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Cooperation and Competition in the Development of a New Era in International Communications.

Since my last appearance before this Forum in 1979, the telecommunications industry in the United States has made great progress towards its long and difficult transition from a tightly regulated, monopolistic from a tightly regulated, monopolistic structure to one more competitive and freed in part from regulation. Another major step will be taken in only a few months when the Bell Operating Companies on January 1, 1984, will be divested from their parent company, AT&T. George Orwell in his well-known book, 1984, made many prognostications concerning the impact of communications on our society, but he failed to foresee the major changes taking place in communications in the United States in that year. Although he suggested that communications and the computer would be used to enslave mankind, communications actually is creating a greater freedom for the world's population. Effective international communications can, /I believe, be a major constructive force in assuring peace throughout the world.

Because United States moves to a more competitive telecommunications environment also have important implications outside of the United States, it is understandable that questions are being raised about whether these new notions of competition will advance international telecommunications. It is important to keep in mind that multiple international record carriers (IRCs) have offered their telex, telegram and private line services to the international marketplace for decades. Although there has been a limited degree of price competition among the six IRCs which largely control the international record market, the entry of additional carriers into the marketplace--utilizing new technologies and responding to new customer demands ... would further stimulate competition, and in my view, better serve the record service customer.

To understand what is happening in the United States we must examine the forces that brought about a competitive telecommunications environment in the first place. The acceptance of competition in the telecommunications industry in the United States did not come about abruptly. Since the passage of the Communications Act in 1984, the United States has been highly successful in pursuing its objective of providing efficient, economical, and universally available telecommunications service throughout the country using private monopolies subjected to stringent government regulation. However, the substantial achievement of the goal of universal service, coupled with dramatic technological advances and accelerating demand by business users for a rapidly growing variety of telecommunications services and products, persuaded the government to reconsider the thesis that communication services could best be provided by a fully regulated telecommunications industry. Major Technological Advances

During teh last 15 to 20 years, major advances have been made in telecommunications technologies, such as satellite communications, microprocessors, digital transmission and switching, fiber optics, and packet switching. These developments have made economically feasible the construction of multiple intercity networks mentation of integrated systems consisting of telecommunications facilities, computers, and office automation systems.

The United States eventually was presented with the choice between increased regulation of data processing and data communications or decreased regulation of communications and increased competition. As I have noted, the United States chose the latter route.

The United States believes that, for much the same reasons that competition in the domestic marketplace is beneficial, international competition also should be stimulated. Since the late 1970s, Congress, and the FCC, have implemented a series of decisions designed to reduce entry barriers and increase competition for the USA portion in the international telecommunications market. Legislation enacted in 1981 enabled United States record carriers for the first time to offer both domestic and international record service. The FCC in a series of decisions and orders authorized new competitive entry into the international record and packet-switched data market; abolished the rigid line between international voice and record carriers; dropped the requirement that all international record transmissions move to and from a few "gateway" cities in the United States; and authorized the Communications Satellite Corporation (COMSAT), once a provider of services only to commercial carriers, to offer direct international connections to the public.

Although the rest of the world has not gone as far as the United States to introduce competition in its respective telecommunications markets, some countries are beginning to implement or give serious consideration to the idea.

In a move which received much attention, the United Kingdom passed the British Telecommunications Act in 1981 subjecting British Telecom, the postal, telegraph and telephone authority (PTT), to heavy competition in selected equipment and service markets. In 1982, Mercury Communications, a carrier formed by Cable & Wireless, British Petroleum, and Barclays Bank, began building a network consisting of fiber optic and cellular radio transmission systems to compete with British Telecom. Other parallel changes, including the planned sale by the Thatcher government of 51 percent of British Telecom to private investors, are gradually privatizing telecommunications in the United Kingdom.

In Australia, the Davidson Committee in October, 1982, issued a report calling for massive deregulation of Telecom, Australia's PTT. The recommendations include authorization for private networks operating in competition with Telecom; a wide open market for terminal equipment; unrestricted resale and sharing of leased lines; cost-based pricing; and extensive PTT reliance on outside contractors for construction of networks and other capital plants. Major government-commissioned studies in both the Netherlands and Japan in 1982 advocated new restrictions on the monopoly powers of the respective PTTs, if not the actual transfer of telecommunications to the private sector.

The European Conference of Postal and Telecommunications Administrations (CEPT) has also recognized that important issues must be addressed in this area. As these remarks were being prepared, CEPT was considering proposals to permit additional United States carriers to join AT&T as international voice carriers and is planning to recommend a European position for each member to consider.

The United States recognizes that new telecommunications services, policies, and even carriers cannot be successfully introduced into the international arena by one nation alone. There must be agreement between the United States on one hand and a corresponding country's PTT on the other. In the end, those outside the United States must draw their own conclusions as to the degree of competition with which they will cooperate.

Admittedly, there may be some costs attached to permitting competition in the international marketplace. It is far easier to negotiate arrangements for rates and services with a single carrier than to come to terms with four or five or more. In addition, modification of equipment to allocate traffic would undoubtedly require additional expenditures.

