Comment

Does monopoly mean stagnation?

J. Dondoux

Through a case study of the telecom- munications environment in France, the President of the European Conference of PTT Administrations sets out his views on monopoly and deregulation. He challenges the view that a telecommunications monopoly is an obstacle to progress, arguing that each country must evolve the system that is best suited to its economic, cultural and sociopolitical contexts.

Mr Dondoux is Director-General, CEPT, Ministere des PTTs, Direction Generale des Telecommunications, 38-40 rue du General Leclerc, 92131 Issy les Molineaux, France.

'There is no one path that is valid for all countries'

Deregulation of telecommunications has been occurring in a number of countries - through both legislation and the evolution of existing systems. Such deregulation is often presented as the necessary condition for the success- ful development of new types of net- works and services that technical and technological change make possible in a successful interlinking of telecom- munications and information tech- nology. Further, it would enable users' needs to be met more satisfactorily and ensure better quality at lower cost.

This scenario is often contrasted with the monopoly which exists in the majority of countries, including the industrialized countries where tele- communications systems are highly developed, and it is often argued that a monopoly in telecommunications presents an obstacle in the path of the kind of development outlined above.

Without discussing in detail the interest that the re is, or will be, in pursuing deregulation in countries where an industrial monopoly has created itself under exclusive operating rights, I would point out - getting away from the French ca se - that a monopoly does not necessarily mean stagnation. There is no one path that is valid for all countries. To argue for deregulation is to take a position which is no longer based on technical considerations, but on political ones.

Internationally, one can identify significantly different kinds of tele- communications regimes, as much in respect of the legal framework as in the way that they are organized. Such diversity reflects political, economic, social and cultural differences which have not arisen overnight but date f~om the development of different civiliz-

ations, modes of thought and economic structures. Such differences will undoubtedly continue to be a phenom- enon of the future development of telecommunications.

However, this diversity is not restricted to a simple distinction between two regime types - monopoly on the one hand and deregulation or free competition on the other. Particularly in the French case, monopoly and liberalism are inter- twined. Here, there is a flexible tele- communications regime even though certain legislative and regulatory provisions may give the impression of a strict legal monopoly. Indeed, the con- cept of monopoly has evolved in response to new technical develop- ments. Such evolution has notably been enshrined in the French law on audiovisual communications passed on 29 July 1982.

In France, in distinction to the postal services in which the State Adminis- tration legally has the exclusive right to operating services, telecommunications are not subject to a monopoly regime.

The legislation gives the Minister for PTT the power to authorize the minis- try or a third party to establish and operate a telecommunications instal- lation. The major characteristic of the French telecommunications regime is thus the authorizing powers invested in the minister for P'VF as a representative of the state, and not a monopoly regime.

Further, this overseeing authority is not arbitrary. It is subject to precise legal regulations which guarantee with legal controls uniformity of treatment for users, in the framework of the neutrality and permanence of the civil service. Consultative mechanisms have

268 TELECOMMUNICATIONS POLICY December 1983

'This environment has produced most of the advantages that would be expected from a monopoly regime'

'Innovation has not been impeded, and perhaps has even been stimulated'

also been set up with users to consider questions concerning telecommuni- cations developments.

It is undeniable that these authoriz- ing powers have been exercised, since the end of the last century, in a very flexible and liberal way. Although it is true that the networks are generally financed, constructed and operated directly by the ~ administration, the market for terminal equipment has been marked by essentially flee compe- tition since 1920. Also, the P I T admin- istration has always been content to equip and maintain only the very low- capacity private exchanges. Thus a large private sector in installing and maintaining private exchanges has developed. The private firms employ 15 000 people and have a turnover of more than 1.5 million. Finally, the public authoritie~ have always been keen to ensure that genuine industrial pluralism prevails, which manifests itself in technical and economic competition.

This environment has produced most of the advantages that would be expected from a monopoly regime: a service accessible to everyone through- out the country; the development of reliable networks; consistency in the supply of services; identical tariffs for everyone throughout the country, which facilitates regional development and does not give advantages to high- density communications traffic (com- plete deregulation would lead to creaming off larger than average profit from such traffic); common standards which make for fewer user problems and give economies for all by avoiding the need for interfaces.

