A comment on the Witte report

Reporrs

Telecommunications that

the

shall ensure

approval

procedure

sions responsible

is

simple as regards the administra-

shall be treated in a way effectively

requirements,

the

time

re-

for tests and the costs.

preventing

monopoly exposed diting

Structural

impact on the DBP

The sovereign rated

from

tasks

as far

not

the

is

40.

Ministry

form

the

sovereign

independent 32.

shall

The Federal

trepreneurial 33.

Telekom’s

straints

shall super-

service

budget/economic

plan by the

of

Posts

Telecommunications

41.

Minister

42.

of

Posts

and

shall be separate nization 35.

as far as orga-

the development

sidies

paid

the

by Telekom a period

of

separately

Deutsche

remain

sector of

Bundespost

a public enterprise

official

and its

members

of the Board

of

the

of Manato the Fed-

pay

value

tions,

of

more 47

tax

the

applicable

to the

of staff shall be made

flexible

and

more

closely

to performance.

the

of personnel

different

costs

divisions

and

organizational

will give Telekom

this

systems,

work and the finan-

decentralized

to the

Initially,

posi-

of bonuses for particu-

The budgeting for

the

of staff

the incentive

larly difficult

distor-

concerning

number

payment

and

added

units

greater flexibil-

ity in the deployment

of staff.

shall at least be apand unreg-

services provided with

others

equipment

Eberhard Witte Universitat Miinchen lnstitut fiir Organisation Munich, West Germany

in com-

and

to the

area.

After

transition

period.

it

A comment on the Witte Report The

West

German

Commission

government’s

on Telecommunications

September

1987

report’

the

to

Kohl.

its

Chancellor

In the German

lic law. This shall also apply to the

Bericht-

the Witte

Report

second management

Commission’s

network,

the monopoly

vices,

the

ulated

services

as separate

regulated

ser-

unreg-

and the terminal

divisions

separate

plans

and

of Telekom

budgets/economic separate

Any

the point

annual

cross-subsidies

shall be identifiable nization

and

area shall be managed

with

accounts.

level.

as such.

of view of orga-

and accounting,

the divi-

Eberhard worked The

report

Commission

was

Commission to develop

its

recommendations. supported

members

by

the

by nine votes to

two, with one abstention. As

Professor

cates, the report tions. Among sed

are:

related

the major

operations

article

indi-

lists 40 recommenda-

separating

literal the

items addres-

the

telephone-

from the Deutsche

monopoly

additional

initia-

on customer and

connection

network

making

between

and private

premispossible

the

public

leased-line

net-

works. The report

states that:

This will have far-reaching consequences for the whole telecommunications sector and for the competitiveness of the Federal Republic. Everything points to a dramatic increase in the importance of telecoms for

the entire economy. In

Witte’s

taking

es equipment;

- after the Professor

The

and

Witte-

as the

independently

assessments

Helmut

chairman,

Witte.

final

press the report

to

by pub-

Bundespost;

tives in prying loose the Bundespost’s

on 16

161-page

referred

shall be governed

equipment

186

to

is often

eration

From

regulation

maximum

be made

met for two years and submitted relationship

gers of the enterprise

The

The

46

en-

1987.

shall

the Federation.

39.

liable

should

obligations I January

in Telekom’s

funds part of the special funds of The

pension

In any case they shall be

The telecommunications the

for

tered into after

enterprises

competition

Telekom

petition

five

budget.

38.

prevent

conve-

Pension reserves shall only be set up

related

tions,

terminal

recorded

37.

To

an adequate

over

is considered

recruitment

by

step

15

law shall apply to the legal

ulated

the

law

of

of com-

nient.

and

Telekom

to

shall

the appropriation

Private

between

Telekom

the application

cial conditions

postal sector shall be reduced step years.

36.

and private

plied to the regulated

of sub-

to

on

ventures

tax.

should also be considered.

arrangement

telecommunications,

profits,

con-

budget

Joint

Federation.

is concerned.

To promote

the

instead of the levy payable

telecommunications

added

Concerning

its customers.

Finance. 34.

law.

relations

and

in consulta-

tion with the Federal

4-l

business

of the public

Telekom

of the en-

tasks.

