenomenon. So are the strategic alliances and mergers and acquisitions I have already referred to that are being put in place by major national operators with the aim of offering "one stop shopping" to customers in different countries. Increasingly, these issues cannot be dealt with in isolation, as questions purely of telecommunications policy. The globalization of telecommunications is inseparable from the globalization of economic activity. Telecommunications have unified world financial, currency and commodity markets in "real-time" trading systems. They have supported the development of global corporations. They are changing the distribution of work between developed and developing countries in both the manufacturing and service sectors. They are a key to improving trade efficiency through techniques such as electronic document interchange (EDI). And they have an important influence on consumer demands, expectations, and tastes through the dissemination of advertising and cultural products. These developments raise the critical question of how domestic and international institutions, such as the ITU and its members, which are based on the premise of national sovereignty, can effectively regulate today's global, "borderless" telecommunication systems, which are largely developing in the private sector and outside the scope of government control. Trend # 5 - Human Development in the Information Society The gap in telecommunication benefits between developed and developing countries has been a long-standing concern to the ITU. While significant progress has been made in closing this gap in some countries and regions of the world in the years since the Arusha Declaration and the report of the Maitland Commission, in other areas, the gap has remained. This must remain an issue of primary strategic importance to the ITU. However, there is emerging evidence that it may be an important instance of a more general concern. Even in the developed world, the benefits of advances in telecommunications are not being equally shared. They are going primarily to big business users, with relatively little benefit to small business and residential customers. From the perspective of the individual's "right to communicate", so as to be able to participate in the economic, social, cultural and political life of the global information society, development issues should be seen as a general problem of the human condition, common to people everywhere. Concerns are also emerging about the relationship between the "right to communicate" and other basic human rights, such as the right to privacy and questions of cultural identity. In addition, there is growing interest in the relationship between the development of telecommunications and the preservation of the natural environment, as well as growing concern about the impact of some new communications technologies on human health. Finally, given the central role that telecommunications will play in global development in the twenty-first century, there is a clear need for the industry to recognize the responsibility it bears for the future welfare of mankind, and to consider the ethical dimension of telecommunications in conjunction with its business dimensions. The emergence of these issues at the global level indicates that the ITU should expand its policy capabilities and become involved in dialogue with a wider range of organizations and institutions at the international level, if it seriously wants to promote a more comprehensive approach to issues of the global information economy and society. The Private Sector's Role in the Restructured ITU Throughout the Union's history, the private sector has played a very important role in the activities of the ITU. Today, more than 250 companies and organizations, other than Administrations, take part in the work of the ITU. Together, they contribute about 10% of our budget. Beyond this, they make an enormous contribution in kind, particularly to the work of the Standardization and Radiocommunication Sectors. I am also pleased to say that many private sector organizations have already joined the ITU's new Development Sector. However, if the new, restructured ITU is to attain the goals set for us by its Members, and continue to play a leading role in international telecommunications, the participation of non-administration players will have to be enhanced. Indeed, last December's Additional Plenipotentiary Conference passed a resolution specifically asking us to review this question. The trends I have outlined clearly have important implications for all ITU members. To deal with them effectively, new patterns of partnership will have to be developed to unite the interests of government and the private sector in the development of global telecommunications. The public sector can no longer do it alone. Nor, may I venture to suggest, can the private sector. Let us look at the reasons why this is so. Member Administrations have lost a certain degree of policy autonomy. In most cases, decisions can no longer be made on the basis of purely national considerations. International and regional developments must be taken into consideration, as must the actions of trading partners. At both the national and international levels, there is also a growing interdependence between telecommunications and other areas of policy and regulation, particularly in the field of economics. These trends are increasing the complexity of telecommunications policy-making. At the same time they are - or should be - moving telecommunication policy considerations toward the centre of national policy agendas, in both developed and developing countries. But to respond effectively, policy-makers will have to gain a greater understanding of how the private sector works, and come to appreciate both the possibilities and limits of government regulation. For their part, telecommunication network operators, service providers and product suppliers face equally complex challenges. Business opportunities are expanding in both domestic and international telecommunication markets at growth rates well above the economy as a whole. But so