Alphabet soup

Luís Ángel Fernández Hermana - @luisangelfh
18 April, 2017
Editorial: 90
Fecha de publicación original: 21 octubre, 1997

That which hasn’t happened in a year, can suddenly happen in an hour

In less than a year our dictionary of acronyms has been enriched at a speed worthy of the digital age. Having grown up with Telefonica, we knew that somewhere nearby there was FT (France Telecom), DT (Deutsche Telecom) and BT (British Telecom) and, perhaps, one or two other acronyms. From far across the seas, came the distant echo of the gigantic ATT, and we were aware of the fact that a few Baby Bells were also at play, and those really in the know assured us that NTT was Japanese although they had never come into any direct contact with it. And that’s as far as it went. Suddenly, this brief dictionary has expanded at a stroke as a result of mergers – friendly and hostile attempts to buy somebody else’s shares and grandiose strategies by telecommunications mega-operators who want to rule the world. The curious thing, the new thing, is, that some of them have attained the name “mega” all of a sudden over the last few days, and some of them have even got it at the exact same moment that they have chosen to let us and their victim know that they were about to gobble them up with thousands and millions of dollars. This is what is happening as WorldCom tries to buy up MCI after having snacked on Compuserve, although now GTE has appeared on the scene with a better offer which safeguards the agreement of the former with BT and leaves ATT in the cold. Are you following me? All in all, over a couple of weeks, these acronyms have moved 73,000 million dollars in offers aimed at polishing each other off. Between them they move a volume of business that transcends 300,000 million dollars a year.

And the ball is not over yet, quite the contrary, in fact they have only struck up the first few bars of the first dance because the Cinderella they are all after is this electronic media which brings, amongst other things, to your screen. But that’s not all, it also brings you voice and images, in other words, if you like you can ring me up and ask for the editorial or complain that it’s Tuesday already and it still hasn’t appeared on the Net, all via the Internet. Telephonic communication via the Internet, that’s the crux of the matter. It is the Gordian Knot of all this agitation, although the majority of the “other” media haven’t realised it yet. This is the first time that the telecommunications industry is undergoing changes brought about by something that is happening on the outside and not within it. Internet began to be exploited by operators “above” the telephone system, and now it is already providing this service. A deregulated network is demolishing its highly regulated predecessor. This is the first time this has occurred and it’s giving rise to surprising opportunities for small but dynamic companies, who by making a few carefully planned purchases could own telephone services on the Internet thereby dealing a crushing blow to some of the big fish that owe everything to their vast infrastructures for transporting voice.

So, what’s the secret? The fact is that telephone companies have never taken the Internet seriously and now they are paying the consequences. At the moment, more than 16 million host computers provide services to some 60 million users, a figure that is still quite small compared with the 741 million telephone lines on census at the beginning of 1997. But, the annual compound growth rate of Internet host computers was 103% from 1987-1996, while telephone lines only just reached 6%. The youthful energy of the Internet, therefore, means that it is predisposed to offering very juicy markets as opposed to the period of maturity that is afflicting telephone lines. If we add to this the other services that operators will be capable of offering when fibre optic cable is installed as well as high speed systems of data transfer, such as Asynchronous Transfer Mode (ATM), we start to catch a glimpse of the Net’s Little Red Riding Hood’s big ears and to understand why there are so many wolves lurking around. The problem is, as always in these cases, that the PTTs have no control over these new technologies and the services they supposedly provide. It’s because of this that the big, traditional acronyms are suddenly finding themselves harassed by new ones which want, at their cost, to forge themselves into legendary Wild West figures: young gunmen always knew that they could only become famous by gunning down the fastest cowboy in the area.

PTTs have discovered, in the first place, that Internet’s router system, initially designed for data transmission, can also supply voice, fax and video –unexpected competition on the external wing. In the second place, tariffs in the Net are based on flat-rate charges which don’t depend on distance or the volume of data transmitted, while telephones have usage-based tariffs dependent on distance, duration and volume. In other words the Internet represents fatal competition for the rigid tariff structures of telephone companies, above all because it operates precisely through the public switched telephone networks (PSTN). Finally, PTTs are still subject to the states who protected their monopolies and who got them to where they are now. Internet, on the other hand, flourishes in a world without boundaries. Seen from this perspective, the words of Bernard Ebbers, CEO of WorldCom, when he tried to buy MCI (breaking, in passing, the alliance of the latter with BT), are significant: ” After all, we are from the same country so understanding one another will be easier”. Of course, in the world of transnational companies, the nationality of corporations has been a fundamental factor in the politics of alliances, not to mention fusions. In addition, MCI is one of the two operators on the market that has proposed the creation of a global backbone network for Internet with the aim of diverting the traffic of data from the backbone network of the US created by the National Science Foundation (NSF), which is beginning to saturate telephone lines there (the other is the alliance of PTTs headed by ATT).

We could mention other factors that differentiate the Internet from the big traditional telecommunications operators, such as the fact that the growth engine on the Net has been the youthful, disrespectful (in a manner of speaking), flexible and dynamic culture of the computer sector, just the opposite of the classic policy of investments of the telephone companies that require clearly regulated strategies and, are therefore slow, very slow, compared to the turbulent nature of the Internet.

Within this framework, in addition, there are other interesting contradictions. When the social benefits of the Internet are discussed, there is always the question of differences between rich and poor countries. Will the latter benefit from the Internet or, on the other hand, will the Net widen the already vast gap between them, dividing info-rich from info-poor forever? The answer to this question is not an easy one, but, for the moment anyway, it seems that it is more positive (they will be able to benefit) than negative. The expansion of the Internet depends on the digitalisation of networks which gives countries that are just starting to build their infrastructures the advantage over those whose infrastructures are already mature and need to be converted to the digital system. As I said, this is the case at present, although many other factors need to be taken into account. For example, to mention a matter of no little importance, the number of personal computers available to the population and the ability of this population to use them. Another factor, undoubtedly, is the tariff structure for accessing the Internet in these countries.

All this indicates that, along with the fixed and mobile networks in existence at present, the Internet already represents a third, complementary network, but it shows all the signs of acquiring an unwonted importance on the world communications map. While the annual compound growth rate of cell phone subscribers was 52% between 1991 and 1996, the rate of Internet users during the same period was 67% and that of Internet host computers was 85%. According to the UIT, from now to the year 2001, the corresponding figures will be 24%, 38% and 46% (see table).

The challenge for operators is clear. The sweet cake they have been feasting on since the beginning of the century is beginning to go off. These companies, whose acronyms were the figureheads leading the great fleet of telecommunications, are suddenly discovering that the most important ocean is somewhere else and that on those seas new acronyms and new ways of doing things are afloat. In addition to these new telephone companies which are preparing to offer voice, data and images via the third network there are also the cable television network operators –who, after a few months of fascination with digital TV, have begun to include high-speed Internet on their agendas–, satellite operators and re-salers of services through what the UIT calls “overbuild” networks. Too many new vessels for the old telephone company sea wolves.

If we add to this the announcement the marriage between the Internet and television, the alphabet soup is served. It’s the first dish on a menu that overtly announces the arrival of a different kind of society. How we build that new society is another matter.

Translation: Bridget King.