Patrice Flichy Liz Libbrecht

Towards a New Model of Communication Network Management

In: Rseaux, 1996, volume 4 n2. pp. 259-269.

Abstract Summary: It is often thought that a new management model for communication, totally opposed to that which prevailed until the 1970s, is emerging. By drawing upon various historical examples this article shows that numerous management models have existed in the telecommunications and broadcasting sectors. These can be characterized by five variables: monopoly/competition, public/private, universal/specific, mass/elite, and national/regional/international. Since the restructuring which is currently taking place influences these variables simultaneously, it is likely - as in the past - to give rise to a number of management models.

Citer ce document / Cite this document : Flichy Patrice, Libbrecht Liz. Towards a New Model of Communication Network Management. In: Rseaux, 1996, volume 4 n2. pp. 259-269. http://www.persee.fr/web/revues/home/prescript/article/reso_0969-9864_1996_num_4_2_3314

TOWARDS A NEW MODEL OF COMMUNICATION NETWORK MANAGEMENT

Patrice FLICHY

Translated by Liz Libbrecht

Summary: It is often thought that a new management model for communication, totally opposed to that which prevailed until the 1970s, is emerging. By drawing upon various historical examples this article shows that numerous management models have existed in the telecommunications and broadcasting sectors. These can be characterized 259

Patrice FLICHY

by five variables: monopoly/competition, public/private, universal/specific, mass/elite, and national/regional/international. Since the restructuring which is currently taking place influences these variables simultaneously, it is likely - as in the past - to give rise to a number of management models. 260

TOWARDS A NEW MODEL OF COMMUNICATION NETWORK MANAGEMENT against monopolies. By favouring comp etition, the public authorities defend the consumer. In Europe, on the other hand, whereas the Commission has fo rmulated a doctrine that is fairly similar to that of the United States, the same cannot be said for the member states. For a long time deregulation in Europe meant the opening of a public activity to private enterprise. Governments either privatized public institutions (British Telecom in the case of telecommunicat ions, TF1 in that of broadcasting) or opened the sector to private capital (Mer cury, Fininvest). This dual character of European deregulation (privatization, competition) indicates the complexity of the phenomenon, the dimensions of which need to be measured. In the seventies in Europe, the dominant model of communication services was often described as that of a public monopoly, proposing universal mass services on a national basis. Can it be said that deregulation constructs a dia metrically opposed model: competitive, private services for specific or elite publics on a regional or international basis? This does not seem to be the case. Contrary to Eli Noam's suggestion (Noam, 1987), there has been no unified model of the FIT derived from an absol utist conception of the State (of which AT&T was only a North American variat ion), and to which a patchwork of hun dreds of interconnected networks was to be opposed in the future, 'serving differ ent geographical zones, particular classes of user and types of service, with no clear-cut classification or possible partitioning'. The intention of this article is to show that the organization of com munication networks has been more diversified than is often believed, and that new forms in the future will 261

TOWARDS A

NEW COMMUNICAT MODEL OF

ION NETWORK MANAGEMENT

Patrice FLICHY

As far as telecommunication and broad casting policy is concerned, the eighties and nineties seem, to a large extent, to be the decades of deregulation. On the eve of total liberalization of telecommun ications in Europe, when intervention by the Brussels Commission has led to the establishment of new rules, it appears highly relevant to consider the different aspects of the transformation of public telecommunications and broad casting policies. We note, first, that the concept of dereg ulation does not have entirely the same meaning on both sides of the Atlantic. In America, as Jean-Paul Simon illustrated in an excellent synthesis (Simon, 1993), deregulation is characteristic of the political and legal tradition of fighting

