International Institute of Communications (IIC) THE GLOBAL TELECOMMUNICATIONS TRAFFIC REPORT- 1991 Gregory C. Staple -Editor Principal International Telecom Flows © HC 1991 THE GLOBAL TELECOMMUNICATIONS TRAFFIC REPORT 1991 Gregory C. Staple Editor © Copyright 1991 International Institute of Communications T~S ~S co~,¥ .o./~ DO NOT REPRODUCE The IIC is an independent educational and policy research organi- zation with members in more than 70 countries. It focuses on telecommunications and broadcasting issues on a world-wide basis. Institute publications include a bimonthly magazine, Intermedia, and a range of topical brief’rag papers. IIC publications and reports do not necessarily reflect the opinions of the Institute’s officers, trustees or members. Previous IIC reports in this series: 1990 1989 The Global Telecommunications Traffic Boom Global Telecommunications Traffic Flows and Market Structures For additional copies of this report or other publications, contact: International Institute of Communications Tavistock House South, Tavistock Square, London WCIH 9LF Tel: 071-388-0671/Fax: 071-380-0623/Telex: 24578 IICLDN G Cover Illustration The cover maps the largest streams of switched international telecommunications traf17c onto a ci~cular projection. Routes shown generally had a two-way flow in 1990 exceeding gO million Minutes of Telecommunication Traf17c (MITT). Some routes have been omitted for presentation purposes. Shaded map areas show major points of origin and destination. Concept: Gregory C. Staple. Illustration: Maryland CartoGraptffcs. ©International Institute of Communications 1991 The Global Telecommunications T:aflqc R#port- 1991 This report could not have been compiled without assistance. Carriers, government departments and regulatory organizations from around the world responded to our informational requests. We are grateful for their cooperation. Special thanks also are due to the many professionals within these organizations who encouraged our work and set aside the time necessary to ensure that the data reported here is as up-to-date and comprehensive as is reasonably possible. We also wish to thank the Commission of the European Communities (CEC), Directorate General XIII, for underwriting our research on European telecommunications and for permitting the IIC to publish certain Commission data on traffic to and from member states. The CEC’s independent effort to improve the scope of statistics on international telecommunications flows is most welcome. The "new look" of the 1991 report and expanded national coverage were also supported, in part, by a special publication grant from MCI Communications Corporation. The grant came without any editorial pre-conditions; the IIC remains responsible for the contents of The Global Telecommunications TraflTc Report- 1991. This report reflects a team effort. Deanna Nichols and Ron Sasine led the statistical research. Word processing and desk-top publishing assistance were provided by Barbara Frank and Michelle McDermid. Bennett Moe at Maryland CartoGraphics (Columbia, MD) contributed his computer graphic skills to the illustrations. We have tried to ensure the accuracy of the statistics presented here by relying upon primary sources whenever possible. Nevertheless, in a project of this magnitude, some errors are bound to occur. We would be grateful if our readers would bring them to our attention so that they are not carried forward to future editions. Gregory C. Staple Editor The GlobM Tde~ommuni~n’ons TrafHc Report- 1991 Toward the end of the 1980s, computing power, electronic databases and global telecommunications networks had succeeded in eroding once formidable barriers to commerce and communi- cations. Geography, political divisions and time ceased to be effective hindrances to business operations or personal interactions. For the in’st time in history, virtually every comer of the globe could tap instantaneously into an expanding, increasingly intelligent global information network. You could say the information age truly came of age -- on a global scale -- by the end of the 1980s. Appropriately enough, in 1989 the IIC issued its fast Global Telecommunications Traffic Report. Measuring global telecommunications traffic is a very useful way to understand the forces at work in transforming our world. That’s the reason this report is such a welcome addition to the wealth of information available about the telecommunications industry. It helps us put key industry trends into proper perspective -- which is increasingly a global perspective. Important trends in business, politics and society at large can be understood, at least in part, by measuring telecommunications traffic and analyzing trends in telecommunications technologies and usage rates. As this report underscores, the forces of technological innovation, customer demand and the growing acceptance of competition in key markets will continue to transform the global telecommunica- tions industry. And telecommunications, in turn, will continue to be a fast-growing, dynamic, strategically-important industry for any country that wants to sustain or initiate solid economic growth. There is no alternative. A nation’s economic and political health today depend upon a thriving telecommunications sector. This third edition of a:ke,~abal Telecommunications Traffic Report emphasizes three key trends. It makes clear that, despite recession and war, the global traffic boom is continuing, that national and global markets are conver#ng and that a new era of innovative, increasingly-multimedia information services are creating a platform for an ongoing revolution throughout the 1990s. The transformational power of information, widely dispersed and instantly available, should not be underestimated. Information tends to undermine rigid political and corporate hierarchies and artificial boundaries. It is, therefore, no coincidence that the 1980s ended with a flourish of democratic revolutions and with the globalization of business organizations. Both in politics and in business we are now in the midst of a new, transnational era. We have moved abruptly from a bi- polar world, dominated by two superpowers locked in a Cold War standoff, to an increasingly multipolar world order. World politics have become more decentralized and democratic. In global business, we’re seeing a similar trend toward a decentralized world in which advanced global telecommunications networks enable companies to respond quickly to market opportunities anywhere, anytime. Because this report is so helpful to so many audiences, MCI is proud to be associated with the third edition of The Global Telecommunications Traffic l~:~tt. We recommend it wholeheartedly as a valuable resource for telecommuni- cations users, for service providers, for regulators and for students of the industry. William G. McGowan Chairman and CEO MCI Connnunicatioas Corporation 6ii) The Global Telecommtmications Trat~c Report I.~I (iv) Page Preface Index of Table and Maps (vi) I. Introduction A. Coverage and Themes 1 B. The Year In Review 1990-1991: 5 Carriers and Traffic Trends II. Review Articles III. A. "Rewiring Europe: New Politics, New 13 Networks?" by Denis Gilhooly B. "The International Market For Multimedia 24 Communications: Looking Beyond Tlxe Fax Machine" by Kyoto Uehara and Hirotoshi Nishida C. "Whose Traffic Is It Anyway? A Survey of 35 Foreign Investment in North American Telecommunication Companies and National Ownership Rules" by Gregory C. Staple Statistics 53 A. Basic Indicators: Countries and Communications 55 B. The World’s Largest International Carriers 62 C. International Telecommunication Traffic: 67 Countries and Routes 1. The Americas 67 2. Europe 78 3. The Middle East 98 4. Asia and the Pacific 100 Appendix A Methodology 111 The Global Telecommunications Tratt~c Report 1991 MAPS Page Ao Countries With Route-by-Route Tables Telegeography: Regional Traffic Flows 54 (1) North America 68 (2) Europe 79 (3) Asia 101 STATISTICAL TABLES A. Basic Indicators National Statistics: Population, GNP, Area and Telephone Lines (1989) 55 2 National Telecommunication Statistics: 56 Telephone Lines, Mobile Telephones and Fax Machines (1989 1990) 3a Telecommunication Traffic Balances For 57 Selected Countries (1990) 3b Telecommunication Traffic Balances For 58 Selected Countries (1989) 4 International Telephone Charges and 59 Traffic Balances for Selected O.E.C.D. Countries (1989) 5 Capacity and Cost, Per Voice Path, Of 60 Selected Trans-Oceanic Cables (1956 1996) 6 Capacity, In Voice Paths, of Trans-Oceanic 61 Cable And Satellite Systems (1986 1996) (vi) TABLES (ConL) B. The Largest International Carriers and Markets Page 7a The Traffic Base Of The Top 25 International 62 Carriers (1990) 7b The Top 15 International Carriers (1990) 63 8 The Fastest Growing International Carriers: 64 1986- 1990 9 Market Shares Of Competing International 65 Carriers in the U.S., U.K. and Japan (1985 1990) 10 International Routes With The Largest Volume 66 of Telecommunication Traffic (1990) Co International Telecommunication Traffic: Countries and Routes 2-’he Americas 11 Brazil 69 12 Canada 70 13 Colombia 71 14 Mexico 72 15a United States Outgoing Traffic 73 15b United States Incoming Traffic 74 15c United States Top Ten Routes 75 15d United States Fastest Growing Routes 76 16 Venezuela 77 The European Comm~lni~;y 17 Belgium 80 (vii) TABLES (Cont.) 18 19 20 21 22 23a 23b 24 25 26 27 28 29 Denmark France Germany Greece Ireland Italy Intercontinental Traffic Italy Continental Traffic Luxembourg Netherlands Portugal Spain United Kingdom Cross-Border Traffic Between The Nations Of The European Communities: A Statistical Matrix (1989) Europe (non-EC) 30 Austria 31 Finland 32 Norway 33 Switzerland 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 34 Israel 35 Turkey 98 99 (v~) The Global Telecommunications Traft~c Report 1991 i::i::ii~ i~:ii.! ::.::.i. :ii,::..:: .::.::..!,:.~.. i.;..~.ii.i:, ..~?:.i::i.i.!.i::?~.i.i::?:.i..i,.!.i~~. :.,;~.;-# :. .i:+:: ::?: ::.::i ~.:-.:::.?~;i:.i::.;~;~:::;i:.~::.:i::: i!., :::.i, i:::i::::::!:,::::;,::.::::,::::i~::::i::~:~:::,!; TABLES (Cont.) Pa~e Asia and Pacific 36 Hong Kong 102 37 India 103 38 Japan 104 39 Republic of Korea 105 40 Malaysia 106 41 New Zealand 107 42 Philippines 108 43 Taiwan 109 44 Thailand 110 MISCELLANEOUS TABLES Multimedia Evolution: A Broader and Broader Electronic Pipe 4 International Telecoms Traffic Carrier Market Shares (1990) 6 Number of 2 Megabit-Per-Second Circuits in Europe 15 Data Communications Service Tariffs in Europe 16 Cash Balance for EC-Wide Broadband: Synchronised vs Unsynchronised Introduction 18 Number of INS NET Lines and Service Areas (Japan) 26 Future Prospects for INS Net Services (Japan) 27 (ix) MISCELLANEOUS TABLES (Cont,) KDD’s International ISDN Network 31 Usage of International ISDN 32 Usage by Industrial Classification of International ISDN (Japan) 32 Growth in Japan’s Total International Traffic by Global Regions 33 Growth in Japan’s International Traffic by Principal Asian Countries 34 Usage by Media of International Public Telecommunications Network (Japan) Selected Foreign Interests in United States Telecommunication Businesses 34 42 Selected Foreign Interests in Canadian and Mexican Telecommunication Businesses 43 Telecommunications and the North American Free Trade Agreement (NAFTA) 47 (x) T~e Global Telecommunications Tratt~c Report- 1991 Introduce’on Introduotion Since the 1970s, international telecommunications has remapped the globe. Today telegeography is reorienting our lives and our work. Traditional boundaries, based upon politics and nature, have been replaced by network boundaries. Increasingly, what matters -- for the telecommunication industry itself as well as in finance and manufacturing, in politics and the arts -- is what can be connected and how, not what is close or established. Chronicling the connections and forecasting their evolution has motivated this report since it was founded. This year’s edition, the third since 1988, provides expanded coverage of these themes. A new two-part format also has been adopted to make the report more accessible to readers. Part one contains review articles on business and regulatory activities shaping the market for international telecom services in the early 1990s. We are fortunate to have major contributions from Denis Gilhooly, Editorial Director of the Paris based Communications Week International, and Kiyoto Uehara, Managing Director of InfoCom Research in Tokyo. Part two provides country-by-country and carrier- by-carrier statistics on the demand for international telecoms services. The focus is on the volume of switched voice traffic in approximately 35 countries. 1990 statistics are given for more than 475 routes totaling over 27 billion Minutes of Telecommunications Traffic (MITT) -- almost 90% of the world market. By compiling and analyzing standard statistics on telecom traffic, this part of the report seeks to t211 a gap in industry analysis, still heavily dependent on revenue and facilities data. Major Themes Three significant market trends, first raised in the llC’s 1989 and 1990 reports, provide a point of departure for this year’s publication. The Global Traffic Boom. During 1990, economic output in most English speaking countries began a decline which continued well into 1991. The collapse of international travel during the Gulf War also reduced calling volumes. And yet, for carrier after cartier, year-on-year international traffic for switched telephone services continued to rise. Outbound traffic from the U.S. in 1990 was up approximately 18% from 1989 (excluding Canada and Mexico) -- the same rate of growth as from 1988 to 1989; Japan saw approximately 23% growth in telephone drcuit traffic for the year ending March 1991. Traffic volumes from the U.K., Germany, Switzerland and the Netherlands also grew 12%-15% in 1990. Singapore, Taiwan, Hong Kong and Thailand all experienced growth rates for outgoing switched telephone services of over 20% in their last reporting period. Yes, lower tariffs did stimulate demand and these price cuts likely will continue through 1995 at about 10% annually on major intercontinental routes. Indeed, since last year’s report (June 1990), a surprisingly broad consensus has emerged among carriers that cross-border tariffs and accounting rates (what carriers charge each other for interconnecting traffic) should and will be brought more into line with costs. The new outlook on international telecom pricing practices (accounting rates, tariffs) marks a departure from that prevailing in the 1980s. By mid-decade it could have far-reaching implications for service choice and demand. Several factors 1 The Global Telecommunications Trafl~c Report- 1991 Introduction appear to have encouraged a break with the past. The first is the likelihood of growing "by-pass" of the switched network. Market liberalization and new technologies have given major users more and more options for avoiding high-price carriers by routing traffic via least-cost national hubs, private networks and alternative (value added) carriers. Smart terminals and digital networks will soon enable other groups of users to convert their basic international telephone traffic into enhanced "off- net" services (e.g. via store and forward technology), and often to save money in doing so. Second, during the 1990s, the rate of growth in the supply of international telephone pathways, especially on tram-continental routes, is likely to exceed the growth in demand by a factor of two or more. For example, available voicepaths on tram- Atlantic fiber optic cables alone will grow almost 400% by 1996 and by approximately 600% on tram-Pacific cables during the same timeframe. (See Table 6 of this report.) International satellite capacity in each region also is likely to double by 1996. In this environment, further cuts in inter- continental call prices are inevitable. The projected gap between supply and demand also suggests that carriers will soon begin to devote more attention to building a market for band- width intensive services (e.g. dial-up video) so as to maximize their return on new cable and satellite investments. Which brings us to a third factor affecting the industry’s future pricing plans: international Integrated Digital Services Networks (ISDNs) -- the industry’s multimedia platform. Multimedia, like ISDN before it, has become a ballyhooed buzzword with a multiplicity of meanings (more on this below). But the implications for telecom tariffs are reasonably clear. This is a matter of economics. To be attractive to a mass market, tariffs for the ISDN must not be priced at too high a multiple of that for voice services. But nor can they be priced too low vis-a-vis the comparable price for an equivalent number of voice channels; that would be an open invitation to arbitrage. Thus, the lower the price for international telephony, the more flexibility carriers are likely to have to introduce wider bandwidth services in the 1990s. We shall return to the potential market for multimedia communications below. Market Convorgen¢~. The boundaries between international and domestic telecom markets continue to erode. In countries as different as Hungary and Argentina, privatization has become synonymous with internationalization. With each new PTT share offering, foreign carriers are buying into national markets from which they were once barred. At the same time, from Sweden to Japan, market liberalization is sharpening the head-to-head battle between national carriers for cross-border traffic. Where new facilities licenses are limited, competitors seek to enter the market by negotiating network management contracts with large business users. (BT’s Pathfinder Project is one of the more publicized examples.) Similarly, where basic services remain the monopoly of national carriers, value added networks and mobile facilities provide an opportunity to build a market presence for the future. The same question is now asked in almost every country: "Whose traffic is it anyway?" It belongs to the customer, of course. Or does it? We explore this question further in two review articles. The first one focuses on the North America market and the impact of national ownership rules on inward investment by trans-national carriers. Privatization 2- The Global Telecommunications Traf~c Report- 1991 Introduction has led many countries to see the merits of accepting more foreign investment in national carriers; the article argues that the U.S. and Canada also would do well to reconsider their positions on this issue. The second article focuses on Europe, where the challenge presented by competing tram-European networks is just beginning. "IT]he development of real European services and networks which are not the sum of national services or networks -- needs to be focused through a European body with a truly commercial stance," argues the author. The solution might come from a joint effort by existing operators or the private sector. But, the overriding need today "is for a new brand of politics which will create the conditions for this new brand of networks." New Media. "The telephone is going through a metamorphosis," we wrote last year. "The black bakelite chrysalis is becoming an electronic butterfly. But what kind of a butterfly will it be? And how will it affect network traffic....Could it be that [the] fax [machine] has given us a glimpse of what lies ahead?" We continue this inquiry here. In mid-1991, the worldwide base of fax machines was still only approximately 16 to 17 million, less than 3% of the global base of telephone lines. The number of modems was even smaller. But, these few million terminals have transformed the market for international communications. Fax is now the medium of choice on most trans- Pacific routes; about 15 20 % of the traffic across the Atlantic is fax. And on international private lines, it is estimated that data traffic is growing at 30 40% annually. This anecdotal evidence suggests that it is international users -- and especially on the Asia- Europe, Asia-North America routes -- which will be the most avid customers for the next generation of multimedia or ISDN services. How quickly will such multimedia services be available on cross-border routes? That depends on what is meant by multimedia. On this subject there seems to be a growing divide. On one side is the computer industry which now appears to see multimedia as a new set of stand- alone entertainment consoles -- a successor to the current generation of Personal Computers (PCs). As Businessweek wrote in a recent cover story on the computer industry, "PCs, high definition television, stereos, VCRs and laser disks will soon converge in a new multimedia information and entertainment system for the living room." The prototypes of this vision are the current line of smart Compact Disc (CD) TVs introduced by Commodore and Philips, and the video peripherals for PCs now offered by several computer manufacturers. On the other side is the telecoms industry. Its multimedia vision is tied to a new generation of ISDN based terminals for dial-up video, high- fidelity audio, color graphics transmission and data exchange. The focus here is on connectivity and an integrated office console. How will these two visions come together? In theory, a common set of standards could permit entertainment oriented and telecom oriented terminals to interwork on a common network. In practice, however, the computer industry’s greater marketing clout and its long history of proprietary interfaces suggests that connectivity is likely to take a back seat to equipment sales. -3- Multimedia Evolutioq: A Broader and Broader Electronic Pipe This is potentially bad news for carriers as well as consumers. It could lead to a repeat of the PC era where networking (working "on line") was almost an afterthought. As a result the mass market for data transmission (E-mail), compared to fax, has been slow to develop. It could also retard the movement toward making the telecom network a platform which is at least as open for new ISDN applications as the current PC platform is for new software developers. Nevertheless, there are those who believe that the multimedia age still might produce something more than a "smart TV" or a telephone with pictures -- more in the sense that a word processor is a different kind of medium than an electronic typewriter. And more too in the sense that the urban electrical grid brought with it night baseball as much as it did the air conditioner. And that global satellites made possible CNN as much as MTV. Earlier this year, therefore, we were struck by the vision of Mitchell Kapor, the energetic chairman of ON Technology and co-developer of the popular PC spreadsheet program, Lotus 1-2-3. He put it this way during a U.S. Federal Communications Commission (FCC) forum on the futur~ of the 4- The Global Telecommunications Traffic Report- 1991 In~oducO’on public telecoms network: "Applications will drive [the] demand for services [in the future] because users are interested in doing something new with technology in order to make a difference in their lives. They have an aversion to technology itself....The most valuable contribution of the computer industry in the last ten years is not a machine, but an idea -- the principle of open architecture...