Advertisement
YOU ARE HERE: LAT HomeCollections

Wiring the World / THE NEW AGE OF GLOBAL TELECOMMUNICATIONS : The Industry : Battling for a Piece of the Global Pie : Telecommunications is now the world's largest economic sector, with importance that surpasses that of oil, steel--even computers.

July 26, 1994|LESLIE HELM | TIMES STAFF WRITER

Seventy years ago, AT&T was a trademark recognized around the world as synonymous with the telephone. Then regulators forced the communications giant to spin off its international operations and focus on building a telephone infrastructure for America.

Today, as AT&T and other U.S. companies move out to take on the world market, they face a bittersweet reality. The once-sleepy telecommunications business has grown to be the world's largest economic sector, with a strategic importance that surpasses that of oil, steel or even computers.

And while U.S. companies were looking inward these past decades, fragments of the old AT&T empire have emerged as leading world players. Alcatel of France is the world's largest supplier of telecommunications equipment--it has a 50% share of the rapidly growing Chinese market--in large part because of the assets it acquired from ITT, the international operation that was broken off from AT&T. NEC Corp., Japan's leading communications and computer company, was once a subsidiary of AT&T's Western Electric.

These companies have strong footholds in world markets that are growing at an astounding rate in size and importance. Anderson Consulting, which counts most of the world's leading companies as its clients, figures the telecommunications sector will represent a $1.1-trillion industry by the year 2000, about double its current level.

"When you buy a shirt at the store, a computer automatically registers its color, style and size," says Ali Sabeti, chief of telecommunications for the World Bank. But that information is useless, Sabeti says, unless it can be sent over phone lines to the factory in Hong Kong so new shipments will arrive to replenish shelves while the item is still in demand.

"Cheap labor isn't enough to be competitive," Sabeti says. "Countries that don't have access to (telecommunications) networks can't participate in the global economy. They are just left out."

*

From China to the Czech Republic, from Mexico to the Middle East, nations are responding to this new reality. Advanced land-line, mobile and satellite telephone systems are being installed in record numbers. This year, as many as 100 million more phones lines will be connected to the expanding web that is the world telecommunications system.

"One of the major drivers for growth today is the realization of the importance of telecommunications to the economy," says Roger Dorf, president of AT&T's Caribbean and Latin American network systems operations. "People have discovered that there is more of a willingness and ability to pay (for telecommunications) than anybody ever imagined."

In China, which has only one telephone for every 100 people, people are shelling out $1,800 just to get on a two-year waiting list for phone service. That's many times the average annual salary. China wants to quadruple the number of phones it has in service by the end of the decade.

India has committed itself to spending $15 billion to modernize its telecommunications sector, although it is more reluctant than China to permit foreign competition. It has plans for a network of hundreds of satellite dishes to bring telecommunications to remote areas.

Industrialized nations such as Britain, Japan and the United States are taking the next giant step forward, making plans for massive investments in new interactive systems that can offer education, video on demand and home shopping as well as wireless telecommunications.

It is hard to judge just how much of a market this telecommunications boom represents to U.S. companies. Only six countries outside the United States have anything approaching open markets: Australia, Britain Chile, Japan, New Zealand and Sweden.

In France, only France Telecom can offer phone services. And it buys most of its phone equipment from national supplier Alcatel. The same is true of Deutsche Telecom, which has a virtual lock on the German market and buys most of its equipment from German supplier Siemens. Although Japan is nominally open, industry analysts don't expect much of its planned $200-billion-plus investment in a new information superhighway over the next two decades to go to foreign companies.

*

But freer world markets may be just a matter of time. Anderson Consulting figures that countries representing more than half of the world market have either begun the process of dismantling their old telephone monopolies or have concrete plans to do so in the coming years.

Those that delay too long may find major multinationals choosing to locate their operations in nearby countries where phone services are cheaper and better. Already, Britain has become a major communications hub for Europe, and Australia is emerging as a hub for Asia.

Advertisement
Los Angeles Times Articles
|
|
|