Telecoms liberalization a model for services

GENEVA--When talks to open up the telecoms sectors started in 1994, the EU's negotiator did not know what an e-mail was, mobile phones and the Internet were in their infancy, and it was very expensive to call abroad.

But in the 10 years since the Basic Telecommunications Agreement (BTA) came into force in 1998, the sector has seen dramatic and unimagined growth.

Billions of people in rich and poor countries are now connected by mobile phone, new companies and jobs have arisen, and new industries and services are opening up on the back of telecoms, from outsourcing to social networking.

By the end of 2006, mobile phone subscribers had increased 20-fold, and now represent 70 percent of all phone subscribers.

Mobile growth rates are particularly strong in developing countries, running at over 50 percent a year in Africa, the World Trade Organisztion (WTO) said.

"There are more people connected today than we could have dreamed of 10 years ago. Prices have declined. Minutes of use have increased... We have seen new business models develop," said Robert Pepper, head of global advanced technology policy at US network equipment maker Cisco Systems.

"The world has benefited significantly from the BTA and from those market liberalization decisions," Pepper, a former telecoms regulator, told a WTO symposium.

Trade officials and industry officials say the telecoms deal -- which succeeded because trade negotiators and industry regulators worked together -- can serve as a model for opening up other services.

WTO Director-General Pascal Lamy said he hoped last week's symposium would inspire negotiators in the long-running Doha round to make a "quantum leap" in the services talks.

Telecoms liberalization had particularly marked effects in developing countries.

One study of six emerging markets by consultants Deloitte for Norwegian telecoms operator Telenor estimated that a 10 percent increase in mobile penetration can boost GDP growth rates by 1.2 percentage points.

Rapidly growing mobile phone use fostered by liberalization as new companies, domestic and foreign, enter the market creates jobs and rising revenues for telecoms companies.

That in turn provides tax revenues for governments, raises the incomes of other businesses through enhanced productivity and creates yet more jobs and revenues as the telecoms companies and other businesses buy more services.

Recent average annual growth of mobile subscribers in Ukraine of 70 percent has boosted productivity by 9 percent a year, said Telenor's vice-president for government relations, Harriet Berg.

The example of Ukraine can be mirrored by dozens of developing and transition economies around the world.

Liberalization in Mauritius saw the cost of international calls drop 80 percent and of mobile calls fall by more than 50 percent. The Indian Ocean island is now building up an outsourcing industry on the back of telecoms, said Krishan Oolun of the ICT Authority of Mauritius.

"The fear that this negotiation would only serve the strongest economies has absolutely been demonstrated to be wrong," said Kurt Falkenberg, a top EU trade official who was lead negotiator for Brussels in the talks.

Access to mobile phones has empowered poor people in developing countries, and boosted their incomes.

Farmers can find the best price at different markets before they set off, and are not dependent on middlemen, for example.

Pakistan, which fully liberalized its telecoms market under the BTA, has seen mobile subscribers jump to 79 million from 2.4 million. Telecoms contributed 2 percent to GDP in 2007, or 5 percent including indirect effects, compared with almost nothing before the reform, said Zainab Hussain Siddiqui, senior project manager at the Ministry of Information Technology.

Of course, the reform has enriched companies, too.

Egypt's Orascom Telecom, with operations in several emerging markets that have constantly far outstripped growth expectations, will soon have over 80 million subscribers, more than 150 times what it started with in 1998, said investment and business development officer Michael O'Connor.

India's Tata Communications, which took over an incumbent in 2002, now generates over half its revenues outside India and is active in a range of telecoms services that did not exist six years ago, said head of strategy Srinivasa Addepalli.

And yet the market is far from perfect. Companies still face restrictions on access or ownership in many countries.

At the same time, operators say existing rules on liberalization in telecoms need to be enforced and broadened to ensure continuing growth in the sector as it readies for billions of dollars of investment in next-generation networks.

"That transformation will simply not occur without a global move to removing the remaining barriers to foreign investment in trade in telecommunications," said Tony Warren, head of regulatory affairs at Australia's Telstra.

And as telecoms converge ever faster with information technology, media and content, it must wrestle with new issues such as free speech, hate speech, pornography, public safety and national security. "If we don't, we run the risk that regulators, government officials around the world, will put up their own rules and block connectivity," said Donald Abelson, a communications and trade consultant who was chief US negotiator on the BTA talks.

Operators say the industry's glory years are still to come.

Telenor's Berg points to massive growth potential, given that only 12 percent of Asians are on the Internet, which in turn is increasingly accessed via mobile.

And Telstra has drawn up ambitious plans ranging from remote appliance power management to teleworking and high-definition video-conferencing for countries to exploit telecoms to reduce carbon emissions. By Jonathan Lynn - Reuters