Patrice FLICHY probably be even more diverse and will induce restructuring among the various organizational players. Five characteristics of communication services can be distinguished. These exist in one of two forms, as shown in the table below, although the items may be combined differently. The history of communication policy shows that the 1960s model of public service monopoly stemmed from a complex social con struction which led to a system that was relatively stable but never unique in Europe. The present restructuring is hardly likely to generate an entirely new model. In order to understand this evo lution, it is necessary to examine suc cessively the following polarities of communication systems. Competition Monopoly Public Private Universal Specific Mass Elite National Regional or international Monopoly/ competition Unlike Eli Noam, we assert that telecom munication services were not managed in a monopolistic framework from the out set. Although that was indeed the case in France, it was an exception; in the UK, as in the US, the telegraph was launched in a competitive context. In the US a private monopoly (Western Union) developed in twenty years. In liberal nineteenth cen tury England, it was through the first nationalization in modern history that the government set up a telegraphic monopoly. The same was true for broad casting. In England the BBC monopoly was established in 1922 only, while in France a mixed competitive system with public and private stations developed between the two World Wars. How can one explain the fact that, in most cases, there was a move from a 262 competitive to a monopolistic situation? The explanation given by economists is that the framework was naturally one of monopoly; economies of scale and of scope were such that a monopoly situa tion was more effective. The recent debate attending deregulat ion has fuelled numerous controversies among economists over this issue which seems to suggest that the effec tiveness of natural monopolies is not universally recognized. One may, howe ver, question whether the answer to such a controversy lies in economics. David Allen has shown that on a number of important questions concerning the economy of telecommunications (e.g. mixed local and long-distance call subsid ies, or the risk of minority rivals skim ming off the most lucrative links), widely diverse positions are to be found among American economists (Allen, 1992). In reality the grounds for breaking up AT&Twere far more legal than economic. In a much earlier book on the BBC monopoly, R.H. Coase, a recent Nobel prize winner for economics, considered that technical or economic justifications for monopoly are hardly convincing (Coase, 1950). Instead, he explained the constitution of the BBC by a series of historical coincidences which brought about a consensus in the British politi calclass. Behind the question of a monopoly lay other issues, primarily that of the public service. There are basically two political tradi tions in North America and Europe which lead to differing standpoints regarding monopolies. If we agree that there is a natural tendency towards the formation of a monopoly in a strongly capitalistic activity such as network management, the political establishment can either thwart this tendency by

TOWARDS A NEW MODEL OF COMMUNICATION NETWORK MANAGEMENT breaking up monopolies, or place them at the service of the nation, i.e. the nationalization of public services prac tised in Europe. However, within a Euro pean Community of liberal inspiration, as defined by the Treaty of Rome and agreements on the Single Market, the American concept is replacing the old tradition of a public monopoly. Public /private The principle of the public management of communication systems dates back to the nineteenth century. In France, mili tary and law enforcement considerations were successively invoked to justify State intervention, followed by the scarcity of networks (in this century, the scarcity of frequencies) and finally the Saint Simonian perspective of State intervention to build the infrastructures needed for economic development. In Britain, nationalization of the telegraph (1868) was demanded by the chambers of commerce who wanted a service to be available throughout the country and not only in the major industrial centres.1 In the United States, the first telegraph line built by Morse operated within a public framework. The weakness of the federal State in the middle of the nine teenth century caused it to relinquish any claims in this domain and the tel egraph was built by private enterprise. This choice was never to be called into question. When, during the First World War, the military powers wanted to insti tute a public monopoly over radio com munications, they were to encounter fierce opposition from the public who saw therein an unacceptable threat to its freedom. Thus, by the end of the nineteenth cen tury the models of public and private control had definitively taken shape as regards the telegraph. With the develop ment of the telephone this model was to be reconsidered. While in Germany the telephone was taken over by the postal administration, in France and England it was initially launched by private compan ies. In France it was soon to be nationa lized, with England following suit only later. During the inter -war period the question of the State's role in the man agement of the telephone was debated at length in both countries. In France pri vatization was seriously considered and finally, in 1923, the PTT was given mana gerial autonomy with the creation of an annex to the budget. Its management thus came to be of an essentially indust rial and commercial nature since it had to balance its accounts. It could not be subsidized from the general budget, and the telephone tax became the price of a service and no longer a tax. Similar measures were debated at length in England by several parliamentary commissions, but were finally rejected. It appears that in an area which concerned daily life so closely, control over the publ icwas considered indispensable and achievable by Parliament only (Garnham et al., 1994). It was only in 1961 that the Post Office obtained financial autonomy. In the historical evolution of the organi zation of telecommunications, another debate appeared in the 1980s: the dis tinction between operation and regulat ion. It is interesting to note that this separation between two functions, which is today being established in all Euro pean countries, was not immediately apparent to legislators. The proof is that when in 1982 Mrs Thatcher's govern ment put an end to the British Telecom monopoly, the latter retained the Post Office's powers in respect of the granting of licences. It was only in 1985 that an 263