[W]e need to think how to make the [public network] into an attractive platform for the development of new information products and services...." The platform must be designed to be appealing to the application developers. It cannot be thought up in isolation and foisted onto the market in the hope that it will be found interesting." These remarks deserve a wide audience. And a response. For the sooner that the computer and telecommunications community see multimedia as a platform for applications and connectivity rather than as a ready-made set of terminals, the more likely it is that the multimedia future will attract the kind of consumer base it will need to create a truly global market. Japanese companies have been at the forefront of multimedia developments on both the computer and telecoms side. The telecoms perspective is explored more fully in the articles section of this report by Tokyo’s Infocom consultantcy, a major NTT advisor. It is NTT, of course, which in 1990 placed multimedia at the core of its network vision for the 21st century. The key phrase, said NTT, is "V I & P Visual, Intelligent & Personal." And by Infocom’s account, NTT has already made si~ificant strides toward this goal. By mid-1991, about 90% of Japan had access to a basic ISDN interface. Other perspectives on the future of multimedia communications will appear in later IIC reports. The Year In Review 1990 1991 We have already flagged two of the most important stories of the last twelve months (to August, 1991) -- the relatively buoyant demand for international telecom services, a recession notwithstanding, and the new consensus, at least among major carders from industrialized countries, that international accounting rates and call prices will be brought more into line with costs. Our survey research indicates that the global demand for switched services topped 30 billion Minutes of Telecommunication Traffic (MiTI’) in 1990 and will total 35 3(5 billion MiTr in 1991. By 1995, this figure likely will rise to 60 70 billion MiTI’. As shown by the chart below, the market remains concentrated. The top 20 carders have approximately 86% of the cross-border market. (See also Tables 7a and 7b.) As for the pricing issue, 1991 saw a new determination by regulators in the U.S. (FCC) and Europe (Oftel, the EC’s Competition Directorate DG IV) to speed up reforms. The business press also began to add their voices to those calling for change. And, by late summer, steady pressure from the Americans, the Australians, the Swedes and the OECD Secretariat, among others, led the CCITT (International Telegraph & Telephone Consultative Committee), the Geneva-based organization which writes the ground rules for settling accounts between carriers, to begin a serious dialogue on a 5- The Glol~l Tel~commuaiaat.ions Trm~c Report 1991 TI~e Year Reffew more cost-bared compensation system. But do not look for a quick resolution. A new deal on intercontinental accounting rates is unJikely until 1993 or later. International Telecoma Traffic Carrier Market Shares (1990) Several other development in 1990 and 1991 will continue to affect the market-for international telecom services in the 19908. Chief among these are: o Additional Privatizations. The last year saw Argentina and Mexico oomplete their privatizations. Next are the U.K. (in November, 1991 the Government will sell its remaining 48% interest in BT), Singapore, Venezuela, Uruguay, Pakistan, the Ivory Coast, Poland and Hungary. Nigeria, Korea, the Netherlands and Germany have also begun the process. This trend is redrawing market boundaries because privatization almost always goes hand-in-hand with more competition and investment by foreign carriers. o Network Comlmtition. Ia 1990 and 1991, Sweden and Australia joined the ranks of countries willing to license more than one international telephone company. And in principle, the U.K decided that three or even four international carriers might be a good thing. Maybe. Those countries favoring network competition the U.S., Japan, the U.K., New Zealand, Sweden, Australia are still a minority. But, they are gaining important allies (notably within the European Commission). Thus, in retrospect, the 1990 1991 period may well be seen as a turning point. The burden of proof has been shifted from those favoring network competition to those in opposition. o Liberalization of Private Lines. Ia July, 1991, after years of debate, the CCITI" voted to liber-aliT~ the D-1 series of recommendations which govern the terms on which international private lines can be used. The new D-1 series essentially lets each nation decide for itself the extent to which such circuits can be subleased or interconnected to the switched network, i.e. resale of private lines for switched voice services is permissible under bilateral agreements. o Undersea Cable Projects. The last year has seen the launch of an unprecedented number of new tram-oceanic fiber optic cable projects. TAT-10 and TAT-11 in the Atlantic; TPC-5, SEA- ME-WE2 and ASPAC in the Pacific. The long term impact on price and service competition, discussed further below, should not be underestimated. We now take a closer look at developments in the world’s major regions. North America North American carders continued to experience strong growth in the demand for international service in 1990. Excluding cross-border routes, -6- T’ne GlohM Te, leoommm~Jc~’oz~s T~:’affi~.Repog 1991 Tl~e Year ~n Review CO.S.-Canada, U.S.-Mexico) U.S. outbound MiTT grew approximately 18% from 1989; for Canada growth was 21% in the year to March 1991, excluding traffic to the U.S. This steady increase in d~mand pushed the U.S. and Canadian traffic deficits to new highg in 1990 (Mexico enjoyed a record surplus). The U.S. had a net traffic ddicit of over 3.1 billion MiTT leading to net out payments (a trade deficit) of approximately $3 billion, up from $2.4 billion in 1989. The principal beneficiaries of this deficit were Mexico, Germany, the Philippines, South Korea, Colombia and various Central American and Caribl~an countries. Competition and discounted calling plans for the residential market plainly stimulated U.S. demand in 1990. MCI had an especially strong year recording a 70% increase in international call volumes (excluding Canada and Mexico). This boosted MCI’s market share to 14.6% as compared to 10.2% in 1989. The gain was almost entirely at AT&T’s expense. By the end of 1990, AT&T’s international market share had fallen below 80% and was still declining. (In contrast, AT&T’s share of the U.S. domestio long-distance market appears to have stabilized in 1990 with approximately 65% of switched traffic.) MCI’s 1990 performance made it the world’s 7th largest international carrier (in terms of switched minutes). US Sprint, which has just over 6% of the U.S. international market, also advanced to the ranks of the top 20 carriers in 1990. In Canada, 1990-1991 saw a number of actions by carriers and resellers to increase their share of the 2.6 billion MiTT U.S.-Canada cross border market and to keep Canada’s overseas traffic on Canadian carriers. Yet, despite regulatory reforms designed to make Canadian carriers more competitive (e.g. by requiting Teleglobe to interconnect directly with the private networks of Canadian resellers), the appeal of cross-border networks to the U.S. continued. In June, 1991, thig led the Canadian Radio-television and Telecommunications Commission (CRTC) to issue new guidelines to deter Canadian service providers from routing Canada-Canada or Canada-overseas traffic via the U.S. However, the big competition issues are still ahead in Canada. The CRTC has now completed its hearing on the applications of Unitel and a BC Rail consortium to provide competitive long- distance service. If the CRTC approves at least one of these applications, as seems likely, it may well lay the basis for international competition with Teleglobe when that company’s monopoly runs out in 1992. In Mexico, the big story in 1990 was the completion of the Telmex privat_i~,~tion leading to the acquisition of a controlling stake by Grupo Carson, France Telecom and Southwestern Bell. Telmex’s new owners must increase exchange lines by 12% annually to 1994. Despite a gradual reduotion in the size of Telmex’s settlements per minute from handling U.S. traffic, the new lines should be a major foreign exchange earner. In 1990, Telmex earned approximately $120 a line for terminating U.S. calls alone. (Both Canada and Mexico are discussed at greater length below in the review artiole -- "Whose Traffio Is It Anyway?") The European Community originated approximately 40% of the world’s international telecom traffic in 1990 -- approximately 12 billion switched minutes. This IIC report provides the 7 The Global TelevomrnunicaO’ons Tza[JYc Report 1991 The Year first comprehensive statistical review of the pattern of traffic between the EC-12. (See Table 29.) What does it show? Three countries Germany, the U.K., and France account for almost 2/3 of all outgoing international traffic. On average, using 1989 figures, approximately 55% of outgoing traffic from one EC state was destined to another member country. Luxembourg, Belgium and Ireland are the most EC oriented (83% 88% of traffic) and the U.K. and Germany the least (about 43% 44% of traffic). Approximately 10% of the EC’s outgoing traffic goes to the U.S. and about 1% goes to Japan. (By comparison,, about 25% of outgoing U.S. traffic and about 17% of outgoing Japanese traffic is directed to the EC.) The European telecommunity is growing; Turkey, Yugoslavia and parts of North Africa are becoming as much a part of it as Switzerland, Austria, and Scandinavia. The volume of telecommunications traffic between Eastern and Western Europe is still very small. Supply constraints on cross-border facilities in the East are severe and they are unlikely to be eased until the mid-1990s. Mobile systems may provide alternative routing arrangements for some users. But such facilities cannot be expected to meet the great pent-up demand for international telecommunications which has been let loose by the new mobility of people and money in the East. The international facilities bottleneck is most critical in the U.S.S.R. In 1990, it was reported that but 1200 international circuits were available for interconnecting over 38 million Soviet telephones to the global network. One result: in 1990 the Soviet Union’s switched telecommunications traffic to the U.S. (13 million MITT) was roughly the same size as that from Bahrain or Bolivia. Next year, politics permitting, will see several new Soviet tele-bridges to the rest of the world. One bridge, largely financed by the American carrier, U.S. West, will place new international gateway switches in ICier, Leningrad and Moscow so as to add over 20,000 circuits to the two gateways (in Moscow and Yerevan) now serving the Union. Another project involves the construction of an overlay network in Moscow with 240 dedicated international circuits for hotels and businesses. The operator, Sovintel, is a partnership between GTE Corp. and the Soviet Ministry of Communications. The Ministry has also announced plans for several new cross-border cables -- one from Denmark across the Baltic to northern Russia, one under the Black Sea from Italy and Turkey to the Crimea, and one between South Korea and western Siberia. A microwave link between Magadan and Alaska, across the Bering Straight, is already in place. Other new tele-bridges to the Soviet Union will be provided xJ_a InterSputnik and PanAmSat whose satellite facilities are currently under utilized. Beyond that, in 1991, the Soviet Union decided to join Intelsat, the global satellite consortium, and announced plans to expand the number of Intelsat ground stations in the Union. These are all helpful signs. But it will take marly more such projects before the Union or any of its Republics enters the ranks of the top 25 international carriers. More network competition also received new attention in Western Europe in 1990 199I. Of prime importance was the European Commission’s growing commitment to revisit the scope of reserved services in 1992. Equally significant in -8- The Global Telecommunications Traflqa Report- 1991 The Year In Review 1991 was the boost to the Commission’s authority provided by the long-awaited decision of the European Court of Justice upholding the Commission’s 1988 Directive liberalizing the provision of telecoms terminal equipment. A companion Directive providing for the phased opening of the telecom services market is still before the Court; the outcome of that case is less clear. Nevertheless, the legal victory on terminal equipment maintained the momentum of the Commission’s reform program to 1992. (Tbe scope of the EC’s network policies and the prospects for new pan-European carriers are discussed further in the review article "Rewiring Europe.") Several national developments also deserve notice. German unification in September 1990 c¢-mented the leading role of DBP Telekom as Europe’s largest international carrier. (Telekom now handles over 40% more international traffic than British Telecom or France Telecom.) Long a junction state for intra-European traffic, the addition of 5 to 6 million more German exchange lines to 1998 (primarily in the East) and parallel modernization programs in Hungary, Czechoslovakia and Poland, will continue to boost Telekom’s stature throughout the 1990s. 1990 also saw a historic reform of the French telecommunications law. From January 1, 1991 France Telecom became an autonomous state- owned corporation with sufficient control over its budget and strategic plans to compete on an equal footing with other major operators. Indeed, with its successful bids for ENTEL (Argentina) and Telmex (Mexico) already in hand, France Telecom now has the ability to become a global player well ahead of most of its European counterparts. Meanwhile, in the U.K., Mercury Communications continued to do very well, despite a declining economy. In FY 1990, Mercury increased its market share (against BT) from 9% to 14%; outbound traffic rose over 75% and incoming traffic (where profits are substantially higher) over 110°/6. In 1991, Mercury’s parent, Cable & Wireless (C&W), also made plain its intention to try and repeat Mercury’s success on the continent; the company acquired a 40% interest in Tele2 AB, the leading competitor to Swedish Telecom. C&W also signed an agreement to modertfize the telephone system in Gdansk, Poland. But Europe is a big market, even for a company with ambitions as large as C&W. A key question for the 1990s, therefore, is whether Europe’s expanding markets (and especially Germany) will birth a new European-owned multinational carrier. Or will U.S. carriers remain C&W’s major competitors for new licenses. A~ia Carriers serving the Asia-Pacific region continue to experience the highest growth rates for international traffic. In 1990, outbound traffic for companies in this region was 20% 30% higher than in 1989. The rapid expansion of regional traffic has especially affected the U.S. market which looks increasingly to the Pacific. Japan, India, Taiwan, the Philippines, Korea and Australia were all among the 15 fastest growing U.S. routes from 1988 to 1990. (See Table 15d.) Japan continues to be a junction state for regional telecom traffic. It is the fhst or second most frequently called country for Korea, Taiwan, Malaysia, Thailand, the Philippines and Singapore. Several of these countries now have two-way traffic volumes of 75 million MiTT or more, comparable -9- The Global Telecommunications Traffic Report 1991 The Year In Review to U.S. routes to South American and the Caribbean. Since the last quarter of 1989, the demand for international telecom services in Japan has also been given a sharp stimulus from competition. The two new carriers, International Digital Communications (IDC) and International Telecom Japan 0TJ), which are largely user owned, have now won at least 25% of the outbound market from KDD, Japan’s established overseas carrier. (The lower market shares reported in Table 9 for IDC and ITJ are based on the 1990 fiscal year to March 1991.) As competition has lowered calling prices in Japan, more traffic has begun to flow out of Japan than into the country (See Table 3 of the report). In 1991, this trend and the large stake of Japan’s electronic industries in the next generation of multimedia terminals began to encourage Japan to bring about a more cost-based telecoms price platform at home as well as overseas. Yet, despite the foregoing trends, Japan remains comparatively insular. In 1990, Japan’s 55 million telephone lines accounted for only about twice the international telecom traffic of the 2.5 million fines in Hong Kong (excluding the Hong Kong China route), or about the same as that of the Netherlands, which has about 7 million fines. Japan’s insularity is also evidenced by the small proportion of international calls (about .2% in F.Y. 1989) as compared to total calls. In the U.S. about 1% of total telephone calls are now international and in the U.K about 2%. This data underscores the potential for a further expansion of the Japanese international telecommunications market as well as the incremental nature of such growth. Even though new price cuts are likely to sustain 20% plus year- on-year growth levels to 1995, there are unlikely to be any surprises, pending the widespread availability of new media terminals (eg., dial up video). But when such terminals become available (circa 1995), all bets are off. (See the second review article, "Looking Beyond The Fax Machine," for more detailed projections on Japan’s international traffic to 2000.) After Japan, Hong Kong continues to be Asia’s telecom hub, followed by Australia and Singapore, with Taiwan and Korea increasingly active. As noted last year, China’s international traffic is growing at 40 50% annually. This has been a boon to Cable & Wireless controlled Hong Kong Telecom International which, in 1990, began to serve as a gateway for southern China’s outbound traffic. Reciprocity is at work here; Hong Kong now sends over 250 million Mi’I’F to the Peoples Republic annually. The size of this "cross border" route thus is now similar to that between the largest European countries (France-Germany; Switzerland-Italy). As China and Hong Kong become more integrated and the size of their joint international traffic base rivals that of Japan, the leading role which Japanese carriers have enjoyed in the region may well be challenged. No recent summary of telecommunications matters in Asia would be complete without discussing the momentum of privatization and corporate restructuring. In Australia and New Zealand, this process has already laid the basis for two new international carriers, each of whom will benefit from the region’s buoyant markets. Privatization in Singapore and the corporatization process in Malaysia, South Korea, and Taiwan could do the same for competition in these countries by the late 1990s. Beyond that, transfo _rm._ation of the Asian region 10- The Global TeleaommuMcations Traffic Report- 1991 The Year In Review (ahead of Europe) into a zone of investor-owned operators is likely to provide an additional stimulus to traffic and services in what are already the world’s fastest growing markets. This brings us to a final reflection on the region’s future traffic -- the proliferation of new fiber optic cables. By 1994, the HAW-5 cable (U.S. mainland to Hawaii; 45,000 voice paths) and the PACRIM EAST (Hawaii New Zealand; 37,500 voice paths)/PACRLM WEST (Australia Guam; 37,500 voice paths) systems will be complete. $o too will the ASPAC system linkJtag Singapore, China (Shanghai), Hong Kong, Taiwan and Japan. And also the ASEAN network with cables linking Brunei, Singapore, Malaysia, the Philippines and Guam. Then, in 1996 (or 1997), a KDD/AT&T consortium will complete the TPC-5 loop -- two fiber optic cables with alternative routes between Japan and the U.S. via Guam and Hawaii. TPC-5 system capacity: over 600,000 voice paths. In short, the 1992 1996 period will radically change the supply constraints for trans-Padfio telecommunications. (See Table 6 for further details.) The commitment of the numerous carriers involved in the projects is a vote of confidence that market demand will keep pace. But, even if telephone traffic on key tram-Pacific routes doubles every three years, our estimates suggest that substantial excess capacity will remain through 2000, when plans for another generation of cable will be well underway. It is unlikely that price will be the major means of closing the gap between supply and demand. As the cost per voice path of major Pacific cables falls to $2000 or less (see Table 5), a cable system may be quite profitable, even though it is only partially loaded. For this reason, as suggested earlier, the huge new capacity of the Pacific cable systems should lead some carriers to maximize their return on investment by marketing new bandwidth intensive (eg. multimedia) services. This could be an exci~ing prospect. The rapid take up of fax during the 1980s suggests that there is a strong unmet demand for telecom services which can better bridge time zones and cultures across the Pacific. As such, in the 1990s, new transmission facilities and a new set of multi- function terminals could give the region the kind of telecoms power which Europeans have long taken for granted. Concluding Thoug.hta The "content" of a medium, Marshal McLuhan once said, is like the juicy piece of meat carried by the burglar to distract the mind’s watchdog from the real message. McLuhan was fight, in part. The message of today’s global telecoms network is telegeography. Whether a telephone circuit is used to seal a marriage between New York and New Delhi or to confirm a line of credit between Singapore and Seattle, the geographical implosion is much the The message is so persuasive precisely because it uses the ordinary patter of business or the everyday pleasantries between families as a foil. But, all the while, the network is remapping the world. And we are only just be#nning to have a picture of this new geography. McLuhan was wrong, however, in suggesting that the content of the medium is of no importance in shaping the overall message. All of the statistics in this report -- on growth rates and traffic bases, thick routes and thin ones -- are shaped by the 11- The Global Teleoommunimtions Traffic Report 1991 The Year In Review changing desires of millions of people to make a call or to send a fax. Whether motivated by the need for rapport or reporting, medicine or money, curiosity or community, safety or sensation, the contours of telegeography reflect the sum of these desires. The IIC’s 1989 and 1990 traffic reports gave comiderable attention to identifying the origins of the booming demand for international telecom services. Among other things, we looked at the linkages between cross-border telecom flows and travel, sto~k market activities, immigration, trade and the rise of global production. This is a very large subject, however, and our knowledge remalm fragmentary. Hence, in 1992, despite the risk of distracting some of our readers, we shall return to this subject and take a more searching look at those "juicy pieces of meat" which led people in North America, Europe and Asia to stay on the line with foreigners for over 35 billion minutes this year. Gregory C. Staple Washington D.C. August 30, 1991 12- The Global Telecommunica~bns Traffic Report 1991 Rewiring Europe Rewiring Europe: New Politics, New Networks? By Denis Gilhooly" Europe has reached a turning point on the road to telecommunications reform. Since the European Commission launched its liberalization drive in 1987, the lowering of internal trade barriers and the accompanying extension of markets in goods, services and capital to cover the Community’s entire territory has become the underlying dynamic for change. But despite the growing body of legislation aimed at opening up the market to competition, there is mounting concern that the measures so far adopted do not go far enough. It is widely recognized that a Europe without internal borders will create an urgent demand for tram-European infrastructures for all types of tramportation, whether via rail, road, air or telecommunications. The benefits of the single market to Europe’s economy and competitiveness will materialize only if there is a network of adequate infrastructures, in both physical and technological terms. Unfortunately, at present, such systems either hardly exist, or are not emerging fast enough, or are prevented from being interoperable by the absence of vital links) These deficiencies are particularly acute in the context of Europe’s network of information highways. While the Community has begun Denis Gilhooly is the Editorial Director of CommunicationsWeek International in Paris. coordinating advanced telecommunications infrastructures -- in digital and mobile communications networks -- major gaps remain, particularly in tram-European applications. Currently, intra-Community traffic accounts for much less than one-tenth of total telecommunications traffic, and the supply of tram-European electronic data tran..