is competition, between established players and from new entrants. The explosive growth potential of the telecommunications industry has proportionally increased the economic value of frequency allocations, standardization recommendations, and development initiatives - and potentially increased the value of ITU products and services to non-governmental participants. To capture the public and private benefits of the telecommunications revolution, all the members of the ITU -- both big-"M" and small-"m" must work together to ensure that the products and services provided by the ITU not only anticipate and respond to the direct needs of the Union's public and private participants, but that they serve the best interests of mankind as a whole. The central strategic challenge facing the ITU is to adapt an intergovernmental organization based on national sovereignty to the emerging requirements of the global information society, in which telecommunication is becoming an increasingly important business activity, as well as remaining a key socio-economic infrastructure and an essential public service. In his keynote address to Intelevent 92, Jean Jipguep outlined some of the main issues which face the ITU in the post-APP period, in seeking to reconcile the premises of "inter-nationalism" with the realities of globalization. They are worth repeating today: Issue #1 - Membership For many years, "small-m" members - recognized operating agencies, scientific and industrial organizations, and regional telecommunications organizations - have participated in the work of the ITU alongside "big M" Member Administrations. However, their rights in ITU decision-making processes have been very limited. If the ITU is to retain a leading role in the globalized, liberalized, competitive telecommunications industry of the future, it must enlarge its membership. As well as involving new players from the telecommunications industry, the ITU must expand its constituency to include "convergent" industries, particularly computing, as well as the user community. This will only be possible if the rights and obligations of this wider constituency are enlarged. Issue #2 - Financial Foundations Issues concerning the rights and obligations of ITU members are closely linked to issues concerning the financing of the Union. At present, as I mentioned, governments contribute about 90% of the ITU ordinary budget, with the remainder coming from non- governmental entities . These proportions no longer reflect the structure of the telecommunications industry, and it is questionable whether they reflect the true value of the services provided to these two different constituencies. Clearly, some rebalancing of financial shares is required. The contributions provided by Administrations must be complemented by new revenues drawn from other sources. Financial diversification will be particularly important if the willingness or ability of governments to support Administration contributions declines in proportion to the liberalization of telecommunications. Issue # 3 - Value for Money To maintain a strong level of government support well into the future and simultaneously to attract greater contributions from the private sector, the ITU will have to offer services that are of value to its members and participants. In the past and as long as the ITU was primarily an inter- governmental organization, hard questions about return on investment and value of service tended not to be asked. As governments everywhere tighten budgets and reduce their direct involvement in telecommunications, these questions are beginning to be asked by public authorities. Questions of this kind will certainly be asked by the private companies that are now beginning to dominate the telecommunications industry, and asked with increasing sharpness as competition increases. Issue #4 - Quality of Service Value for money considerations lead directly to the issue of quality of service. The ITU has already taken a number of steps to streamline its procedures, reduce its overheads, and improve customer responsiveness, principally through new working methods, extensive computerization of internal operations, and by providing electronic remote access to ITU products, processes, and services. Beyond improving the efficiency of its current lines of business, the ITU will need to keep its portfolio of products and services under continuous review, to make certain that they anticipate and respond to our clients' changing needs, whether they are from government or the private sector. Issue #5 - ITU Organizational Culture and Methods Responding to the changes that are taking place in the telecommunications industry along the lines described in the previous sections will require new capabilities, a transformation of the ITU's organizational culture, and significant changes in the way it does business. In the past, the ITU was a bureaucratic organization, bound by rules, regulations, and past practices. In this respect, it was a faithful mirror of the industry it regulated and the administrations that governed it. Today, the organizational culture of the telecommunications industry is changing rapidly in response to the competitive pressures of the market-driven environment. Many government administrations are changing their methods of operating too, in response to declining resources and increasing demands for public services. The ITU must change too - in the direction of becoming more client and market oriented, more innovative, more entrepreneurial. Issue # 6 - ITU Governance and Management In order to bring about these changes, there will have to be changes in the way the ITU is managed. To begin at the top, Member Administrations will have to share the power they have reserved for themselves with other players in the telecommunications industry, and eliminate unnecessary distinctions between "Members" and "Non-Member participants". The political aspects of meetings and conferences will have to be reduced, so that less time is spent listening to Ministerial pronouncements, scoring debating points, and putting views on the record for domestic consumption - and more time is spent on the business of developing telecommunications. Member Administrations will also have to be willing to delegate more authority to the officials who are elected and appointed to manage the ITU, and to hold them accountable for results. Within the ITU Secretariat, the efforts now underway to introduce modern management practices will have to be intensified. Towards a "Really New" ITU From the foregoing analysis, it should be clear that the trends which are transforming telecommunications from an international government service into a competitive, global business opportunity will have a profound effect on the ITU. To respond to these challenges, I have recommended to the ITU governing Council that the following strategic policies should be considered by the Kyoto Plenipotentiary Conference as a guide for the Union's activities in the 1994-98 period: * The ITU should continue to be guided by the goals and principles that are set out in the Constitution. They are the "moral compass" of the ITU. They help to define our role and distinguish it from those of other members of the telecommunications community. * First and foremost among these is the goal of fostering and facilitating the global development of telecommunications for the universal benefit of mankind. This is a practical challenge of immense importance to the international community. In the twenty-first century economic, social and cultural development, as well as global peace and security, will depend on good communications. * The symbolic functions of the ITU are also very important. Symbolically, the ITU represents the rights and obligations of all members of the global community - not a particular segment. It seeks to advance the common interests of mankind in telecommunications through the rule of law, mutual consent and cooperative action. Its actions are based on fundamental respect for the right to communicate and recognition of the role that telecommunications increasingly plays in sustainable economic, social, cultural and political development. * Against this background, the mission of the ITU should be "to provide the products and services required by the global telecommunications community that are best provided by an international organization". * Carrying out this mission in the changing telecommunications environment will require the ITU to become an open organization, responsive to the needs of all members of the telecommunications community, client-oriented, entrepreneurial and risk-taking in its behaviour. * As part of the process of becoming a more open organization, and to reflect the changing telecommunications environment, participation by non-governmental entities in Union activities must be enhanced. * The scope of ITU activities should be enlarged. Information technology is breaking down the barriers that existed between the telecommunications, broadcasting, computing, entertainment and publishing industries. Major users in resources, manufacturing and services are developing their own networks. Advanced communications technology is linking all these systems into the multimedia networks of the future. All of these elements - as well as others not yet imagined - will be part of the global telecommunications community of the future. * To respond to the needs of its increasingly diversified clientele, the ITU should segment its markets much more clearly than it does today, target the needs of its clients, and offer a much more diversified portfolio of products and services. Some of these (e.g. in the domain of radio and telecommunications regulations) may continue to be of primary interest to governments. Others (e.g. in the domain of standardization) will be of primary interest to operators, industry and users. It follows that different approaches will have to be developed in different parts of the organization to respond to these divergent needs. * As part of this process, the ITU must become a much more effective communicator, both with its members/clients, with other intergovernmental and non governmental organizations involved with telecommunications at world and regional levels, and with its own staff. Implementing this vision of a new ITU will require an interrelated set of strategies at the corporate and sectoral level. In the main, these strategies can be developed and implemented within the structure decided by the APP. However, there is one critical area in which further structural reform will have to be considered - the formal constitutional rights and obligations of private sector organizations that participate in the work of the ITU. At present, although the private sector does an increasing amount of the actual work of the Union and although it enjoys important rights as a matter of practice, only governments have a voice in ITU decision-making. As the telecommunications industry transforms itself from the national government monopolies of the past to the global private companies of the future, will it continue to be satisfied with its present, limited role in charting the course of global telecommunications development? Or will it demand greater rights, and express a willingness to take on correspondingly greater obligations? If so, how can the voice of the private sector be represented in an intergovernmental organization based on treaties between sovereign member states? Given the dramatic changes that have taken place in the telecommunications industry, it is quite conceivable that the members of the ITU will have to face these questions, if not at the Plenipotentiary Conference which will take place in Kyoto in September and October 1994, perhaps at the next one, in 1998. If so, we will perhaps have an interesting subject for discussion in future Intelevents. *** See The Changing Role of Government in an Era of Telecom Deregulation, Report of a Colloquium Held at ITU Headquarters (ITU, Geneva, 1993) The contributions of "small-m" members vary between ITU Sectors, reflecting differing degrees of private sector involvement in their activities. For example, 40% of the Standardization Sector budget is currently contributed by "members".