Minister

or

services and

without

the

be liable to pay all other taxes like

been

law for the provi-

market

from

to the Federation

any other corporation.

may set up subsidiaries

private

of Posts and

shall be subject to approval Federal

value

pany

the

vise the performance

the change-over

levy payable

au-

activities to be able to compete

tasks as an

Minister

has

for any complementary

per-

ministry.

Telecommunications

After

determine

every year whether

sion of unregulated

of Posts and

Telecommunications

An

shall

requirement

Telekom under

The Federal

to competition.

this

43

of

met.

entrepreneurial

as organization

concerned. 31.

transfer

to monopoly

services.

to the divisions

company

and certify

tasks shall be sepa-

the

profits

shall also be applied

equipment

tive

quired

30.

for unregulated

services and terminal

addition,

vinced

that

the monopoly

the only

drafters

with competition

levels can lead to a market withstanding The

TELECOMMUNICATIONS

are

‘con-

the replacement

of

at all

capable

of

the future’.

meaning

of

this

POLICY

report

can

June 1988

probably

be best understood

in the

equipment

under

very

government

restructuring

example,

a thicket

stan-

from

other

forwarding

efforts

Commission munities

of other

In February

for the European

accelerated

Europe’s

market

as

of its plan to

that

There

such

a

dards,

in most European

is some

shot in what

more

nations.

These

than

25

efforts heavily

communications competition.

markets

to

There

switchboards, most

other

terminal

ressive

liberalization

for

market,

except

for

voice

of receive-only

hes will be achieved In addition,

satellite

services,

other

gear

network

from

as

cables and

which

the

that for

service

telephony liber-

satellite

dis-

One

Should

has caused market tions

the Commission

is in-

an

invasion

products,

opening kets

also the

by European

generally

with

the

however,

of

the

US

telecommunicano

of the major

to

While

by 1989.

note

myth that US deregulation

equivalent

European

USA.

The

mar-

statistics,

do not support this position.

the EC nations

are net expor-

ters of telecommunications

equipment

service

of arbitrage) run,

of this

however.

found it necessary to

prices

quickly

for

long-

in

turn

which

telex pricing back in line with

underlying

costs

for

providing

this

service. A newly

published

charges West

cluding

perceived

West

business

messages,

phone

Myth

new

a form

PITS

‘phone

is built.

from

to take advantage

telex

expensive

services will start in 1989. Full alization

telex,

as sales of switches,

for

was con-

than sending

directly

European lower

office and

telex

In the long

rates

A prog-

the

computer-communications

to the UK

to Hong Kong. Consequent-

of the

period

of

mar-

For

message

Kong

was created

well

equipment

handsets.

phone

take stabs at liberalizing

telex

situation.

services.

modems

ber 1990, with a transition

in

a

Germany

refiling,

greater

connects to phone lines) by 3 1 Decemthe first telephone

long-regulated

It will

Commis-

competition

with

countries.

to Hong

an entirely

(telex

is plan-

(telephones.

computer

by the

more

ly,

brought

to

of its proposals.

market

allow

as a first

to be a noisy.

comparison

less expensive

same

including

will be full liberalization

equipment

the

tele-

ning to stick to a strict timetable the implementation

siderably

distance

regulated

The Commission

coun-

West

broad segments of the phone market.

the EC’s first steps in its campaign open Europe’s

kets.

is likely

campaign

to

Europe’s

European

can be seen as

impeding

may view this effort

five-year

including

continue

in

European sending

Germany

marketnations,

and

will

sion

member

technical

restrictions

regulations

opening effort could spread easily also 12 EC

varying

competition

beyond

the

of

import

tries. One

telecommunications

to competition.

speculation

Com-

by as much

three years key portions open

indus1988 the

equip-

expensive

ment segment at which the order aims.

nations.

in the terminal

some other

control.

trialized

Even

strict

context of similar telecommunications

over

apparent

nations

as

the

nation surveyed

most

overall,

long distance

analysing

many

of tele-

Western

Germany

domestic

When

survey’

in

cost trends

seveal

years,

in-

calls.

in Ger-

it becomes

that this nation has remained

stable and expensive.