~mi~ion services has not developed in most cases beyond bilateral agreements limited to the strict minimum in terms of both capacity and quality. This situation is in marked contrast to the United States and Japan where competitive, multi-billion dollar long-distance communications networks are firmly established. According to recent surveys prepared for the European Roundtable of Industrialists and the European Commission, large business users of telecommunications are missing out on the opportunities created by technical innovation and liberalization. High tariffs for high speed international communications links, their inflexibility and their unpredictability; the lack of coordinated planning in Europe which limits the use of broadband capacity and creates problems for network management and maintenance; regulatory restrictions on the integration of voice and data, on the use of two-way satellite networks, and on the shared use of bandwidth; and, the 13- The Global TeJeoommuaications Traffic Report 1991 Rewiring Europe absence of dynamic bandwidth allocation -- these all remain si~nificant barriers to change) The limited quality and quantity of available trans-European networks and services, as well as the absence of one stop shopping and one stop billing facilities available from the public Telecommunications Organizations (TO) has held back demand. Moreover, in both regional and global markets, the lack of advanced, international communications is denying European multinational fu’ms the competitive advantage enjoyed by their North American and Japanese rivals. In part this reflects a failure of supply, and the fact that the TOs do not themselves set up international networks. Rather, they have experience at point-to-point connections and have proved consistently less effective where intermediate carriers are involved. (Examples include the problems associated with international X.25 packet switched data networks, the collapse in 1989 of the Conference of European Posts and Teleco_mmunications (CEPT) adminigtrations’ managed data network services project, as well as delays in the pan-European introduction of ISDN.) In part these failures are a result of stresses inherent in current regulatory policy at the European level. Here, the new reliance on competition law inhibits the coordination of infrastructure supply among the TOs. At the same time the continued protection of the TO monopolies on voice telephony and the network infrastructure prevents effective new competition) Perhaps most important, the current situation is a function of the crucial lack of political power to organize on a European scale. The tendency to condone nationalist and protectionist policies has inhibited a single entity from providing leadership in telecommunications policy. However, change is in the air. With the advent of potential bypass technologies in the fields of mobile, satellite and optical fiber communications, the accelerated pace of liberalization, and the unforeseen developments in Central and Eastern Europe, a far more favorable climate is emerging for the deployment of trans-European networks and services. In this evolving landscape it is not yet clear how the market or technology will develop, nor which systems will finally be deployed. But for the first time conditions are ripe to bypass the remaining roadblocks to full-scale telecommunications reform and put Europe’s missing networks in place. Latent Capacity. Latent Demand Ironically, much of the infrastructure needed for advanced communications is, in piecemeal fashion, already being laid in Europe. The growing demand for inter-enterprise communications, as well as the emergence of new operators for text, data and mobile services, has increased pressure for broadband leased line capacity and the removal of usage restrictions on shared use and private-to-public network interconaection. In Germany, the United Kingdom and France, for example, this has led to plans for national digital transmission networks. These nets will incorporate large broadband digital transmimion links and digitaI cross-connect nodes able to switch different bandwidths of the Synchronous Digital Hierarchy (SDH) optical transmission standard from 2 Mbps (Mega bits-per-second) to 140 Mbps. These networks will be used as the basis for switched public telecommunications services and for a flexible offering of leased line services. In addition, many international digital trammission links between the international gateways of the 14 The Glo&ff Telecommaaiaa~z’o~s Trat’Hc Report 1991 telephone networks, based primarily on optical fiber tran.~-nission media, were implemented or are m the plsnning phase from 1987-1994. Most of these tran._~mission projects are, however, purely bilateral projects between national TOs. Thus, while all the planned digital tran.cmi~ion links are in principle equipped with broadband capacity they do not form a digital broadband transmission network, because they were not planned in the first instance for broadband switching facilities. Even for private operators and users who want to run international services based on leased lines it would be difficult to achieve a European leased line network with digital transmission paths at 2 Mbps or more. The Amsterdam based Reseaux Associes pour Recherche Europeenne (RARE), for example, rcoently issued a report identifying the target network requirements for academic networking across Europe. But while the minimum requirement was for a network of 2 Mbps linkg, these were found to be unavailable to research users except on a limited basis in a few national networks: TABLE 1 shows the extremely uneven availability of high capacity 2 Mbps leased lines in Europe. This situation can be compared with the United States where much higher performance and low cost T1 (1.5 Mbps) links are available. This has led to a proliferation of applications for LAN to LAN intereonnection, CAD/CAM applications, f’de transfer, videocoaferencing, digital imaging and multimedia services. TABLE 1 Number Of 2 Megabit-Per-Second C/’rcu~ in Eu/R~ Cou n try 1988 1990 Belgium France Western Germany Ireland Italy Netherlands Spain Sweden Switzerland U.K. (BT) U.K. (Mercury) 71 475 900 1,377 140 525 (leased line/fixed connection) 7 17 0 114 81 301 14 110 33 53 290 1,381 22,705 40,470 1,195 2,130 Source." European Commission 15- The GlobM Teleo~mmtm~ations T~’a[~ Report 1991 Rewiring Europe RARE estimates the cost for intra-European 2 Mbps circuits to be ten times that of equivalent capacity in the United States. Their conclusion is that mejor improvements to the European backbone carrier services are needed to enable them to handle the growing load of intra-European traffic as well as to be able to effectively connect to other continents. Tke communications gap between Europe and the United States is well documented in the 1989 and 1990 Perspective on Advanced Communications in Europe (PACE) reports prepared for the European Commission. These show that long distance traffic in the United States accounted for more than 30% of overall telecommunications services revenues in 1988. But in the 12-nation Community, less than 10% of calls are international, of which intra-European traffic is only one part. TABLE 2 Data Communications Service Tadffs in Europe Germany France Italy U.K." X25 PSDN (ECU/ksegment) maximum 1.65 0.60 1.07 0.43 BT marginal 0.80 0.36 0.73 0.26 BT DLC (kECU) at 9.6 kbps 10.2 10.5 14.0 4.8 BT at 64 kbps 23.4 31.5 31.1 6.9 BT at 2 Mbps 222 105 311 32.8 Mercury The indicated tariffs for UK are those of the cheapest between the two operators for the specific service, almost always BT Source." Pace 90, Vol. VI, p. 30 16 Global Tde~ommuMc~tions Tra~Tc Repo~ 1991 Rewiring Europe Also, when compared to the United States, the European data communications market is significantly underdeveloped, suffering both from poor X.25 and leased line infrastructures and distorted tariff levels across the Community. See TABLE 2. Further, whereas data communications revenue in Europe reached about ECU5 billion ($3.7 billion)in 1989, equivalent revenue in the United States was about ECU20 billion the same year -- and is expected to reach about ECU40 billion by 1992. European spending on private networks was about ECU3 billion in 1989, versus ECU10 billion to ECU15 billion in the United States. The data communications gap between Europe and the U.S. will become a critical concern as the installed computer base in Europe -- currently about half that of the United States increases and the number of local area network nodes grows to an estimated 1.7 million by 1993. With annual growth rates of 30 percent in Europe and 25 percent in the United States, compared to 5 percent growth for voice services, the demand for data communications is generating not only extra revenue for carders, but is also the prime driver for the introduction of broadband services. Broadband Plans In 1986, the European Commission launched two major studies on the technical and economic feasibility of establishing a Europe-wide broadband network and the potential market for broadband services.5 The studies showed that it would be technically feasible to set up a Europe-wide digital broadband network on top of the already ongoing establishment of bilateral digital transmission capacity with relatively low financial resources. The studies also found a potential demand for broadband services from leading edge companies, with a concentration of about 70 percent in France, Germany, Italy and the United Kingdom. Yet, five years on, Europe is still without an effective international broadband infrastructure. Nevertheless, this early work was the inspiration for the three principal, and ongoing, broadband initiatives from the TOs: o the European Broadband Interconnection Trial (EB1T), between sixteen CEPT members offering pilot projects, particularly for the European Commission Research for Advanced Communications in Europe (RACE) project, at 2 Mbps switched connections progressing to 140 Mbps. o the Global European Network (GEN), between TOs in five European countries based on existing switching and trans_m_ission links offering international leased lines up to 140 Mbps or transparent semi-permanent channels of 2 Mbps or more. The project envisions one-stop shopping and billing facilities. o the Managed European Transmission Network (METRAI~, open to all 31 CEPT members and based on SDH technology. Digital cross-connects will operate at the SDH equivalent of 140 Mbps and 2 Mbps. METRAN will support all service networks: those supported by circuit switches for voice telephony and leased lines; and, those supported by new Asynchronous Transfer Mode (ATM) broadband switches. Ultimately the network will incorporate an automated network management system. Two other proposals from the European Commission for linking government and corporate networks throughout the Community are the so-called Nervous System and the Integrated 17- Tl~e Global Ted~communications Traffic R~port 1991 R~wiring Europe Broadband Communications (IBC) Island lnterconnection (3I) projects. But confusion over the aims of these projects and low level of support has put their future in question.6 In theory, the collaborative nature of EB1T, GEN, and METRAN should reap considerable benefits. Studies undertaken for the European Commission estimate that if the twelve countries of the Community cooperate on the synchronized introduction of broadband networks, break-even could occur up to seven years earlier than ff one country were to proceed alone (see TABLE 3).~ Here, a precedent is already being set in Central and Eastern Europe with the new Trans-Europe~n Line (TEL). ~ginning in Frankfurt, passing Warsaw, Prague and Bratislava and ending in Budapest, the projeot consists of a fiber optic cable jointly financed by Germany, Poland, Czechoslovakia and Hungary. It is to be completed by the end of 1993. Although this kind of joint investment and use of facilities is common in the submarine cable environment this is believed to be the fast example on land. With their recent admission to the CEPT, the Eastern bloc countries should also soon be eligible to join the EB1T, GEN and METRAN projecls, thus expanding the potential reach of a pan-European infrastructure. But the commercial success of each of these projects is by no means assured. EBIT, in particular, has been beset by technical, managerial and tariffing problems. Signalling incompatibilities have hindered the TO’s ability to communicate across borders, while agreement was impossible to TABLE 3 ,I 4O 30- 20. 10- 0 -10 "- Umyachtonise.d S~nm’m 18- The Global Teleeomraunieations Tratt~e Report- 1991 Rewiring Europ~ reach on tariffing procedures for the pilot projects, with some operators offering free service and others charging high fees. In fact, the situation became so serious that the European Commission cut off funding for the flagship project, a failure that casts considerable doubt on the likely success of GEN and METRAN.s For example, it is unclear whether GEN will be open to all other members of CEPT or what its relationship to METRAN will be. While some observers have interpreted GEN as a political attempt to head-off competition from the HERMES project, it is unlikely that GEN’s planned 1991 introduction will be achieved. In the case of METRAN, though the project will be based on SDH technology, for which fLrm international standards are in place and equipment will be available this year, it has not yet progressed beyond a draft memorandum of understanding between CEPT members. The timing of METRAN is also extremely conservative, with SDH cross-connect capability planned for 1995 and network management for 1998 only. In the United States, AT&T plans to introduce SDH cross-connects from 1991 on for full deployment throughout the network in 1993, and the incorporation of ATM cross-connects from 1995 on. Further, the decentralized perspective of METRAN, with national peer network management centers, carries the risk of higher costs, technical difficulties, and cooperation problems. Both GEN and METRAN, like the former CEPT managed data network project, could run into regulatory problems to the extent that they may be perceived as cartels, and in violation of Coramtmity competition law, ff not structured properly. At the same time, however, for these projects to work, the TOs must exercise the kind of unified control and responsibility across frontiers which customers demand. But, as international competitors, increasingly attempting to penetrate each other’s markets, TOs have less and less incentive to cooperate. In this regard, BT has led the way in breaking up the old operator’s club in Europe, primarily with its acquisition of Tymnet. Others are now also pursuing strategies of their own. Outside the national TOs a number of potential pan-European players can already be identified. They include Cable & Wireless (C&W) in the United Kingdom, as well as those North American telecommunications companies eager to expand in Europe, notably AT&T, US Sprint and some of the Regional Bell Operating Companies (RBOCS). They might also include computer and systems integration firms such as IBM, DEC, EDS and GEIS. New players set to take advantage of expected satellite liberalization in Europe could likewise figure in the equation. But the main potential challenger to the TO’s broadband plans to date is HERMES. HERMES is a private consortium which, in its f’mal phase, would upgrade the existing European railways network towards a broadband network with gateways in at least 60 cities. Dependent on most regulatory constraints being lifted, HERMES will be based on optical fiber technology offering a range of digital leased line, switched narrowband and broadband services, but mainly targeting 64 kbps and 2 Mbps leased line customers with a price level similar to that in the United States. The investment for the network is calculated to be 19- T~e Global TelecornmunicaHons Tz’af~c Report- 1991 Rewiring Europe around ECU 800 million. The private consortium would own the network and the railroads would ordy give their legal fight for use of the physical wayleaves. Implementation is planned to be finished in eighteen months, with the investors setting a brcak-even target of four years. Profit after tax of at least 20 % is anticipated from which the railways should get 30%-40% for the land right of ways. Apart from the European railways in Austria, Belgium, Denmark, France, Germany, the U.K., Italy, the Netherlands, Spain, Sweden, and Switzerland, the HERMES consortia includes Daimler Benz, Banque de Suez, Nynex, Telecolumbus, Tractabel and Sprint International. However, with the withdrawal of Racal Telecommunications earlier this year the consortium lost its sole partner with credentials as a European telecommunications carrier.9 And so far the railways have not yet taken up the consortium’s optical fiber plan, only the more modest proposal to upgrade the railways data network. Other problems include the number of players in the consortium and the fact that some railroads are pursuing their own telecommunications strategies, and are considering becoming operators themselves, like British Rail. These companies may be reluctant to help a competitor set foot on their home market as well. It is questionable, therefore, whether the railways have enough political clout to carry HERMES off, particularly in the more conservative countries. These major regulatory hurdles remain to be overcome in order to make third party access possible, and parallel regulatory coordination on interconnect arrangements to the public networks would be essential. All of these will impact the original timescale and ultimately could derail the entire project, at least as originally conceived. 