10. A short history of telecommunications reform

The year of 1984 was the starting date for the modern history of telecommunications. It saw the introduction of competition into the US market and privatisation in the UK with the divestiture by AT&T of seven regional Bell operating companies (the Baby Bells), the privatisation of British Telecom as a public limited company and the establishment of the British Regulator, Oftel.¹


The same year also saw the publication of the report of the ITU’s Maitland Commission (“The Missing Link”), which firmly established for the first time the link between access to telecommunications and development, and drew attention to the benefits networks could deliver to emergency operations, social services, administration and commerce.

Thus began two decades of parallel and sometimes intersecting work on telecommunications reform and communications for development programmes, culminating in December 2003 with the World Summit on the Information Society²
held in Geneva. WSIS is a test of whether the telecommunications revolution can meet the twin demands of liberalisation and public service and reconcile the interests of big business, governments and civil society.

Reforms in the telecom sector that emerged in the 1980s responded to the prevailing pro-market climate in many OECD countries. They had a number of negative consequences, including the laying off of workers and inflated returns on investment that led eventually to the burst of the telecom bubble in 2000. They were nevertheless progressively transferred to the developing world through the policy prescriptions formulated by the international development agencies – with the World Bank and WTO in the lead. More and more telecommunications operators came onto the market – the old monopolies, now at least partly in private hands, invested heavily in incumbent operators in developing countries. In an effort to level the playing field for new competitors, new regulatory rules were applied to encourage competition. As competition was introduced into the long distance and international markets the subsidies that had traditionally been transferred from highly priced long distance services to local calls to support universal service were put in question. Regulators introduced new pricing mechanisms to encourage efficient operations and promote competition. Countries were encouraged to build a firewall between governments and regulators.

By early in the third millennium more than 106 telecom operators had been privatised and 110 regulators had been established. The pace of international debate on telecommunications and development had speeded up as well. The collapse of the telecommunications markets in the early years of the new century has not seriously called into question the liberal agenda. In fact the scarcity of investment funds has probably increased the pressure to reform the sector.