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Shift to the Economic Center of World Telecommunications Calls for Change.

World economies are shifting. Once driven by industry, economies are today driven by information.

For the first time in history, the focal point and economic center of the world telecommunications industry is shifting pfrom the Atlantic Basin to the countries that rim the Pacific Basin.

Only 30 years ago, almost no international telecommunications existed between countries in the Pacific, and in the developing countries, domestic telecommunications were just beginning.

The last 10 years have seen an enormous expansion of the Pacific Basin international telecommunications network. The number of telephones has more than doubled from 46 million to over 105 million today (excluding North America). and the systems and infrastructure to support this incredible growth have kept pace.

Assisted by the developed nations and organizations such as the UNs Economic and Social Commission for Asia and the Pacific (ESCAP), International Telecommunications Union (ITU), International Telecommunications Satellite Organization (INTELSAT), the European Community (EC) ... all working with the private sector ... the Pacific rim developing countries have made impressive inroads in telecommunications, thereby pulling the Pacific Basin societies closer together.

Today, most of the telephone call, telex and telegraph messages, and data exchanges among the peoples of the Pacific take place by satellite or by undersea cable .. along step from post-World War II High Frequency radio communications. Sixty percent of the world's 508 million telephones link the countries on the rim of the Pacific Basin. From the enormous growth of Pacific telecommunications has flowed economic development. But will this growth continue, and at what pace? *constrained or unconstrained?

In searching for answers, we should examine the advantages of a liberal telecommunications policy ... including freedom of access, freedom to provid services, and freedom to sell equipment ... which will keep these nations bound together, and which I think offer the best opprtunities for dynamic expansion and growth for all countries with shores that touch the Pacific Ocean.

Wrapped in this huge basin are four South American nations, all of Central America, all of North America, Australia, New Zealand and all of East Asia including Japan and the island in between ... an area which holds most of the world's people, a multitude of languages ... a broad spectrum of social-economic cultures ... tremendous resources, friendly governments, and vast distances between nations.

The diversity of telecommunications ranges from rural traffic for very small island nations of the southwest Pacific to the high-speed digital traffic among the major cities of the rim states, continents and developed islands.

Recently, a telecommunications executive said, "Many of us believe telecommunications to be the premier high-tech industry for the balance of this century, and some have suggested telecommunications bears the same relationship to the last two decades of the 20th century that steel had for the last two decades of the 19th century ... the stuff nations are made of."

But even with the tremendous growth to date, international developments to facilitate this growth are lagging well behind the development of technology. What is causing this lag? Is it due to protective government restrictions as well as the failure of some governments to respond to new telecommunications technology? And what responsibility does the private sector bear?

The current world market in telecommunications is about 45 billion. It should reach 60 billion in 1987, and 90 billion dollars in 1990. Telecommunications and information services already comprise the largest element in American trade.

From 1983 to 1990, the world market for information products and services (which includes the telephone, computer and semiconductor industries) is expected to more than double from the current level of about $400 billion to over $932 billion ... an annual growth rate of 12 percent.

But while over 9/ percent of world output of telecommunications products still comes from the advanced industrialized countries, projections show that the greatest growth will increasingly come from developing countries, especially those rapidly advancing economies in the Pacific Basin.

Various forces create this market explosion. One force is the multinational character of the telecommunications industry. Today, this industry is not concentrated in any single country, but is spread around the world with a great deal of the activity focused in the Pacific Basin. Many of the major producers are in some way linked together through a network of technology exchange agreements. These include shared manufacturing of components used in systems and, in a new phenomenon, cooperative reasearch and development activities. Most Pacific nations have benefited from increased competition in telecommunications and related industries.

It is in everyone's interest that competition be allowed to spur development in telecommunications and related industries. But the benefits of fair competition and open markets are not always perceived as sufficient to jestify continued progress towards liberalization of trade and investment opportunities. Indeed, there are those who would argue that closed markets and restrictive practices may somehow yield greater benefits.