These advantages far outweigh the disadvantages (eg inertia, surcharges, etc) associated with a natural or legal monopoly. In fact, innovation has not been impeded, and perhaps has even been stimulated. I cite three examples:

Development of digital switching. In 1970 the first public digital exchange in the world was opened in Brittany. At the end of 1982 digital switching represented nearly 20% of the equipment in the national network, and this is scheduled to rise to 50% by 1986. This will enable a service switched

Comment

at 64 kbit/s to be inaugurated - an important step toward the Rrseau Numerique ~ Intrgration de Services (RNIS) (ISDN).

• Telematics. The development of telematics was specified in the context of a major programme set up by the French government at the instigation of the French PTF. In 1978 the TRANSPAC packet switching network was inaugur- ated. This had been under study since 1973, and it is now much more successful than had initially been foreseen. In 1979 public videotex was introduced. In October 1982, the entire country had access to a professional video- tex network. This enables pro- fessional users to communicate by videotex with all databases con- nected to TRANSPAC. From 1984 terminals will be installed in more than 300 000 locations. The Electronic Directory is already in its operational phase, with 50 0 0 0

terminals installed, and this will rapidly be extended to other regions (Picardy, the Paris region, etc). Also, in 1984 the satellite TELECOM 1 will enter into service; part of its capacity will be devoted to digital services for business use, and will be as

important at the national level as at the European.

• Cable videocommunication net- works. The French government has recently set up a major pro- gramme for wiring the whole country with a 2-way cable net- work using fibre optics tech- nology. Technical development will be carried out by the PIT. The network will eventually enable the user to receive, originating from the same source, satellite, tele- vision, telephone services, tele- matic services, and interactive videocommunications programmes. This is the most interesting example in favour of an operating monopoly for all telecommunica- tions. How can one deny that fibre optics naturally create a 'national monopoly'? Why deny oneself the economic advantages?

TELECOMMUNICATIONS POLICY December 1983 269

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'One criticism is that an operating monopoly leads to the persistence of a poor quality of service'

'Supplying telecommunica- tions services is also likely to become a sociocuitural and political concern'

One critisicm is that an operating monopoly leads to the persistence of a poor quality of service. This was undeniably the case in France until the mid 1970s, yet it can be argued that this was not a result of the existence of a monopoly, but that it derived from a clear lack of investment in the tele- phone by society as a whole. Today, quality of service is comparable with that of any of the most advanced countries. As for tariffs, although some years ago they were a little higher than the world average, today they are comparable with most of the rest of the industrialized world, and compare favourably for the business user with those applied by other European countries and North America.

The French example, when com- pared to those of North America and, importantly, the UK, shows that it would be wrong to think that the regime adopted in one country is a model which will necessarily evolve or be imposed in other countries. In the first place, this is because the interests of the countries involved will not necessarily converge in all respects.

However, there are three technical factors which ought to be taken into account by the public authorities, whichever country is concerned. First,

in the next ten years there will be no slowing down of the rate of innovation in telecommunications. Consequently, lively technological and economic competition is necessary in industry. Finally, fibre optics are likely to become powerful transmitters of the various types of forseeable traffic. Supplying telecommunications services is thus likely to become not only an economic or industrial concern, but also sociocultural and poetical.

Every government, cognizant of its national interests, must thus imple- ment a coherent policy, taking into account social, economic and cultural data which are relevant to its own country's circumstances.

I hope that the French telecom- munications poficy has been clearly specified and may now be better under- stood: it is characterized by a certain voluntarism in the operational sphere and the desire for healthy competition at the industrial level, while constantly defending the legitimate interests of the national economy. I hope also that this article bears witness to my pro- found conviction that one can pursue a variety of means to the same end. It is in this spirit that I approach the presidency of the CEPT (European Conference of F I T Administrations).

270 TELECOMMUNICATIONS POLICY December 1983