The International Telecommunications Union throughout its long history has championed new technology and services and provided the mechanisms for making them effective. As the sole international forum for the regulation of worldwide telecommunications, ITU's permanent divisions have been responsible for such activities as allocating radio frequencies and their use, and more recently in developing spectrum and orbital allocations for international satellite communications. In addition, an International Telegraph and telephone Consultative Committee (CCITT) study group has been studying all aspects of transmission systems including such transmission media as symmetric pair and coaxial cables and optical fibers. A plan has been drafted for a uniform presentation of recommendations on cables, including their use for digital transmission.

The development of the X.25 and X.75 standard protocols by the CCTT has been a key factor in enabling the international public packet-switched data market to grow from virtually nothing in 1974 to approximately $300 million by 1983.

Now we face another new era that will include a diversity of services, a blending of voice and data, and increasingly the introduction of new technology and new entities. The ITU has already taken the lead through several CCITT study groups to set standards for integrated services digital networks (ISDN). These networks are designed and constructed to provide a wide range of telecommunications and information services and to transport electrical signals in digital, rather than analog, form. ISDN will provide the architecture for creating a worldwide network capable of carrying this digital information. Communications Plays Critical Role

The critical role played by telecommunications in stimulating economic and social progress and in promoting peace was recognized by the General Assembly of the United Nations when it proclaimed 1983 as World Communications Year. The World Communications Year has alerted countries and corporations to the importance of sharing technology and cooperating in network implementation and standards and has inspired specific moves at least on a modest scale to transfer new communications technology from the developed to the developing world.

For example, GTE will install a radio communications link between Zimbabwe and Mozambique as part of its contribution to World Communications Year 1983.

I believe it is the responsibility of all of us participating in this Forum to assure the future contribution of new and improved communications to the world community. The ITU can have a major role in helping to adapt to the new era of increased competition while preserving the right of each nation to make its own choices and decisions as to its own domestic structure.

The ultimate objective is to provide the best possible choices of services, in terms of features, quality and cost, to the customer. On this we all agree. We in the United States believe that competition can contribute to that process. We also recognize that regulated monopolies were instrumental in helping the U.S. achieve its current position in the telecommunications field and will continue to have an important place in other countries. But I invite you to keep an open mind towards taking advantage of the opportunities that can be afforded by the new competitive forces in the international marketplace and which in the end can promote the development of an efficient, diverse and technologically advanced worldwide telecommunications system. Benefits Outweigh Costs

But, on the whole, I believe the benefits outweigh the costs. Althoug it may be premature to fully assess the impact of competition on the United States telecommunications industry, I do believe a more dynamic national communications market is emerging as a result of competition and deregulation and that users are being provided with the most innovative advanced technology available at reasonable costs. Diminished regulation in the United States has accelerated the development and introduction of electronic mail, voice mail, high speed data and facsimile transmissions, and other new communications-based services, such as electronic publishing and electronic funds transfer. A Huge Market Potential

Not only do these new services benefit the subscriber, they also represent huge market potential. For example, there are approximately 150,000 domestic and 26,000 international telex/TWX terminals in the United States today, some 100 years after the telegraph was invented. In less than five years, a similar number of terminals has been installed in the U.AS. to use public computer-based message systems (CBMS) or "electronic mailbox" systems. These CBMS services account for only five percent of all electronic mail revenues today including domestic and international telex, teletex, and facsimile, but they are expected to grow at an annual rate of 42 percent over the next decade while telex grows at 10 percent. Overall it has been estimated that public data communications networks will represent a $3 billion domestic market in the U.S. by 1990 and a $6.1 billion domestic market by 1995.

In the voice market, competing carriers are drawing attention to the marketplace with price reductions. As of year end 1982, carriers such as GTE Sprint and MCI have captured more than 4 percent of the $40 billion U.S. domestic long distance market. Network users are also finding that they have greater flexibility than ever before in pricing and billing options and additional services.

Furthermore, competition has compelled the industry to pay closer attention to what its customers want. This responsive attitude goes beyond the effort to offer users a wider range of options in rates and services. It extends to the development and marketing of advanced equipment with innovative features and integrated systems that combine data and voice transmission.

Some of the benefits that I have enumerated are difficult to quantify, but United States experiences in other fields demonstrate that the introduction of competition into a regulated environment can have favorable results. Both the U.S. trucking and airline industries have been deregulated in recent years, and after a difficult transition period during which a number of airlines suffered, the public seems to be benefiting from the new competitive environment. Dan McKinnon, Chairman of the United States Civil Aeronautics Board, testified before a United States Congressional House Subcommittee in May, 1983, that after five years of deregulation, airline travelers on the whole are receiving better service and lower fares n today's competitive environment. Chairman McKinnon noted that airlines now use their new freedom to tailor routes and fares to meet traffic demands and to use their equipment more efficiently. As a result the commuter airliner industry has exploded to fill the gaps left by other airlines' rerouting. In 1978 there were 34 regional and local carriers, while today there are 53 airlines which are providing improved commuter jet service.

I am confident that the United States telecommunications industry will be able to make a similarly optimistic progress report five years hence on its successes with competition. Moreover, i believe that the United States' success domestically with competition will further expand demands for international services from which we can all benefit.
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Author:Brophy, T.F.
Publication:Communications News
Article Type:transcript
Date:Jan 1, 1984
Words:2199
Next Article:Responding to User Needs...with Services for Today and Tomorrow.
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