1992 Review In its landmark 1987 Green Paper on telecommunications liberalization, the European Commission recommended opening up the terminal equipment and value-added services markets to competition, but balked at tackling the underlying user need for inexpensive basic services,i° It calculated that the introduction of competition on voice telephony and the network infrastructure -- which still accounts for more than 90 percent of the revenues and often 100 percent of the profits of the TOs -- was politically unacceptable. Since then, by seeking to harmonize Europe’s wildly divergent tariff, certification and procurement policies, the European Commission has attempted both to cooperate with and encourage competition among the TOs. But though the adoption of common, pan-European standards and norms remains vital to stemming the fragmentation of Europe’s equipment and services markets, both the accelerated pace of technical change and of liberalization are tipping the scales in favour of competition. In a recent report on the application of the European Commission’s Open Network Provision (ONP) rules to voice telephony it was concluded that "there is a significant potential for the realization of additional long term efficiency gains if the reserved [monopoly] status of the voice telephony network and service is relaxed network competition is the logical step in developing efficient and competitive European telecommunications networks which will benefit all userS, "I 1 Meanwhile, the European Commission’s own work on ONP and voice telephony appears to be quickly 20 evolving to a form of "hands-on" regulation of the TOs as dominant players. The emphasis has shifted to the critical competition issues of interconnection, tariff’rag, numbering, quality of service and performance J: In this environment, radical change could come as soon as the second half of 1992 when the European Commission will review the status of the voice telephony and network infrastructure monopolies in the Services Directive and the ONP Framework Directive)3 That review will be a major factor in determining the success not only of HERMES but of other ahernative private network projects. In a number of countries, however, developments have akeady preempted the 1992 review. In the United Kingdom, the duopoly of British Telecom and Mercury was abolished this year. Sweden has also sanctioned a new f’uced network operator to Televerket. Both countries now permit the simple resale of spare capacity and have been at the forefront of efforts to open the market for international resale. In Germany, pressure to upgrade infrastructure in the country’s new Eastern states has led to a relaxation of the voice monopoly on two-way satellite communications. And the second mobile cellular operator has been given permission to build its own national microwave network. A recent study by the German Monopolies Commission also strongly recommended licensing long distance competitors to Deutsche Bundespost Telekom, citing the German railroads and utility companies as potential competitors.14 Mobile and satellite communications are also bringing ha competition on basic services across Europe through the back door. Competitive national networks for the pan-European GSM digital cellular radio system came into service on 1 July 1991. Potentially, these mobile communications networks could loosen the local loop monopolies of the TOs and introduce competition to the international services markets. Opportunities from forthcoming satellite liberalization in Europe will likewise probably be exploited, particularly ff the liberalization of terrestrial networks proceeds more slowly. Recent studies indicate that private satellite networking based on 2 Mbps capacity and switching, in particular, would be economically attractive. The Way Ahead It is likely that the dramatic advance in the cost-effectiveness and versatility of fiber optic systems will be the main driver for the renewal of the world’s telecommunications infrastructure over the next decade. But it is also true that no single technological solution will prevail. Satellites are not interchangeable for fiber, nor is mobile communications for fixed voice telephony, yet all will substitute for one another to some degree. But if it is not yet certain how the market or the technology will evolve, nor which systems will be adopted, it is clear that the telecommunications industry is entering a new era in which the dominant position of the historic TOs will be steadily eroded. Today, the existing European telecommunications networks must be regarded as separate national networks, which work together for international traffic on the basis of bilateral agreements between the network operators. And only the telephone network, with similar technical usage and tariff principles, can really be regarded as a Eurol~an network. 21 The Global Tedecommunie:ation$ Traft~c Report- 1991 Rew’i~ ~’tttoptr The simple fact is that the development of real European services and networks which are not the sum of national services or networks, but from the very beginning aro planned and implemented as European, n~xls to be focussed through a European body with a truly commercial stance. And the focus must come far in advance of the planning phase. For the TOs, this may be achieved through the new European Institute for Research and Strategic Studies in Telecommunicatiom (EURESCOM). But, it is unclear whether national cartier egoism will prevent EURESCOM, or similar cooperative projects (GEN or METRAN) from developing new tariff and marketing structures for fear of conflicting with national strategies. The solution could also, of course, come from the private sector. HERMES may not be the final solution. It will almost certainly not be the only solution, but the project clearly points the way to the future, with the potential to demonstrate the large elasticity of demand that exists for competitive networks in Europe. Given current constraints, however, it is perhaps unlikely that any projects will materialize with a full pan-European focus. It is more likely that a project between two to three countries, possibly in the North of Europe, will emerge building on existing traffic potential. But whether the final solution comes from a joint effort among the TOs, an independent cartier that draws on the resources of the TOs, or from the private sector -- or, for that matter, from a mix of fiber, mobile or satellite technologies -- is not of primary importance. The solution to the relatively slow expansion of international communications in Europe would seem to lie in further Community-wide liberalization, coupled with incentives to stimulate improved coordination of infrastructure supply. Improved coordination of alternative transnational networks and measures to ensure that networks can be interconnected and used at competitive prices by all users is the key to effective advanced communications across national The need is for a new brand of politics that will create the conditions for this new brand of networks. In short, the need is for a European vision of the future. 22 The Global Telecommunications Traffic Report 1991 Rewir~g Europe 1. "Towards Trans-European Networks: A Progress Report", European Commission, Brussels, July 1990. 2. Se~ "Missing Networks A European Challenge: Proposals for the Renewal of Europe’s Infrastructure", European Roundtable of Industrialists, Brussels 1991; "Perspectives for Advanced Communications in Europe (PACE)", Vol I-rr, European Commission, November 1989; and "Perspectives on Advanced Communicatiol18 in Europe (PACE): 1990", Vol I-VI~I, European Commission, November 1990. 3. See "Competition Guidelines on Telecommunications Policy in the European Community", European Commission, Brtmsels, 1991 and the Services and ONP Framework Directives (90/337 and 90/338 EC). Official Journal at the European Communities, Vol. 33, No. L 192/10 24 July 1990. 4. See "Final Report of the European Engineering Planning Group", Reseanx Associes pour Recherche Europeenne (RARE), Am.~terdam, May 1991. 5. See "Investigation and Definition of a Tramnational Broadband Backbone (TBB)" and "European Market Research for Broadband Services", European Telecommunication Consultancy Organization (ETCO), London 1988. 6. CommunicationsWeek International, December 11, 1989 and July 2, 1990. 7. "What Price Broadband?", Analysys, Proceedings of Blenheim Online Broadband Conference, London, 1991. 8. CommunicationsWeek International, November 12, 1990. 9. CommuaicationsWvek International, May 27, 1991. 10. "Towards a Dynamic European Economy: Green Paper on the Development of the Common Market for Telecommunications Services and Equipment", COM (87) 290, Final, 30 June 1987. 11. "Study on the Application of Open Network Provision to Voice Telephony", National Economic Research Associates (NERA), London, 1991. 12. "Analysis Report on the Application of ONP to Voice Telephony", European Commission, Brussels, July 1991. 13. "The Networked Economy Conference", Speech by Sir Leon Brittan and Roundtable Discussion, Proceedings of the Conference Organized by CommunicationsWeek International in association with Blenhein Online, Paris, March 1991. 14. See "Zur Neuordnung Der TeleKommunikation" Sonder Gutachten Der Monopolkommission, Koin, July 1991. 23 The. ~Flobal T~lecornm~2i~f1"on.v T~f’H¢ Repo~rt- 1991 Looking Beyond The .Fax Machine The International Market for Multimedia Communications: Looking Beyond The Fax Machine By Kiyoto Uehara and Hirotoshi Nishida 1. Introduction Recent years have seen a significant increase in non-voi~ international telecommunications, especially fax (facsimile) transmissions. Today more than half of the traffic between Japan and the United States is transmitted via fax machines. Since the usage of these machines is increasing steadily, we assume that the volume of international fax telecommunications will continue to grow. However, fax transmission is just one of the numerous non-voice telecommunications modes available to us today. Others include audio-visual confereneing and PC (personal computers) communications, whose usage is making quantum jumps, especially in the developed world. With the international standardization of ISDN (Integrated Services Digital Network) interfaces, more user-friendly multimedia communications have become possible. In this article, we shall focus on ISDN-based multimedia communications. We look first, however, at the current status of ISDN in Japan and the technological background Kiyoto Uehara is Managing Director of InfoCom Research, Inc. in Tokyo. I-Iiroshi Nishida is a Senior Researcher at InfoCom. that has made such communications feasible. Thereafter, we shall outline the progress of multimedia development up to the early 21st century. 2, ISDN Se .,ryi~es in Japan 2.1 Provision of ISDN Services NTT, Japan’s largest domestic telephone carrier, began offering its version of basic rate ISDN INS Net 64 service in April, 1988. Consisting of two B (64 kb/s) channels and one D (16 kb/s) channel, INS is offered over an existing subscriber line. The B channels are utilized as basic telephone lines, as well as for data communications such as digital circuit-switched services and/or packet switched services. The D channel can be utilized as a control line for call-connection and as a data line for packet switched services. In June, 1989, introduced INS Net 1500, utilizing primary rate interface with optical fibers for local loops. It can provide service with 23 B channels, and one D channel (both 64 kb/s), or a combined use of six B channels (in total, 384 kb/s), which may be used for data transmission and video conferences. INS Net 1500 is also available at 1.5 Mb/s. Furthermore, since August 1990, NTT has been offering INS Net Packet. This is a packet switched data transmission service, using either B or D 24 The Global Telecommunications Tral’Ec Report 1991 Looking Beyond The Fax Maabine channels of the ISDN services. Along with progress in the standardization of B- ISDN, broadband exchange service will be introduced by NIT in 1995. However, before this service can be widely used, must install a greater number of optical fiber subscriber lines. This requires substantial investment, which may be risky, because the future demand for this service is uncertain. An economically feasible method of introducing the broadband exchange service may be to utilize FTI’C (fiber to the curb) rather than FTI’H (fiber to the home). The so-called last mile to the home still would employ copper cables. In other words, FTI’C will enable us to use the existing PSTN (public switched telephone network) and only replace the copper cables linking the COs (central offices) to the curb with optical fibers. 2.2 Present Usage and Future Prospects for ISDN At March 31, 1991, the total number of ISDN lines served by NTT was 32,913 -- 27,313 INS Net 64 and 560 INS Net 1500 lines (one INS Net 1500 line is equivalent to 10 INS Net 64 lines). By June 30 the total had increased by over 15,000 lines to 48,055, a 46% increase in three months (see Fig. 1.1). We estimate this number at 1,060,000 by the end of fiscal year 1995 (22 times the number in June 1990, and at 14,155,000 by the end of fiscal year 2000 (295 times of the number in June 1990, (see Fig. 1.2). Compared with the growth in DDX-P (N’IT’s Packet Switched Services), ISDN services have done very well. In the case of DD-P services, it took 5 years to reach the 10,000-lines level. One of the factors behind this strong growth is the strategy employed by NTT in expanding service areas. Unlike the traditional rigid methods in which little attention is paid to users’ needs, NTT concentrated its efforts in meeting users’ demands. For instance, a company might need a communications network to interlink its head office, branch offices and plants. If some of these offices or plants were located in areas not served by ISDN, then NTT gave first priority to expanding ISDN services to such areas. Thus, customers would not be dissatisfied with only partial service; they would get the full benefit of ISDN. The situation alluded to above, however, rarely occurred because actually expanded INS service areas very rapidly. Service was first introduced in 1988 in the major metropolitan areas of Tokyo, Nagoya and Osaka. At March 31, 1989, the largest 29 cities in Japan were covered. The total number of service areas reached 199 cities by March 31, 1990; and 1,222 cities by March 31, 1991. Today, almost 90% of Japan is served by ISDN! 3. ISDN Terminals As Multimedia Terminals ISDN services may be applied to a wide range of fields. In order to develop ISDN terminals, it is necessary to understand and appreciate users’ needs, as well as to promote international standardization of telematic terminals. Moreover, the development of new services must ensure that they can be made available at low cost. As for the telematic terminals, only a few services, such as G4 fax and video ¢onferencing services, have been standardized. It is expected that services which may be offered by multimedia communications terminals, such as audio-graphic teleconference service or open document architecture, will be standardized soon. 25 i0 5 I 0.5 o.I 1~64 114 221 537 877 1.198 I,T~ 2.723 4,554 6.574 9.413 13.~2 18.873 27,313 40,595 FiB. I. I 11,m Ilmaber Of I1~ ET Lima and Service Arm 26- The Globnl Teleaommunimtio~s Ttal~ Report 1991 Beyood 2"0€ Fax Maahiae I O, 000 5, 000 1. 000 500 100 50 IO 5 I 0.5 Modzfied Total Lines I ’89,3 ’90,3 ’91.3 ’92.3 ’93.3 ’94.3 ’95,3 ’96.3 "9T, 3 ’98.3 ’99.3 ’00.3 ’01.3 1.2 7.T 32.9 109 266 560 1,059 1 846~ 3,018 4.692 1’.00~ |O. lO0 14,154 1.2 6.6 27.3 92 226 479 911 1:5951 2.619 4.088 6.123 8,860 12,454 -- 0.12 5.60 l,T 4.0 8.1 14.8 25,1 39.9 60.4 88.0 124.0 170.0 ~ kctual Figure :~ Est imted (Note: Nodlfied Total Lines =INS !~-T64 +INS I~’TIS00 xl0) Fi~ 1.2 Future Prospects for INS Net Services The Global Telecommunications Traf~c Report 1991 Looking Beyond The Fax Maahine Moreover, telematic terminals will benefit from the following three new elements/components in the near future: 1) large capacity memory elements, which are indispensable to the development of advanced, high-speed, compact terminals; 2) semiconductor dements permitting very high-speed information processing; and 3) high-definition, full- color, very thin Liquid Crystal Displays (LCD’s). An outline of the presently available ISDN terminals in Japan, and future prospects follows: (1) Terminal Adapters The following four types of terminal interfaces are now available in Japan: (a) an interface between circuit switched services of INS Net 64 and existing services of DDX-C, and leased circuits and analogue lines with modems; (b) between packet switched services of INS Net 64 and existing DDX- P services; (c) for both circuit and packet switched services of INS Net 64; and (d) for INS Net 1500. Basic charges for INS Net services are lower than those for DDX services or digital leased circuit services. Communication charges for voice and/or data services using B channels are identical to those for analog services. Thus, digital services may be utilized at comparatively lower costs if customers subscribe to INS Net services. Therefore, many customers who are presently using DDX services and/or leased circuits services, may migrate to INS Net services. (2) Multifunctional Digital Telephones When N’I~’s INS-Net services were introduced, digital telephones were rather expensive compared with analogue telephones, partly because NTT engineers had added many features to simple voice communications services, such as teleconferencing, high-quality communications (7kHz) and image/drawing functions. Recently, however, the price of digital telephones has gone down considerably, thanks to several technological innovations. Today, NTT offers a digital telephone at less than ¥33,000 (about $230). As for voice services, the 3.4 kHz voice signal is now transmitted via a 64 kb/s transmission path, but efficient coding technologies make it possible to transmit this 3.4 kI-Iz signal via 32 kb/s, 16 kb/s and 8 kb/s transmission paths. On the other hand, broadband Hi-Fi transmission at 15 kHz and 20 kHz would be standardized at a 7 ld-lz transmission. This would make the utilization of stereo broadcasting possible via INS-Net services. (3) G4 Facsimile Machines The G4 fax machine perhaps provides a good example of the speed and quality of ISDN services. Users may transmit a fax page (in about 3 seconds) while making calls over the same fine. The sizes of machines vary from console types to desk types. Some machines (especially console types) permit the transmission of documents by putting them on top of the machine (book-type), while others can transmit documents as large as A-3 size. As for the paper, a plain paper machine once cost as much as ¥2.5 million (about $18,000). NIT, therefore, began selling thermal paper machines in 1991 at $980,000 (about $7,500) per machine. Since most fax machines are still G3 types, the new G4 machines provide G3 functions as well. Standards for G4 color fax will be recommended in the near future. (4) Video Conferencing Services ISDN services make it easier to hold video conferences, which are in increasing demand by customers. It has become easier to use this service internationally since the International Telecommunications Union (ITU) International 28 The Global Telecommunications Traffic Report- 1991 Looking Beyond The Fax Mnelffne Telegraph and Telephone Consultative (CCITt) adopted a recommendation for the standardization of international video conferencing services in 1990. The CCYIT’s recommendation has already led to a price reduction in the video conferencing systems. Prior to the recommendation, it cost more than ¥10 million (about $73,000) per side; now it costs ¥7 million (about $51,000). Further technological innovations, such as the usage of Large Scale Integrations (LSI) in codecs, are expected to further lower the prices. As for video telephone service, one service provider began offering a video telephone system with a 5-inch color LCD display, at ¥950,000 (about $7,000). For future teleconferencing services, it is expected that there will be standardization of systems which can permit multimedia communications such as audio-graphic teleconferences or open document architectures. (5) Image Transfer Systems/Remote Monitors ISDN also enables various image transfer applications. Still picture transfer systems, which are connected to a product database, provide real- time retrieval services. Other image transfer applications can be used to monitor cash dispenser machines, parking lots and warehouses. (6) Others Other ISDN services include intercotmection of existing PBXs, multiplexers, and key-telephone systems. ISDN also facilitates the transfer of floppy disks (FD’s) through special FD transfer terminals. 4. Usage of ISDN Many companies in Japan are now employing ISDN services because: (1) Basic and communications charges for ISDN are set lower than those for comparable digital services; (2) Large volumes of information may be transmitted at lower communications rate; (3) Image transmissions are available; (4) A single line can be connected to several terminals and thus may be used as a multi-media communications tool; and (5) Internationally standardized interfaces are available. As the usage of multiple terminals and multimedia communications increased, ISDN applications are also bound to increase in the near future. Mostly ISDN services are employed for data communications. Some principal cases are outlined below: (1) The Distribution Industry In the distribution industry, POS (point-of-sale) systems as well as sales-order systems have been widely introduced. Such systems enable member shops and branch offices to transmit data over communications lines to host computers at head offices, etc. -- thus making real time sales management and physical and distribution management possible. Furthermore, by utilizing these systems, the industry was better able to develop its Strategic Information Systems (SIS) for utilization of information. Formerly, SIS depended on ordinary teIephone lines or Value Added Network services. ISDN services have made SIS easier. For example, 29 The Global Telecommunications Traft~c Report 1991 Looking Beyond The Fax Machine Seven-Eleven Japan has changed more than 4,000 ordinary telephone lines, connecting member shops and their main computer to INS-Net 64. Now these shops can transmit information such as merchandise stock, sales and orders, etc., using G4 fax machines. This is the first step towards multimedia communications. (2) The Manufacturing Industry Many Japanese manufacturers have begun to use CIM (Computer Integrated Manufacturing). Under a CIM system, sales information is sent to the production management system, thereby optimizing component orders. Companies can send design information to sales and manufacturing departments, and thus aid sales operations and shorten the production period. Companies thus enhance the information flow between the head office and the sales offices, so they send image information, such as pictures of new products or designs, in addition to orders. For example, Toyota is going to replace thousands of their communication lines with INS-Net lines, and thus reinforce its sales strategies. Another example is that of a housing contractor. Contractors use CAD system together with INS- Net services, and thus design houses which better satisfy customers. For this industry, terminals need to be developed which can show high resolution images. For now, G4 fax machines and CAD systems are being introduced connecting design departments at factories and sales companies. (3) The Printing Industry The printing industry paid attention to ISDN services in very early stages. It uses G4 fax machines between print presses and clients to shorten the proofreading and editing periods. Printers also send the contents of floppy disks via ISDN service from their offices to factories and thus eliminate the need to use couriers. For this industry, color G4 fax machines and color video transmission systems ought to be developed. (4) The Broadcasting Industry Since INS-Net can transmit 7kHz voice, broadcasters use this service for transmission of radio programs from remote locations. INS-Net service might be utilized for stereo music broadcasting. (5) Others Other ISDN applications now under development in Japan include medical image diagnoses, home banking, home shopping and home security systems. 