The Information Society

Ewan Sutherland

The Telecommunications Industry

Continuing changes in

appearance
structure
boundaries
practices
actors

New technologies

optical fibre cable
radio transmission
satellites
cable television
personal computers

Changing customer needs

Single European Market
pan-European or global
cost competitiveness
strategic value of information and communication technologies and services

Privatisation

Cable & Wireless (1981)
British Telecom (1984)
Matav (1993)
Koninklijke PTT Nederland (1994)
Belgacom (1995?)
Deutsche Telekom AG (1996?)
Tele-Danmark (?)
Norwegian Telecom A/S (?)
Telecom Italia (?)

Graph of telephone lines per employee

European Union

Article 90 actions
Trans-European Networks (TENs)
Open Network Provision (ONP)
Competitiveness White Paper
Bangemann Report
Audio-Visual policies

Voice monopoly ends 31 December 1997

Derogations until 2002 for:

Greece
Ireland
Portugal
Spain

Possibility of two years beyond that.

Graph of conventional telephony

Mobile telephony

Graph of mobile telephony

There is considerable variability of regulatory regimes.

Also a multiplicity of technologies

Groupe Speciale Mobile (GSM 900)
Personal Communication Network (PCN - DCS 1800)
Digital European Cordless Telephone (DECT)
Personal Handyphone System (PHS)

European Union Memorandum of Understanding to achieve pan-European 900 MHz Groupe Speciale Mobile (GSM)

Promises of global services (e.g, Intelsat-P).

E-Plus

Germany

PCN-DCS-1800 MHz service

Launched May 1994 initially in the neues Bundeslaender

Cost DM 7-8 billion

Partners:.

Thyssen
Veba (Germany)
US West (USA)
Vodafone (UK)

Mannesmann Mobilfunk GmbH

Germany

GSM 900 MHz service "D2 Privat"

Launched June 1992

730,000 subscribers at 1 August 1994

Partners:

Mannesman GmbH (Germany)
Deutsche Bank (Germany)
Cable & Wireless plc (UK)
Air Touch (USA)

Cable and Wireless plc mobile telephone activities:

Mercury PCN, One-2-One, DCS1800 (50%)
Hong Kong Telephone Co., Hong Kong (100%)
??, NMT 450, Baltic States (?%)
Mobifon, NMT 450, Bulgaria (49%)
???, NMT 450, Belarus (?%)
Mannesmann, Mobilfunk GmbH, GSM 900, Germany (5%)

Mobile telephony

decline of analogue systems
"churning" of subscribers
excessive discounting
yield management through tariffs and billing software
move to mass market

The United Kingdom

privatisation
competition
duopoly

Regulation:

Office of Telecommunications (OFTEL)
Monopolies and Mergers Commission (MMC)
Department of Trade and Industry (DTI)
Department of National Heritage (DNH)
Independent Television Commission (ITC)
European regulation
judicial review in UK and Europe

Cable & Wireless plc

nationalised in 1947
privatised in 1981
the "Imperial Carrier"
focus on Hong Kong
allowed to become second TelCo in UK as Mercury
federation or holding company?

Graph of Turnover of Cable & Wireless

BT plc

Post Office Telecommunications
privatisaton began in 1980s
faced competition from Mercury since 1984
ever greater competition
tried vertical integration with Mitel and failed
trying US $ 5.3 billions MCI deal

Growth of BT telephone lines

Price Cap

1984-1989 RPI - 3%
1989-1991 RPI - 4.5%
1991-1993 RPI - 6.25%
1993- RPI - 7.5%

RPI = Retail Price Index

BT-MCI

global joint venture
approved by regulators in Europe and USA
US $ 5,300 millions
will it work?
service offered as CONCERT

Graph of Turnover at BT plc

Duopoly review

the end of the duopoly
permission for cable operators to offer telephony
BT and Mercury excluded from national entertainment services
bilateral International Simple Resale (ISR)
presumption in favour of domestic licences
relaxation of licensing of satellite services with connection to PSTN
greater tariff flexibility

The UK has one of the most open and dynamic telecommunications markets in the world. The Government is determined to build on this to provide further benefits to both residential and business users.
Secretary of State for Trade and Industry.

