[afnog] Re: Request for input: The Working Group on InternetGovernance

[Robert.Shaw at itu.int]

Geoff,

This is very thoughtful analysis and amazingly insightful.

> Although if you look at the revenue margins for various 
> services you'd wonder why anyone moves out of the mobile telephony market. 

Interestingly, the mobile operators congratulate themselves in avoiding
destructive competition - mostly through incredibly high termination
rates which regulators are under intense pressue to force down and in
which they've taken action (e.g., UK, France). There are people that
argue the only way out of destructive competition is government stabilization
through cartels - e.g., this Eli Noam piece from 2002. 

http://www.citi.columbia.edu/elinoam/articles/ft-too_weak.PDF

For infrastructure industries of huge economic and strategic importance, 
which communications certainly is, governments tend to be conversative 
and don't want too much destructive competition. They also don't like it
when they fall behind their "national" competitors. Witness the angst 
in the US over their dropping broadband penetration ranking to 13th.

> IP over fixed line appears to be one of the toughest telecommunications 
> markets we've seen for some  time, and the cost disciplines imposed by intense 
> competition are often  beyond the capabilities of many incumbent telco 
> operators. Which is why we see some of the pressure on national regulators 
> to create a slightly different balance within a national market, and 
> pressure at the international level to create a 'different' balance. In 
> this latter effort the ITU becomes a vehicle for the expression of the 
> interests of some of its member states in its recommendations, while other 
> member states find such outcomes regressive and inappropriate.

Watch what they do and not what they say... Remember when Powell said they
wouldn't let Worldcome collapse. And now that VoIP threatens a US multi-billion 
dollar intercarrier compensation scheme, rural subsidies, etc. it'll be it a 
real litmus test for those who argue they are free market absolutists. But 
the reality of political compromise necessary to shift to a new FCC legislative 
regulatory framework in the US (e.g. this congressman wants rural subsidies) 
pre-assures that the outcome will be not be the liberalization dream that some 
people think it will be... e.g., see
http://www.yankeegroup.com/public/home/research_showcase.jsp?ID=11788
Ironically, the economies that are doing very well in telecoms tend to have 
governments that take a more pro-active macro economic approach to the 
sector (e.g., Korea, China). China is adding 1 million bb users a month.

> Now you could say that's international politics and commerce 
> for you, and the ITU simply can't fix that. Indeed the ITU is the way for 
> nation states to air these interests and reach compromises on the voting 
> floor. Like any compromise there are those who favour  the outcome and those 
> who resent it. The folk who feel that they are continually out-voted are 
> stirring up this issue and ignoring the case that the outcomes are the 
> legitimate expression of the interests of the bulk of the international community.
> 
> Or you could take the view that shoehorning the very real need for 
> cooperation and coordination in telecommunications activities into a 
> venue mainly concerned with the advocacy of  starkly opposed 
> interests of  nation states is the very heart of the problem, and this mode of 
> interaction within the ITU venue emphasises a process where political 
> outcomes gain primacy over technical and/or end user considerations.

I'm not so sure they are as starkly opposed as you pitch. Politically 
bargaining is part of the process of gaining leverage in new markets. As
is promulgating your stance on policy/regulatory frameworks so that your
players can enter their market. And that market is Asia.

> While the telco margins were phenominally high I think there 
> was broad acceptance of the ITU process outcomes, to a greater or 
> lesser extent. With the recent shifts of a more deregulated approach 
> in many national  environments , coupled with the deployment of a disruptive 
> technology in the guise of the Internet and the related VOIP 
> implications, then the margins are declining and cost-based 
> competition is becoming very intense.  The outcome is that those 
> who felt that the ITU was a compromise that was only marginally relevant 
> and tenable appear to be now positioning themselves into a more strident 
> and vocal opposition to the ITU structure and its outcomes, while those 
> who saw such a venue as a means of amassing a multi-national grouping 
> with combined economic and political pressure are increasing their 
> political commitment to the ITU.

I think one needs to be careful with the word 'deregulated'. 
Liberalization and privatization requires the establishment of
independent regulators and much more intensive regulatory activity
to keep the market balanced. Some regulators are doing amazing jobs
to stir the market (e.g., ART in France with line sharing and unbundling 
for broadband) while others aren't so successful...

But there are also those who are now saying that the origins of the 
current telecom debacle and the oceans of red ink lies in the historical 
trend of deregulation put into place during the last 20 years. The 
belief was that a golden age of competition was going to emerge 
where prices would fall, innovative services would be quickly 
deployed, and there would be plenty of competition and profits 
for everyone. The critics are contending just the opposite has 
happened. They are saying that telecommunications deregulation has 
failed to live up to its promises, just as it has in the airline, 
banking, and energy industries. Instead of liberalization and 
privatization, it has produced cartels or oligopolies. Instead of 
competition, it has produced cooperation and consolidation. Remember
after the US 1996 Telecom Reform Act, the US had eight local phone 
companies; how many are there today? four? three? 

> >If you look at this as an "us versus
> >them crusade" (as some of you seem to want to make it), I think
> >you're missing the point as industry, particularly the equipment
> >manufacturers are already far down the convergence path.
> 
> It is not an 'us vs them' in the supply-side industry sense. 
> The us vs them is a far older and enduring division of a political 
> nature at the level of nation states, as I see it.

yes, that's true on another higher scale.

>  From this perspective, in many ways the ITU and ICANN are 
> merely vessels for the expression of national interests. While 
> the ITU appears to accept and embraces this characterization in 
> the form of its member states and its manner of decision making, 

It's line 1 of the ITU Constitution. But the ITU, quite unusually
for an intergovernmental organization has about 700 private sector
members who in reality do and approve all the technical standards 
with few exceptions. And its all the same equipment manufacturers 
that you know in the "Internet" space. You may not be surprised that
the people in the same companies doing the technical work seem to
be disconnected from the people doing the policy work....

> (If you find this of interest, and I readily admit that its 
> not the most exciting of topics, you may want to look at 
> http://ispcolumn.isoc.org/index.html and glance over the most 
> recent 2 articles on Internet Governance.)

Yes, a greatly simplified overview (which suggests the common
misconception that the ITU is a regulator à la FCC) but otherwise
quite good.

--RS