What Did The G7 Conference Decide..?

Paul Lavin reports

The G7 conference held late last month explored the means of creating open telecom markets and methods for setting common technical standards. For the first time, leaders of the seven major industrialised nations and leaders of the telecom and computer industries met to discuss the promotion of fair competition, defining a regulatory framework and providing open access to networks.

High on the agenda was talk about the speed at which countries, particularly in Europe, are prepared to dismantle the monopoly regimes enjoyed by many state-owned telecoms operators to allow open competition in infrastructure and services. The EC's target date of 1 January 1998 for open competition in Europe is not soon enough for many European and US business leaders. France and Germany, however, are sticking firm to that conservative date.

The main sticking points may be from the PTTs. Email will eventually replace much of the humble letter carriers’ duties - door to door delivery will probably be restricted to packages in the next decade. High margin services like special delivery are much better done electronically by email. Even voice communications traffic will begin to shrink in proportion to digital communication. The writing is on the wall for the protected European PTTs and their unionised employees.

"Three years is a long time in the fast-moving world of IT....Neither the dominant telecom organisations of Europe nor their multinational customers can afford to wait three years for the benefits of competition," AT&T Chairman Robert Allen said. He also noted that "declaring a market open does not in itself create a competitive market". Look at the years of 'opening' that have had little result in the US-Japan trade imbalance. Without commitment, it could take well into the next decade to completely deregulate Europe. The downside of this would be that European businesses would be at a competitive disadvantage in the emerging information economy.

"The speed of Europe will be the speed of the slowest," according to Lucio Stanca, Head of IBM Europe. He fears that some European countries may seek to delay liberalisation beyond 1998. Strong leadership is needed in Brussels otherwise some countries will be left on the verge of the information superhighway.

Cable companies and other alternative carriers may be used to force the pace by allowing them to start offering basic telephone services before 1998, hinted Karel van Miert, the EU Competition Commissioner.

Competition is the most effective instrument for reducing the cost of telecom services and increasing the quality and availability. The UK's recent experience is the best case in point. Currently, Europe's businesses pay some of the world's highest rates for communications. Consumers also face high tariffs for data calls, over and above normal calls. That puts access to the Internet beyond the reach of many people, preventing the development of a mass market.

US Vice-President Al Gore said that investment barriers preventing foreign groups from taking more than a limited stake in US telecom companies will be lifted this year. However, the opportunity will only be open to companies from countries with telecom regimes judged to be as liberal as that of the US, Gore warned in a pointed comment at French and German telecoms operators.

To develop the standards to allow free exchange of information, US companies and government prefer to leave the development of standards to competitive market forces. However, the Europeans are wary of the emergence of de facto telecom standards allowing industry giants such as Microsoft or AT&T to dominate the market. They want greater governmental control.

A compromised joint statement pledged the G7 "a consensual standard-isation process which is market- led and encourages open interfaces". This is unlikely to provide either the freedom that the Americans expect or the protection that the Europeans desire. These issues will provide a rich source of dispute in the future.