Patrice FLICHY independent regulatory OFTEL, was created. authority, industry, or the staff of telecommunicat ions institutions. To conclude this reflection on the rela tionship between public and private, we note that there exist mixed institutions combining public and private capital. This type of structure has been function ing for a long time in the transport, water and telecommunications sectors. Telefonica, the Spanish operator, is the best-known example. Although initially it was a specific case related to Francoism, the recent expansion of Telefonica shows that, in a context in which dis tinctions between public and private tend to become blurred, a mixed com pany enables the State to maintain its prerogatives and the operator to enjoy private management.2 Universal/Specific Until the end of the nineteenth century, telephone operators mainly offered users point-to-point links which were not sys tematically switched. The network comp rised small zones, usually urban, that were often unconnected. It was at the beginning of this century that, primarily in the United States with the Bell Sys tem, another conception of telecommun ications emerged - that of a universal nationwide service allowing for commun ication between any two points in the network. Three elements define a univers al network: its scope, its uniformity, and its capacity for interconnection. For a long time the Bell System slogan 'One system, one policy, a universal system' was the watchword of telecommunicat ions operators throughout the world. Paradoxically, in Europe where the PTT administrations were theoretically grounded in the principles of a public service, obligations concerning a univers al service had not always been codified.

While the role of the State in communic ationshas been clarified since the 1920s, it should also be noted that the boundary between public and private is less clear-cut than it is often thought to be. In the UK the status of public corpo ration, which the Post Office did not have, was granted to the BBC in 1922 when it was still a private company. It subsequently became a public enter prise. The status of public corporation was also chosen for commercial televi sion. Thus, there is no one-to-one corr espondence between the ownership of capital on the one hand and the charact er of a public service, an institution's defence of the public interest, on the other. It was in broadcasting that the notion of a public service had the most specific meaning for a long time. For the pre-war directors of the BBC, this notion corr esponded to an educative and cultural goal. As Garnham so clearly shows (Garnham et cd., 1994), this project charact erized the Victorian tradition of education of the masses by the middle classes. In France, Italy and Germany, the post-war public broadcasting service fixed itself similar objectives, hoping to broadcast the major classics to the masses (theatre, opera, etc.). Since the mid -seventies the bottom has, however, fallen out of this educative and cultural mission. In telecommunications, an observer such as C.D.Foster considers that the notion of public interest is an 'empty box' that everyone can interpret as they see fit (Foster, 1992: 369, quoted by Bustamante et al). It does indeed seem relevant to wonder whether the public interest is that of the users, the national 264

TOWARDS A NEW MODEL OF COMMUNICATION NETWORK MANAGEMENT Garnham (1994) shows that it was only with the creation of OFTEL and the grat ingof a licence to that the obligations of a universal service were specified in the UK. The same applied to other Euro pean countries where it was also during the preparation of regulatory and opera tional missions that the obligation to provide a universal service was defined. sary to build complex systems of inter connection.

A risk therefore exists of these different networks not linking up into a coherent whole. Is the geodesic network an ill usion? Franois Bar and Michael Borrus suggest that it is: 'If geodesic domes are stable structures, it is precisely because they are made of regular and highly standardized polygonal cells assembled In the current context, in which telecom together in a coherent fashion. Try to munications are no longer limited to the build a geodesic dome with a few bricks, telephone, the question of a universal breeze blocks, constructional timber, a service is, however, presented in differ few sheets of plywood and some stones; ent terms. The development over the if it doesn't collapse immediately there's past two decades of data transmission a good chance it will end up looking like systems has profoundly changed the the tower of Babel.' (Bar and Borrus, telecommunications landscape. For the 1990: 32). wealthiest and most up-to-date users This universal/specific service debate is (essentially businesses) a wide range of not peculiar to telecommunications; a diversified services is available. Moreo similar dichotomy can be found in ver, technological progress has reduced broadcasting. In France, Dominique the cost of switching as compared to Wolton (1990) became a defender of gen transmission. We thus witness the eral-interest TV channels which he saw appearance of what Peter Huber (1992) as being threatened by the development calls a 'geodesic network'; rather than of specialized channels. He is of the being linked up in a hierarchical struc opinion that one of the basic tools in the ture, the network connects different pri functioning of democracy risks being vate corporate networks in a highly undermined. His plea would probably be flexible way. Whereas in the past the more relevant in the United States where telephone was, for businesses, like water thematic channels are becoming or electricity - that is to say, a network increasingly important; in Europe that to which they were connected but on does not seem to be the case. However, which they could not intervene - today that is no longer true. Firms see info the recent bankruptcy of the Cinq shows that the space reserved for general-inter rmation networks as an element of comp est channels is indeed limited. etitiveness, and therefore prefer to design their own systems. These enable Mass /elite them to innovate far more rapidly and thus to obtain a competitive lead.3 Howe Communication, telephone and televi ver, as soon as such firms want to sion services are today mass services extend their network towards other orga which, for a long time, were considered elite services. For almost eighty years nizations, they encounter difficulties. They may initially be able to impose their the telephone was considered in most choice on their suppliers or customers, European countries as being intended but beyond this first circle it is solely for a small sector of the 265

