Reform in eastern Europe

Reform in eastern Europe

Conference worldwide deprivation in telecommunications awaiting a solution. North America has 41% of world telephones, Europe 36%, Japan 12% and the ...

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worldwide deprivation in telecommunications awaiting a solution. North America has 41% of world telephones, Europe 36%, Japan 12% and the rest of the world only 11%. To reach a level of one person in five having access would require $1800 bn ($3000/line x 600 million people). Alan Kamman, Director of KPMG, presented a fascinating scenario of life in AD 2000 as it could be if the promise and pace of telecommunications development is maintained. The profound social, economic and cultural effects on individuals made vivid and concrete the abstractions usual in policy discussions. Salvatore Barbera, President of Bell Atlantic, International, asserted that all services, like all politics, were ultimately local. Improvements at the personal level were the real test of both, and attention devoted to curing everyday frustrations in service reaped rewards far exceeding the effort required. He gave many telling examples. Rui Lopes, Vice President of Sprint International, deplored some of the waste associated with excessive competition, and suggested that in several areas cooperation could produce greater benefits for all. But wisdom and judgement were required to distinguish which of the two modes was best in particular situations.

Albert Halprin, former Chief of the FCC Common Carrier Bureau, made a plea for a new international organization to facilitate more rapid responses to the problems and opportunities in international information technology. He listed some of the shortcomings and delays that now hold back needed developments. Eduardo Correira de Matos, State Secretary of Exterior Transport and Communications, asserted Portugal’s intention to participate fully in the opportunities offered by information technology, and gave it high priority on the national agenda. Full participation in the EC and world economy required it. Henry Boettinger, Consultant, gave the final address on the historical theme that the great achievements of the Age of Exploration, in which Por-

European

Regional Meeting of the International Hungary, 29-30

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February

1990

Telecommunications

Society,

1989

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Henry M. Boettinger Corn wall, UK

Budapest,

Leonard Elfenbein, President of Lynx Technologies, showed the life cycles of innovations and standards, and how ‘conventional wisdom’ was subject to waves of fashion, from enthusiasm to obsolescence. The lesson for strategists was to keep all avenues of thought open, consider alternatives, and make independent judgements geared to long-term effects. Stan Cramton, US West International’s Director of Operations, presented an overview of their commitment to ventures in France, the UK, Hong Kong and other international consortia. Regrettably, the proposed land link between Japan and Western Europe would have to await further evolution before public discussion could be useful.

wisdom

tugal had played the leading role, were based on the systematic collection of knowledge, development of the technologies of ships and navigation, training of venturesome leaders, and resource support. The parallel to today’s new fields of exploration is close, and Intelevent’s purpose is to assist similar voyages of discovery and achievement in telecommunications. Ronald Coleman, Chairman, and Werner Walter, President of Intelevent, closed the conference. Intelevent ‘90 will be held on 24-26 September in Cannes, France at the Hotel Martinez. For further information telephone 703-556 7778 in the USA.

Reform in Eastern Europe

About 100 experts from telecommunication administrations, businesses and universities had followed the invitation of the International Telecommunications Society (ITS) to convene in Budapest. They took the chance not only to attend this conference, but to visit the subsequent annual meeting of the European Association for Research in Industrial Economics - and to get first-hand impressions of the radical political change occurring in Hungary in these days. The conference took place in the main building of Karl Marx University for Economics. But this is nothing but a name - the Hungarian economists and social scientists have always been the avant-garde of the reform process. At the same time that the university building with the statue of Karl Marx was beautifully restored, compulsory classes in Marxism-Leninism were abolished in Hungary. The conference covered a broad range of issues. It is not possible here to review all 27 lectures (accompanied

Conventional

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by the same number of discussion statements), and of course every choice is highly subjective. But since the site of the conference was Budapest, it may be apt to devote special attention to the lectures on Eastern European countries. Several representatives of the Hungarian PTT took the opportunity to report on the restructuring process their institution has just begun in response to the dramatically bad situation in telecommunications (the average wait for a telephone set has increased to 14 years!). A new F’TT law is under preparation, as is a IO-year development plan. According to to Dr Krisztina Heller, of the P’IT Central Unit, both measures were expected to receive parliamentary approval during autumn 1989 - an expectation not yet fulfilled at the end of 1989. The aim of the IO-year plan is to attain present European standards by the year 2000. The new law is expected to bring some kind of liberalization to the telecommunications sector.