4LCurrcnt Status of International ISDN In Japan, three companies (KDD, IT J, IDC0 offer international communications services. Among them, KDD began offering international ISDN in June 1989. At first, service was only to the U.K. and the U.S. Recently, KDD added Australia, France, Italy, San Marino, Vatican City, Germany, Belgium, Singapore and Hong Kong. KDD is planning to add Korea, Malaysia, Indonesia and Thailand in the near future. Customers can use KIDD’s international ISDN services via NTT’s INS-Net services or may access KDD’s ISDN switches directly. Presently, circuit switched services using B channels of 64 kb/s are being offered. Customers can reach several of KDD’s overseas networks such as VENUS-P (packet-switched service), F-port (international fax communications network) and Mesavia (inter- national mailbox service) via KDD’s ISDN lines. 30 Global Telecomrau~icatiozts Tratt~a Report 1991 LooP/n# Beyo~d Tl~e Fax Nla,~ine They may also use VENUS-LP and/or Hybrid Link service (international digital leased circuit service) if their lines are directly connected to KDD’s international ISDN switches (See Fig. 4.1). KDD offers a basic rate interface (2B+D: B=64 kb/s, D=16b/s) and a primary rate interface (23B+D). Some ISDN services that K.DD may introduce in the near future are: Caller ]:I:), sub- address services and several value-added services, such as terminal selection function by protocol identification. Additionally, the introduction of (384 kb/s) digital service is being examined. The number of international ISDN subscriptions was 120 lines in March 1990, and 390 in March 1991. About 40 to 50 new lines are being added every month and it is expected to reach the 900 level by March 1992. Major applications include: document exchange via G4 fax, video coaferencing (replacing overseas business trips), and high speed data communications such as f’de transfers. Usage by industries is shown in Fig. 4.3, and usage by routes is shown in Fig. 4.2. 5. Aai~ ISDN and Mu/timedia Commu~icatio~ Market We estimate that the international switched telecommunications traffic including ISDN service to and from Japan will increase at the pace outlined in Fig. 5.1a and Fig. 5.lb. According to our estimation, the total traffic in 1995 will be 2.89 times of that in 1990; and the total traffic of 2000 will be 8.14 times of that in 1990. As for the regional breakdown for 20(10, North America accounts for 35.2°A, Asia for 41.2%, Europe for 15.2%, and other areas for 8.4%. We estimate that the share of Korea, Hong Kong, Singapor¢, Thailand, Malaysia and Indonesia will increase throughout the 1990s. Basic Rate Interface (2El+D) Primry Rata ,, ,, Interface ;, (228+0. 30B+D) ," ", I~l~d Subscriber TO NTT s Packet S~itching L~ased Lines NTS Facsiele Cmmmicat ions Networks PSTN ISDN ~litd~d Netmrks The Glo&tl TtJecommzmic~t~’ons TIbiae Report 1991 Loolzing Beyond The Fax M,*cfiine Still Picture Tras~issi~n~... TkHzG~dec Broadcasting Backup of Leased Lines-~ Source: KDD Fi€4.2 Usage of International Fig.4.3 Usage By Industrial Classification of International ISi3N 32 The GlobM Telecommu~2icatz’ons Traft~c Report 1991 Looking Beyond The Fax Machiue Surveys conducted by IafoCom Research, Inc., suggest that non-voice traffic such as fax, data transfer, and other image communications will constitute a growing share of international traffic. Since users’ demand for several media, employing ISDN services seems to be strong, and becoming stronger, we expect non-voice traffic will increase at a higher pace than voice traffic. We estimate that in 2000 the share of telecommuni- cations traffic by media will be as follows: telephones 31%; facsimiles 32°,6; data 27%; and images 10% (se€ Fig. 5.2). Six prindpal Asian countries (Korea, Hong Kong, Singapore, Thailand, Malaysia, Indonesia) are promoting the infrastructure of ISDN. The ISDN market for these six countries may increase from less than 1% of total traffic in 1995 to 7% in the year 2000. Multimedia communications can be expected to increase dramatically as ISDlg increases communications efficiency and ease of terminal operations. Further advances are also likely in standardization and technological developments during the 1990s. But, in order to take advantage of such standardization and technological development, it would be desirable to establish an international research organization where users, manufacturers, and carriers from each country may cooperate and carry out field trials. It is also necessary to establish infrastructures of ISDN in several countries. The industrially advanced countries should assist the plans of other countries in this regard, financially as well as technologically. ,°°f 800 ,~ 700 I 5OO 4OO 300 200 1990FY=100~ 289. 3 15. 100.0, 39.4~ 35. 1990FY 1995FY 813.5 2000FY ksia North ~merica Fig. 5. 1 a Growth in Jal~n’s Torn| Interr~t=orml Traffic by Glci~l lil~io~ (Incemir~ 8 [~tgoing) 33 The ~]ob~ Tel~ommmzicafJoz~ Tz’aJ~ Repoz’t- 1991 Looking Beyond The Fax Maclzine 250 20O LO0 5O 1990FY=100~ 39. 4 36, 0 3.2 5.9 12.6 13.3 13.4 115.9 31.5~ ,~------~ ~, 327.4 1990FY I 995FY 2000FY Others Thailand Singapore Korea Fi~ 5. 1 b Growth In Japan’s Interrattor~l Traffic Prmcil=al Asian Cot~tr~es(Incemin= & Outgoing) Picture Data Facsimile Voice 0.4 ~45. 4~ 10.0 990FY 1995FY 2000FY IooX 9O 8o 70 60 50 40 30 20 1o o Fi~5.2 Usage by !ledia of International Public Telecmmqicatims Network 34 The Globsl Telecoramunicatioz~s Traffic Report 1991 WIzos~ Ttaffie Is It A~y~y? Whose Traffic Is It Anyway7 A Survey Of Foreign Investment in North American Telecommunication Companies And National Ownership Rules By Gregory C. Staple Whose traffic is it anyway? There was once but one answer. Telecoms traffic belonged to the national PTT or a private operator with a .~imilarly exclusive national franchise. But no longer. The vast national pools of traffic, once a country’s patrimony, as much as its forests or its mines, have become the subject of multinational bidding. Technology, market liberalization and corporate users are driving the process forward. Technology now enables multinational companies to hub their international traffic through a private line network originating in the most attractive national entrepot. The deregulation of value added serdces means that a fax or voice message from London to Rome may be lodged in an electronic mail box and then forwarded by an American company. Or one from Sweden. The new readiness of large users (IBM, Unilever) to "outsource" management of their networks means that a foreign company need no longer own any domestic faoilities itself in order to manage a large slice of the traffic delivered to the companies which do own them. Gregory C. Staple is a cornmunicatious lawyer and consultant with the Washington D.C. law firm of Koteen & Naftalin. So whose traffic is it? Surely it belongs to the customers who originate it. They pay the bill. Many countries are moving toward that conclusion. Yet the pace is uneven, the terms highly contentious and the time frame unpredictable. Witness, for example, the long- lamnirlg debate within the GATI’ negotiations on national treatment and the right of establishment for basic telephone services. Or the differences within Europe over what telecom services shall be reserved exclusively for Telecommunication Administrations and for how long. Witness too the persistence of national rules which limit the extent to which telecoms carriers can be owned by foreigners. In effect, these ownership rules are a de faoto traffic set-aside for national carriers. Even in competitive markets, such as Japan, the U.S. and the U.K., foreign ownership rules permit users to deliver traffic to a carrier of their choice, any carrier, so long as it is locally owned. The debate over the merits of these national ownership rules -- over whose traffic it is or on national treatment, to use the vocabulary of trade negotiations -- is part of the larger challenge to national sovereignty posed by the growth of a global economy. The language of the debate is often one of "us" and "them", to borrow from 35 The GlobM Te_Je~ommtwic~tion$ Trm°fic Report. 1991 Whos~ Trmffc Is It Anyw~.v7 Harvard Professor Robert Reich) But, as Reich properly asks, in an age of networked production and supranational carriers, "Who is ’us~." And "Us" is not necessarily a company incorporated in our territory which manufactures and sells most of its products outside our borders. "Them" is not necessarily a domestic subsidiary of a foreign company which commits its capital and technology to develop a new service in our communities. Global managers of supranational corporations have their own priorities -- winning market share, increasing stockholder value, securing the bottom fine. Similarly, every nation wants to improve its economic performance and provide the jobs and services its people want. National security is also a legitimate concern. That is why all countries have basic ground rules -- regarding taxation, competition, employment and so on for doing business. For telecommunication carriers, these include price and sendce obligations as well. "They must abide by "our" rules. But so long as "they" do, how much does it matter today what a company’s national pedigree is. Isn’t a common carrier a common carrier? Or whose traffic is it anyway? This essay explores some of these issues in the context of the North American market for telecom services. There are three parts. Part one offers a primer on the rules regarding foreign ownership of telecom service providers in the U.S., Canada and Mexico. Part two surveys the extent of foreign participation in these three markets, national ownership rules notwithstanding. It looks at who owns what and the likely targets for future foreign investment. A final part resumes the opening discussion on national ownership laws and global markets. It suggests that, although North American telecoms traffic, especially in the U.S. and Mexico, is no longer the exclusive preserve of national carriers, the 1990s will see pressures for greater internationalization. Accordingly it now may be time, especially in light of the hemisphere’s new free trade negotiations (see Figure 1), for the telecom industry and governments in North America to start a more thorough examination of the costs and benefits of national ownership rules than has occurred to date. And they should invite their counterparts in Europe and Asia to do so as well. A. lqational Ownership Re~_uirements For Teleoommunication Service Providera 1. The United States A foreign company may, in principle, provide any telecommunication service which can be offered by an American company. And, excepting government procurement, national treatment of foreign service providers is the rule. However, the U.S. does restrict foreign ownership or control of certain radio licenses issued by the Federal Communications Commission (FCC). These limits are stated in Section 310(b) of the Communicatiom ACt of 1934.2 Section 310(b) is often perceived as an unavoidable barrier to foreign entry. Telecom networks traditionally have retied upon point-to-point microwave and sateRite radio facilities for tn,.l~ routes. But, as discussed below, the advent of fiber optic systems and regulatory flexibility have 36 The ~]oba] Telecommun~caLl’ons Tral~¢ ~epol’~ 1~1 Vv"no~e I’rai~c J’s It Anyway? reduced Section 310(b)’s si~mificance to foreign investors, although trade negotiators on both sides may have reason to downplay these developments. (a) Section 310(b) of the Communications Agt Section 310(b) states that no broadcast or common ~arrier or aeronautical radio license shall be granted to or held by an alien or a foreign corporation. Nor may such a license be directly held by any corporation with an alien officer or director or in which more than 20°6 of the capital stock is owned or voted by aliens or by a foreign government or by a corporation organized under the laws of a foreign country. Section 310Co)(3). Uniess the FCC f’mds that a waiver of the limits would be in the public interest, the statute also bars such radio licenses from being held by any corporation or controlled by another corporation of which any officer or more than 25% of the directors are aliens or of which more than 2:5% of the capital sto~k is owned or voted by aliens or by a foreign government or by a corporation organized under the laws of a foreign country. Section 310(b)(4). What do these provisions mean in practice? First, in the telecommunications field, the law only applies to common carrier and aeronautical licenses; private radio facilities, such as Specialized Mobile Radio (SMR) networks and microwave radio stations used for Cable Auxiliary Relay Services (CARS) are outside the statute’s reach,s These are significant exceptions because the FCC generally permits the excess capacity of private (intra-corporate) radio facilities to be sold for a profit. Moreover the U.S. cable television industry already has a "wire" into over 80% of U.S. households. Second, the 20°6 direct 25% indirect ceilings on alien stock ownership in Section 3100)) permit a foreign company, in aggregate, to own a substantial minority stake. The FCC does not cumulate a company’s direct and indirect interests; it is permissible for a foreign company to own up to 20°6 directly and up to 25% indirectly. Further, the FCC uses a multiplier to account for the reduction of influence on the licensee caused by successive layers of minority ownership. For example, a foreign investor who owns 40% of Company A which holds 45% of the licensee Company B would be held to have a permissible 18% (.45 x .40) interest in Company B.4 Third, where a foreign interest is held indirectly (ie, through an intermediary company, as in the above example) the FCC may waive the 25% statutory limit if it would serve the public interest. A waiver is most likely to be granted ff a common carrier license (ie, non-broadcast) is involved; the U.S. company might otherwise lack the funds to stay in business causing si~ificant harm to customers and employees; the foreigners involved are from a country offering like opportunities for U.S. investment; and the FCC is satisfied that a U.S. national will maintain control over the license in question. Fourth, where a waiver is not possible (eg, the foreign interest is held directly) the FCC seems willing to apply Section 310(b) flexibly to permit a U.S. company to accommodate a foreign investor so long as the deal leaves control of the radio license(s) in U.S. hands. This may be done: (a) by having the foreign entity manage the traffic carried by the Section 310(b) facilities rather th~n acquiring the faoifities or (b) by segregating the Section 310(b) facilities from the communications business to be acquired by a foreigner and then executing a lease arrangement for the necessary transmission capacity. 37 ~e Glol~I Td~ommt~zlaa£ions T~c Re~o~ 1991 Wl~os~ Traffic Is It Anyway? For example, in one traffic management case, the FCC permitted a foreign company to operate and maintain a series of microwave facilities and to lease 90°,6 of their capacity so long as the U.S. licensee (also owned 25% indirectly by the foreign company) maintained ultimate controls The second option is illustrated by Paoific Teiocom’s pending agreement to sell TRT/FTC to Cable & Wireless North America (C&WNA)6. See also Table 1. There, as an inoident to the sale, the seller has proposed to transfer its radio ficenses (primarily for earth station facilities) to a new subsidiary which, upon closing would lease 100°,6 of the facilities’ capacity to the buyer under a transmission services agreement. The seller has also agreed to manage the Section 310(b) facilities for the buyer under a separate agreement which, while allowing the buyer to designate the manager, leaves ultimate control in the hands of the seller. At this writing, the FCC is expected to approve the TRT/FTC deal in the last quarter of 1991. Caveat emptor: If it does go through, the precedential value of the TRT/FTC case must be treated cautiously. C&WNA, the buyer, is well known to the FCC (it has been a major resale carrier in the U.S. since 1985) And the U.K., home of the C & W group, has shown a willingness to grant U.S. companies significant investment opportunities in its telecommunications sector. The real lesson of C&W’s success in North America may have more to do with network engineering than law. In 1989, CWCI, the existing C~W carrier in North America, had over $275 milfion in revenues relying exclusively on leased facilities and a national fiber optic cable network to carry traffic. Notably, the TRT/FTC business to be acquired by C&WNA, provided service to over 130 countries and generated revenues of million in 1989 while holding but fourteen FCC radio licenses, prim_arily for satellite earth station facilities. (b) Non Section 310(b) Considerations It would be a mistake to suggest that Section 310(b) is the only legal hurdle with which a foreign company must contend to acquire a U.S. telecoms business. A major acquisition in this sector, as in other fields, typically requires a variety of regulatory clearances. Section 5201 of the Omnibus Trade and Competition Act of 1988 also empowers the president to "suspend or prohibit" on national security grounds, any merger, acquisition or takeover by foreign persons of an entity engaged in interstate commerce.7 (Section 5201 is sometimes known as the Exon-Florio amendment, after its Congressional sponsors, Senator James Exon and Congressman James Florio.) Although ~his law has rarely been invoked (it is not a factor in the TRT/FFC case) it might well come into play ff the target company were one of America’s premivr carriers or a carrier with "bottleneck" faoifities for domestic or international services. We shall return to the national security issue in the last section of this essay. 2. Canada (a) Type I and Type H Carriers The Canadian rules on foreign ownership of telecom carriers are somewhat simpler than in the Foreign ownership is limited to 20°,6 of the voting shares for all Type I facilities-based carriers. Type I carriers have the exclusive right to own fazilities for providing basic telephone services between provinces and between Canada and other 38 The Global Telecommunications Tra~a Repor~ 1991 Whose Trafl~c Is It Anyway? countries. No foreign ownership restrictions apply to Type II carriers, which are defined as value added carriers providing service in whole or part using the network facilities of Type I carriers. In Canada, thus, the foreign ownership bar is linked to a carrier’s basic service license not to the licensing of a specified radio facility. But, with tim/ted exception, Type 11 carriers may not own radio tran~qmission facilities. The foreign ownership rules stated above were announced in a July 1987 policy statement by the Minister of Communications and were restated in the government’s January 1988 proposed guidefines for Type I and Type II carriers.8 Under the guidelines (still pending at this writing), Type I carriers include the members of Teiecom Canada (the provincial telephone companies, Bell Canada) Telesat Canada (the national satellite carrier), Teleglobe Canada (the country’s overseas carrier) and Unitel (the major private line and data services provider which has long sought to become Canada’s second long-distance telephone carrier). Cantel, the national cellular radio company, and the provincial cellular companies are also classified as Type I carriers. The guidelines permit preexisting foreign ownership interests in excess of the 20% ceiling (eg, GTE’s majority interests in BC Telephone and Quebec- Telephone; see Table 2) to continue. However, non-Canadians are barred from serving as a Director or presiding officer of a Type I company. Cable television companies are not classified as Type I companies but are treated like broadcast companies. Foreign ownership is limited to 20% of the voting stock. Canada has yet to consider many of the practical issues which have arisen in the United States in administering the 20% ownership ceiling. For example, it is unclear how the Government or the CRTC would view they kind of traffic management and trat~,~mission leases recently approved by the FCC. (b) Route Canadian Policy Apart from the legal limits on foreign interests in Type I carriers, any foreign company seeking to compete for a share of Canadian traffic must take account of the long standing route-Canadian policy. This policy favors the carriage of all Canadian domestic and international traffic on Canadian facilities. Prior to the 1930s, east-west traffic in Canada was handled largely by AT&T which, at the time, owned over 30% of Bell Canada. Although this government mandated traffic set- aside has been eroded in recent years by corporate users (software defined networks and cross-border private lines to the U.S. allow many businesses to determine their own routing), it retains a strong political constituency. In June 1991, the CRTC also adopted new enforcement measures -- at least pending a decision on the scope for facilities-based competition in Canada -- by directing all domestic carriers to amend their tariffs and relevant customer contracts so as to prohibit any customer from routing basic telephone traffic by way of the U.S.9 The CRTC stated that its action was coI~sistent with the terms of the 1988 U.S. Free Trade Agreement (FTA) because the VIA only liberalized the cross-border provision of network based computer services (ie, data traffic). The FTA expressly provides that the agreement shall not "prevent a Party from maintaining or introduoing measures requiring basic telecommunications 39 transport service traffic to be carried on a basic telecommtmications transport network within its territory," where such traffic originates or terminates wilhin its territory. 10 Absent the FTA, the text of the CRTC’s order suggests that the Commission would have applied its route-Canadian policy to all telecoms traffic originating or terminating in Canada. 