Patrice FLICHY population. In the sixties the French political authorities still considered that no mass demand existed for the tel ephone. The situation was entirely differ ent in the United States where a quarter of all households were already equipped by 1910 . Were cultural features peculiar to the US responsible for the difference in demand? Unquestionably so, as far as the rural world was concerned, for isola tion was far greater there than in con temporary Europe.4 One must, however, also take into account the particular dynamism of supply. Until the mid18908, the 'Bell System' had had a timid development policy for the telephone. The targeted clientele consisted essent ially of businesses; only a small per centage of all households were connected to the system. However, the day on which the Bell patents expired in the public domain and competition became possible, domestic demand grew steadily, especially in rural areas (farms are both businesses and homes). The Bell System' subsequently restructured its monopoly, but it was unquestionably the period of unrestrained competition (rival networks were not interconnected) that enabled the telephone to take off in the United States. Ought we to conclude that competition alone can spawn a mass communication service, as Milton Mueller (1994) suggests? The example of television which from the outset became a mass medium both in the US, the country of competition, and in Europe where a State monopoly had been insti tuted, seems seriously to undermine this argument if not to invalidate it. What can be said today of the mobile telephone which is developing on both sides of the Atlantic in a competitive environment? Some operators believe that it is a service intended solely for a 266 business clientele; others, particularly in the Scandinavian countries, see it, on the contrary, as a mass service. More broadly-speaking, two opposing strategies exist among the major operat ors. One, adopted by British Telecom, consists of promoting a limited market that of major corporations; the other, by contrast, has set its sights on mass mar kets - SMEs and households. Either way, the strategy adopted by France Telecom when it launched the videotext - i.e. households rather than businesses - does not seem to be relevant today. Contrary to widespread belief, the mass/elite distinction does not corre spond to that between a universal and a specific service. The telephone, from the 1920s to the 1960s, was a universal but elite service. We nevertheless note that the legitimacy of a universal service operator is far greater in the context of a mass service than in that of an elite ser vice. Moreover, as soon as a service has a mass dimension, it faces the question of universality. Thus, whereas a number of new services are being developed today in a specific and elite framework, as soon as they become mass services it will be neces sary, as in the case of the telephone, to give them a universal character. Californian consumers, for example, have demanded certain value-added services as part of an extended universal service. National/international From the outset European communicat ion networks adopted either a national or a regional form. In most cases they subsequently converged, in the post-war years, towards a strong national struc ture. The most centralized ones have not always been those that are generally thought to have been so. In Great

