ITU Secretary General reprises old narrative on settlements regime

Posted by on June 24, 2012  /  1 Comments

My previous post on the subject of ITU moves on the Internet elicited a response: a link to a speech made by the ITU Secretary General where he says the criticisms are ridiculous. This is good. Let’s see what his main argument is:

There are many important issues that may be addressed at WCIT, but I would like to focus on one broader issue in particular: how do we ensure sufficient investment in broadband network infrastructure?
. . . .
Everyone wants mobile broadband and the benefits it will bring. But few seem willing to pay for it – including both the over-the-top players, who are generating vast new demand through their applications, and consumers, who have become accustomed to unlimited packages.

This is putting tremendous pressure on mobile operators, who need to invest in high-capacity broadband networks in order to maintain quality of service as demand rises.

At the same time, as broadband becomes increasingly viewed as basic infrastructure for social and economic development, operators are being asked to extend the reach of their networks to under-served populations.

For those of us who have been in the field long enough, this has a familiar ring.

In the bad old days, before the mobile revolution created almost ubiquitous voice connectivity, the argument was made that access-network operators in developing countries (usually a monopolist) needed the resources to build the networks out into their rural areas and thereby connect the unconnected. The settlement-rate regime was seen as the conduit through which resources would flow to the access-network operators so that they could connect the unserved, thereby increasing network externalities for all.

Money did flow. But few got connected. The money permitted cross-subsidization of the national calls made by government and elite groups who were the only ones with phones. It made the telcos reliable sources of revenue for the government. It enriched the managers and employees of the state-owned monopolies.

It was only when the access-network and international markets were liberalized that billions of people got connected and were able not only to talk inside their countries but outside too. Yes, massive investments were needed to build out the networks to connect these people. But those investments came from private sources, not from settlement revenues or even on the basis of business plans built on settlement revenues as a significant component. In most countries, the new entrant access-network operators were excluded from participating in the international market and were thereby unable to get any significant contributions from the international traffic they originated or terminated. Yet, the investments were made and the networks built out.

1 Comment

  1. Allow me to explain, “It enriched the managers and employees of the state-owned monopolies.” They amassed humungous volume of wealth from implementing new projects and maintaining the networks. Political masters and bureaucrats of the line-ministry shared the loot. Milk and honey stopped flowing after the private sector has emerged with innovations. The old guards have tightened their grip on domestic backhaul and international gateways. Bypassing the traffic appeals more than smuggling drugs or arms. ITU or its Broadband Commission is too romantic on such pressing issues.