 | Issue: | Latin America II 2003 |
| Article no.: | 5 | |
| Topic: | Convergence, Globalisation And Universal Service | |
| Author: | Carlos Eduardo Balen Y Valenzuela | |
| Title: | Commissioner and former Executive Director | |
| Organisation: | Comision de Regulación de Comunicaciones – C.R.T – Colombia | |
| PDF size: | 252KB |
About author
Not available
Article abstract
The evolution of ICTs brings the promise of great social and economic impact developing economies. The convergence of networks and services poses a series of regulatory challenges. Traditionally, regulations defined services in terms of the transmission medium or frequencies assigned. Today, digital technologies transmit any and all content via any and all means of transmission. Consequently, service-bound regulatory structures will have to change to permit new technologies that will help the universalisation of access and, consequently, social and economic growth.
Full Article
The revolution of information and communication technologies (ICT) has had a great influence upon the development of national economies. The contribution of the telecommunications infrastructure to the GNP has been substantial and in general far exceeds its cost. As the networks evolve, and society gains access to them, great economic and social changes take place. The challenges and opportunities of these changes are enormous for developing economies. If the necessary measures are taken, they bring increased economic efficiency and productivity, as well as better education, health and public management. ICTs are an important factor in the international competitiveness of a nation. Forces such as globalization, convergence and competition are driving changes that profoundly impact the rural and marginal sectors of Latin American countries. This article reflects upon the way these forces affect the telecommunications sector in the region. It is a moral imperative that access to networks, and the services they bring, be made available to all social groups throughout every country. Globalisation The telecommunications sector is an industrial sector in which the strategic positions of competitors in the principal geographic or national markets are basically affected by their general global positions. Such sectors require the companies to compete on a coordinated worldwide basis or face strategic disadvantages. The global advantages are derived from: comparative advantages, economies of scale, product differentiation advantages, and prestige due to market information and technology. The financial strength of multinationals, easy access to capital markets, and corporate strategies allow these companies to consolidate themselves in short periods of time as leaders of the segments in which they participate. Since their strategies are oriented towards international or regional coverage, they generate synergies and economies of scale in their diverse operations, in part due to their easy access to funding through stock markets and from international banks. A clear example in Latin America is the Bell South Latin America group, whose stockholders approved the issue of shares distinct from those of the holding company in November 2000. This group has nearly 10.8 million mobile phone subscribers in 11 countries and its share of the total number of subscribers in the region is almost 20%. The table illustrates how the company has integrated itself regionally, offering all kinds of services, oriented towards the convergence and the operation of networks. 38% of the Telefónica de España sales come from the Latin American region, derived from earnings provided by over 44 million fixed lines of monopolies established in 6 countries. Telefónica’s 10 lines of business – including Emergia (submarine cable operator), Terra (Internet gateway), and Telefónica Datacorp – have leverage. Their example clearly exemplifies the tendency of global operators to diversify their services portfolio by offering everything related with information, content and connectivity. The thoughts of Professor Eli Noam´s, which a few years ago seemed farfetched, are a reality nowadays. Technology, the new business models in telecommunications and the need to provide integrated products to subscribers, make companies develop convergent strategies. A good example of this was the 97 billion dollar merger of AOL, the Internet giant, and Time Warner, the most important media enterprise, 2 years ago. In this operation, the entertainment, information and connectivity industries came together. It was the convergence of the analogue present with the digital future. Service differentiation by network – voice in one network, for example and data on another – is rapidly becoming obsolete; we are now talking about digital networks that carry all types of content simultaneously. The new technologies developed by telecommunication equipment manufacturers highlight the phenomenon of convergence even more. Integrated terminals that handle Internet, fax, e-mail, voice and numerous software applications all in one mobile phone are a good example of this. A recent worldwide study concluded that, for the first time, sales of mobile terminals with integrated digital cameras were greater than the sales of traditional digital photographic cameras. Over 25 million telephones of this type were sold during the first semester of 2003; only 20 million digital cameras were sold during the same period. Finding a young Japanese at the airport using his phone to take pictures of a young English football star who plays in a Spanish first league team, then using the same terminal to watch the transmission of the goals is a clear example of convergence and of the global world we live in. Several years ago, we thought we