CHAIRMAN REED E. HUNDT
FEDERAL COMMUNICATIONS COMMISSION
WORLD AFFAIRS COUNCIL
October 22, 1997
(As Prepared for Delivery)
FROM BUENOS AIRES TO GENEVA AND BEYOND
All of us gathered here today recognize that the recent revolution in information
technology has permanently changed the way we do business and the way we live our lives.
The digital information age we are entering is not only transforming the communications
business itself. It is impacting almost every aspect of daily life -- from education to health care
to commerce. It is enabling us to transcend distance and time, and to contemplate linking the
world's disparate populations together through a global information highway. As Vice
President Gore said at Buenos Aires, "we are on the verge of a revolution that is just as
profound as...the Industrial Revolution."
This rapid technological revolution has also been an engine of job creation and
economic expansion. Of the 12 million jobs created since President Clinton took office, 8
million have been in the information sector, which now comprises one-seventh of the U.S.
Moreover, a developed information infrastructure is essential to the growth of the vital
services sector of all economies. Services already account for 70% of the GDP of industrial
countries and 40% of developing countries' GDP. And trade in services is growing on a
worldwide basis at twice the rate of trade in goods. The information revolution is a catalyst of
expansion in the services sector, and in other sectors of the economy from agriculture to
The information revolution is also fueling the creation of a global economy.
Improvements in technology and increased competition have led to a dramatic decline in
communications costs on a worldwide basis. In real terms, the cost of a three-minute call from
New York to London is almost 100 times lower today than it was in 1940. Cheaper
telecommunications services and the growth of new services like the Internet have reduced the
cost of distance and increased capacity, creating new markets for the long-distance provision of
goods and services and expanding the effective scale of markets.
Today, commerce is increasingly conducted by electronic impulses. Capital moves
around the globe with astounding speed as trading follows the sun, from Tokyo to London to
New York. The Internet is fast becoming a worldwide electronic marketplace, and will be a
conduit of tens of billions of dollars in commerce by the year 2000. It is clear that the global
economy of the 21st century will be driven by the flow of information over the networks we
are building today.
The ability of countries, businesses and individuals to participate and compete in this
new global economy will be shaped by telecommunications policy. While some benefits of
technological advancement are inevitable, governments -- and regulators -- wield great
influence over the nature and impact of technological innovation through the policies they
pursue. The four years in which I have had the privilege of serving as chairman of the FCC
were a period in which the Commission was very much at the forefront of the communications
revolution. Many critical issues came before the FCC for resolution, and they required us to
make important and occasionally controversial policy judgments. I believe we have helped set
the communications revolution on the right course these past four years.
At home, we have rewritten or repealed rules to open up to competition all five lanes of
the information highway -- telephony, cable, wireless, satellite and broadcast -- and ushered in
a new era of communications competition. We enacted the Telecommunications Act of 1996,
the first top-to-bottom overhaul of the telecommunications regime in over sixty years. The Act
enshrined a pro-competitive, deregulatory communications policy and opened previously
closed local telephone monopolies to new entrants. In implementing the Act, we have
established practices and standards for interconnection, unbundling, and universal service that
are being studied and copied by countries all over the world. We have completely reformed
our wireless market: introducing auctions for spectrum (thus far, we have auctioned 1,164
MHz of spectrum, netting in excess of $15 billion dollars for the American taxpayer),
encouraging flexible use of spectrum and ending the local wireless duopoly. We have
encouraged competition to cable through new technologies, including satellite and wireless cable. And, we licensed the first private global satellite systems in history.
Just as important as the rules we have written are the ones we refused to write. Few
actions have done more to promote economic growth and innovation than our refusal to
regulate the Internet or to force onto the Internet the outdated, cumbersome regulatory regime
that has so long harnessed circuit-switched telephony.
