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Issues Concerning Communications and Economic Development Are Scrutinized.

An effective telecommunications systems is vital to the growth and prosperity of any nation. Nations with only minimal telecommunications tools are inhibiting their prospects for productivity improvement, industrial development, and competitiveness in an increasingly competitive world.

One way to assess the telecommunications needs of Pacific Rim countries in the years ahead is to study the correlation that usually exist between the growth in a nation's gross domestic product (GDP) and the growth in its number of telephones.

Economists, who seldom agree on anything, also disagree about the nature of this relationship. Does an improved telecommunications system help a country step up its gross domestic product? Or does an increase in the GDP simply make it possible for a nation to expand and enhance its telecommunications systems?

Assuring that growth in telecommunications matches or exceeds growth of the GDP, we arrvied at a rather awesome conclusion when we apply this observation to a sampling of countries on the Pacific Rim. Throughout the 1980s and beyond, those countries should undergo considerable expansion of their telecommunications systems, as expressed in the number of telephones they acquire.

Consider the recent economic growth in Indonesia, Singapore, Taiwan, Korea, the Philippines and New Zea zealand.

According to widely published sources, these nations have increased their gross domestic product by an average of 15 percent a year over the past several years. According to the latest figures available, they have, collectively, approximately 12.6 million telephones in service.

If we project his economic growth rate, and assume that the number of telephones will grow at the same rate, the six countries should collectively install more than 30 million additional telephones by the end of the present decade.

Using the standard rule-of-thumb of $2,000 in investment per telephone, we can forecast a need for $60 billion to finance new telecommunications in those six countries alone.

In manpower, that growth projection would mean a minimum of 300,000 new telephone company employees, based on the rule-of-thumb of 10 employees per 1,000 stations. And those six nations represent only a sampling of Pacific Rim countries.

No matter how rough and ready those estimates may be, their broad implications cannot be ignored. The potential trends I am describing cover international as well as domestic systems. Any country that aspires to compete in international markets must be capable of communicating readily and swiftly with its neighbors and with the world at large.

As I see them, the major issues in such expansions include: the source of financing for new or improved telecommunications systems; the recruiting and training of manpower; the development of effective management strategies and techniques; the education--so to speak--of authorities who harbor outdated concepts of modern technology; the necessity for long-range planning of communications systems within a national economic strategy; the transfer of technolgy; and a redefinition of the role of government in telecommunications.

It is questionable that the financial resources now available to most Pacific Rim countries are sufficient to meet the need. It may be that the time has come for a re-examination of how international financing of telecommunications ventures is carried out.

It is difficult to identify precisely where such a study might lead, but it would undoubtedly pinpoint areas in which financing of this essential element in economic growth could improve.

One point I want to make is that it isn't necessary to try to do everything at once Universal service, where everyone, no matter how remotely situated, is entitled to telecommunications services, is an ideal but it is beyond the immediate financial resources of many socieites. I recommend a phased approach. Start by building networks that can offer premium services that can be sold at premium prices to businesses and government. This contributes immediately to the national economy and raises funds to expand the network to customers in other parts of the country.

I am not criticizing the concept of universal service...that would not be in character with what I have practiced in my 36 years in the industry. I am talking of phasing and funding to a maximum degree from internal growth.

In the area of manpower, new measures are also required. It might be appropriate to consider an international institute to train the personnel needed to install, maintain and operate th expanding telecommunications systems. The makeup of such an entity would have to be studied and worked out. But in its early stages, at least, it would require input from telephone companies, telecommunications suppliers, and educational institutions as well as governments.

Equally pressing is the development of managerial techniques and strategic planning capabilities required to support rapid expansion. I can think of no area where international cooperation would be more appropriate and effective.

We can learn a great deal from each other about the effective management of the modern business enterprise. Those of us on the North America side of the Pacific Rim cannot pretend to have a monopoly on this expertise. One recent book on the bestseller lists in the United States and Canada was entitled The Art of Japanese Management.

Whatever the means, the training of management in the new technologies and systems is essential if new telecommunications systems are to be installed and operated as effectively as possible. No action--least of all a rapidly developing country with limited resources--can afford to waste even so much as a dollar's worth of its resources through bad management.

Effective management is crucial because any new telecommunications system must accommodate continuous and accelerating, technolgoical change. There is no point in designing a system that focuses solely on today's technology and needs. Nations that do so will find their telecommuications investment rapidly and painfully obsoleted by rapidly evolving electronics and telecommunications technologies.