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Conference reports

Reforms In anticipation of the new law, the Hungarian PlT has initiated some reform steps of its own. From January 1990 there will be a separation of posts, telecommunications and broadcasting. (The Post Bank has already been autonomous since its foundation in July 1988.) In July 1990 the two latter entities are to be converted into joint-stock companies, according to the new Hungarian law for state businesses. The state will hold bonds according to the respective enterprise assets, and further bonds will be emitted to raise funds. It is still not decided whether Hungarian enterprises alone or citizens and foreigners can also become shareholders. Moreover, it is still uncertain how far the new PIT law will allow competition. The same uncertainty surrounded the previous round of PTT reforms. Now the PIT’s Director General is no longer a member of the cabinet, and the departments with governmental tasks have been transferred from the PTT to the Ministry of Transport which is now also responsible for Telecommunications (and Construction). These changes, designed to give the P’TT a more enterprise-like attitude, came into force at the beginning of 1989, yet as late as October 1988, at a conference organized by the Research Institute of the Hungarian PTT,’ no information at all was available about these projected measures. Dr Heller also criticized the oversophisticated cost-accounting and the outdated organizational structure of the Hungarian PTT’ and pleaded for the separation of posts, telecommunications, broadcasting and auxiliary activities in order to end crosssubsidization. Her colleague Zoltan Pap presented the first results of demand analyses - a new approach adopted by the Hungarian PTI’ on its way towards a customer orientation. Given the waiting period and the high installation fees (12 000 forints for a main set - when the average monthly net income is 7000 forints!), Pap stated there is a wide social gap between telephone subscribers and nonsubscribers. To raise funds for expanding and

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updating the telephone network, the Hungarian PTT has been introducing rather creative techniques such as telephone bonds: the rate of interest is relatively low, but holders will receive priority for a telephone. Emilia Nyevrikel presented financial models for another form of financing, the formation of territorial telephone companies with private and business shareholders who would not have to pay subscriber or connection fees. The creation of subsidiaries with well-defined areas of responsibility could also be an appropriate way to attract foreign capital, at least as long as the PTT as a whole cannot simply borrow money on the international capital market because the Hungarian forint is not yet convertible. Imre Csorba pleaded for strictly cost-based tariffs but argued that tariff mechanisms suitable for the saturated markets in the West are not always appropriate for the shortage conditions found in Hungary. This author contributed some thoughts about national initiatives and international cooperation in the Hungarian case and compared the successful introduction of telefax in Hungary with the questionable experience of videotex, demand for which still has to be developed in advanced Western countries. Discussions about a PTT reform have also begun in the USSR. Dr Olga Kuznetsova (Leningrad) presented some proposals including a decentralization of management functions and the foundation of an investment bank for the communication sector with subscribers as shareholders, which would be a remarkable change for the USSR. She also criticized the fact that the PTT has to deliver 75% of its profits to the state budget. But her proposal that local PTT entities should contribute to local budgets would simply mean another form of state dependency. Moreover, aims such as the elimination of telephone density disparities between urban and rural areas are unrealistic in a country where the capital has five times the telephone density (45 per 100 inhabitants) of the third largest city in the Russian Republic, Gorki. For Yugoslavia, Zivojin Matejic

(Belgrade) described the planning process in his country. This is a complicated procedure which is almost entirely vitiated since seldom more than 50% of targets are met. The planners, however, are not looking for a change, and considerably increase the plan targets from year to year. To mention some of the lectures delivered by Western speakers: Professor Gunther Knieps (Groningen) presented a comparative institutional analysis, carried out jointly with Professor Charles Beat Blankart (West Berlin). The argument was that the differences in deregulation between FR Germany and the USA cannot be explained by economics or by the structure of interest groups, but by the different policymaking and lobbying procedures in these countries. They argued that the centralized political process in Germany was leading to a kind of compromise, whereas in the US the promoters of deregulation had the federal government behind them and could overcome their opponents, who had found support only at state level. Knieps also presented a proposal which could make a further deregulation in Germany politically acceptable. Subsidization of local calls should be continued, but competition for local networks should be introduced to make efficiency gains possible.3

Deregulation It was a fairly general feature of the conference that deregulation was not advocated with great vehemence. For example, Erik Bohlin and Ove Granstrand (Goteborg) voiced the opinion that the effects of competition on interconnection and standardization would lead to anticompetitive regulation. Bruce Laidlaw (London Business School) said that British Telecom had not been able to increase its efficiency since privatization, and Mercury would act too cautiously to become a real challenger. Professors Carmo Seabra (Lisbon) and Anastassios Gentzoglanis (Sherbrooke, Quebec) presented empirical analyses sustaining the view that the conditions for a natural monopoly existed in their respective countries. In a related way,

