This talk is a part of a more extensive discussion on ICT4D Information and Communications Technology for Development) and Global Governance, but as I only have 8 minutes, I’m going to focus on changes in national network infrastructures worldwide and why we now have global data transfer and very cheap international voice and video calls. I want to discuss the transition in network architecture technology and telecommunications organizational models and how these led to the global Internet we have today.

In what was termed “liberalization,” “deregulation,” and “privatization” of national telecommunication systems, global pressures led to a radical transition in network architecture and organizational models. Often called “PTTs” for “Post, Telegraph, and Telephone,” these government entities underwent a transition to state-owned enterprises (SOEs) that were placed in competitive environments (liberalization), deregulated, and then sold off to private investors (privatization), in whole or part.[1] In this process, the global Internet emerged.

My analysis has been developed in the context of a larger set of ICT4D developments since 1945 that I examine elsewhere in detail, but because of limited time, I will focus primarily on networks. I got involved in ICT4D in the mid-1980s when I interned at the East-West Center (EWC) in Honolulu. The EWC was noted for its research on Communication for Development (C4D), including work on satellites for development such as India’s INSAT and Indonesia’s Palapa satellites.[2]

I arrived when they were putting together a project on National Computerization Policies, based on France’s Nora-Minc Report: The Computerization of Society (1982). We wanted to make the turn to computer technologies and their role in development (primarily agriculture, education, and health).

Because we had a good relationship with the Pacific Telecommunications Council (PTC), where I did my first internship, network infrastructure was a strong part of the East-West Center’s agenda on development. Also located in Honolulu, PTC brought a wide range of telecom professionals to Hawaii for their annual conference. This meant government representatives, corporate executives, academic researchers, etc. I remember that my first presentation on the national computerization policy project had International Telecommunications Union (ITU) Secretary-General Dr Pekka Tarjanne in the front row.

How did the transformation occur? Pressures started to build in the 1960s as global companies wanted better telecommunications, including more computer communications. Along with transportation, these were seen as “permissive” technologies, allowing expanded financial, manufacturing, and marketing capabilities. Undersea communications increased at a rate of one a year since 1956, and the Space Race put satellites in geosynchronous space orbits to facilitate international connectivity and the usability of earth stations. By the time of the Moon landing, NASA realized Arthur C. Clarke’s vision of “rocket stations” providing global radio coverage.

The dynamics of the global economy changed when President Nixon took the US off the Bretton Woods’ gold-dollar standard in 1971, ultimately leading to significant changes in the world’s telecommunications networks. Nixon ended the convertibility between the dollar and gold, figuratively “closing the gold window” and stopping the bleeding of gold from reserves at Fort Knox and the Federal Reserve Bank in New York. The dollar subsequently crashed in value, incentivizing OPEC to raise oil prices and creating havoc in global currency and debt markets.

At the same time, new technologies were emerging with the commercialization of the Cold War’s semiconductor and telecommunication technology. Intel released the first microprocessor in 1971. Reuters historically provided a news service but created a new virtual marketplace for foreign exchange trading (FX). The monetary volatility of the 1970s oil crises made Reuters Money Monitor Rates for FX quite profitable. SWIFT provided international messaging of money information between banks.[3]

Banks also used network technologies to create syndicated loans to recycle OPEC money, soon to be called “petrodollars.” Where did they recycle them? Primarily countries that needed the money to buy oil, but also development projects worldwide borrowed the dollars. Thus grew the “Third World Debt Crisis.”

The debt crisis became the lever to “structurally adjust” countries towards a more open and globalized system. The Reagan administration tasked the IMF with ensuring that countries looking for debt relief started to follow a specific agenda that included the liberalization and privatization of their PTTs. Liberalization meant encouraging new companies to compete against the national and international incumbents, while privatization meant the process of transitioning from public to private ownership.