3. Mexico In the late 1980s, Mexico embarked on a historic program of economic liberalization and reform. Foreign investment, long disparaged, is now welcome, especially where it may help to modernize the country’s infrastructure. The telecommunications sector evidences the changes underway. The new rules governing foreign participation are primarily stated in the 1990 privatiT:ation plan and terms of sale for Telefonos de Mexico (Telmex), the May 1989 Foreign Investment Regulations and the amended Telecommunications Regulations of October, 1990.II Taken together, these measure have probably made Mexico the most liberal re#me for foreign ownership in North America. (Competition, however, is another story.) Telmex provides local and long distance telephone service throughout Mexico; its exclusive concession for basic services runs through August 1996. Under the Telmex privatization plan, foreign investors were permitted to acquire approximately 25% of the company’s voting stock as minority partners in a Mexican led buy-out consortium which acquixed a controlling (51%) voting bloc. Up to 80% of Telmex’s non-voting stock may be held by foreign interests pursuant to the privatization plan. The government has agreed to grant competitive concessions for public telecom services where Telmex does not have an exclusive concession and where the services are not provided directly by the Government (eg, satellite and telegraph services). Fairly liberal national ownership rules apply to these concessions. With the exception of cellular radio, where a 30% ceiling applies, a foreign company may own up to a 49% interest in a competing service provider. There are no foreign ownership limits _tmr se on companies providing value added services. However, such companies must register their activities and apply for a permit. Foreign companies are likewise eligible for permits to construct private (intra-corporate) telecom networks; part of the capacity of these network may be shared with third parties. Resale of basic services will not be permitted in Mexico prior to 1997. This rules out one of the principal avenues available in the U.S. and Canada for foreign companies to build a domestic traffic base. (As with the CRTC’s recent route-Canadian decision, it will also limit the scope for alternate routing of Mexican overseas traffic.) Nevertheless, the Government has signaled its willingness to entertain competition and resale after 1996 by requiring Telmex’s new owners to prepare a plan for equal access by 1994. If Telmex does not meet the agreed targets for network modernization and service improvement, competitive concessions may be granted even sooner. B. Foreitm Investment In North American Teleoom Service Companies How have the national ownership rules described above affected inward investment in North 40 The GlobM Tde~ommunications Trifle ~epoz’t 1991 Whose Traffic Is It A~yway? American telecommunication companies? Who owns what? The survey which follows is an informal one. Government data on the foreign ownership of telecoms carriers is not centralized and what data does exist is incomplete. With the exception of Mexico, value-added service providers are not regulated and hence need not disclose their ownership. Further, the largest telecom carriers in the U.S. and Canada are all publicly traded companies. Our research did not reveal any single foreign investor holding as much as 5% in these companies, but cumulative foreign ownership may be as much as 20%. Or more. A significant amount of telephone company stock is held under a "street name" or in trust, making it difficult for anyone to survey accurately the nationalities of the beneficial owners. The main findings of the survey are compiled in Tables 1 and 2. Some of the highlights are discussed below. 1. United States The most active U.S. players are currently two U.K. carriers, British Telecom (BT) and CabIe & Wireless (C&W). It is not obvious that this should be so. 1989 data on foreign investment in the U.S. shows the leading role shared by the U.K. (32%), ffapan (16%) the Netherlands (15%) and Canada (8%).12 Yet, the U.K. liberalized its telecoms sector ahead of other major U.S. investors. (C&W was denationalized in 1981 and BT followed in 1985.) Hence once telecom companies in other key states begin to have the freedom of action enjoyed by those in the U.K., the British lead may well be challenged. Second, foreign investments have been made primarily by telecom companies (not those outside the industry) and they have concentrated on what they know (carriers and value added services) and new franchises (mobile services) where capital is needed. (a) Carriers U.K., Swiss, Canadian and Italian companies have all acquired interests in U.S. based carriers, especially those servicing international routes. C&W’s pending acquisition of TRT/FTC is the boldest step. International services are one of the fastest growing and most profitable market segments Buying into a U.S. carrier can enable a company to exploit both ends of the link in its home market; it may also benefit from acquiring an interest in an independent set of foreign operating agreements and commercial contracts secured by the U.S. carrier. This strategy is still open to a foreign cartier in the 1990s. But the stakes may be higher. Domestic mergers and the t-u-st wave of foreign buyers have narrowed the number of independent U.S. long- distance and private line carriers. There are still some profitable independents in the market. And ff the TRT/FTC deal is approved, it may also provide an opportunity for the sale or recapitallzation of existing foreign interests. For a major international player, however, the price of becoming a U.S. carrier in the 1990s may be the price of buying into MCI, US Sprint or AT&T. (b) Data Networks Companies which own and manage data networks have offered a second target for foreign telecom 41 Whose Tratfic Is R A~yway? TABLE 1 Selected Fomion Interests in United ~ta~=t Telecommunication Businesses Foreign Company (Nalionality) Target Type of Business Percent Interest Value of Interest/ (Year Acquired) BdtJsh Telecom (U.K.) Cable & Wireless (U.K.) DBP Telekom (Gom~any) Motet Columbus AG (Switzerland) Memotec Data Inc. Canada) itak~at~e (Itely) Coditel Branbant (Belgium) Maclean Hunter Cable "IV (Canada) Kaneallis-Osake-Panldd (Finland) McCaw Cellular Communications I Leading U.S. c~lutar radio provider 1 22% Tymnet I No. 2 U.S. packet switched data network I 100% Othe~ BT has a 28% interest in VoicaCom Systems, a voice messaging company and owns 100% of Dialcom, the 3rd largest U.S. electronic mail service. TDX Inc., now Cable and Wireless Communications Inc. The 5th largest long distance carder with a national fiber oplic cable network primarily sewing business users 100% TRTIFTCC The 5th and 6th largest U.S. international service carders 100% (application pending before the FCC) Other:. C&W also ovms 50% of PTAT Systems, Inc., the owner of a trans- Atianlic pdvate teleoom cable and has a joint marketing agreement with U.S. SpdnL co-owner of PTAT: owns 20% of Pacific Telecom Cable, Inc., the ovmer of the Nor~ Paci~c Cable (NPC) between the U.S. and Japan. Infonet/International packet switched data, EDI and network management company 16% (Note: France Telecom also owns 16%; MCI owns 25% (bought for $27 million in 1980); the remaining shares are ovmed by eight other foreign telecom compenies) WoddCom (forrnedy ITT WoddCom) Ints~netJonal private lines and switched se~ices carder/100% Houston International Teleport Competitive local access provider 24% IDB Communications Group I A leading supplier of international private lines 20% interest held through Teleglobe Canada, Irm., a Memot~c subsidiary (Note: S~ssair also owns 4% of IDB which is rnajodty owned by ConteL) LCI Communications Holdings, Inc. ! Top 10 long distance carder 1 20% (appli- cation pending before FCC) United States Cellular Cellular servic~ provider majority owned by Telephone & Data Systems (TDS) 6% Directly owns cable TV systems in Rodda, Michigan and New Jersey with over 650,000 subscribers Reetcall Leading Specialized Mobile Radio (SMR) company N/A $1.48 bigiorV(1989/90) $355 million (1990) N/A (1985) $174 million I (1991) N/A I N/A I (Ig89) N/A I (1990) N/A I (1989) $50 mglion (1991) $11 million (1987) N/A Note: This table was complied [tom public sources as of July 3f, 1991; lhe #sting is not comprehensive and generally excludes publicly //~ed companies. IntareMs are valued in year of acquiM#on. ©International Institute of Communications 1991 42 The Global Te3eo~mrnunicaO’ons Tra£~c Report 1991 Whose Traft~c Is It Anyway? TABLE 2 Selected Foreio_n Interests in Canadian and Mexio~n Telecommunication Businesses Foreign Company (Nationality) Target Type of Business Percent Interest Value of Interest/ (Year Acquired) CANADA: GTE (u.s.) MEXICO: Southwestern Bell (U.S.) France Telecom (France) Bell Canada (Canada) Mobile Telecommunica- tion Technologies Coq~. (u.s.) BdtLsh Columbia Telephone Local exchange carder for most of B.C. 51% [Note: G’rE also has a 55% Interest in Quebec Telephone, a local exchange carder for porllon$ of Quebec.] C~ble & Wireless Telecommunications, a former subsidiary of the U.K. based Telephone RentaLs, acquired by Cable & Wireless/Reseller of long distance sorvlces/100% Telmex Mexico’s local and long distance telephone company with an exclusive concession for basic services I~ August 1996 Upon privatization, a 20.4% block of stock with majority voting rights was sold to a conso~um of Grupo Carso of Mexico (10.4%), SW Bell (5%) and France Telecom (5%). SW Bell also has an option on a further 5% of non-voting stock. (Note: The Govemment’$ remaining stock later was sold in an intemationa| public offeflng, in principle allowing up to 80% foreign ownership of Telmex capital.) Portacell and Telecom Bend "A" (non-wireline) regional cellular radio concession 1 30% [Nole: seven of the nine Band "A" cellular concessions have foreign parther~ Including Bell South (U.S.), McCaw (U.S.), Contel (U.S.) and Millicom (U.S.). The Bend "B" ¢allular carders are owned by Telrnex.] Communicadones Mlal S.A. Start-up company, controlled by Televtsa Group, to develop nationwide paging ~ervice Mtel owns 49% N/A (1955) NIA (1990) $486 million (1990) $412 million (1~)0) N/A I (1990) NIA (1991) Note." This table was compiled from public sources as of July 3L f991; the//’sting is not comprehensive end genaral/y excludes publicty listed companies. Interests are valued in the year of aoyu~’tion. ©International Institute of Communications 1991 43 The Global Telecommunications T~af~c Report. 1991 W~ose Traftic ls It Anyway? companies in the U.S. BT acquired Tymnet, which owns a leading packet switched data network in 1990. Infonet is primarily owned by a consortium of foreign carriers. As demand for data communications continues to grow more rapidly than that for voice traffic, this sector will continue to prove attractive. Over the next decade, a portion of today’s basic voice traffic is also likely to become value added traffic. Digital networks and "smart terminals" will make it possible for a broader number of users to migrate traffic from the basic telephone network to a value added network by subscribing to voice mail, computer data base services, enhanced fax, E- Mail and related services. Notably, both BT and C&W have been early investors in U.S. voicemail services and equipment manufacturers. The 1990s will challenge them to integrate the technologies offered by these companies into their core U.S. service offerings. (c) Cellular Radio Mobile services and especially cellular radio has drawn foreign interest, just as it has been a primary target for American companies abroad. Cellular radio is an industry which is hungry for capital, promises above average returns and has been marketed globally on a grand scale. What is surprising is not how large but how small is the amount of foreign investment in the U.S. cellular industry. To date, for example, none of the Regional Bell Operating Companies (RBOCs) have taken on a foreign partner (notwithstanding their foreign bids) and neither have independent telcos (US Cellular and McCaw are the exception). (d) Future Targets? As suggested above, thus far foreign telecom companies in the U.S. have largely invested in what they know, subject to the constraints of Section 310 (b). Two lesser known areas of the industry, however, have been largely passed over. One is private radio (intra-corporate networks), a service on which both MCI and Souther Pacific (later acquired by US Sprint) built up a considerable business. Private point-to-point microwave and specialized mobile radio facilities still offer some entrepreneurial opportunities.13 Another area is the growing business of competitive local access --metropolitan fiber optic networks and teleports. These companies (Metropolitan Fiber Systems and New York Teleport are the best known) typically install backbone networks in high-density metropolitan areas for business customers. The prospects for this business were given a boost in May 1991 when the FCC began a wide-ranging proceeding to facilitate interconnection between local fiber loops and the switches owned by local exchange carriers.14 And then there is cable television. Although cable television facilities fall outside Section 310(b), the 1980s saw relatively little foreign investment here either. This is largely due to the politics of the U.S. local franchising process, where close community ties are often the key to success. Yet, now that almost all of the big-city franchises have been secured and major systems have begun to position themselves as future competitors to the telephone company, some cable companies may begin looking for foreign capital, particularly if it is also backed by telecoms experience. 2. Canada Foreign investment in Canada’s telecoms markets has been static compared to the U.S. The main reason is that competition has been more limited and hence there have been fewer potential targets for foreigners. Cellular radio was the exception in the mid-1980s. Cantel, which holds Canada’s only nationwide franchise, initially sold a 20% equity interest to Amefitech, the Chicago based Bell Operating Company (BOC). But in 1988 the 44 The Global Telecommunications Trafl~e Report 1991 Whose TraftTa Is It Anyway? interest was sold back to Rogers Communications, Cantel’s majority owner, ostensibly for business reasons. The buy-back, however, helped to quiet concerns over Cantel’s compliance with the 20% foreign ownership limit given the significant non- Canadian ownership of Rogers’ publicly trade shares. There are signs that Canada’s telecoms sector could become more internationalized in the 1990s. Notwithstanding the CRTC’s recent route- Canadian decision, the Commission’s general support for telecom service resellers does provide some new opportunities for foreign capital. Further, this year (or next) the CRTC will decide whether to grant a license to Unitel (and possibly others) to provide long distance service in competition with Telecom Canada. Unitel, jointly owned by Canadian Pacific Ltd. (60%) and Rogers Communications (40%), has stated that it will invest about $I.5 billion over the next few years, including over $400 million in long distance public voice service. In addition, during the next year, the Canadian Government will likely decide whether Teleglobe’s exclusive franchise for international services (excluding the U.S.) will be extended beyond April, I992. Again Unitel is in the wings. But competition costs money and if Unitel succeeds in becoming Canada’s second carrier, a foreign partner can not be ruled out downstream. 3. Mexico The about-face by Mexico on foreign investment in the late 1980s has internationalized the country’s telecom services sector in less than three years. In the short run, the sale of Telmex and the new mobile radio concessions, may have exhausted the best prospects for foreign investment. Opportunities may still exist in data networking (there were only about 30,000 modems hooked up to the telephone network in 1990) and private services. But much will depend on improvements to the basic network with which these services must interconnect. In the longer term, as with the maquiladora factories along the U.S. border, Mexico may serve as a telecoms entrepot to the North. Certainly this must have been one of France Telecom’s considerations in bidding for Telmex. This logic may also become apparent to other companies, such as those from Japan, whose growing investment in Mexico, could provide an attractive base for a Japanese value added carrier with wider ambitions (Japan is already Mexico’s tenth largest foreign telephone correspondent.) Foreign money is also likely to play a role in the contest for a second (or third) long-distance concession in the mid-1990s. Reconciling The lmp~mtivea Of Global Markets And National Sovereignty This essay began with a question: "Whose traffic is it?" In theory, we suggested, the answer should be "the user." But, in practice, even where competition exists, North American laws still reserve the majority of telecommunications traffic for national carriers. (The situation, of course, is much the same in other regions of the world.) These traffic set-asides are far from absolute; the rules on national ownership differ markedly between the U.S., Canada and Mexico. Indeed, in the U.S., the relevant provisions of the Communications Act may no longer pose a serious barrier for an innovative foreign cartier. Overall, however, our survey found only modest 45 The GlobM Telecommunications Traffi~ Report 1991 Whose Trm~fic Is It Anyway? foreign participation in the North American market for telecom services, Mexico aside. This finding is echoed by other reviews of inward investment in the region. For example, an international database which Booz, Allen & Hamilton m~intains on cross-border telecom mvrgers and acquisitions shows that from 1989 to June 1991, the value of announced deals involving U.S. or Canadian telecom service companies was just over 1% of the $46 billion global total (the majority of deals involved equipment manufacturers and privatizations). Further, none of the 100 largest Japanese investors in the U.S. since 1985 (compiled in the May, 1991 issue of Business Tokyo) reported a significant interest in any U.S. telecom services provider.iS 1. New Cross-Border Investment What will happen in the period ahead? Can North America’s national carriers expect to keep the majority of the continent’s traffic or will foreign players begin to bid for it in greater numbers? There are several reasons for thinking that the latter scenario is more likely and that it will bring with it a renewed attention to the national ownership rules described above. First, the 1990s will see a sharp increase in the ranks of potential bidders. In the last decade, there were only a handful of privately owned telecom companies which were in a position to develop an international strategy. By 1995, there may be twenty such companies from Singapore to the Netherlands and from Australia to Venezuela. More cross-border investment in the telecom sector is also likely to be stimulated by the current negotiations for a North American Free Trade Agreement (FTA) (see Figure 1). Although an FTA might do little in and of itself to liberalize the cross-border provision of telecom services, as with the Europe 1992 phenomena, the attention given to the negotiations may lead foreign companies to believe that, as the various trade, investment, employment and tax concessions are worked out, the sooner they have a presence in this "single market", the better off they will be. Given these parallel developments, it will be hard for government or industry to avoid a more searching review of the current limits on foreign ownership of telecom carriers, particularly in the U.S. and Canada, than has now occurred. This is probably all to the good, despite the issue’s political sensitivities. 2. Rethinking National Ownership Rules The current rules tend to protect carders not consumers. Yet, although some carriers might think it unpatriotic to say so publicly, given a choice, many might trade in some of that protection for more access to foreign capital and a wider market for their equity. Telmex, of course, has already done so. (So have many of America’s air carders, whose dire f’mancial condition has led them to be more vocal about the cost of the Section 310(b) style national ownership rules which have traditionally applied to their industry as well)’) The existing rules have several other costs. As technology changes, the rules tend to skew foreign investment in a way that may harm national telecommunications interests more than it helps. Where the rules are technology specific tie, tied to radio licenses), foreigners tend to invest in alternative transmission systems such as fiber optics and cable television, where the rules axe service specific tie, linked to the provision of basic services) foreigners are encouraged to invest in data networks, computer software and network management contracts. One result is that the most capital intensive, slowest growing portion of the market -- the local network infrastructure -- is left to be modernized 46 ~e Glol~l TP_Jecommu~caD’on$ T,~J~c Repo~’t- 19#1 WI~o~ Ttat]ic ]’$ [t AB2w’aJ/? Teleeommunieations and the North American Free Trade A~eement .