But, as the communications links that bind us extend more readily around the globe, the
international dimensions of communications policy have assumed greater importance. And, as
new services like high-capacity satellite systems and the Internet are able to provide seamless
global service, the regulation of communications services inevitably transcends national
The increasingly transnational dimensions of communications policy prompted us to
centralize our international functions and create an International Bureau at the FCC three years
ago this month. The International Bureau's third anniversary -- and the end of my tenure --
seem a fitting time to review our achievements in the international arena, which have been
many, and to look ahead to tomorrow's challenges. Indeed, the policies we have pursued
abroad in promoting competition and private investment and in pursuing open markets will
bear directly upon our ability to reap the benefits of the information technology revolution at
From Buenos Aires to Geneva
It was Vice President Gore who first called upon the nations of the world to join in
building a Global Information Infrastructure. Addressing the International
Telecommunications Union's first development conference in Buenos Aires in March of 1994,
the Vice President envisioned a planetary network that would transmit messages and images
across the globe with the speed of light. This Global Information Infrastructure would circle
the planet with information superhighways connecting a global community. It would also be
the circulatory system of national and international economic growth.
In a sense, the Global Information Infrastructure being proposed is analogous to a Bill
of Rights for the Information Age. Inherent in the GII is the idea that access to the information
highway is an essential element of citizenship in the digital age. In addition, like the Bill of
Rights, the GII is a revolutionary concept whose full implications will unfold over time,
assuming greater power and meaning. The first step in this process was the United States' call
to end state enterprises and introduce competition and independent regulation into the world
market in telecoms services.
The reality is that building a global information infrastructure that would extend to all
corners of the globe is a highly capital-intensive endeavor. Even today, about 45 countries in
the world have less than one telephone line per 100 inhabitants. It requires billions of dollars
to build out the underdeveloped infrastructures that exist in vast regions of the world. These
funds will probably not come from multilateral institutions or from national governments.
That's why the Vice President counseled reliance on open and competitive markets and flexible
regulatory regimes. Under these conditions, the private sector could and would, he suggested,
build out a global information infrastructure.
But governments and regulators had to do their part to attract private investment as well
as to secure private commercial financing on reasonable terms. In the early 1990's, private
commercial financing of the telecommunications infrastructure in developing countries was
only 20%, with the bulk coming from the monopoly profits of state enterprises. By 2000, the
World Bank estimates that private lending will account for 55% of telecoms infrastructure
financing in the developing world. That trend is clearly related to the liberalization that is
Since Buenos Aires, Vice President Gore has consistently exhorted the international
community to embrace competition and private investment in the telecommunications sector.
In 1995, at the G-7 Global Information Society Conference, he pledged to remove restrictions
on foreign investment in the U.S. telecoms sector for all countries willing to do the same. His
challenge was quickly taken up by U.S. policymakers and regulators, and his leadership in this
area provided the impetus for February's landmark WTO agreement.
The enactment in the United States of the Telecommunications Act in February of 1996
provided further impetus and a blueprint for a global accord. The United States had just
enacted the gold standard in pro-competitive deregulation and hastened the demise of
monopoly telephone service domestically. The United States also sent a clear message to the
world that we were fully prepared to live up to the commitments that our negotiators were
The WTO Agreement on basic telecommunications services that was signed in Geneva
last February was, as my esteemed and indefatigable colleague Charlene Barshefsky said, "one
of the most important trade agreements for the 21st century." The Agreement exports the
American principles of open markets, private investment and competition to nations that
together account for 95 percent of the $600 billion world market in telecommunications
services. It eradicates deeply embedded traditions of telecommunications monopolies,
allowing new entrants to deploy innovative, cost-effective technologies across the globe.
The agreement, which takes effect on January 1, 1998, will allow U.S. companies to
enter previously closed foreign markets and develop competing networks for local, long
distance and international services. In many cases, these markets have been entirely closed to
competition until now. Before the Agreement, only 17 percent of the world's 20 top telecom
markets were open to U.S. companies. Now virtually 100 percent will be. Just last year,
94% of worldwide telecommunications revenues still flowed to monopoly providers. This is
simply unacceptable, and thanks to the WTO agreement, it has already begun to change.
The range of services covered by the Agreement is broad. From satellites to submarine
cables, from cellular phone service to fixed wireless service capable of serving rural and
underserved areas, the Agreement's market access opportunities
cover the entire spectrum of innovative technologies pioneered by U.S. industry.
The agreement has four principal components: market access, the adoption of
regulatory principles, liberalization of foreign investment, and satellite offers.
In the area of market access, all 69 countries agreed to permit competition from foreign
suppliers, with 52 countries making commitments to provide full market access for all services
and facilities. These market access offers account for 97% of all international traffic among
WTO member countries.
