CITEL WRESTLES WITH INTERNET CONNECTIVITY AMID MARKET DOWNTURNS

One dilemma for some countries and operators is that economic conditions worsened in last few years as telecom deregulation was taking full effect, several panelists said. That was case in Argentina, whose deep recession dated back to second half of 1998, said Marcelo Kohan, that country’s communications secy. Communications companies continued to make network investments, driven by concerns about remaining competitive in newly deregulated environment, he said. Those infrastructure investments remained on track even as consumer demand signals would have indicated that such investments wouldn’t be justified, Kohan said. He and others said challenge that remained for region was larger development issue of how to increase economic well-being of consumers so they could buy telecom services in greater numbers. “We must get these citizens back into the market -- that is the main challenge we face today,” Kohan said in panel discussion moderated by BellSouth Vp-International Frank Urbany.

Another challenge for govt. regulators in such dire economic conditions is how to craft financial emergency measures that remain compatible with goals of full liberalization, Kohan said. Predilection of some in such climate is to go back to pretelecom liberalization climate when factors such as price controls were in place, he said. “We should not allow the solutions of the emergency process to lose the achievements of the past,” he said. Third regular assembly meeting of CITEL originally had been scheduled for Argentina but was moved to Washington after Buenos Aires was beset with protests late last year related to its financial straits. Argentina has undergone cash crunch since it defaulted on its International Monetary Fund debts last year. Among U.S. govt. attendees at Mon. meeting was FCC Comr. Martin, U.S. Deputy Asst. Secy. of State for International Communications David Gross, FCC International Bureau Chief Donald Abelson and Richard Beaird, U.S. coordinator for international communications and information policy at State Dept. ITU Secy.-General Yoshio Utsumi was to speak at meeting at our deadline.

Dilemma for regulators in current economic crisis is extent to which they will be called on to do more than enforce existing regulatory requirements, many of which may have been crafted before recessions took hold, said Fernando Xavier Ferreira, pres.-Telefonica Group in Brazil. “The rules must recognize the dynamics of the marketplace and adapt themselves.” While pace of telecom infrastructure investments in Latin America in past decade have outstripped money spent in other regions, Ferreira expressed concern about drying up of capital to continue network buildouts. “The failure of a generation of investments puts in danger a whole chain of development,” he said.

In other areas, Jose Pileggi Veliz, chmn. of CITEL’s permanent executive committee, warned against spectrum policies designed to maximize govt. revenue at expense of service rollouts. “Spectrum must be free,” he said at opening session of assembly of CITEL, arm of Organization of American States that coordinates govt. and private sector efforts involving telecom and information technology. Pileggi said he advocated competitive process to assign spectrum and acknowledged that there would be services for which govt. should assign charges. But he said legislation that focused on revenue without consideration of service accessibility “must be changed.” He stressed extent to which govt. regulation not only must compel incumbent operators to open networks to competitors but to confer “entitlement” on citizens to have access in first place. “The infrastructure of public networks should be a right of citizens to use,” he said. Pileggi also emphasized need for Internet content to reflect local cultures and not just to provide “canned products… We have to have our own content in our own language -- that’s very important.”

Draft action plan on connectivity that’s on table at CITEL meeting offers regional strategy for Americas to implement cooperative regulatory and investment strategies in areas such as infrastructure, utilization, content and financing. While definition of “connectivity” is broad, Pileggi said it was key to report and required sign-ons by politicians who had to be educated as to what communications connectivity meant. That term “led to some raised eyebrows,” he said, referring to definition that outlined “society’s internal capacity for communication” on global scale through use of telecom, information technologies and content. Among important goals of that effort are implementation of previously adopted mutual recognition agreement in region on testing and standardization of telecom equipment, he said. “Equipment doesn’t have to be re-tested but can be used directly,” Pileggi said. Other goals include elimination of tariffs that create barriers to invest in sector and development of technology to allow deployment of universal services, he said.

Draft document itself cites as vital element of its infrastructure components “the establishment by the telecommunications regulatory agencies, with private sector support, of policies or programs to promote wide connectivity in the country. These policies and programs should include a plan for universal access to infrastructure, including the Internet.” It urged broad definition of what constituted infrastructure, including not just wireline, cellular and Internet-based communications but community radio and community-based broadcast. Draft said govts. were “by no means solely responsible for financing connectivity.” It said they should consider creating mechanisms to increase investments, including supporting already established “Americas Connectivity Venture Fund.” Document recommends that govts. assess whether marketing regulations are adequate to promote e-commerce, “for example by ensuring that the taxation regime does not penalize users of e-commerce (tax neutrality).”

Several panel speakers said they still were grappling with relatively low teledensity rates (number of phones per 100 residents) in some countries at same time as they were eyeing broader Internet access. In Brazil, teledensity is about 10%, said Juarez Quadros do Nascimento, Brazil’s communications minister. In Costa Rica, regulators looked to example of Korea, where Internet access at rates around 1500 kbps costs about $24 per month. Alvaro Retana, Costa Rican asst. mgr.-telecom of the Instituto de Electricidad, said that by comparison, U.S. model’s rates of 254 kbps cost closer to $30-$40 monthly. To that end, Costa Rica has embarked on investment programs to replace legacy, copper- based networks with infrastructure of IP over fiber, Retana said. Goal is to move from 4-layered network for handling range of services to 2-layer network for voice, data, and images.