(NAFTA) NAFTA Countries Canada Mexico U.S. Population (Millions) 26.3 85.4 248.2 GNP/Capita (u.s.) 19,020 1,990 21,100 Tel. Lines (Millions) 14.6 4.7 131.5 Note: All statistics are for 1989. THE NEGOTIATIONS The NAFTA negotiations started in the summer of 1991. They cover six main areas:. market access, trade rules, services;-investment, intellectual prope ~rty and dispute seBement. Seventeen working groups have been set up to address these issueS. Telecommunications cuts across several working groups and is likely to include the following issues: Eauipment Abolition of tariffs on teleph~)ne terminals and phased reduction of same on central office switches andother equipment per Canada FTA, effective January 1, 1989. Steps to increase government procurement (eg., by reduCing "buy national" provisions). Services National treatment and right of establishment for companies offering enhanced services; interconnection rights of users and possible requirements regarding resale and unbundling of network elements. Protection of monopoly concessions for basic telecom services and right to carry domestic traffic on domestic systems. ©International Institute of Communications 1991 47 The Global Teleeomraunieations Traffic Report 1991 by domestic capital. Foreign capital can con~ntrate on the growth markets of tomorrow. Another problem with the existing rules is their inconsistency,t~ In Canada, the proposed regulations for Type I and II carriers, "grandfather" the majority U.S. interest in two provincial telephone companies which have a monopoly over local service (see Table 2). Yet, the same rules would limit (to 20%) a new U.S. investment in a second or third long-distance service provider. In the U.S., the internal logic of Section 310(b) is equally hard to follow. The FCC can not waive the statutory limit on direct investment under Section 310(b)(3) -- even though made by a national from a friendly country. However, an investor from a country which has been hostile to inward investment by American telecom companies may still invest a full 20% directly and (without a waiver) another 25% indirectly. These problems aside, some would argue that the current rules, such as Soction 310(b), provide an important bargaining chip for negotiations on trade and investment. Accordingly they should not be abandoned until they have been "cashed in" at the bargaining table. Perhaps. But, if so, the days when the chip can be "cashed in" for something worthwhile may be numbered. The marketplace and technology are devaluing national ownership rules more rapidly than many people realize. Much of the fiercest competition today for telecom traffic is not being fought over licenses or carrier franchises but over traffic management contracts. This has been fueled by the growing willingness of corporations to "outsource" their telecom requirements. Modern signalling systems and distributed network intelligence are only likely to expand the future opportunities for separating network ownership and management. In short, the current period may give the U.S. and Canada the best shot they are likely to get for some time to trade in their existing ownership rules for an equivaient set of market opening measures in other countries. What should replace the current rules? In those markets where effective competition exists for public telecommunications services (cable TV and broadcasting raise more difficult issues) the answer might well be nothing. Of course, this may be impractical politically, as compared to raising the current foreign ownership ceiling (eg, to 49%). But it is not at all clear that the common carrier regulations and competition laws now on the books in North American markets are insufficient to protect the public from abuses by foreign and domestic carriers alike. Where competition does not exist or where a cartier owns unique bottleneck facilities or holds strategically sensitive technologies or service authorizations, a government might reasonably decide to bar foreign control. This might be done on telecom policy or national security grounds. In each case, a careful examination of the facts should be undertaken to ensure that the categories which are "off limits" to foreigners actually reflect current conditions and not those of a past age. Such a review is also necessary to ensure that national ownership laws for telecom carriers do not simply serve as a stand-in for a poorly defined national security interest. Otherwise, the rules may well disserve a country’s real security interests as much as its national telecom policy. Further, where foreign control is prohibited, it does not necessarily follow that the best method for achieving this is to set a fixed ceiling on the ownership of a telecom company’s voting stock. Commonwealth governments have experimented with a variety of post-privatization mechanisms for protecting national security and community service 48 The Global Telecommunications Tral~e Report 19~1 Whose Traft~e Is It Anymay? interests. One method relies upon Government retention of a "golden-share" (U.K.) or a "Kiwi- share" (New Zealand), entitling the Government to block corporate actions which would threaten the national interest. A variant of these schemes (eg. involving different classes of shares) might prove to be attra~dve elsewhere, as a means of fadlitating a greater degre~ of foreign investment without ceding control on corporate de~sions of overriding national importance. So whose traffic is it7 However defined, that is the question. And it is likely to be at the forefront of business and public policy discussion in North America during the 1990s. Which suggests that, to the extent privatiT.ation has not already done so, Europe and Asia will soon find this question at the top of their agendas as well. 49 The Global Telecommunications Traft~c Report 1991 Whose Traft~c Is It Anyway? 1. See Robert Reich, "Who Is ThemT", Harvard Business Review, Vol. 69, No. 2, Manzh April 1991, p. 77, and Is Us?", Harvard Business Review, Vol. 68, No, 1, January February 1990, p. 53. 2. 47 U.S.C. Sec. 310, (1990). 3. For this reason, however, some members of the U.S. Congress have proposed to amend Section 310 to cover CARS statiom, multipoint distribution services and direct broadcast satellite services. See eg, the "Cable Television Comumer Protection and Competition Act of 1991," H.R. 1303, 102d Cong., 1st Sess. at See. 15. 4. In addition, a foreign investor may maximize its interest in a U.S. radio license by use of a limited partnership, non- voting stock, a preferential dividend policy, debt, stock options or otherwise, so long as the interest does not give the investor de facto control over the Section 310(b) facility. For a more complete discussion of these options, see Ronald W. Gavillet, Yfll M. Foehrkolb, Simon Wu, "Structuring Foreign Investments In FCC Licenses Under Section 310(b) Of The Communications A~t," 27 California Western Law Review 7 (1991). 5. See Limited Partnership, 5 FCC Red 1673 (1990). 6. FCC Public Notice, Mimeo No. 11788, dated February 13, 1991, File No. W-P-C-6694. 7. 50 U.S.C. app. See. 2158 (1989). 8. See A Policy Framework for Telecommunications in Canada- Ottawa, Dept. of Communications, July 1987 and Proposed Guidelines for T_vpe I Telecommunications Carriers, Ottawa, Dept. of Communications, January 1988. 9. Tele~obe Canada Inc. Resale of Tran.~border Servic~.~, Telecom Decision CRTC 91-10, 26 June 1991, (Decision 91- 10). 10. See U.S.- Canada Free Trade Agreement, Chapter 14, Annex 1404, Part C. Computer Services and Telecommunications Network-Based Enhanced Services, Article 6: Exceptions (1988). 1 I. I have relied here upon unofficial U.S. Department of Commerce translations of the "Plan For The Privatization Of Telefonos De Mexico, S.A. De C.V. (TELMEX)", dated August 27, 1990 and the original ’q’eleeommunieations Regulations," published in the Mexican Official Daily, October 29, 1990. For a discussion of the new Foreign Investment Law (FIL), see Ignacio Gomez-Palacio, "I’he New Regulation On Foreign Investment In Mexico: A Difficult Task," 12 Journal ~1"~ L~w 181 (1990). 12. See Foreign Ownership Disclosure Act of 1989: Hearings Before the Senate Committee on Comme.ree. Science and sT~all~:lgl~, 101st Cong., 1st Sess. at 8-9 (1989). 13. The Section 310 0a) ownership restrictiom do not apply to private radio licenses but the FCC’s rules do bar foreig~ governments and their representatives from holding a private radio license. 47 C.F.R. See. 90.115 (1990). 14. See Notice of Pro_rinsed Rulemaking and Notice of Inquiry, (CC Docket No. 91-141), FCC 91-159, released June 6, 1991. 15. Busin¢.ss Tokyo. Vol. 5, No. 5, May 1991, p.13. 50 Global Telecommuaications Tz~qYc 2~eport 1991 Whose Traffic Is It Anyway? 16. In June 1991, the U.S. Secretary of Tra~portation announced that the Administration would seek legislation to allow foreigners to own up to 49% of the voting stock of U.S. airlines. Several foreign carriers already own minority stakes in U.S. airlines: K.LM owns 10.5% of the voting rights and 20% of the equity of Northwest Airlines; SAS owns 18.4°/6 of the voting rights and 16.8% of the equity of Continental Airlines; Swissair and Singapore Airlines each own about 5% of Delta Airlines. See "Plan To Raise Foreign Cash For Airlines,~ by Steven Prokesch, The New York Times June 21, 1991, p. D1. 17. For a fuller discussion, see H.N. [an~sch, "Emerging Issues In Foreign Investment In Telecommunications," University of Toronto, International Business and Trade Law Program, Working Paper 1988-89 (1). 51 52 The Global Telecommunications Traft~c Report 1991 53 ~’"~The Global Telecommunications Traffic Report- 1991~ Countries Having Route-By-Route Tables © International Institute of Communications 1991 .Table 1 NATIONAL STATISTICS (1989) Population Per Capita Area Country (millions) GNP (US$) (000 sq. kin) Telephone Lines per 100 people Austria 7.6 17,360 84 40.7 Brazil 147.4 2,540 8,512 6.0 China (PRC) 1,119.7 360 9,561 .9 Denmark 5.1 20,510 43 55.5 Finland 5.0 22,060 338 52.1 Germany, FR 62.0 20,750 249 39.7 Hong Kong 5.8 10,320 1 40.7 Ireland 3.5 8,~0 70 25.9 =~ly 57.5 15,150 301 37.0 Japan 123.1 23,730 378 43.2 Luxem~u~ 0.4 24,860 1 46.4 Mexico 84.5 1,990 1,958 5.6 New Zealand 3.3 11,800 269 46.5 Philippines 60.1 700 300 1.1 Saudi ~abia 14.4 6,390 2,150 8.9 Spain 38.8 9,150 ~5 30.4 Swi~erland 6.7 30,270 41 56.9 Thailand 55.5 1,230 513 2.1 United Kingdom 57.2 14,570 245 44.6 U.S.S.R. 286.7 NA 22,402 11.2 Sources: Wodd Bank; Siemens © International Institute of Communications 1991 55 Table 2 NATIONAL TELECOMMUNICATION STATISTICS (1989) Mobile Telephone Fax Machines Telephone Lines Subscribers 1990 est. Country (Millions) (Thousands) (Thousands) Austria 3.1 51 110 Brazil 8.9 N.A. 60 China (PRC) 9.7 10 N.A. Denmark 2.8 124 N.A. Finland 2.6 1~ 40 Germany, FR 31.2 164 920 Hong Kong 2.3 99 120 Imland 0.9 14 40 I~ly 21.3 66 203 Japan 53.2 490 4300 Luxemburg 0.2 1 N.A. Mexi~ 4.7 9 N .A. New Zealand 1.5 29 70 Philippines 0.6 N.A. N.A. Saudi Arabia 1.3 14 N.A. Spain 11.8 30 360 Swi~erland 3.8 73 N.A. Thailand 1.2 N.A. 40 United Kingdom 25.5 975 670 U.S.S.R. 32.2 N.A. 80 Sources: ITU, Siemens, Industry Interviews © International Institute of Communications 1991 _56 Table 3a TELECOMMUNICATION TRAFFIC BALANCE FOR SELECTED COUNTRIES (1990) Country Outgoing Incoming ~i~i~:~!~1 Mi’l-r in Mi’l-r in Balance Surplus as % Millions Millions of Mi’i-F of Total Mi’lq" Belgium 731 755 24 1.6 Finland 186 213 27 6.8 France 1921 2091 170 4.2 Ireland 75 122 47 23.9 Israel 118 202 84 26.3 Korea, Repub. of 188 350 162 30.1 Malaysia 80 100 20 11.1 Portugal 126 270 144 36.4 Spain 611 653 42 3.3 Taiwan 212 302 90 17.5 Tu~ey 159 441 282 47.0 Note: M/-I’Tis Minutes of Telacemmuniceb’on Traf#c. Data are for intemaEonal public voice circuits only. Canada Egures are for Teleglobe only and exclude U.S. and Mexico ffafEc. Data for Ireland are for f~e #scal year April ~990 to March ~9~ excluding U.K..-Ireland mule, Taiwan data are for fiscal year ending June f990. Japan data are for KDD onty for ~e fiscal year ending March 1991; France data are for #scal year ending March f991, U.S. data are for lraf#c between conb’nental U.S. and foreign points for A T& T, MCI, US Sprint and TRT/FT"C combined and exclude ffafEc to Canada and Mexico. © International Institute of Communicalions 1991 .57 Table ~b TELECOMMUNICATION TRAFFIC BALANCE FOR SELECTED COUNTRIES (1989) Country Outgoing Incoming MiTT in MiTT in Balance Surplus as % Millions Millions of MiTT of Total MiTT Austria 476.3 486.8 10.5 1.1 Belgiu m 643.9 666.1 22.2 1.7 i.’~ .!.!: Ireland 225.0 269.0 44.0 8.9 Italy 908.0 1161.0 253.0 12.3 Note." M~TTis Minutes of Telecommunication Traffic. Data are for intemational public voice circuits only. Japan data are for KDD on/y. Canada #gums are for Teleglobe only and exclude U.S. and Mexico traffic, U.S. #gurus exclude traffic to Canada and Mexico. Data for U.K,, Japan, Ireland and Australia are for the fiscal year Apdl ~989 to March ~990. © International Institute of Communications 1991 58 Table 4 INTERNATIONAL TELEPHONE CHARGES AND TRAFFIC BALANCES FOR ,SELECTED OECD COUNTRIES (1989) 1989 Traffic Balance1 (Deficit)/Surplus as % of Total Mi’n" Tariff Level2 Busine## Residential Portugal 35.8 131.1 131.3 Italy 12.3 116.2 116.8 Ireland 8.9 121.9 108.1 Spain 2.3 123.0 121.1 Belgium 1.7 101.6 114.9 U.K. 1.7 96.5 101.8 Austria 1.1 95.5 89.6 France .1 87.3 92.2 Denmark (2.0) 76.2 90.8 Netherlands (2.3) 107.0 97.5 Germany (8.3) 87.3 92.2 Ausb’alia (13.2) 79.6 71.8 Switzerland (14.0) 85.2 78.4 Luxembourg (14,1) 107.0 97.5 Canada (20.4) 84.2 83.8 U,S. (32.9) 89.7 78.0 Not~: f MITT is Mk~uios of Tele~mmunicaOon Tref#~ Data are for public voice circuits only. Traffic balance is stated of Iota/two Fay Pal#c, See Table 3 for [urther details on county-by-county data. Tariffleval based on Purchasing Power Parity indides for IntemaOonal tariffs at November, 1989 as reported at Figure 3. 13 in Performance Indicators For Public Te/e~mmunicab’ons ODeraiors (OECD), Paris, 1990). © International Institute of Communications 1991 59 COST AND CAPACITY, PER VOICE PATH, OF SELEC’rED TRANS-OCEANIC CABLES (’ZSSS-’ZgSS) TransAtlantic Systems Year Cable Cost (US$) Capacity In-Service System per voice path in voice paths 1956 TAT-1 557,000 89 1965 TAT-4 365,000 138 1970 TAT-5 49,000 1,440 1976 TAT-6 24,500 8,000 1983 TAT-7 23,000 8,400 1988 TAT-8 9,000 37,800 1989 PTAT 6,000 85.000 1992 TAT-9 5,500 75,600 1993 TAT-10 2,500 125,000 1993 TAT-11 2,000 125,000 Trans-Pacific Systems Year Cable Cost (US$) Capacity In-Service System per voice path in voice paths 1957 Hawaii 1 378,022 91 1964 TPC-1 405,928 167 1974 Hawaii 3 41,183 1690 1975 TPC-2 72,761 1690 1988 TPC-3 51.852 18,900 1991 North Pacific Cable 5,000 85.000 1992 TPC-4 5,500 75,600 1996 TPC-5 2,000 605,000 Notes: Costa are ~pital and construction cost~ only slated tn SUS to ~e nearest $500 in ~he year given, unadjusted for Inflation. Current te~hnolo~ permits appmxfmataly 5 viduai voice paff~s to be derived from a digital channel ope/ating at 64,000 bits per second (64 kbp#). Fiberop#c submarine cables am expected ~b hava a useful life of at least 30 years. Table mpods average co~t per vok~ pa#/ [or cables with multiple lending poin/s. For example, #~e TA T.9 syslem in~erconnec/s ~e U.S. and Canada with ~e U.K., France and Spain. The average U.S.-U.K co,!par voice pa#~ l~ approximately $4000. Source: FCC and U.S. carders © lntemationa! Institute of Communications 1991 60 Table ESTIMATED CAPACITY OF TRANS-OCEANIC CABLE AND SATELLITE SYSTEMS (1986-1996) Trans-Atlantic (North Amedca to Europe) Year Cable Satellite Voice Paths Voice Paths 1986 22,000 78,000 1987 22,000 78,000 1988 60,000 78,000 1989 145,000 93,000 1990 145,000 283,000 1991 221,000 283,000 1992 346,000 496,000 1993 471,000 496,000 1994 471,000 540,000 1995 640,000 720,000 1996 809,000 720,000 Trans-Pacific (North Amedca to Japan via Hawaii or Guam) Cable Satellite Year Voice Paths Voice Paths 1986 2,000 39,000 1987 21,000 39,000 1988 21,000 39,000 1989 21,000 39,000 1990 21,000 39,000 1991 106,000 27,000 1992 183,000 27,000 1993 183,000 117,000 1994 183,000 207,000 1995 183,000 207,000 1996 783,000 207,000 Notes: Est/’mates based on year cable/satellite facilites begin service. Esb’mate of cable voice paths assume b~at 5 vlrlual voice paths can be derived from one 64kbps digitel circuit; cable eat/mates Include circuits held in reserve [or cable/satellite restoration services. Es#mate of satellite voice paths based on Intalsat satellites on¥ and Intelsat’s July, 1991 deployment and launch schedule; satellite esb’mates exclude one satellite in each region hem in reserve. Satellite est/’mates also assume one voice pab~ per channel unt/7 1989 deployment of lntelsat Vl san’as with 24,000 channels or 120,000 voice pa#~s using Digital Code Mul#plicaffon Equlprnent (DCME). The Intelsat VII se(iss, to be deployed in 1992, wTI have a nominal capacity of 18,000 channels or 90,000 voice pa#~s using DCME. A small numer of addib’onal satellite voice paths in the Atlantic and Paclfc likely v~ll be available to 1996 from PanAmSat (PAS- 1; ORBX-2); Columbia Communications (using NASA "s TDRSS system)," and InterSputnik. Regional capacEy est/’rnates do not necessarily imply that full capac#y Is available to satis[y demand on any given bilateral mute. © International Institute of Communications 1991 Rank Carrier THE TRAFFIC BASE OF THE TOP 25 INTERNATIONAL CARRIERS (19g0) Outgoing MiTT Jn Millions" Country 1 AT&T 5780 United States 2 DBP Telekom 3146 Germany, FR 3 British Telecom 2170 United Kingdom 4 France Telecom 1921 France 5 Telecom Canada 1420 Canada 6 Swiss PTT 1356 Switzerland 7 Cable & Wireless 1291 United Kingdom 8 MCI 1132 United States 9 Italcable/ASST 1045 Italy 10 Netherlands PI-I" 905 Netherlands 11 KDD 764 Japan 12 Belgian PTr 731 Belgium 13 OTC 620 Australia 14 Swedish Telecom 615 Sweden 15 Telefonica 611 Spain 16 Saudi Communications Ministry 590 Saudi Arabia 17 US Sprint 577 United States 18 Teleglobe 565 Canada 19 Austrian P’IT 559 Austria 20 China PTT 460 China (PRC) 21 Telmex 421 Mexico 22 Danish PIT 363 Denmark 23 Norwegian Telecom 28t Norway 24 Telecom Ireland 263 Ireland 25 U,A.E. Comm. Ministry 248 United Arab Emirates "MITTis M/nutss of Telecornmuntcation Traffic. Data are for public /elephone circuits only. Data for U.S. canters includes estimated Irafffc ~o Mexico and Canada; data for U.K. and I~sh canters includes U.K.-Idsh #aNc. Te/ecom Canada total includes U.S. and Me.dco Paf#c originated by nine provincial lelephone companies and Telesat Canada of which ~079 million M/7-r was orl,ginated by Bell Canada. Cable & Wireless total includes on!y traf#c originated by Hong Kong Telephone (729), Mercury Cornmunica#ons (362), Bermuda and Caribbean companies (200). For Ita~ ~e sham o[ Italcable is 208 re#lion MiT~. Note: BT, France Telecom, KDD, C&W and OTC data are for 1990 fiscal year (Apdl 1990 to March 1991). © International Institute of CommunicalJons 1991 62 Table 712 6000 5500 3500 3000 2500 1500 1000 500 0 The Top 15 International Carriers == ,,? /I/ *Mi~ is Minutes of Tele~m~n~at~n Traffic. Data are for out~ing traff~ on ~blic telephone d~ts only. © International Institute ot Communications 1991. 63 ~able 8 THE FASTEST GROWING INTERNATIONAL CARRIERS Carrier 1990 1986 Cumulative Outgoing Outgoing Growth Mi’l-I" Mi’l-I" 1986-90 US Sprint 338 43 686% MCI 772 103 649% Comm. Auth. Thailand 134 20 570% Cable & Wireless 1064 160 565% Embratel (Brazil) 157 53 196% Bezeq (Israel) 118 41 187% OTC 620 239 159% Teleglobe Canada 565 223 153% China P’I-I" 460 190 142% KDD 764 319 139% United Arab Emirates 248 120 107% Singapore Telecoms* 186 99 88% Telefonica 611 330 85% France Telecom 1921 1095 75% Austrian P-I-r 559 321 74% AT&T 4124 2492 66% DBP Telekom 3146 1977 59% Korea Telecom* 188 131 44% M/7"7"~s Minutes of Teleeommunicaffon Traffe. Data are for public ~elephone circuits only. C& W data are for Hong Kong and Mercury Communlca#ons excluding U.K. Ireland mute. AT&T, MCI and US Spdnt are for traf~c from ~he con#nantal U.S. excluding traffic ~o Mexico and Canada. The table excludes ~he new Japanese carriers IDC and ITJ, which only began service In f989. Singapore data are for 1986-f989. Koraa Telecom, Telefonlca and China PTTdata are [or 1988-1990. © Intemationa/Institute of Communications 1991 64 Table 9 Market Share of Competing U.S., U.K. and Japanese international Carriers: Percent of Outgoing Voice Circuit MITT" (1986-1990) United States AT&T MCI US Sprint 1986 94.3 4.0 1.6 1987 93.0 4.7 2.3 1988 89.1 7,0 3.5 1989 83.3 10.2 5.8 1990 78.4 14.6 6.4 United Kingdom BT Mercu~ 1986187 (FY) 99.8 0.2 1987188 (FY) 98.5 1.5 1988189 (FY) 95.5 4.5 1989/90 (FY) 91.0 9.0 t990/91 (FY) 86.0 14.0 Japan KDD 1989190 (FY) 93.3 3.7 3.0 1990/91 (FY) 88.0 6.5 5.5 *M/7-1" is Minutes ~f Tei~communicab’on Traffic. Sources: US: FCC (excludes traffic to Canada and Mexico) UK: oriel and Industry Sources (excludes traffic to Ireland) Japan: MPT and Industry Sources © International Institute of Communicalions 1991 6_5 Table 10 INTERNATIONAL ROUTES WITH THE LARGEST VOLUME OF TELECOMS TRAFFIC Continental Intercontinental United States Canada United States Mexico United States United Kingdom Austria Germany, FR Switzerland Germany, FR United States Germany, FR United States Japan France- Italy France Belgium France Spain France Switzerland France United Kingdom France Germany, FR Hong Kong China (PRC) Nethertands United Kingdom Netherlands Belgium Netherlands Germany, FR Switzerland France Switzerland Italy United Kingdom Germany, FR United Kingdom- treland France United States ° MITTIs Minu~e$ of Telecommun/ca#on Traffic Data are [or two.way traf~c [or switched voioe circuits only. © Internalional Institute of Communications 1991 66 The Global Telecommunications Traffic Report- 1991 67 North American Traffic Patterns Outgoing Regional Traffic 38% 19% 10% 8% 2% Highest Volume Routes 1990 MiTT 2730 1110 1105 695 590 360 240 MFI-I" is Minutes of TelecommunicalJott Traffic; data are for two-way Iraffic. 58 Institute of CommunicalJon$ ’1~1 Table 11 Brazil and its Major Telecommunications Correspondents (1990) Destination Outgoing MiTT in Share of Millions" Total (%) United States 53.4 34.1 Argentina 12.5 8.0 Germany, FR 9.0 5.8 aly 9.0 5.8 ortugal 7.4 4.7 France 7.0 4.5 United Kingdom 6.7 4.3 Japan 4.7 3.0 Paraguay 4.3 2.8 Uruguay 4.2 2.7 Switzerland 4.2 2.3 Spain 3.3 2.1 Chile 3.1 2.0 Canada 3.1 1.9 Netherlands 1.8 1.2 Other Countries 23.0 14.7 Total Outgoing 156.5 100 Other Comfrles (24.5~) © International Institute of Communications 1991 69 Canada and its Major Telecommunications Correspondents (1990) Destination Outgoing Mirr in Share of Millions" Total (%) United States 1420.0 71.2 United Kingdom 105.1 5.3 Germany, FR 33.8 1.7 France 33.6 1.7 Hong Kong 31.2 1.6 Italy 27.2 1.4 Australia 17,2 0.9 Japan 14.8 0.7 Trinidad & Tobago 13.7 0.7 Jamaica 13,3 0.7 Phili ppines 13.0 0,7 Netherlands 12.2 0,6 India 11.6 0.6 Portugal 11.3 0.6 Greece 10.8 0.5 Other Countries 224.5 t 1.3 Total Outgoing 1993.3 100 Other Countl’tes © International Institute of Communications 1991 70 Table 13 Colombia and its Major Telecommunications Correspondents (1989) Destination Outgoing MiTT in Share of Millions* Total (%) United States 39.4 58.8 Venezuela 4.6 6.9 Panama 2.3 3.4 Ecuador 2.1 3.1 Spain 1.9 2.8 Mexico 1.9 2.8 United Kingdom 1.3 1,9 Germany, FR 1,1 1.6 France 1,1 1.6 Brazil 1,0 1.5 Italy 1.0 1.5 Canada 0.9 1.3 Peru 0.9 1.3 J’gentina 0.9 1.3 o~ta Rica 0.6 0.9 Other Countries 6,0 9.0 Total Outgoing 67.0 100 Germany (1 Other C0untrles (15.4~) Unilad Kingdom States © International Institute of Communications 1991 -71- Table 14 Mexico and its Major Telecommunications Correspondents (1990) Destination Outgoing Mi’I’T in Share of Millions" Total (%) United States 373.9 88.8 Canada 6.9 1.6 Spain 5.2 1.2 United Kingdom 3.7 0.9 France 3.0 0.7 Germany, FR 3.0 0.7 Italy 2.4 0.6 Colombia 2.3 0.5 Argentina 1.8 0.4 Brazil 1.5 0.4 Costa Rica 1.4 0.3 Japan 1.4 0.3 Venezuela 1.4 0.3 Switzerland 1.1 0.3 Ei Salvador 1.1 0.3 Other Countries 11.0 2.6 Total Outgoing 421.1 100 United States (88.8%) © InternalJonal Institute of Communications 1991 72 Table 15a United States Outgoing Traffic (1990) Outgoing Mil-I" in Share of Destination Millions* Total (%) Canada 1460.0 19.5 Mexico 780.0 10.4 United Kingdom 626.7 8.4 Germany, FR 493.5 6.6 Japan 313.8 4.2 France 201.4 2.7 Italy 169.0 2.3 Dominican Republic 165.0 2.2 Korea, Republic of 163.9 2.2 Philippines 163.3 2.2 Colombia 132.5 1.8 Taiwan (ROC) 119.8 1.6 Brazil 108.7 1.4 Israel 106.8 1.4 Jamaica 96.8 1.3 Australia 92.8 1.2 Hong Kong 85.0 1.1 El Salvador 84.0 1.1 Switzerland 77.4 1.0 Netherlands 70.9 0.9 Guatemala 70.5 0.9 Spain 68.9 0.9 Saudi Arabia 68.1 0.9 Peru 64.4 0.9 Poland 64.2 0.9 Other Countries 1651.3 22.0 Total Outgoing 7498.7 100 "~FFT is Minutes of Telecommunication Traffic. Data are for public talephone voice ckcuffs on¥ be~veen con~’nantal U.S. and foreign points for A T& T, MCI, .US S.p.rint and TRT/FTC comte’ned. Outgoing ~al~c to Canada and Mexico Is es#’mare~. © International Institute of Communications 1991 73- Destination Table 15b United States Incoming Traffic (1990) Incoming Millions* Share of Tota~ (%) Canada 1420,0 32.3 United Kingdom 482.6 11.0 Mexico 373.9 8.5 Japan 267.9 6.1 Germany, FR 201.1 4.6 France 136.6 3.1 Australia 94.6 2.2 Taiwan (ROC) 73,9 1.7 Italy 69.9 1.6 Hong Kong 67.0 1.5 Switzed and 61.2 1.4 Brazil 57.6 1.3 Korea, Republic of 56.9 1.3 Netherlands 54.1 1.2 Sweden 46.5 1.1 Colombia 42.0 1.0 Dominican Republic 41.7 0.9 Israel 41.0 0.9 Greece 39.5 0.9 Venezuela 38.8 0.9 India 37.5 0.9 Ireland 35.3 0.8 Spain 35.2 0.8 Bahamas 32.0 0.7 Saudi Arabia 31.0 0.7 Other Countries 558.8 12.7 Total Incoming 4398.6 100 "MiTT is Minutes of Telecommunica#on Traffic. Data are for public telephone voice circuits one, between continental U.S and foreign points for A T& T, MCI, US Sprint and TRT/FTC combined and are as#mated for Canada. © International Institute of Communications 1991 74 United States Outgoing Traffic 1990 United Repub, United States Incoming Traffic 1990 ~) IntemalJonai Institute of CommunlcalJons 1991 75 Table 15d United States Fastest Growing Routes 1988-1990 20~ Japan Gmta’nalo Talwan Grea~e rl Salvador Poland Spain ,dand Saudl Arabia India Philippines Brazil Peru Korea Australia Don~ Repub. Country © International Institute of Communications 1991 76 Table 16 Venezuela and its Major Telecommunications Correspondents (1990) Destination Outgoing MiTT in Share of Millions* Total (%) United States 35.0 41.0 Colombia 8.7 10.2 Spain 6.1 7.2 Italy 5.1 6.0 Portugal 2.1 2.5 Peru 2.0 2.3 Germany, FR 1.9 2.2 Dominican Republic 1.9 2.2 Canada 1.8 2.1 Argentina 1.7 2.0 France 1.6 1.9 BrazJI 1.5 1.8 Mexico 1.3 1.5 Puerto Rico 1.3 1.5 United Kingdom 1.3 1.5 Other Countries 12.0 14.1 Total Outgoing 85.3 100 Domlnlcon R~publlc C2.2~.