65 of the 69 signatories adopted the transparent pro-competitive regulatory principles
set forth in the WTO Reference Paper. These principles, which cover interconnection of
competing communications suppliers, competition safeguards, and transparent and independent
regulation of services, incorporate the principles that are at the heart of the
Telecommunications Act of 1996.
All 69 countries made significant offers on foreign investment, with 48 of the offers
allowing full private investment.
Finally, 52 countries made full offers guaranteeing market access for domestic and
international satellite services and facilities, with an additional 7 guaranteeing market access
for selected satellite services and facilities.
To say that the Geneva agreement will fundamentally alter the landscape of the global
telecommunications market is an understatement. But it is also too soon to rest on our laurels.
Those who maintained that there was no need for a multilateral approach because liberalization
was happening on its own missed a critical point: proclaiming markets to be open is just the
first step. There must be pro-competitive rules and independent enforcers to make competition
real. The WTO agreement raised the level of international competition standards to the highest
common denominator, rather than relegating the market to a hodge-podge of less exacting, less
timely national measures.
Implementation of the WTO Accord
Implementing the WTO Agreement will be no less challenging than negotiating it was,
and success hinges to a large degree on the willingness of signatories to adopt and enforce pro-competitive deregulatory principles. The United States will issue next month a comprehensive
restatement of the rules that will govern foreign entry and participation in light of the WTO
accord. The Commission proposed in its Notice of Proposed Rulemaking in the Foreign
Participation proceeding that it would no longer use the Effective Competitive Opportunities
Test for carriers from WTO countries, but would replace it with a regime that encouraged
entry by and competition with carriers from all WTO member countries. The Commission has
also proposed a similar framework for non-U.S. licensed satellites. But the Commission has
also indicated, and rightly so, that it would implement safeguards in the international market to
ensure that competition is free and fair and to prevent carriers with market power from abusing
their position -- just as we do in the domestic market.
As we implement our WTO commitments through our forthcoming orders, we must
work closely with fellow WTO members to ensure that the market access commitments and
fair competition principles enshrined in the WTO Agreement and the Agreement's Reference
Paper are realized. First and foremost, competitors must be able to gain access to existing
networks at fair prices which will promote competition. And, they must be able to get that
access on an unbundled basis. If they cannot, competition will not take hold. So getting
interconnection right is key internationally, just as it is key to opening up local markets in the
Second, the transition from monopoly to competitive markets will require the
establishment of strong independent regulatory entities abroad. The United States is committed
to support the work underway in numerous international fora to help countries develop new
regulatory regimes and to turn the principles set forth in the Reference Paper into effective
statutes, regulations and rules. These would include, among others, clear and transparent
licensing rules and criteria.
Finally, because many of the signatory countries must pass ratifying legislation and
develop implementing regulations in order to give effect to their commitment to implement the
Agreement in January, we must monitor the timeliness and completeness of this near-term
implementation process. We must do the same for the commitments that are phased-in after
Although implementing the WTO Agreement looms large on the horizon, the future
presents other challenges as well, many of them driven by rapid technological innovation. A
decade ago, national telephone monopolies operating voice networks dominated the scene.
Today, the action is shifting to data networks. The Internet, the proliferation of digital
wireless networks, and the imminent launch of new global satellite systems are supplementing -- and supplanting -- existing voice networks. Although voice still accounts for 90 percent of
worldwide telecommunications, that figure is already significantly lower in the United States
and Europe. And, by some estimates, voice phone calls may account for as little as 10 percent
of all telecom traffic within five years.
This shift means that it will become easier and cheaper to send vast amounts of data,
and ultimately voice and video around the globe on new broadband packet switched data
networks. It also promises to bring increased competition to existing circuit switched
networks. But, as I know perhaps as well as anyone, no monopoly cedes its privileges easily.
Thus, one of the challenges facing U.S. regulators and their counterparts around the world will
be to promote emerging global democracy.
