The Globalization of Telecommunications: A Study in the Struggle to Control Markets and Technology

By Trebing, Harry M.; Estabrooks, Maurice | Journal of Economic Issues, June 1995 | Go to article overview

The Globalization of Telecommunications: A Study in the Struggle to Control Markets and Technology


Trebing, Harry M., Estabrooks, Maurice, Journal of Economic Issues


The telecommunications industry has undergone a technological revolution that has created new markets and new systems of supply and has generally transformed corporate relationships and the institutions for public control. The advent of computers, satellites, fiber optics, digital switching, and new forms of wireless communications has had a particularly dramatic impact on customer usage patterns. The traditional distinction between local and long-distance telephone service, as well as the demarcation between voice, record, data, and video services, is fast disappearing. Comparable changes are taking place on the international scene as the conventional separation between local, national, and global communications is being eroded and as integrated telecommunications usage readily transcends national boundaries.

The dynamics of global communications display five distinct features. First, international communications is the fastest growing segment of the total communications industry (excluding new wireless services). Between 1988 and 1993, the International Telecommunications Union estimated that total international phone traffic doubled; it is expected to continue to double every five years for the foreseeable future.(1) This growth will be sustained by the continuing pressure to promote world trade by reducing tariff and trade restrictions through GATT and NAFTA-type agreements.

Second, global traffic would appear to reflect the same type of usage concentration that exists in domestic long-distance traffic, in which 20 percent of business customers account for 80 percent of business revenues. Accordingly, a major determinant of the international telecommunications infrastructure will be the demands of the 2,000 largest multinational corporations.

Third, global telecommunications will have a significant impact on the growth rates of both industrialized and developing nations. The World Bank has recognized this by encouraging privatization of government-owned postal, telephone, and telegraph systems (PITS) and the introduction of regulatory oversight designed to promote greater entry and competition. The assumption is that this will stimulate trade and growth in the Third World. However, it is far from clear that privatization will result in the type of infrastructure that will achieve balanced growth. The prospect of privatization has created an immense incentive on the part of communications carriers and suppliers in industrialized nations to invade the Third World to acquire and upgrade telephone properties. Whether privatized networks will provide comprehensive domestic service or cater primarily to the needs of multinational corporate buyers remains to be seen.

Fourth, the familiar questions of discrimination and cross-subsidization between different classes of users, which existed for many years in the United States, will now be extended to overseas markets. The potential for such behavior exists both between nations and within individual national boundaries.

Finally, there remains the question of what criteria should be used to evaluate a global infrastructure. A global network is a form of commons, and the general goal should be greater participation in this facility by everyone. But the pressures for profitable operation associated with privatization and interfirm rivalry will give little or no recognition to such values.

At the same time, technological advance has dramatically changed the cast of players involved in the telecommunications infrastructure. It has grown from the original private and publicly owned telephone monopolies to include a host of new entrants such as competitive access providers (CAPs), resellers, value-added carriers, new interexchange carriers (IXKCs), new local exchange carriers (LECs), cable companies, wireless carriers, direct broadcast satellites, media conglomerates, and specialized brokers. Each of these entrants will seek to exploit and, whenever possible, to control markets and technology for their own advantage. …

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