~) © International Institute of Communications 1991 77 78 European Traffic Patterns Outgoing EC Traffic 55% 13% 11% 3% ",, Highest Volume Routes 1990 Mi!-!" 1110 700 560 520 500 490 470 410 MiTT is Minutes of TeleoommunicatJon Traffic; dar~ are for two-way traffic. © InternalJonal Institute of Communications1"~1 Table 17 Belgium and its Major Telecommunications Correspondents (1990) Outgoing Mi’l-r in Share of Destination Millions* Total (%) France 184.8 25.3 Nether|ands 151.3 20.7 Germany, FR 99.6 13.6 United Kingdom 66.4 9.1 Italy 38.2 5.2 United States 26.9 3.7 Luxembourg 26.8 3.7 Switzerland 20.5 2.8 Spain 19.9 2.7 Sweden 9.2 t .3 Greece 6.6 0.9 Portugal 6.5 0.9 Turkey 6.4 0.9 Denmark 6.3 0.9 Austria 5.4 0.7 Other Countries 56.5 7.7 Total Outgoing 731.3 100 United Kingdom (! Switzerland © International Institute of Communications and Commission of the European Communities 1991 80 Table 18 Denmark and its Major Telecommunications Correspondents (1990) Outgoing MiTT in Share of Destination Millions* Total (%) Sweden 69.0 19.0 Germany, FR 63.1 17.4 United Kingdom 42.0 11.6 Norway 40.1 11.0 United States 18.5 5.1 France 16.5 4.5 Netherlands 13.6 3.7 Italy’. 8.8 2.4 Switzerland 8.3 2.3 Spain 7.6 2.1 Finland 7.6 2.1 Belgium 7.0 1.9 Tu rkey 4.1 1.1 Poland 3.9 1.1 Austria 3.3 0.9 Other Countries 49.5 13.8 Total Outgoing 362.8 100 Norway [11.0~) Spo~n [2.1 UNfed Kingdom (11.6%) Comtrlas Germany (17.4~) © International Institute of Communications and Commission of the European Communities 199i 81 Table 19 France and its Major Telecommunications Correspondents (FY 1990) Destination Outgoing MiTT in Share of Millions* Total (%) Germany, FR 250.6 13.0 United Kingdom 240.9 12.5 Italy 192.1 10.0 Belgium 166.4 8.7 Spain 132.0 6.9 United States 131.6 6.8 Switzerland 130.0 6.8 Portugal 98.2 5,1 Netherlands 70.0 3.6 Algeria 47.9 2.5 Morocco 46.8 2.4 Tunisia 34.3 1.8 Turkey 28.1 1,5 Canada 27.2 1,4 Sweden 19.3 1.0 Other Countries 306.1 15.9 Total Outgoing 1921.5 100 Other Comtrles Netharlands Portugal (5.1 Switz~r~and © International Institute of Cornrrtunications and Commission of the European Comrn~j~ities 1991 82 Germany, FR and its Major Telecommunications Correspondents (1989) Destination Outgoing Mi’rr in Share of Millions* Total (%) Austria 269.0 9.5 Switzerland 253.0 8.9 France 246.0 8,7 United Kingdom 238.0 8,4 Turkey 229.0 8.1 Italy 227.0 8.0 United States 216.0 7.6 Netherlands 195.0 6.9 Yug.oslavia 132.0 4.7 Spa~n 90.0 3.2 B_,elgium 68.0 3.1 ~reece 62.0 2.2 Denmark 55.0 1.9 Luxembourg 25.0 0.9 Canada 21.0 0.7 Australia 12.0 0.4 Ireland 9.0 0.3 Other Countries 467.0 16,5 Total Outgoing 2634.0 100 0ther Counlries (26. (8.9%) Netherlands (6.g70: United Stales (7.670) © International Institute of Communications and Commission of the European Communities 1991 83 Destination Greece and its Major Telecommunications Correspondents (t990) Outgoing Mi3-r in Share of Millions* Total (%) Germany, FR 48.0 22.5 .United Kingdom 28.6 13.4 United States 20.3 9.5 Italy 19.6 9.2 France 13.6 6.4 Cyprus 9.5 4.5 Switzerland 7.3 3.4 Belgium 6.4 3.0 Netherlands 6.1 2.9 Yugoslavia 4.6 2.2 Austria 4.2 2.0 Turkey 4.1 1.9 Canada 4.0 1.9 Australia 3.9 1.8 Sweden 3.8 1.8 Other Countries 29.4 13.8 Total Outgoing 213.4 100 Other Countries (25. (22.5~) Kingdom (1 ,United States (g.5~) © International Institute of Communications and Commission of the European Communities 1991 84 Ireland and its Major Telecommunications Correspondents (FY 1990) Destination Outgoing MiTI" in Share of Millions* Total (%) United Kingdom 187.0 71.3 United States 25.4 9.7 Germany, FR 9.3 3.5 France 8.0 3.1 Netherlands 4.5 1.7 Canada 3.0 1.1 Belgium 2.9 1.1 Italy 2.9 1.1 Spain 2.8 1.1 Australia 2.6 1.0 Switzerland 1.7 0.6 Denmark 1.4 0.5 Sweden 1.2 0.5 Japan 0.7 0.3 Austria 0.6 0.2 Other Countries 8.2 3.1 Total Outgoing 262.2 100 "MITT Is Min~tas of Teiecom~P_.a~n Tfefflc. Data am for ~o~bt/c telephone ~Jce clrcudS only. Italy (1.1%) Obher Countries (5,2%) France (3.1%) United States Nethedands reunited Kingdom (71.3%) © International Institute of Communications and the Commission of the European Communities 1991 85- Table 23a Italy and its Major Telecommunications Correspondents (1990) Destination Outgoing MiTT in Share of Millions* Total (%) United States 98.3 47.4 Canada 13.8 6.7 Brazil 10.3 5.0 Argentina 9.4 4.3 Australia 8.9 4.3 Japan 8.0 3.9 Venezuela 4.4 2.1 Israel 4.4 2.1 Hong Kong 3.0 1.4 South Africa 2.5 1.2 Saudi Arabia 2.4 1.2 Colombia 2.2 1.1 Mexico 2.2 1.1 Singapore 1.7 0.8 Iran 1.7 0.8 Other Countries 34.5 16.6 Total Outgoing 207.5 100 Other Comities (21 H0ng Kong States © International Institute of Communications and Commission of the European Communities 1991 86- Destination Table 23b Italy and its Major Telecommunications Correspondents (1989) Outgoing Mi’l-I" in Share of Millions* Total (%) Germany, FR 165.0 18.2 France 143.0 15.6 Switzerland 113.3 12.5 United States 86.0 9.5 United Kingdom 85.5 9.4 Spain 31.9 3.5 Belgium 31.8 3.5 Austria 27.6 3.0 Netherlands 22.4 2.5 Yugoslavia 18.8 2.1 Greece 15.2 1.7 Canada 12.5 1.4 Sweden 9.1 1.0 Brazil 8.2 0.9 Australia 7.2 0.8 Other Countries 130.5 14.4 Total Outgoing 908.0 100 Austria (I 5.7~.) Belg|~lYt ~pain United Kingdom (9.4~) Swllzerlond (12.5~=) ur~t~ stot= ~.s~) © International Institute of Communications and Commission of the European Communities 1991 87- "Fable 24 Luxernbourg and its Major Telecommunications Correspondents (1990) Destination Outgoing MiTT in Share of Millions* Total (%) Belgium 33.9 22.5 Germany, FR 30.8 20.5 France 29.4 19.5 United Kingdom 10.3 6.8 Portugal 8.0 5.3 Italy 7.5 5.0 Netherlands 5.6 3.7 Switzerland 5.2 3.5 United States 3.5 2.3 Denmark 3.2 2.1 Spain 2.2 1.5 Sweden 1.7 1.1 Austria 1.4 0.9 Greece 0.9 0.6 Norway 0.7 0.5 Other Countries 6.3 4.2 Total Outgoing 150.6 100 United Kingdom Frclnce (I United © International Institute of Communications and Commission of the European Communities 1991 88 Destination Table 25 Netherlands and its Major Telecommunications Correspondents (1990) Outgoing Mill" in Share of Millions* Total (%) Germany, FR 218.4 24.1 Belgium 154.1 17.0 United Kingdom 124.5 13.8 France 69.4 7.7 United States 53.1 5.9 Ital},. 29.7 3.3 Switzerland 28.5 3.1 Spain 22.3 2.5 Turkey 21.8 2.4 Sweden 15.1 1.7 Austria 13.8 1,5 Denmark 13,8 1.5 Canada 10.2 1.1 Norway 8.7 1.1 Surinam 6.5 0.7 Other Countries 115.3 12.7 Total Outgoing 905.2 100 Other Comtrles (~18.6~.) Swed~ (~t Belglu’n (~1 © International Institute of Communications and Commission of the European Comr~unities 199~, 89 Destination Table 26 Portugal and its Major Telecommunications Correspondents (1990) Outgoing Mi’l-r in Share of Millions* Total (%) France 33.3 21.3 Spain 20.8 13.3 United Kingdom 19.7 12.6 Germany, FR 15.6 10.0 Switzerland 9.6 6.1 United States 7.9 5.0 Brazil 6.1 3.9 Italy 5.8 3.7 Netherlands 5.3 3.4 Belgium 5.3 3.4 Canada 3.0 1.9 Sweden 2.6 1.7 Angola 2.3 1.5 Gumea-Bissau 1.9 1.2 Denmark 1.6 1.0 Other Countries 15.8 10.1 Total Outgoing 156.6 100 Other Comtrles (1 (~13.3%) United Kingdom (~12.6~,) © Internationa~ Institute of Communications and Commission of the European Communities 1991 90 Destination Table 27 Spain and its Major Telecommunications Correspondents (1990) Outgoing MiTT in Share of Millions* Total (%) France 119.0 19.5 United Kingdom 98.0 16.0 Germany, FR 93.0 15.2 Italy. 45.0 7.4 Un=ted States 36.0 5.9 Switzerland 27.0 4.4 Netherlands 25.0 4.1 Belgium 22.0 3.6 Portugal 21.0 3.4 Sweden 12.0 2.0 Argentina 12.0 2.0 Venezuela 6.0 1.0 Colombia 4.0 0.7 Brazil 4.0 0.7 Other Countries 87.0 11.9 Total Outgoing 611.0 100 ~wede~ Pottu~ol Germony (1 © International Institute of Communications and Commission of the European Communities 1991 91 Tabte 28 United Kingdom and its Major Telecommunications Correspondents (FY 1990) Destination Outgoing MiT’F in Share of Millions* Tota~ (%) United States 530.0 20.9 Germany 250.0 9.9 France 230.0 9.1 Ireland 180.0 7.1 Netherlands 110.0 4.3 Italy 100.0 4.0 Spain 100.0 4.0 Switzedanc~ 90.0 3.6 Canada 90.0 3.6 Australia 80.0 3.2 Belgium 60.0 2,4 Sweden 60.0 2.4 Japan 50.0 2.0 Denmark 40.0 1.6 Norway 40.0 1.6 Other Countries 520.0 20.6 Total Outgoing 2530.0 100 °MITT I# Mlno’t#~ of T~t~wn’~Jnlc..~on T/’d=~ D#tt~ af~ for puMl~ newest 10 m##on M/TZ. O#~r U.K.. ro~te~ in FY l..o~JO with more tf~n Hong Ko~g. Greece. Au~,’r~ Singapore. Ind.. Turkey and New Zea~nd.. stores International Institute of Communications and Commission of the European Communities 1991 92 Cross-Border Traffic Between The Nations Of The European Communities: A Statistical Matrix (1989) G 0 ! N G F! i T T (X106)* FRG G S F ]R IT L N P U.K. Total SurpLus (Deficit) BELGIUFI -- 6 88 6 21 158 3 32 30 136 4 55 539 (1) DE NI~ARI( 5 55 2 7 11 1 8 3 12 1 34 139 (15) GERI4ANY 88 59 -- 44 85 233 8 165 27 197 13 192 1111 (146) GREECE 4 2 62 -- 2 13 0 16 1 6 1 23 130 6 SPAIN 18 7 90 2 -- 119 2 32 2 20,,. 16 74 382 (12) .. FRANCE 165 15 2/.6 15 103 -- 7 143 25 62 27 209 1017 60 IRELAND 3 2 9 1 5 10 -- 2 1 5 1 170 209 24 1TALY 34 8 227 21 38 170 2 -- 7 26 4 86 623 106 LUXEI~BOURG 2/~ 2 25 1 2 11 0 7 4 1 9 86 (30) NETHERLANDS 136 12 195 5 22 62 4 22 5 -- 4 99 566 (11) PORTUGAL 5 2 22 1 17 85 0 4 6 5 -- 16 163 75 UNITED KINGDOH 58 39 238 26 92 205 158 86 9 110 16 -- 1037 70 TOTAL EC 540 154 1257 124 394 1077 185 517 116 583 88 967 6002 MITT is Minutes of Telecommunication Traffic. Matdx shows millions of MITT. Data based on survey of operators and IIC estimates. Data are for public voice drcuit~ only. © International Institute of Communications 1991 Table 30 Austria and its Major Telecommunications Correspondents (1990) Destination Outgoing Mill" in Share of Millions* Total (%) Germany, FR 250.3 44.8 Switzerland 46.7 8.4 Yugoslavia 43.9 7.9 Italy. 33.1 5.9 United Kingdom 18.6 3.3 United States 17.6 3.2 Hungary 16.3 2.9 France 15.8 2.8 Turkey 15.8 2.8 Netherlands 15.1 2.7 Czechoslovakia 12.6 2.3 Poland 11.4 2.0 Sweden 6.2 1.1 Belgium 5.8 1.0 Spain 4.7 0.8 Other Countries 44.8 8.0 Total Outgoi ng 558.7 100 Netherlands Other Comtrles (~15.3~) -~ TLrkey United States HLr~lary Yugoslavia United Kingdom Italy © International Institute of Communications 1991 94 Table 3! Finland and its Major Telecommunications Correspondents (1990) Destination Outgoing Mi’1-1" in Share of Milfions* Total (%) Sweden 85.1 45.8 Germany, FR 17.0 9.1 United States 12.2 6.6 United Kingdom 11.8 6.3 U.S.S.R. 8.0 4.3 Denmark 6.5 3.5 Norway 6.4 3.4 France 5.8 3.1 Switzerland 4.1 2.2 Netherlands 3.8 2.0 Italy 3.4 1.8 Spain 3.3 1.8 Belgium 2.3 1.2 Canada 2.0 1.1 Austria 1.5 0.8 Other Countries 12.8 6.9 Total Outgoi ng 186.0 100 Unifed Kingdom Other Countries (13.6~) --,, © International Institute of Communications 1991 95 Norway and its Major Telecommunications Correspondents (1990) Destination Outgoing MiTT in Share of Millions* Total (%) Sweden 85.1 30.3 Denmark 42.7 15,2 United Kingdom 36.6 13.0 Germany, FR 20.6 7.3 United States 20.2 7.2 France 8.9 3.2 Netherlands 7.9 2.8 Finland 7.7 2.7 Spain 4.9 1.7 Switzerland 4.3 1.5 Italy 4.2 1.5 Be(glum 3.4 1.2 Poland 2.7 1.0 Canada 2,5 0,9 Yugoslavia 1.8 0.6 Other Countries 27.7 9.9 Total Outgoing 281.2 100 ,Spaln Other Countries (15.0~,) -’k Switzerland (1 © International Institute of Communications 1991 96 Table 33 Switzerland and its Major Telecommunications Correspondents (1990) Destination Outgoing MiTT in Share of Millions* Total (%) Germany, FR 308.6 22.8 France 235.1 17.3 Italy. 205.8 15.2 United Kingdom 75.1 5.5 Austria 60.7 4.5 United States 58.8 4.3 Yugoslavia 57.8 4.3 Spain 48.3 3.6 Portugal 47.7 3.5 Netherlands 32.4 2.4 Turkey 29.8 2.2 Belgium 23.9 1.8 Sweden 14.5 1.1 Canada 10.4 0.8 Denmark 8.4 0.6 Other Countries 139.0 10.2 Total Outgoing 1356.3 100 united Kingdom (22.8~,) PortL=gal Comtrles (16.7T.) © International Institute of Communications 1991 97 Table 34 Israel and its Major Telecommunications Correspondents (1990) Destination OM .ut.~q.o.i ng ~l ~n Share of Millions* Total (%) United States 40.2 34.1 United Kingdom 13.0 11.0 France 9.7 8.2 Germany, FR 8.5 7.2 Italy 4.4 3.7 Canada 3.9 3.3 Switzerland 3.8 3.2 U,S.S.R. 3.1 2.6 Belgium 3.0 2.5 NetSerlands 2.9 2.5 South Africa 2.3 2.0 ,~,u rkey. 1.4 1.2 ustra~ia 1.3 1.1 AEgypt 1.3 1.1 rg entina 1.3 1.1 Other Countries 17.8 15.1 Total Outgoing 117.9 100 Other CoL~frles (2 Netherlands (~2.5~) Italy Switzerland Unitecl Kingdom (~11.0~) (8.2~.) © International Institute of Communications 1991 98 Turkey and its Major Telecommunications Correspondents (1990) Destination Outgoing MiTT in Share of Millions* Total (%) Germany, FR 64.2 40.5 United Kingdom 14.7 9.3 France 10.6 6.7 United States 10.1 6.4 Switzerland 7.0 4.4 Netherlands 7.0 4.4 Italy 5.5 3.5 Austria 4.9 3.1 Greece 3.2 2.0 Belgium 3.0 1.9 Iran 2.7 1.7 Saudi Arabia 2.4 1.5 Bulgada 2.1 1.3 Yugoslavia 2.0 1.3 Sweden 1.9 1.2 Other Countries 17.2 10.8 Total Outgoing 158.6 100 Kingdom (9.3~) © International Institute of Communications 1991 99 I00 Map 3 Asian Traffic Patterns Outgoing Regional Traffic Intra-Asian 40% North America 18% European Community 10% *Countries covered in(dude: Hong Kong, India, Japan, Repub. of Korea, Malaysia, New Zealand, Philippines, Taiwan and Thailand. .!.:+: Highest Volume Routes 1990 Rout~ MiTr U.S. Japan 580 Hong Kong China 410 U.S. Korea 220 U.S. Australia 190 U.S. Taiwan 180 Australia New Zealand 180 Japan Korea 160 MiTT is Minutes of Telecommunication Traffic; data are for two-way traffic. © International Institute of Communications 1991 Table :~6 Hong Kong and its Major Telecommunications Correspondents (FY 1990) Destination Outgoing Mi’F~" in Share of Millions* Total (%) China (PRC) 265.0 36.4 United States 70.0 9.6 Taiwan (ROC) 50.0 6.9 Japan 40.0 5.5 United Kingdom 30.0 4.1 Canada 30.0 4.1 Macao 25.0 3.4 Australia 25.0 3.4 Other Countries 194.0 26.6 Total Outgoing 729.0 100 © International Institute of Communications 1991 102- Table :~7 India and its Major Telecommunications Correspondents (FY 1988) Destination Outgoing MiTT in Share of Millions* Total (%) United States 26.8 29.6 United Kingdom 13.8 15.2 United Arab Emirates 8.1 8.9 Saudi Arabia 4.3 4.7 Singapore 3.9 4.3 Canada 3.3 3.6 Germany, FR 2.8 3.1 Hong Kong 2.7 3.0 Japan 2.4 2.6 Australia 1.8 2.0 Kuwait 1.8 2.0 Oman 1.7 1.9 France 1.6 1.8 Bahrain 1.1 1.2 Belgium 1.0 1.1 Other Countries 13,5 14.9 Total Outgoing 90.6 100 © International Institute of Communications 1991 103- Table 38 Japan and its Major Telecommunications Correspondents (FY 989) Destination Outgoing Mil-r in Share of Millions* Total (%) United States 162.4 27.2 Korea, Republic of 83.9 14.1 aiwan(ROC) 55.0 9.2 nited Kingdom 33.4 5.6 Philippines 31.2 5.2 Hong Kong 30.1 5.0 China (PRC) 20.8 3.5 Singapore 19.2 3.2 Germany 18.2 3.1 Thailand 17.7 3.0 Australia 16.4 2.7 France 13.1 2.2 Malaysia 8.5 1.4 Canada 8.2 1.4 Indonesia 7.5 1.3 Other Countries 49.4 8.3 Total Outgoing 596.5 100 ou’t~otr/~ MITT/nclud~ only/DO csl/s. To~l o~n~ MITT ~r 198~ 701.4 milton, Other Comities Stales C27.2~) Repub41c of Kingdom © International Institute of Communications 1991 104- Table 39 Republic of Korea and its Major Telecommunications Correspondents (1990) Outgoing Mi’1-r in Share of Destination Millions* Total (%) Japan 63.2 33.6 United States 51.9 27.6 Hong Kong 9,3 4.9 Germany, FR 6.2 3.3 Taiwan (ROC) 5.0 2,7 United Kingdom 4.5 2.4 Australia 3.8 2.0 Singapore 3.4 1.8 France 3.2 1.7 Canada 3.1 1.6 Indonesia 2.9 1.5 China IPRC) 2.1 1.1 Philippines 1,9 1.0 Italy 1.8 1.0 Thailand 1.6 0.9 Other Countries 24.2 12.9 Total Outgoing 188.1 100 United Kingdom Talwan (ROC) German, Unlt~ Slates (27.7%) © International Institute of Communications 1991 105 Table 40 Malaysia and its Major Telecommunications Correspondents (1990) Destination Outgoing Mi’/-I" in Share of Millions* Total (%) Japan 11.3 14.1 United States 9.0 11.3 Australia 8.9 11.1 United Kingdom 7.9 9.9 Hong Kong 7.2 9.0 Taiwan(ROC) 6.9 8.6 Th ailand 5.7 7.1 Indonesia 3.4 4.3 ~ndia 2.5 3.1 Philippines 1.8 2.3 Canad a 1.7 2.1 Germany, FR 1.6 2.0 Korea, Repubtic of 1.4 1.8 Brunei 1.1 1.4 New Zealand 1.0 1.3 Other Countries 8.6 10.8 Total Outgoing 80.0 100 Other Comities (I (1 1.1T,) Kingdom (9.9%) Hong Kong Talwan © International Institute of Communications 1991 106- Table 41_ New Zealand and its Major Telecommunications Correspondents (FY 1990) Destination Outgoing Mi’l-I" in Share of Millions* Total (%) Australia 84.0 48.3 United Kingdom 16.0 9.2 United States 15.0 8.6 Japan 13.0 7.5 Hong Kong 9.0 5.2 Fiii 8.0 4.6 S~ngapore 6.0 3.4 W. Samoa 5.0 2.9 Canada 4.0 2.3 Germany 4.0 2.3 Other Countries 10.0 5.7 Total Outgoing 174.0 100 Hong Kong Singapore United Stales United Kin0dom C9.2%) © International Institute of Communications 1991 107- Philippines and its Major Telecommunications Correspondents (t990) Destination Outgoing MiTT in Share of Millions* Total (%) United States 51.4 51.0 Japan 12.5 12.4 Hong Kong 9.3 9.2 Taiwan (ROC) 3.7 3.7 Australia 3.1 3.1 Singapore 2.9 2.9 United Kingdom 2.1 2.1 Saudi Arabia 1.8 1.8 Guam 1.6 1.6 Canada 1.3 1.3 Korea, Repub. of 1.3 1.3 Germany, FR 1.2 1.2 Other Countries 8.5 8.4 Total Outgoing 100.7 100 Slalas © International Institute of Communications 1991 108 Table 48 Taiwan (R.O.C.) and its Major Telecommunications Correspondents (FY 1989) Destination Outgoing MiTT in Share of Millions* Total (%) United States 56.2 26.5 Japan 43.3 20.4 Hong Kong 36.7 17.3 Singapore 8.3 3.9 China (PRC) 8.1 3.8 Malaysia 6.1 2.9 Philippines 5.4 2.5 Thailand 5.3 2.5 Canada 4.5 2.1 Germany, FR 4.4 2.1 Korea, Republic of 4.1 1.9 Australia 4.0 1.9 Indonesia 4.0 1.9 United Kingdom 3.3 1.6 France 2.1 1.0 Other Countries 16.1 7.6 Total Outgoing 211.9 100 © International Institute of Communications 1991 i09- Table 44 Thailand and its Major Telecommunications Correspondents (FY 1989) Destination Outgoing Mill" in Share of Millions* Total (%) United States 29.6 22.1 Japan 27.0 20.2 Singapore 16.3 12.2 Hong Kong 15.1 11.3 United Kingdom 10.1 7.5 Taiwan (R.O.C.) 9.0 6.7 Australia 6.3 4.7 Italy 4.6 3.4 France 4.2 3.1 Spain 2.8 2.1 Korea, Republic of 2.5 1.9 Sweden 2.4 1.8 Canada 2.2 1.6 Indonesia 1.6 1.2 Other Countries 0.2 0.1 Total Outgoing 133.9 100 Hong Kong (1 Austratl~ (4. Stot~ (22.1 Comities (6.6%) United Klngdom Slngopore (12.2%) Japan C20.2%) © International Institute of Communications 1991 ii0 Tl~e Glolxzl Te, l~omm~mic.stI’oI~s Traffic Report 1991 The telecommunications traffic statistics in this report were primarily compiled by the International Institute of Commtmieations (IIC) from an independent survey of service providers. In some cases, the data have been estimated based upon annual reports, government publications and industry interviews. The following publications were also consulted: Yearbook of Statisti~ (ITU, Geneva, 1991); Intem.ational Fernspreehstatistik (Siemens, Munich, 1991); The World’s Telephones January. 1987 88, (AT&T, Indianapolis, IN, 1989); and The World’s Telephones January. 1989 (AT&T, Indianapolis, IN, 1990). A common accounting unit known as MiTT -- Minutes of Telecommunication Traffic -- is used throughout the report. Unless otherwise stated, MiTT refers to paid minutes of public voice circuit traffic including operator assisted calls. Depending upon national conditions, therefore, MITT may include voice and non-voice (eg., facsimile, slow speed data) traffic. For a discussion of the origins of MiTT and its various applications (eg., economic forecasting, competition policy, geography), see G. Staple and M. Mullins "Telecom Traffic Statistics MiTT Matter", Telecommunications Policy, Vol. 14, No. 2, June 1989, pp. 105- 128. Carrier traffic statistics do not include traffic from foreign subsidiaries or investment interests, unless otherwise stated. Calendar year data have been used wherever possible; fiscal year data are used elsewhere (eg., the U.K., France, Japan, Taiwan, Australia). Traffic data compiled in calls for certain countries and service providers have been converted to MiTT based upon average call lengths, exchange lines in service and national calling patterns. For a further discussion of the basis for deriving MiTT from call data, see Appendix A to Global Telecommunication Traffic Flows and Market Structures (IIC, London, 1989). 111 McI Preparation Of This Report Was Supported, In Part, By A Grant From MCI Communications Corporation THE GLOBAL TELECOMMUNICATIONS TRAFFIC REPORT IS PUBLISHED ANNUALLY B Y THE INTERNATIONAL INSTITUTE OF COMMUNICATIONS (I I C), LONDON