Nothing embodies this shift more clearly than the Internet. And there is perhaps no
more important priority than ensuring that this powerful medium remain free of unnecessary
regulation. This means, among other things, that the Internet must be kept free from heavy-handed content regulations so that it can continue to thrive as a free forum of ideas and
communication across borders and cultures. It also means fostering the growth of electronic
commerce by keeping the Internet free of new taxes when it is used to deliver goods and
We must not make the same mistakes with the new packet-switched technologies that
we have made with our existing circuit-switched network. We must allow competition to build
the packet-switched network and allow competitors to operate that network using the
technologies and standards that the market favors. This network should neither give nor take
market-distorting subsidies; it should be governed by the market forces of supply and demand.
Governments should, however, not hesitate to assist institutions like schools, libraries
and health care providers from purchasing in a competitive market the wonderful array of new
services offered by the Internet. Indeed, I hope countries around the world will adopt their
own versions of the landmark Snowe-Rockefeller provisions in our Telecom Act so that
students and learners in every country will be presented with literally a world of educational
Second, just as the Internet is revolutionizing the world of wireline telephony, so too is
the extraordinary variety of wireless services that can provide circuit-switched, packet-switched and every type of service under the sun. New satellite technologies and emerging
terrestrial wireless services have the capability to link people within and across countries as
With regard to satellites, the Commission eliminated the regulatory distinction
between international and domestic service and provided that all U.S.-licensed satellite services
could provide both domestic and international service. The Commission did so in recognition
of the fact that the satellite footprint does not recognize national boundaries. It had also
already licensed certain satellite services -- for example, the big low-earth orbiting satellites, or
Big Leos -- which are specifically designed to provide global services. The providers of such
services must still obtain licenses to operate from the countries in which they intend to provide
service, but we eliminated any separate domestic regulatory hurdle for providing international
Likewise, we must also promote direct broadcast satellite services as an alternative to
the cable monopolies. Since this type of service is not covered under the WTO Agreement, the
United States must negotiate individual agreements with other countries for the provision of
DBS. We concluded a DBS protocol, according reciprocal rights to provide DBS service, with
Mexico last Fall. I hope it will be the first of many such agreements.
Third, if we are to succeed in promoting new technologies, it is imperative that we
increase capacity. By this I mean getting licenses out in a transparent and timely manner and
enabling qualified new services to come to market. The United States must also vigorously
pursue spectrum allocations internationally for new services. If we do, we will make it easier
for new entrants to bypass existing bottlenecks in the communications infrastructure. We will
also facilitate real competition against the telephone monopolies and the cable cartels.
To do this will require better spectrum management. In recent years, the United States
has led the way in pressing the international community to allocate spectrum on a global basis
for new services like non-geostationary satellite systems. These mobile satellite systems and
the newer non-geostationary fixed satellite services have the potential to bring wireless service
to rural and underserved regions with poor or non-existent wireline infrastructures. They will
make the Internet more readily accessible around the world and will provide enhanced voice,
data and video services.
Fourth, if we are to ensure meaningful market access for these new technologies as well
as existing technologies, we must deal effectively with the next generation of trade barriers.
Now that we have broken the back of traditional market access barriers through the WTO
Agreement, we must make sure that countries do not erect new barriers to entry.
Unfortunately, the potential for the emergence of new non-tariff trade barriers exits. Let me
mention a few areas of concern.
Standards. Our approach to technical standards in the United States is to let the
marketplace, not governments, determine the technologies it prefers. The theory is that
competition is best served if we allow a thousand flowers to bloom. The Europeans, by
comparison, tend to favor the adoption of a single standard. Although this approach allegedly
provides predictability, it does so at the expense of competition and choice. It is in many
respects a throwback to industrial policy, where governments picked winners instead of
leveling the playing field and then getting out of the way.
There is work currently underway in the ITU on the adoption of standards for achieving
interoperability in a variety of areas, including the next generation of wireless. The outcome
of these deliberations could have significant market access consequences and we must be
vigilant in ensuring that standards don't become veiled non-tariff barriers.
Spectrum allocations. As I mentioned, the allocation of spectrum for new technologies
like satellites where the United States dominates are often a matter of contention
internationally. We must ensure that spectrum be allocated efficiently and according to the
needs of the marketplace -- and that new technologies are not held hostage to protectionist and
Licensing. Global satellite systems are particularly vulnerable to discriminatory
barriers. For example, country X could impose national gateway requirements, thereby saying
in essence "you are welcome to provide service but you must spend millions of dollars to build
a gateway within our borders first." Onerous earth station licensing conditions would be
another potential obstacle to entry.
