Conclusion

In most of the twentieth century, governments subsidized telecommunications monopolies and guaranteed their rate of return on investments in exchange for monopolies building and maintaining national networks. At that time, network construction was so capital and labor intensive that it was felt that only large monopolies had the necessary resources to build secure networks. However, as new technologies such as microwave, fiber optics and computer-controlled switches were developed, private companies became capable of supporting backbone networks to reliably carry enormous amounts of traffic. Carriers today are building wireline and wireless networks and adding innovative new Internet, data and messaging services.

However, no single competitive carrier has emerged with the financial strength to provide high-speed service to all of the subscribers in metropolitan, suburban and rural areas. As has happened in the United States and recently in parts of Europe, fiber connects large financial institutions, hospitals, high-rise apartments and multistory office buildings in developed nations and in parts of Latin America to high speed services. These sites have numerous options for data, Internet access and low-priced voice service. Consumers and small and medium-sized businesses in rural and suburban areas do not.

Cable TV so far offers the most promising means of reaching the largest number of consumers in Europe and Latin America. Fixed wireless might emerge as a better option in emerging markets and possibly rural areas. NTL and United Pan-Europe Communications (UPC), the largest cable TV companies in Europe, are burdened with heavy debt. NTL reported a $3.1 billion loss in 2000. At any rate, it requires enormous investments to install either type of infrastructure and, in the case of cable TV, to upgrade it for cable modem service. Even in places where cable TV is available, it is for the most part sold only to residential customers so small and medium-sized businesses are left out of the loop.

A major problem for telecommunications providers is the large capital investment required to build new networks. Private companies and shareholders do not have the patience to wait years for returns on their investments. The recent economic downturn combined with massive debt levels are an enormous problem. Another problem is the vast amount of investment lost when large numbers of telecommunications and Internet companies went out of business.

It is clear that new models need to be explored so that telecommunications companies retain their innovative edge but basic telecommunications as well as affordable high-speed Internet access are made available to consumers and small businesses as well as large enterprises. Some interesting proposals and undertakings are already being looked at. In the UK, British Telecom has suggested that it be broken up into two entities: one that supplies local loop infrastructure to carriers at wholesale prices and one that sells service to end users. This has the possibility of improving cooperation between new carriers such as DSL providers and the British Telecom wholesale company. They will no longer have an incentive to delay service to providers they view as competitors. Another interesting approach is the Japanese government's pledge to invest in high-speed Internet infrastructure for consumers. The Japanese government also is subsidizing the deployment of 3G service by not charging for new spectrum capable of supporting 3G devices.

Others in the industry are looking at cooperation between carriers in building out 3G networks and upgrading cable TV. NTL is in talks with United Pan-Europe Communications about sharing resources to upgrade its facilities. Cellular providers in Europe are in negotiations to share costs of building parts of their third generation networks. Some of the challenges facing the world telecommunications markets are:

• Building high-speed infrastructure to serve consumers where revenues might not be high enough for carriers to earn back their investments in the short term

• Making high-speed infrastructure in cities and local rural areas available to many carriers for innovative service without building duplicate, wasteful local facilities

• Finding the resources to build 3G networks

• Providing adequate capacity for voice on fast growing cellular networks

• Finding the means to supply affordable, basic service to consumers (many of whom have no phone service) and commercial entities in emerging markets

Solutions to these problems are critical to the deployment of next-generation Internet and wireless services.