Sometimes called “spreadsheet capitalism,” this process often involved inventorying and valuing assets such as maintenance vehicles, telephone poles, digital lines, etc., so the company could become a State-owned Enterprise (SEO), valued by investment banks, and eventually sold off to private investors. These changes started to open up the PTT telecom structure to the introduction of new technologies, including the fiber optic lines and packet-switching routers needed for the emerging World Wide Web.

The 1980s was a decade of significant changes in the global political economy, particularly in the US and Great Britain and their relationship with the rest of the world. Both Ronald Reagan and Margeret Thatcher wanted to counter the growing criticisms from the South countries while moving their economies out of the “stagflation” that rocked the oil crises-riden 1970s. Both were influenced by “Austrian” economists Frederick Hayek and Ludwig Von Mises. Reagan was also influenced by George Gilder’s Wealth and Poverty, that promoted a potlatch “big man” theory that partly inspired his tax cuts. Both wanted to reduce the influence of unions.

Reagan was hesitant about breaking up the AT&T telecommunications company, but Thatcher was quite aggressive about privatizing the British PTT. US’ “Ma Bell” telephone monopoly had been under various forms of anti-trust attacks in the previous decades, especially to make more spectrum available and add terminal equipment. Spurred on by other companies like MCI and Sprint, AT&T was eventually broken up by having to divest its local service to the “Baby Bells” and Bell Labs, inventor of the transistor. The new ATT got to hold on to a lot of cash and its long-distance business, and was finally allowed into the computer business.

I moved to New Zealand in 1992 to study the transition of the country’s PTT to a State-Owned Enterprise (SOE) and then the privately owned “Telco.” The government had started a process of organizing and valuing the “Post Office” into a SOE in the early 80s, following the Reagan-Thatcher preference for private ownership. Then, it sold off 49% of its shares to two Baby Bells, Ameritech and Bell Atlantic (later integrated into Verizon), partially to pay off one-third of the debt it acquired as part of the Third World Debt Crisis. The majority of shares were meant for domestic control.

The “financial revolution” of the 1980s was based on dramatic changes in the 1970s and continued into the 1990s with the formation of the World Trade Organization (WTO). Headed first by Renato Ruggiero from Italy, and later Michael Moore, the former PM of New Zealand, the WTO opened up the trade of all types of communications and information products and services with the ITA in 1996 in Singapore and pushed for further privatization of the telecommunications networks the following year in Geneva.

A speech by Vice President Al Gore to the International Telecommunications Union (ITU) on March 21, 1994, signaled the importance of building a “Global Information Infrastructure.” But even more important was Gore’s participation the next month during the final negotiations of the GATT’s Uruguay Round that led to the establishment of the World Trade Organization (WTO).

The General Agreement on Tariffs and Trade (GATT) originated with the International Monetary Fund and the World Bank at the 1944 Bretton Woods Conference in New Hampshire. This event laid the foundation for the post-World War II financial system. It established the US dollar–gold link that Nixon severed in 1971. It had more trouble trying to ratify the International Trade Organization (ITO), which the US Senate rejected. Negotiations continued, and the GATT avoided the ITO’s fate in 1947 and entered into force on January 1, 1948, but it lacked a solid institutional structure.

It did, however, sponsor eight rounds of multilateral trade negotiations from 1987 to 1994, including the Uruguay Round that integrated services in 1987. International trade negotiations historically concentrated on physical goods, while services were only seriously considered in the November 1982 GATT ministerial meeting. The Uruguay’s Round of trade negotiations led to the General Agreement on Trade in Services (GATS) as part of the World Trade Organization (WTO) mandate. The GATS extended the WTO into unprecedented areas never previously recognized as coming under the scrutiny of trade policy.

The WTO would shape the Internet and its World Wide Web. While the Clinton-Gore administration was initially hesitant about the “Multilateral Trade Organization,” it saw the World Trade Organization as a way of enforcing key trade priorities and policies on global communications and e-commerce.

