TELECOMMUNICATIONS: Throwing Open the Markets

By Gustavo Capdevila Reprint | | Print |

Gustavo Capdevila

GENEVA, Feb 10 1997 (IPS) - The World Trade Organisation (WTO) set out Monday on the last leg of negotiations on the opening up of telecommunications markets amid an atmosphere of cautious optimism.

At the opening of Monday’s session, WTO Director-General Renato Ruggiero underlined that “success in this negotiation will do a great deal to strengthen the credibility of the services agreement (GATS – General Agreement on Trade in Services) by demonstrating that it can deliver valuable results even in a sector of the greatest technical and political complexity.

“Failure, or a disappointing outcome, would correspondingly damage confidence in the GATS, and perhaps in the WTO itself.”

The negotiations are taking place under strong pressure from the United States to get the rest of the industrialised countries, as well as the developing world, to open their markets to its powerful industry, which controls nearly one third of world telecoms revenue.

European countries are currently in a phase of a stepped-up deregulation of telephone services, while favouring the formation of national capital in the sector and gaining positions in the international market, as in the case of Spain’s Telefonica in Latin America.

One group of Third World countries – Ghana, Grenada and Malaysia – put off the presentation to the Group in Basic Telecommunications (GBT) of their proposals for the opening of markets until the last minute, doing so on Monday for the first time. The governments of six others – Hong Kong, India, Mauritius, New Zealand, Norway and Peru – provided modifications to their previous proposals.

A total of 43 proposals from 57 countries (the European Union counts as one) have been put forth with offers for the opening of their markets for basic telecoms, an activity that in 1995 produced 601.9 billion dollars in global telecom services revenue.

The deadline for an accord is Feb. 15, although the predominant impression among the delegates was that the outcome of the negotiations would be announced by Feb. 14.

The attempt to eliminate barriers to commercial activities in the sector of basic telephone services was frustrated in April 1996 by a U.S. decision that the proposals for liberalisation were insufficient.

The negotiations were formally renewed last January. The president of the GBT, Neil McMillan, said at the end of Monday’s session that the outlook was “quite good.”

Up to now, the WTO and its predecessor, the General Agreement on Tariffs and Trade (GATT), had only been successful in opening markets in commodities.

Negotiations in services, financial, maritime and telecoms areas have lagged, giving rise to fears that the WTO would be limited to supervising trade in commodities.

The distribution of basic telephone services throughout the world is skewed in favour of the industrialised north. The European Union, the United States and Japan account for 73.6 percent of world revenue – 77 percent with the addition of Australia.

Those four countries account for 58.7 percent of telephone lines, 64.6 percent of investment and 63.2 percent of international phone traffic.

The list of the top 10 in telecoms revenues also includes Canada, Switzerland, South Korea, Brazil, Mexico and Argentina.

But in spite of their reduced size, the markets of the South are attractive because they are growing – 13.8 percent a year from 1990-95 in the case of telephone lines, compared to 3.5 percent in industrialised countries.

Revenues also grew at an average annual rate of 9.7 percent in developing countries, more than double the 4.2 percent rate in the industrialised North.

According to Ruggiero, “open markets (in telecoms) will be a major achievement for the preparation of the world economy for the challenges of the 21st century.”

“This is one of the most dynamic, fast-changing industries in the world, growing at 10-15 percent a year,” he underlined. “If we fail now, we shall be accused of impeding the natural development and growth of the industry. In that case it is likely to be a very long time before we are trusted with such an opportunity again. You cannot afford that risk,” he warned the delegates of the 130 WTO member countries.