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February 1990

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Sean 0 Siochru (Dublin) and Knud Erik Skouby (Lyngby, Denmark) expressed the smaller countries’ scepticism of the EC liberalization process. Other speakers addressed more theoretical issues. Dr Werner Neu (Bad Honnef, FR Germany) discussed price capping in comparison with other regulating mechanisms. Dieter Blixmann (also Bad Honnef) and Professor Ishaq Nadiri (New York) presented productivity studies. Professor James Alleman (University of Nebraska and President of the ITS) reviewed revenue allocation for international calls in the USA. The conference as a whole greatly benefited from the well-known Hungarian hospitality and from the professional preparations of ITS European Coordinator Dr Jtirgen Miiller (West Berlin). Lecturers and discussants were put together with great care. Some members of the latter group, however, took their task too lightly and scarcely referred to the relevant lectures. In general, more time for discussion would have been

worthwhile, especially in order to point out correspondences and contradictions between lectures. The conference papers, which were distributed among the participants, covered a broad range of interests. Therefore it must be said again that the choice of lectures reviewed here was only subjective.

Marec Bela Steffens Flensburg, FR Germany

‘See M. B. Steffens, ‘Hungary for change’, conference report, Telecommunications Policy, Vol 13, No 1, March 1989. The proceedings of this conference have since been published in English: Posta Kiserleti Intket, Telecommunications, Economy, Society, proceedings of the Scientific Days ‘88, Budapest, Hungary, 1988. 2See M. B. Steffens, ‘Organizational structure and investment financing at the Hungarian post: the telephone case’, in A. Raba and K.-E. Schenk, eds, investment System and Foreign Trade Implications in Hungary, G. Fischer, Stuttgart and New York, 1987, pp 99-129. 3See Kyklos, Vol 42, Fase 4, 1989.

Book reviews A parochial text TELECOMMUNICATIONS PRACTICE

LAW AND

A more precise title for this book would be ‘Telecommunications Law in the United Kingdom, 1981-87’ since most of the text describes the regulation and licensing of systems, British Telecom, branch systems, value added and data services, telecommunication services, apparatus and competition law during that period when so much changed in the UK. The book con-

cludes with chapters on property rights and the environment, and legal issues covering copyright, defamation, criminal and contractual liability, supply of apparatus and contractual formation by telecommunications. In the preface the author suggests that ‘This book is designed to serve as an introduction to lawyers and businessmen and as an aid to more detailed consideration of the issues arising out of United Kingdom regulation of telecommunications. It is not intended as an out and out practitioners’ textbook.’ If this is the intention, then the text should contribute to some or all of the following objectives: (a) a better

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by Cohn D. Long Sweet & Maxwell, London, UK, 1989, 206 pp, f29.00

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understanding of the important elements of the law as defined; (b) some clarification of what the legalistic language is intending to promote or prevent; and (c) some feel for the policy considerations that the law is designed to support. The text reorders the clauses of the relevant acts to add to the clarity of presentation but the reader is left uncertain about how selective is the presentation and the language still generates the suspicion that legal English is used so that ordinary mortals must have a legal translator to interpret what is meant. Here are some examples: ‘In consideration of the allimportant conditions (1-17 inclusive) set out in Part 2 of Schedule 1, applied pursuant to Section 8 of the Act, as well as the conditions (18-53) included in Part 3 pursuant to Section 7 of the Act.’ ‘The essential feature of all the simple services permitted by Schedule 3 is that they should extend only to “the conveyance (not including switching) of messages and switching incidental to such conveyance” which obviously encompasses normal telephone service but was thought to preclude the provision of value added (but not basic data conveyance) services.’ ‘Condition 11 requires that any item of apparatus which is to be comprised in a branch system and is not itself directly connected to a public system, and which is connected to call routing apparatus, can only be brought into service by the Designated Maintainer of that apparatus or “any other person” where the Designated Maintainer has agreed to that other person carrying out the work or has failed to bring the apparatus into service before the end of 14 days after notice from the licensee requiring the apparatus to be brought into service.’ One would need to check the legal texts to know how much the phraseology stems from the originals and how much is the language of the author. Only in the last chapter are there examples of case law which tend to make the analyses more readable and interesting. Earlier in the text a reference to a complaint by PanAmSat against British Telecom is raised in connection with interpreting what is

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