Fifth, at the same time, we must be cognizant of the fact that if we are to establish
seamless global networks, we must ensure interoperability among divergent technologies and
networks. It is the United States' view that industry should take the lead in establishing
voluntary minimum standards for platforms of interface that would ensure interoperability.
Sixth, at the same time that we press forward with the development of new technologies
and fight to keep outdated regulatory restraints from being imposed on these technologies, we
should examine and eliminate wherever possible the vestiges of the monopoly era. Ranked at
the top of this list is the accounting rate system. The accounting rate system is a century-old
relic of the era of monopoly to monopoly system of international communications. It has no
place in the modern, competitive world. It limits competition, frustrates innovation and forces
consumers to pay prices far in excess of what they should.
The Commission took an important step in this direction this summer when we adopted
international settlement rate benchmarks. Settlement rates are the per-minute fees paid by
U.S.-licensed carriers to foreign carriers for terminating U.S.-originated calls. These rates
currently exceed foreign carriers' actual costs by multiples ranging as high, in some cases, as
high as 10 or 15 times cost. As a result, and because there are more outgoing calls from the
United States than there are incoming calls from virtually every single country in the world,
U.S. carriers paid $5.4 billion in 1996 to foreign carriers all told. This amount dwarfs the
total non-military U.S. foreign aid budget, which is under $2 billion annually. The bulk of
these payments constitute a pure subsidy of foreign monopoly carriers by U.S. taxpayers.
These inflated settlement payments have created artificially high international calling
rates for both U.S. and foreign consumers. U.S. consumers today pay on average 88 cents per
minute for an international long distance call versus 13 cents per minute for domestic long
distance. The FCC's Benchmarks Order mandates phased-in reductions in settlement rates,
which will bring them significantly closer to cost and ultimately lower the cost of international
service. In addition, the benchmarks will also diminish the ability of foreign entrants to
engage in anti-competitive behavior.
Seventh, we must maximize the utility of the existing multilateral institutions. My
friend Martin Bangemann of the European Union Commission has eloquently made the case
for greater multilateral cooperation and coordination. There are certainly areas in which this
would be desirable. For instance, the world's central bankers meet annually at Basel. These
meetings supplement the ongoing dialogue among the world's finance ministries. Perhaps
some regular forum should be established along similar lines for telecoms policymakers. We
could use that forum to exchange ideas and develop a code of best practices that would put
flesh (and teeth) onto the principles established in the Reference Paper.
As I have met with telecom ministers and regulators from around the world over the
past few years, it has become increasingly clear to me that we have one thing in common: we
are all new at the task of moving from monopoly to competition and we all have much to learn
from one other.International institutions can play a role in this process.
They could also play a role in monitoring compliance in certain areas. The ITU or the
OECD could, for example, monitor national regulatory regimes to assess compliance with
WTO principles in much the same way that the OECD's International Energy Agency
evaluates national energy policies.
Lastly, if we are to build a truly global information infrastructure, we must make sure
it extends to every corner of the globe. More than half the people on this planet have never
made a telephone call. There are more telephone lines in the city of Tokyo than on the entire
continent of Africa. Does this matter? It certainly does. Let us be clear: communications
service is no longer a luxury. It is a key to economic growth and an essential condition of full
participation in the modern world.
As I said at Buenos Aires, one of our central purposes in building this global
infrastructure must be to end the solitude of hundreds of millions of people around the world.
The information highway we are building must therefore span the gulf that separates the haves
and the have-nots. If it fails to do so, a majority of the world's population may remain have-nots forever.
We all know that the challenges of achieving universal service on a global basis are
many. But so are the opportunities. By exporting the principles of open markets, competition
and private investment through the WTO accord, we have paved the way for innovation,
efficiency and choice. We have enabled new mobile services to provide alternatives to the
wireline monopolies and to reach underserved regions. By developing and exporting rules for
free and fair competition, we have unleashed new technologies that will be able to furnish
phone service to remote regions of the world that have never had it.
In short, if we provide an open and competitive global market with fair and clear
regulatory regimes, the private sector will finance the development of a global
telecommunications infrastructure. I believe that if we get it right, we can succeed in building
the GII, and that putting us on course to do so will be one of the Clinton Administration's most