would not be possible to see the sort of scene above, at least for some time to come, in Latin America. Now, Latin America is getting closer thanks to the involvement of global telecommunication companies and their global strategies that reduce the time they adopt new technologies in their operations around the world. The new multimedia terminals are designed for digital video transmission systems; this changes the way we traditionally watch television. Digital signals can be received by land, cable or satellite systems. In the future, there will be more applications running on a host of increasingly diverse terminals. This will contribute, for example, to the mass use of systems such as GPS navigation for vehicles or remote operation systems for electrical appliances. Convergence is occurring between technologies, infrastructures, and even at the level of content, services and applications. Convergence is a reality, and the competitive edge of countries will be determined by the way in which the governments effectively respond to it. For this reason, it is not rational to think about framing legislation, as it has been traditionally, assigning each service to a frequency or means of transmission. Today, the tendency is clearly towards networks that distribute any and all types of content and services using the same transmission medium or the same frequencies. The distinctions between information and entertainment between wired and wireless, between technologies and between businesses are blurring. Connectivity, by any means, any technology or convergence of technologies is what matters. Conclusions “Legislation regarding telecommunications is more effective when it is general and establishes the framework for laws and regulations, foreseeing the details of the application (for example, by means of decrees or similar legal instruments). If the legislation is more general, the possibilities of it being valid for a longer time are greater.” (ITU, Rec DI, 1998) The telecommunications industry requires great investments in infrastructure; it is subject to quick and great technological changes and responds well to economies of scale and diversification. These characteristics require large investments of capital that governments typically cannot cover by themselves, but can easily be covered by global firms with access to international capital markets. Consequently, it is clear that legislation regarding telecommunications must promote private investment in the sector. It is also clear that this investment must provide a return-on-investment – profits – for each line of business developed. If all the people in a country are to have access to telecommunication services, the operating companies will have to invest in building a structure to provide them, but they will do so only if they believe the businesses will be profitable. Globalization Free and ample competition is the best way to promote the growth of the telecommunications industry, and in parallel increase the social and economic development of the countries of the region. Competition generates space for global players by creating attractive regional markets and building a minimum critical market mass that gives local companies an adequate chance to compete. On the other hand, increasingly competitive markets call for the reduction of government intervention as a fundamental next step in the development of business. Therefore, legislation regarding telecommunications must establish principles by which asymmetric regulation is permitted, only acting upon the actors that have significant power to dominate any of the relevant markets. National regulatory agencies, accordingly, need to define the characteristics, measures and relevant markets necessary to promote competition as set forth in the principles established by the legislation. Convergence The fact that many different services can be provided through a single network or that a given service can be provided through multiple networks using different technologies, makes impossible, as was done in the past, to classify services according to technical characteristics of the networks and the services, for this would create artificial barriers to the development of the industry. In North American and Argentina, for example, single permits can now be issued for the operation of networks, independent of the services provided, thus allowing for fast technological innovation, cost reduction and improvement in the quality service. All this promises bring great benefits to subscribers. Universal Service The universal service is one of the fundamental policy objectives of developing countries. This is especially important for these countries, since telecommunications is, perhaps, the only infrastructure sector that can give them real competitive advantages, and international market inclusion. It is quite evident that competition and convergence, by themselves, do not provide massive access to the telecommunication services for all the inhabitants of countries where great economic differences still exist among the inhabitants. To provide universal access to telecommunications, a package of “basic services” must be made available by the State to all its citizens as a fundamental part of its universal service programs. Traditionally, the universal service goal was to have a telephone in every home. However, the emerging technologies and the convergence of networks and services, call for the revaluation of the universal service notion. According to the ITU, a new notion of universal service is being discussed in the international community as a practical option for developing countries, which is to consider global access and community solutions instead of individual telephones for each home.
