08 November 2005
Opinion by Louis G. Hobeika
Telecommunications is one of the world's most dynamic economic sectors. Hardly a week goes without telecom events making news in the national, regional and international press. Research shows the importance of telecommunications as infrastructure for efficient economic and social development. Countries that lack access to modern telecom systems cannot effectively participate in the global economy.
Improving the standards of telecommunications would therefore help the development of the business sector, including e-commerce. Telecommunications helps education, openness and brings the world closer.
The increasing information intensity of economic activity coupled with the globalization of capital flows, trade, manufacturing and other activities result in strong demand for telecom services.
Advances in telecom technology helped reduce the costs of production in all sectors.
Four words sum up today's telecom markets: private, competitive, mobile and global.
The convergence of mobile communications and the Internet will produce great results. Because of its availability and costs, the mobile Internet should not be considered as a substitute for the fixed-line Internet.
The telecommunications industry made its mark in history. It experienced a series of dramatic changes since its inception in the 1880s. From an industry heavily regulated and owned by the public sector without competition, it became privatized very competitive and deregulated due to technological innovations and legal and institutional development.
Telecommunications is part of the GATS since 1985. The U.S. was the first country to deregulate its telecom markets. The 1996 Telecom Act, with limited success, attempted to adapt the regulatory structure to technological reality.
Worldwide, national carriers were privatized and new competitors licensed and new services allowed.
For the telecommunications companies, these developments created new opportunities and threats. They have stimulated the convergence of previously distinct industries such as the telecommunications, information technology, entertainment, media, and consumer electronics into a new industry called "multimedia information."
Internet telephony (VOIP) emerges as a major new telecommunications technology. As it improves, the artificially high prices of voice calls will not be sustainable and could threaten the very existence of the established telecom giants.
Revenues of the international telecom market reached $1,370 billion in 2003.
An extensive use was made of alliances, mergers and acquisitions. The growth of data and mobile services has outpaced that of basic fixed-voice services.
In 2002, mobile subscribers overtook fixed-line subscribers worldwide.
These events continue to have serious implications for the design of relevant policies and regulation. They raise serious life and health concerns related to driving while using the mobile, and related to the addiction of children (one in five adolescents are awakened regularly by text messages late at night).
Around the world at the start of 2003, there were about 63 million broadband subscribers (and rapidly increasing) and 1.13 billion fixed-line and 1.16 billion mobile phone users. However worldwide, over one billion people remain without access to basic telecom services and 800,000 villages are still unconnected.
Recently, the International Telecommunications Union, within the context of the World Summit on the Information Society, launched "Connect the World" initiative to reduce the "digital divide." The initiative aims to connect all communities by 2015.
In the Arab states where the sector is dominated by state owned monopolies, there are no fixed link operators which are 100 percent privately owned. Foreign participation in the incumbent remains minimal.
Many Arab states are involved in privatization efforts not by conviction but because of the need for private capital for infrastructure development.
The Middle East and North Africa (MENA) region remains relatively underdeveloped in technology and telecommunications. The unsatisfactory result is due to many factors, including the overall level of economic and human development as well as to high costs and tariffs.
Some Arab states need to invest heavily and urgently in the sector to reach adequate levels of technological development.
The telephone indicator for Lebanon is near those of the advanced Arab Gulf states and is higher than Saudi Arabia and Oman. Lebanon invested heavily and successfully in its telecommunications sector which still needs to be maintained and modernized.
Israel holds a very high level of telecommunication indicators which are reflected in the efficient performance of its economic sectors.
The MENA region, especially its poor countries, would benefit from improving the quality of existing telecom projects and from further investments and reforms in the sector.
The regional telecom sector should move further in the following four directions:
a.) Commercializing and separating operations from those of the government.
b.) Increasing the participation of private enterprise and foreign capital.
c) Containing monopolies, diversifying supply of services and developing competition.
d) Shifting government responsibility from ownership and management to only policy and regulation.
Louis G. Hobeika is a professor of economics and finance at Notre Dame University - Louaize, Lebanon.
