The World’s Networks : The U.S. Still Lags Many Nations in Developing Digital Communications Systems. But There Are Signs of a Comeback.
In Singapore, electronic networks have cut the time it takes the city-state’s avid traders to process shipments from two days to two hours.
In Japan, already blessed with one of the world’s best phone systems, engineers are testing a fiber-optic network that would allow households to use videophones and watch theater-quality images sent over the same lines.
France has tied the French together with a videotex system so ubiquitous that singles use it to find dates and travelers find it convenient for train reservations.
The United States may be the world’s greatest highway builder, but when it comes to information highways, Americans have been outclassed. Progressive telephone monopolies in places such as Singapore, France and Japan have invested heavily in telecommunications over the past decade, rapidly overtaking Ma Bell’s phone system in networking speed, quality and efficiency.
In a study released this year by the Center for Telecommunication Management at USC, America ranked ninth in the world among countries moving to higher-quality digital communications systems.
While Singapore, Japan, Hong Kong and France are virtually 100% digital, the United States is only halfway to that point. And while Japan’s Nippon Telegraph & Telephone has invested $19 billion a year--nearly one-third of its revenue--to upgrade its network despite plunging profits, America’s regional phone companies cut investments over the past decade.
“If I were in the U.S. where management capability is measured on a quarterly basis, I would be fired,” says NTT President Masashi Kojima.
Lately, though, there are signs that American firms are ready to break out. Regulatory and technological barriers holding back a flood of innovative new services are beginning to crumble, and hungry U.S. phone companies, awakened by competition from years of monopoly slumber, are aggressively expanding in foreign markets.
Mergers among some of the biggest U.S. telecommunications players--witness Bell Atlantic’s recently announced decision to merge with cable giant Tele-Communications Inc.--have begun sweeping away more than a decade of bitter wrangling between cable and telephone companies.
The new order is likely to open up the huge infrastructure of the cable companies to deliver a smorgasbord of new services from home banking to video-on-demand. Dozens of start-up companies, newly aggressive Baby Bells and a competition-hardened AT&T; could quickly turn this country into a major exporter of telecommunications equipment and services.
“I’m optimistic,” says Bill Davidson, who co-authored the pessimistic-sounding USC study, which was funded by U.S. telecommunications companies. “Suddenly there is life in this industry.”
American companies enjoy a number of advantages. From Microsoft to Paramount, the United States holds a commanding lead in software, the crucial content and operating systems that are a major reason networks exist.
And the lack of state-run telecommunications and computer companies has left the field open to nimble private concerns and new technologies. U.S. venture capitalists, once wary of the multimedia business, are suddenly tripping over each other to back start-ups.
Consider Broad Band Technologies of Durham, N.C. Over the past week, the telecommunications start-up’s stock has rocketed to $48 a share from $39. Why? The company has a $100-million deal to supply equipment that will be used by Bell Atlantic in its drive to offer interactive television services in New Jersey. Subscribers could shop, send checks or pick videos, all from a terminal attached to the TV set.
Broad Band Technologies already has equipment being used in trials in Taiwan, Korea and Puerto Rico, says John Gorman, the company’s chief financial officer. Analysts project the company’s revenue will nearly triple next year, to $45 million.
In an environment where technology is changing rapidly and the potential for new services seems limitless, America’s no-holds-barred approach may yet be more effective than the highly centralized approach of the Germans and the Japanese.
“I don’t want to be standardized,” says Richard T. Liebhaber, chief technology and strategy officer for MCI Communications. “I want to use whatever technology is available.”
Still, most experts agree that America has much to do to make the various technologies now in use--from cellular phones to computers and cable television--work together much as local roads feed freeways. America’s information network is less a highway system than a collection of railroads all running on different gauge track.
Disagreement over technology standards, for example, has slowed the adoption of Integrated Services Digital Networks, or ISDN, a technology developed by Bell Laboratories that offers faster transmission and a potential standard for communications systems.
A nationwide ISDN network, for example, would make it easier to connect all the nation’s schools and libraries into a single network, says Eric Benhamou, chief executive officer at network supplier 3COM and chair of the regional “smart valley” effort to upgrade Silicon Valley’s telecommunications infrastructure.
But today, ISDN is available from just a few hundred of the 12,000 central office switches nationwide that handle communications traffic. By contrast, Singapore, Japan, France, Germany and Hong Kong offer ISDN to virtually all customers. Disagreement over standards here also explains why higher quality digital cellular phones have been introduced more rapidly in Europe than in America.
“There is confusion over technological leadership,” says Benhamou. “It is unclear who has responsibility for the whole.”
While America’s long-distance carriers such as AT&T; and MCI have built great trunks of optical fiber, the infrastructure gets far weaker when it comes to connections to business and the home.