For networks, it meant replacing telecom monopolies with a more liberalized environment that included outside equipment vendors and service providers and replacing PTT public ownership with private enterprises that would be more competitive and friendly to outside investment. For e-commerce, it meant replacing detailed bureaucratic regulations with a legal environment for fairer and more effective competition. It also meant eliminating cross-subsidies between profitable and unprofitable services that hindered corporate expansion with non-market pricing and subsidies based on social goals rather than market activities. The WTO would shape the Internet and, precisely, why it could globalize and become so cheap.

Summary and Conclusion

The 1970s and 1980s saw significant technological advancements (like undersea cables, satellites, and microprocessors) and economic changes (such as the end of the gold standard and the oil crises) that reshaped global telecommunications. These factors, combined with the financial revolution and the restructuring of global trade policies, pushed countries toward a more open and competitive telecommunication environment.

The global transition from government-controlled Post, Telegraph, and Telephone (PTT) systems to privatized and liberalized telecommunications led to the creation of the global Internet. This shift involved deregulation and the sale of state-owned enterprises, as well as opening the market to competition and new technologies. The network structure is important for the development of ICT4D.[4]

The establishment of the World Trade Organization (WTO) in the 1990s played a crucial role in furthering the liberalization of global telecommunications. This included the introduction of the General Agreement on Trade in Services (GATS) and the promotion of a legal environment that favored competition, which helped globalize the Internet and reduce costs for international communication.

The liberalization and privatization of national telecommunication systems, driven by technological advancements, economic shifts, and global trade policies, were key factors in the development of the global Internet. These changes not only facilitated the creation of a more interconnected world but also made international communication more accessible and affordable.

Citation APA (7th Edition)

Pennings, A.J. (2024, Aug 14). ICT4D and the Global Network Transformation. apennings.com https://apennings.com/telecom-policy/ict4d-and-the-global-network-transformation/

Share

Notes

[1] Herb Dordick and Deane Neubauer, “Information as Currency: Organizational Restructuring under the Impact of the Information Revolution.” Keio Review. No. 25 (1985)

[2] Meheroo Jussawalla was our resident communications development economist at the East-West Center, who also worked closely with Marcellus Snow of the University of Hawaii. Norm Abramson, the creator of ALOHANET, would also walk across the street from the Engineering School at the University of Hawaii. Herb Dordick and Deane Neubauer made a substantial contribution with “Information as Currency: Organizational Restructuring under the Impact of the Information Revolution.” This paper became very influential in my graduate studies.

[3] For my graduate work I swiched focus to financial technology, particularly the telecommuniations regulatory framework for international banking. I was intrigued by the emergence of new networks such as CHIPS, SWIFT, Reuters, and the shadowy world of eurodollars. Reuters was very innovative with its Stockmaster and particularly its Money Monitor Rates. By the 1980s, SWIFT was pioneering the use packet-switching, but the earlier X.25 network and X.75 gateway protocols developed by the ITU and adopted by most of the PTTs around the world at the time.

[4] Information and Communication Technologies for Development (ICT4D) is one of the specializations for the undergraduate B.Sci. degree in Technological Systems Management here at SUNY Korea and part of my research agenda.

© ALL RIGHTS RESERVED

---

Anthony J. Pennings, PhD is a professor at the Department of Technology and Society, State University of New York, Korea teaching broadband policy and ICT for sustainable development. From 2002-2012 he was on the faculty of New York University where he taught digital economics and information systems management. He also taught in the Digital Media MBA at St. Edwards University in Austin, Texas, where he lives when not in the Republic of Korea.

Related

Category: enabling frameworks, sustainable development, telecom policy and net neutrality, telegraphic political economy
Tags: AT&T > Money Monitor Rates > PTTs > SWIFT > The Society for Worldwide Interbank Financial Telecommunications (SWIFT) > WTO agreement on basic telecommunication services

Comments

Comments are closed.