Energis Communications Ltd

subsidiary of National Grid Company itself owned by the Regional Electricity Companies (RECs)
launched 15 September 1994
national coverage
links to other UK new TelCos

Energise your phone.

Cable television

UK has low level of cable television
competition with DBS
competition in local loop
strong presence of RBOCs

Graph of cable television and telephony in UK

Strangers in UK telephony

US West

Windsor, Middlesex, Croydon, Merton, Kingston-on-Thames, Bristol, Edinburgh, Tyneside, Tilbury, Birmingham, Camden, Hackney, Haringey, Enfield

Nynex

Portsmouth, Brighton, Bromley, N Surrey

SouthWestern Bell

Wigan, Black Country, Telford, N + S Liverpool, Central Lancashire

Bell Canada

Southampton, Lambeth, Greenwich, Harrow, Ealing, Kensington, Hammersmith, THamesmead, Wandsworth, Watford, Tower Hamlets, Havering, Waltham Forest

Singapore Telecom

Bradford, Sheffield, Cambridge, Harlow

Germany

Poststrukturgesetz (1989)
more reform (1994)
introduction of competition
privatisation of Deutsche Telekom AG
die Wende

Deutsche Telekom AG

In mid-1989 Deutsche Bundespost separated into:

Telekom
Postdienst
Postbank

Ownership

transfer of shares from government to Bundesamt
sale of 40% shares in 1996 ?
market value of DM 80 billions (??)
massive investment in cable television

Commercialisation

Kakfaesque bureaucracy
over-staffed
unresponsive
cross-subsidy

Deutsche Telekom is energetically ridding itself of the fossilized structures of the past decades. The new company is lively and dynamic, competent and reliable.

Dieter Horn, Head of Technical Systems Operation, Oldenburg

Graph of cable television in Germany

International activities of Deutsche Telekom AG

Société Europeene des Satellites -- Astra
Matav (Hungary)
Utel (Ukraine with AT&T and KPN)
Romantis (Romania)
Intersputnik (Russia)
InfoTel A.O. (Russia)
Russian GSM Networks
Fifty-Fifty (Russia)
joint venture with Kazakhstan PTT
France Télécom and Sprint

Sprint

joint venture with France Télécom
1994 20% worth US $ 4,300 millions
1996 20% worth US $ 5,000 millions
global one-stop shopping
unlikely to succeed
cartel issues
organisational and national cultures
can you think of a parallel?
were they desperate?

Competition

BT and Veba
Cable & Wireless and Viag
AT&T and RWE

Neues Bundesländer

Desperate political and economic necessity

Transfer of DM 60 billions

Program Telekom 2000

7.2 million lines
5 million cable television connections
300,000 mobile telephone connections
68,000 public telephones (coin and card)
50,000 Datex-P connections

E-Plus new PCN service

East and West Germany

Graph of telephone penetration rates in East and West Germany

USA

Pressure to enter US telecoms market:

MCI
Sprint

Divestiture of AT&T approved 1982 and implemented in 1984.

AT&T plus Regional Bell Operating Companies (Baby Bells or RBOCs)

NYNEX
Ameritech
Bell Atlantic
Bell South
Bell SouthWestern
Pacific Telesis
?

Regulation

controlled by 1934 Act
Federal Communications Commission
until 1984 an effective private regulated monopoly operated by AT&T
plus individual state regulators
no ability to pass new legislation
no evidence of administrative branch taking control
left in the courts

The Infobahn

Universal service

implicit understandings
explicit undertakings
social necessity
no more cross-subsidy
who pays?

Social obligations

if we live in an information society how can the poor and the isolated expect to be "plumbed" in?
what social provision should be made in the field of telecommunications?
how far (if at all) should universal service be allowed to evolve?
how far should social provision go beyond what is supplied by the market?
who should pay for this and how?
to what extent is universal service an argument used to shield monopoly?