Because the telecommunications industry is undergoing such rapid technological change, many government administrations understandably find it hard to keep up. As a consequence, they tend to impose strategies and regulations suited more to the past than to the present or the future. The tedency of administrations to favor domestic telecommunications system suppliers, without really considering or understanding the quality of the technology they are obtaining, is an example.

I believe that, for the benefit of all concerned, the world telecommunications industry has a duty to keep political leaders and industry regulators constantly and thoroughly infomred on technology trends. If we can do that we can at least be assured that the right information is available even if the wrong decision is made. We can also increase the probability of the right decisions being made.

In some countries, the value and necessity of a long-term plan for telecommunications is not appreciated. Again, the industry is probably at fault. It needs to do a better job of education.

In discussing such a need with telecommunications administrations, I stress two basic points. First, a telecommunications plan must be an integral part of the broad, long-term national economic plan or strategy. Second, those responsbile for the plan concentrate most on defining its general aims and devising an appropriate structure for the system, rather than trying to set a precise timetable for completion. With such an important and permanent asset as a telecommunications system, the structure, technical quality, and appropriateness of the system are vital. They are much more important than meeting one or more deadlines, which are often more politically than technically oriented.

National planning leads to the question of technology transfer and industrial participation. I would urge any administration to take a moderate approach in demanding a high degree of local content in the manufacture of telecommunications equipment. Such a desire is natural because it seems to support the best interests of the host nation. However, such measure can be self-defeating.

By insisting on extremes of local manufacture, without even considering the alternatives, a country will merely discourage integration of new technology into its national network. The result is often branch plants specializing in "busy-finger work" and outdated technology. Worse, the telecommunications system itself and national economic growth suffer because the country has cut itself off from the rapidly developing technologies in other parts of the world.

Instead of self-defeating domestic content requirements, a government can serve its own interests far better by considering some other kind of arrangement, such as a joint venture with a telecommunications manufacturer.

For example, in the mid-1960s Northern Telecom entered into a joint venture with the government of Turkey. At the outset, 51 percent of the jointly held operation was owned by my corporation, and most of the management jobs were held by Northern Telecom people because they were the ones with the technological training and management experience.

Today, Turkish interests own 69 percent of the company, and virtually every management position is occupied by a Turkish national. Only two or three of our people are still on the scene at the request of the Turkish government. With our advice and assistance, the original plant has developed into a full telecommunications manufacturing industry. It has established a sophisticated research-and-development laboratory, and has begun to export. Equally as important, Turkey is now able to upgrade its telecommunications system with home-grown technology.

Northern Telecom is perfectly happy with the way things have developed in Turkey. We maintain a share in the company, and that original joint venture has led to several other profitable deals for us--including a recent $300 million (Canadian dollars) sale of our leading-edge digital communications systems and other equipment. This, incidentally, will be the second technology transfer from Canada to Turkey. The first was analog; the second is digital, the technology of the future.

Such technology transfer and local growth would not have happened if Northern Telecom had not established its Turkish parnership. It serves both parties equitably. We have helped develop a Turkish industry which employs 2,000 Turks. The Turkish company buys Canadian-made components and sub-assemblies sufficient to keep 800 of our people permanently employed.

The Turkish government, according to the evidence, is as happy with the project as we are. It now has an important and flourishing industry--providing employment, training, and export potential--that otherwise might never have developed. Its telecommunications system now boasts 1.8 million lines, an increase of 1.5 million in the past 15 years. By the end of the decade the system will operate 2.2 million lines, and is expected to rank as one of the most advanced in that part of the world.

I believed there are many Pacific Rim countries that could probably emulate the Turkish experience. It is important, however, to understand certain basice rules of the game.

A government must realize and accept from the outset that the creation of an indigenous high-technology telecommunications industry is a long-term proposition. Results take time to achieve.

Every modern country needs a sophisticated and healthy telecommunications system that serves broad public and specific business needs, but it does not necessarily need government to provide or finance all the elaborations of sub-networks and specialized functions. This does not mean that these subsidiary or separate networks are not themselves tools for social and economic health; they are. And every national system must ensure that its standards and technical protocols do not inhibit or prohibit their development. This requirement will undoubtedly become a more prominent consideration for a number of Pacific Rim countries in the 1980s.

Like the road system of the ancient Romans, an effective, efficient telecommunications system is essential to economic growth. We must constantly state the case for telecommunications in our dealings with governments, financing institutions, and other agencies that affect the quality and rate at which telecommunications systems are developed.

Our success in helping create this awareness will have a significant impact on the future economic development of the Pacific Rim.
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Author:Benetau, B.
Publication:Communications News
Date:Mar 1, 1984
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