The USA

among

the cheapest

in all categories

(local,

long

telephone,

distance,

including

has dropped Europe’s overall.

international telex).

its position

most

scored

Belgium

in

1987 as

expensive

British

country

Telecommunications

sisting that tariffs be closely related to

with a total surplus of $1.2 bn in 1986,

PLc’s

local telephone

costs. If this is not achieved

shipments

tinued

to be the highest of all major

the EC

will

number

of

covering

throughout

creation

of

the

munications on

the situation.

additional

Europe,

European

Standards

in April

the

principles

of

lines and eventually included.

The

a directive

public procurement Currently,

all

private

products,

Institute open

(or

giving

network

access to leased ISDN)

aimed

European the

communcations

ment market.

However,

by the Commission

telecommunications the USA

has imported

equipment

from

to a total value of $988 m and

from Japan to $724 m. Even

PTT

unwilling

of

countries

four years. charges

- with their their

ments - are not immune

govern-

to competi-

tive forces. As the world is continuing

also fell by 23.3%.

41.7%

and

their telephone

countries ot these teleor near equip

leaves the remain-

as international

much

faster

PlTs

that

than do

unresponsive fered

address

may

continue

competitive

their revenue

growth.

to

rates in West

POLICY June 1988

European

into

West Germany

at the telex rate structure some other

are

suffer

inroads

may serve as a case in point. telex

traffic, and

to user needs have suf-

and

significant

domestic

not

tele-

telephone added

increases

traffic

Looking

in the 1970s

Germany countries

and in were

calls.

impressive

Changes

some

German

Deutsche

and for

Bundespost

opening

after

recently

the

EC

more

market,

the world

of

that

some of

the

telecommunications

pressuring

Fairly

value-

costs.

degree

USA

ernment

in

imply

are some signs that the ultra-

German

Inc

an

can now reclaim

monopolistic

The

for international to

tax laws in France

There to

them.

calls in France

drop in the cost of international

globalized

communications

countries

France is now also

due

consumers

electronic

other

country

as business is increasingly

and

of

local call

increased

long-distance

messaging,

1988.

due to over-

or

charges

a period

reduced

most

froze

the cheapest call

rates have con-

over

France

while

either Domestic

monopolies

support

Western

networks

$110 bn market for services and telecommunications

TELECOMMUNICATIONS

to Japan only $39

however,

electronically

this measure

der of Europe’s

EC,

to shrink

re-

in some segments of the $21

bn European

m. The

merely

expanding

national

a monopoly

$368 m and exports

totalled

also

administrations’ in March

to the USA

are also at opening

sales of some

phone companies monopoly

Telecom-

Commission

telecommunications

limit

the

1988. and agreement

provisions (addressing

leased

A

provisions

fair processes for equipment

approval

ETSI)

review

by 1992,

access

the USA

been to

Brook,

the

largest

in

and Japan.

the West German

has given MCI Rye

market. have

the third

is

West

gov-

International

New

York,

the

187

opportunity

to establish

dent gateway services

to

and

from

the

competition

with AT&T’s

al services.

A future,

way operator. be favoured

USA

in

Communities

for

pried

the

and

European

loose another

fin-

ger in the grip of the Deutsche

Bun-

despost in 1986 when the Bundespost agreed

to end

provision public

its monopoly

of modems connected

network.

Only

terminal

is connected

provide

extensions.

the

on the

Bundespost

after

to the

the

first

can private firms Under

now

this ruling

allows

stand-

IO 000 of the cur-

postal

and

jobs would

Party

mendation

the

postal services,

be absorbed the postal reduced, would

service

would

or postal

The

various

West

the entire in

Report.

reflect

of

the

Witte

Democratic

Party oppose

into terminals

mendations

for not going far enough.

by private

to be supplied

suppliers.

that

Commission

that,

prior

public

directly

One should note spokesmen

to this ruling,

telephone

stated

users of the

network

could

not

always obtain the type of modem suited

to their

market

for

private

needs,

and

modems

networks

to

one

expect

in

fore the

lic effort

West

one of several pointing of the German

discussions,

and reactions the German

of the Witte

Report

in

chances for significant

in West

Germany’s

munications

market.

ably expect

something

in competition, viewed

opinions

press does not suggest in

any way major

as a

One

can

prob-

of an increase it is not

to be

major

increase.

Most

interviewed

those

ties to the

communications Commission’s

telecom-

but

individuals with

-

especially

German

industry report

-

see

and

pectations

with regard to the Bundes-

The

gewerkschaft

(the

post’s labour

union)

cized

the

had

Deutsche Deutsche

views

the

positon.