Three years ago, the Japanese and American governments negotiated an "Agreement on Procurement" by Japan's Nippon Telegraph and Telephone Public Corporation (NTT) with the hope of expanding access by American suppliers to the sizable Japanese telecommunications market. Access to NTT procurement is important for a number of reasons:

First, Japan's telecommunications market is the second largest in the world and NTT procurement represents about 40 peracent of Japan's telecommunications market. In my opinion, any firm that intends to be a world-class competitor in telecommunications must have an active presence in the Japanese market.

Second, access to NTTs procurement is important because it offers one of the fiew vehicles available to foreigh companies for obtaining market access into Japan's telecommunications system. The agreement provides a formal process for procurement by foreign firms where none existed before. It is aimed at gaining equal market access and is another step on the road to freer trade and open markets.

Third, NTTs influence over the development of high-technology industries in Japan is enormous. It establishes standards for the quality, reliability and performance which affect equipment for both the private and public markets. And this trend will increase with the possible re-organization of NTT somewhat along the lines of American Telephone and Telegraph Company (AT&T) over the next several years.

Has the NTT agreement benefited the United States? Unequivocally, the agreement has given United States firms a means ... a window .. into NTT and how it workds. These firms have not achieved the sales growth we had hoped for, but there are signs ofimprovement in NTTs receptivity in working with United State firms.

While I remain unsatisfied at the relatively low level of sales to date by United States business firms to NTT, *i am confident that the effort to establish longterm relationships with capable United States firms will be successful.

I am convinced that NTT is committed to this process, for reasons which relate to its own best interests and those of the Japanese consumer. Greater access to American technology, which increased competition will bring, undoubtedly will also be accompanied by lower costs and wider choices for the users.

The recently published report by the Organization for Economic Cooperation and Development (OECD) ... "Telecommunication, Pressures and Policies for Change ... concludes that competition polices are the principal stumbling block for growth in the global telecommunications industry. The report calls for government acton to liberalize trade in the domestic and international telecommunications markets.

The fundamental principle of United States telecommunications and information policy is the same one that underscores our international trade policy in general... that the best way to enhance techonological innovation and efficiency is through competition by the private sector with minimum government intervention. In other words, free trade by firms competing against each other fairly.

Domestically, the United States is vigorously pursuing a policy which emphasizes deregulation of the telecommunications industry as quickly and comprehensively as possible, which minimizes direct government involvement, and which maximizes reliance on private enterprise and initiate. We believe other countries should also adopt this approach.

Difficulties arise, though, because, unlike virtually every other country in the world, the United States teleacommunications infrastructure is not a government-operated monopoly. Although there are some encouraging signs of privatization and liberalization in a few other countries, the United States is still unique in its approach.

Protectionist policies exclude foreign manufacturers from the marketplace. They inhibit innovation, restrict consumer choice and ultimately lead to retaliation by those countries whose participation in this exciting industry is restricted.

In the long term, countries, which restrict markets will find themselves facing higher cost, less innovation or improvement of existing systems, limited choices in the marketplace for consumers, and reduced capital availability.

Telecommunications ties nations together. In the past, business executives required only reliable telephone and telex availability. Today, the cost and ease of access to sophisticated telecommunications networks rank at the top of the list with other traditional investment and corporate-location decision factors such as labor, taxes and transportation

Expensive telecommunications services act as a tax on the economy and restrain efficiency. For a large multinational company, these costs have the same effect as a tax. International business investors must consider this fact in selecting, expanding or relocating their facilities to achieve lower costs.

We will all lose if it becomes the norm for each government to support its domestic industry through preemptive policies or in response to similar foreign government interventions. Not only will the free-market system suffer, but we will forgo growth, income and jobs.

In President Reagan's State of the Union message, he said, "America must be an unrelenting advocate of free trade. As some nations are tempted to return to protectionism, our strategy cannot be to follow them, but to lead toward freer trade."

The next century will be the century of the Pacific, and telecommunications

will be "the stuff nations are made of."
COPYRIGHT 1984 Nelson Publishing
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Article Details
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Author:Olmer, L.
Publication:Communications News
Article Type:transcript
Date:Mar 1, 1984
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