Rightsizing Telecoms

The current financial crisis has been branded as that of the banking, insurance and automobile industries. However, other sectors—namely telecommunications—which are seemingly humming along should not be ignored by those interested in maximizing today’s economic lessons. Turning a blind eye toward a profitable industry should no longer be an option. Industry regulators and legislators must be prepared to take proactive action before an industry falters.

Taking inventory is a good starting point. The United Nations Conference on Trade and Development (UNCTAD) recently issued its 2009 Information Economy Report. The report focuses on the development implications of information and communication technologies (ICTs) worldwide. The position of the US should be ringing some alarms.

  • Japan leads the world in number of VOIP subscribers, with 34% of households subscribed. The US comes in at a far second with 10%;
  • Based on mobile subscriptions per 100 inhabitants in the Americas alone, the US is not even close to the top of the list.
  • For the period of 2003-2008, the US did not make “The twenty most dynamic economies in terms of increased Internet penetration,” or the “Top five most dynamic economies by region in terms of increased Internet penetration”;
  • China leads the US as the world’s single largest broadband market;
  • “China is today by far the largest exporter, responsible for more than one fifth of all exports of ICT goods, more than twice the share of the second largest exporter, the United States;
  • “According to balance-of-payments data, world trade in IT and ICT-enabled services…the largest declines in market shares…were observed for the United States…”

This not a pretty picture for the US.

It is no longer debatable that telecommunication services are a basic public utility in today’s world—no less important than electricity, street lighting, or a road network.
The history of how telecommunications’ infrastructure has been structured is one of high centralization. First in the hands of the public sector, then with a global wave of privatizations over the past few decades, a shift resulted in significant control now residing with a handful of companies.

The handful of industry players and their faithful lobbyists are squarely in the driver’s seat and unless structural change takes place, consumers (and the US’ global competitiveness) will remain holding the short end of the stick.

Private telecommunications infrastructure operators are not rushing to make the huge investments required to upgrade America’s communications infrastructure. Today’s operators are just as short-term focused as the now battered banking industry. If left alone the industry has little interest in revolutionizing America’s connectivity, let alone reducing your monthly bill. Structural change in the sector will have to come from elsewhere.

A new model of ownership in telecom infrastructure should be considered—municipal governments assuming the responsibility to install and maintain (either directly or though outsourcing arrangements) the communications infrastructure of their communities. They then open this infrastructure up on equal grounds for anyone wishing to use it to provide specific services. There already are a few bold examples of this being done in the US and these should serve as learning platforms to regulators.

The analogy frequently used is how local government builds and maintains local road networks that are open for any qualified driver to benefit from—cars, trucks, bicycles, or otherwise. The benefit to consumers in separating infrastructure from services provided using the infrastructure cannot be overestimated. For entrepreneurs, the separation is the difference between starting a business or not. Bringing a part, at least, of the telecom business closer to communities can reduce reliance on another set of firms which are “too big to fail.”

Today’s technology allows for such a rightsizing of the telecommunications sector to be deployed rather easily, whether it deals with the restructuring of ownership of the underground ducting, the cellular tower masts, or the community’s fiber backbone network. The burning question remains: do those responsible for community development and safeguarding consumers interests have the wherewithal to make it happen against the backdrop of an entrenched telecommunications industry?

Restructuring with the aim of broader participation should be vigorously pursued. The ultimate benefits are more jobs being created closer to home, while improving our nation’s communications competitiveness.

Sam Bahour is a business development consultant from Youngstown, Ohio who also works in the occupied Palestinian territory and may be reached at sbahour@palnet.com.

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