It is precisely

ters

the

strongest

188

that

trade

objections if

the

the

debate

Commission’s

of

question. based

the Such

on the

schaft’s

P’IT a

position

Deutsche

campaign

the PTT,

is out

Germany’s

of

the

may

be

selling

Report

roughly

and

the

is presently economics,

jus-

After

With

debate,

such

will

recommendations

restructuring

being

by the minis-

interior.

made to the cabinet.

four

than in the UK.

be

subsequent

deliberations year.

of the Deutsche

if any is to occur,

is not

until 1989 at the earliest.

Professor Rolf T. Wigand Program in Information Management Arizona State University Tempe. AZ, USA

out

hibit a turnabout

of the existing

state

to note also that as high

they

has

monopoly. It is interesting 1986,

lines

and reviewed

Bundespost,

pro-

as

because

the leased line had

tries of post. finance,

likely

would

recently

leasing

Actual

also that West

constitution

controversial

apply after

by

howev-

may move well into the current

Postgewerk-

against

and probably

are

Such tariffs,

parliamentary

Bundespost

‘Eberhard Witte, Neuordung der Telekommunikation: Bericht der Regierungskommission Femmeldewesen, Heidelberg, Germany, 1987. *The International Telecoms Price Survey, National Utility Services. Croydon, UK, and Park Ridge, NJ, USA, 1988.

Conference reports Debating regulation issues

criti-

First International

Telecommunications

as this

The Netherlands,

12-13 November

effort

from the quarthat

originate.

Regulations

Conference,

Amsterdam,

1987

as a

monopolistic

unions

tization

er,

tariffs

customers

be-

Minister.

Schwarz-Schilling,

Christian

on lines leased to major

the

to intro-

cuts in volume

will

to accept

PTT

said that he wanted

efforts,

recommendations.

Germany’s

Schilling

tice

must

cabinet

Schwarz-

Mr

Budes-

has already

threat to the Budespost’s

claim

ex-

Post-

recommendations,

organization

of

higher

for competition.

powerful

Kohl’s

Ministry.

the

proposal,

post’s opening

political

One

with

Economics

tele-

as a conservative

many

intensive Chancellor

too far.

for Posts and Telecom-

The Witte

who oppose the Witte

for going

Report’s be set by

in conjunction

analysed

stated on several occassions that priva-

market.

Reviewing

change

to an opening

from

would

times more expensive

conservative

make a decision on whether

view such an event as a merely symbobut it was

highly

state of Bavaria

the

used

politicians

and

on the Witte

the Minister

making

the recom-

end of the spectrum

encounters

influential Report

was open. One might

of the Bundespost,

the other

best

only

be

At

a

been used for only 80 hours a month,

factions such as the Free

alone modems and those incorporated

such

munications

would

and procompeti-

Just

that tariffs

the Bundespost.

of positions possi-

opinions

Free market

tion political

in

be split

for post and

Commission.

duce significant

factions

most certainly

spectrum

their

to be

increased.

political

Germany

have to

is no real will

enterprises

Commenting provision

rates for services

have to be greatly

there

is now a recommendation

of the Witte

Ministry,

have

separation

tra-

as the result-

losses would

that

that the PIT

telecommunications.

operation

by the Finance

stated

into separate

recom-

unprofitable

officials possibility

the highly pro-

telecommunications

ing post office’s

ble

telecom-

be lost. The

opposes

to separate

from the Budespost’s ditional

US trade negotiators

Commission

munications

fitable

is said to

by the Germans.

Similarly,

500 otlo

Socialist

gate-

International

Missouri,

were implemented. rent

internation-

additional

US Sprint

Inc of Kansas City,

the

an indepen-

for telecommunications

the They

recommendations

More

than

125 senior decisionmakers

in telecommunications Japan

and the USA

dam in November latest regulations

from

Europe,

met in Amster-

1987 to debate issues. The

the

first In-

ternational

Telecommunications

ulations

Conference,

the

Consulting

PA

Technical impact

Services.

Group focused

of the European

TELECOMMUNICATIONS

Reg-

cosponsored and on

by IBC the

Commission

POLICY June 1988