“We have a great information highway but there are no access ramps,” says Davidson of USC. He is frustrated because he can’t get telephone companies to service his consulting company with high-speed lines that would allow him to transfer and edit several-hundred-page documents from distant locations.
The Internet, a U.S. based network of networks, is metaphor for America’s approach. Initiated by the government to connect defense contractors and the military, the Internet has exploded to encompass perhaps 20 million users worldwide, flourishing as a network in a state approaching blissful anarchy.
Users can access libraries worldwide and speed data from one corner of the globe to the other for next to nothing. But the Internet requires new users to learn obscure computer commands that make it inaccessible to most Americans, and only recently has it begun to offer much in the way of commercial services.
Compare that to the situation in France, where the government established a nationwide videotex network accessible to 40% of the population by giving away free terminals that are so easy to use that millions of people in France and the rest of Europe use the service to access more than 18,000 services offering everything from home shopping to pornography.
Singapore, in an effort to build the world’s most advanced communications infrastructure, is backing such services as Teleview, a new system that will begin by offering home banking and shopping. Also in an effort to boost the use and development of on-line services, students at one campus are being given laptops with wireless modems from which they can access class schedules and library information.
America’s decentralized approach to building a telecommunications infrastructure carries yet another disadvantage. While AT&T;’s breakup opened the American market to foreign telecommunications suppliers, most markets around the world remain closed.
Partly as a result, the United States ran a $492-million deficit last year in telecommunications trade, basically thanks to Japan’s $2.1-billion surplus with the United States in that sector.
The move toward interactive video could temporarily make matters worse as Japanese companies supply some of the equipment for the new networks.
For instance, Japanese communications giants NEC Corp. and Fujitsu Ltd. are making inroads into the market for ATM (asynchronous transfer mode) switches, a new technology that could be critical in the age of interactive video. ATM helps transmit information at blinding speeds by first reducing data into common digital “bits,” processing them and then reassembling them into video, voice or data signals when they get where they’re going.
Earlier this year, Nynex Corp. chose Fujitsu switches for ATM trials to deliver movies over phone lines to customers in New York and New England. Bellsouth Corp. has also ordered Fujitsu switches. NEC’s ATMs are playing a core role in ambitious efforts by Williams Telecommunications Group of Tulsa, Okla., to provide leading-edge telecommunications services.
But America’s free-market approach to telecommunications may emerge as a strength as the blending of the cable and telephone sectors moves the industry into the uncharted territory of interactive video.
“We have a richness and diversity in our infrastructure that exceeds anything anywhere else,” says Ralph J. Andreotta, director of technology/infrastructure at AT&T.;
Oswald Ganley, executive director of Harvard University’s Program on Information Resources Policy, warns that Singapore’s government could make the wrong technological bet and send the entire country off in the wrong direction.
Japan’s NTT may lead the country to move more quickly toward such predictable utilities as video telephones, while America’s competitive environment may work more quickly to develop new services.
MCI’s Liebhaber sees monopoly markets as easy pickings, much like AT&T;’s was soon after its breakup.
“It’s a $1-trillion global industry,” he says.
The World’s Networks
Singapore
* Government monopoly pushing for world’s most advanced telecommunications infrastructure.
* Plans for fiber optic lines to every home by 2005.
* Specialized computer networks serve industries from shipping to medicine.
France
* Government monopoly runs Minitel, world’s most popular videotext system, where 10,000 companies offer goods and services and users can access nationwide directories.
* Minitel reaches 40% of France’s population versus U.S. online services, which reach 5% of Americans.
* Monopoly policies have retarded growth in other areas: just 1% of French have cable TV.
Britain
* Open competition spurs new cable and satellite TV services such as Rupert Murdoch’s Sky TV.
* Big improvement in telephone services after privatization.
* Boom in electronic mail and other data communications.
* Basic phone service in some places via satellite and cable lines.
Germany
* Government monopoly holds back growth in areas such as cable. Also weak in satellite services.
* Great advances toward a completely digital phone system.
* Plans networks that would allow videoconferencing among six major cities.
* In East Germany, effort to link 1.2 million homes with optical fiber by 1995 is part of ambitious $37 billion plan to upgrade aging phone system.
Japan
* Initial strong leadership in telecommunications stalled by weak earnings of quasi-monopoly NTT.
* Plans to spend $450 billion by 2015 to create fiber optic network into homes. Fiber optic and digital offerings now available to most offices.
* Held back by scant use of personal computers due to complex ideograph writing system.
* Latest service: online karaoke.
United States
* Regulated free-market approach, high quality phone service.
* High ratio of phone lines to residents and high degree of cable penetration.
* Falling investment by phone companies and, on a per-line basis, by cable firms.
* Leader in the crucial content--movies, TV programs, published works--that any information highway will need.
Sources include:Telecommunications Infrastructure Policy and Performance: A Global Assessment. Center for Telecommunications Management. University of Southern California.