TOWARDS A NEW MODEL OF COMMUNICATION NETWORK MANAGEMENT Britain, for example, after nationaliza tion of the telegraph and then the tel ephone, networks were set up to cover the entire territory. The BBC also started on a national basis. The same was true in Germany. In France, while the telegraphic and tel ephonic network rapidly assumed a national character, the Jacobin state did negotiate with the communes and dpartements which partly financed the service in rural areas. As for the radio, it functioned between the two World Wars on a regional basis. It was under Fascist regimes that cen tralized broadcasting structures were set up in Germany, Italy and Spain, as well as in France under the Vichy govern ment.With the Liberation, in France and Italy, the existing structures inherited by the new political powers were barely amended. By contrast in Germany, under pressure from the Allies, broad casting was organized along the lines of the federal structure and the Lander were given a prominent role. We subsequently witnessed the re-emer gence of a local dimension in broadcasti ng, initially in British commercial TV stations, local radios in Italy and then France, and the birth of Catalonian and Basque TV stations in Spain. This has been followed, during the past fifteen years or so, by the first steps taken by regional authorities in the field of telecommunications networks. There is even a precedent dating back to the beginning of the century when the Engl ish town Hull operated its own telecom munications network. In France the Cable Plan drew the attention of local authorities to the role of telecommunicat ions in urban development. Until now achievements have, however, been somewhat modest and largely confined to a handful of data networks used in an academic and research context. Another element has fragmented the uniformity of the national territory as far as telecommunications are concerned: the granting of licences for new telecom munications services. The regulatory authority grants licences, notably for mobile telephones, for limited geographic al zones. As a result, mobile techniques vary from one zone to the next. It seems that there is a strong chance of this lead ingto a reorganization in which the most successful techniques will spread across the territory. There is, however, also a serious risk that certain sparsely popul ated zones might never be connected. The national communications networks must also contend with the emergence of organized networks in a far broader con text - that of Europe. Satellites are open ing up a whole new range of possibilities in the telecommunications field and in broadcasting. For example, European sports or variety channels are starting to appear on television, and firms rent satellite links to transmit data or voice across Europe. The dominant position of the Astra satel lites in Europe today has made television without borders a reality. Whereas lin guistic barriers protected the various cultural zones for a long time, the arrival of multilingual channels has made regu latory protection redundant. It is also in the area of professional telecommunications that the national framework is in the process of disinte grating. Firms that are today largely internationalized would like to have vir tual networks enabling them to link up their branches in all corners of the globe. They would like to negotiate with telecommunications operators who can offer them a global network and a single 267

Patrice FLICHY agent world -wide. Recent alliances between British Telecom and MCI on the one hand and France Tlcom, Deutsche Telekom and Sprint on the other, show that operators are reorganizing thems elves accordingly. In order fully to grasp the significance of this dual challenge (from below and from above) to the national communication space, it is also necessary to reflect on the link between telecommunications and national sovereignty. Whereas certain countries are busy selling their national aviation company to neighbouring States, it seems relevant to wonder whether, in future years, European countries will continue to see the existence of a national telecommunications operator as an el ement of national sovereignty or whether, on the contrary, some of them will be pre pared to consider a rapprochement between public operators. At the end of this century, when telecommunications and broadcasting are facing major challenges, it seems clear that they cannot be reduced to two opposing models: one of the past, statist and unified, and the other of the future, liberal and geodesic. The historical and geographical comparisons outlined here illustrate the variety of choices made in the past in the management of commun ications networks. As the diversity of communication services increases, the fragmentation of organizational models is likely to intensify. If competition becomes the rule in Europe, will it be effective? Will new, more or less natural, monopolies develop? How can competition and the obligation to provide a public service be reconciled? Will this obligation be reserved for public or traditional opera tors? Is the evolution of the public towards the private inevitable? Or will 268 public and private operators co-exist, as they do in the broadcasting sector? Will mixed solutions be found? Would such a mixture be a compromise growing organi cally from the past, or would it reflect a new relationship between public and pri vate interests? If new services appear as specific ser vices - like the telephone in the early days - will they eventually become uni versal? What criteria will the regulatory authorities apply to know whether a ser vice should be universal or not? Is a competitive system always the most suitable for transforming an elite service into a mass service? How can rules of universality be imposed when operators can always invoke the fact that some or other competitor is not subject to certain rules in the national market? Will networks maintain a geographical base at national level or, by contrast, will there be a superimposition of networks, each designed according to specific objectives? These are just a few of the many ques tions facing communications operators today. Clearly, they will not all find the same answers, and diverse configura tions will emerge. But there is also mater ial for a serious political debate, for new public policies in these domains have to be formulated. While constraints are numerous, the options often remain more open than they are thought to be.

TOWARDS A NEW MODEL OF COMMUNICATION NETWORK MANAGEMENT References Allen, D. (1992): 'Le dbat d'ides avant et aprs le dmantlement d'ATT, Rseaux n56. CNET. Bar, F. and Borrus, M. (1990): 'De l'accs public aux connections prives : politique de rseaux et intrt national'. Rseaux n 41. CNET. Bustamante, E. et al (1993): Tlphone et tlvision, enqute sur une convergence europenne', collection Rseaux, CNET. Coase, R.H. (1950): British Broadcasting, a study in monopoly. Longmans, London. Fischer, (1992): America calling. A social history of the telephone to 1 940. University of California Press, Berkeley. Flichy, P. (1995): Dynamics of Modern Communication. The shaping and impact of new communication technologies. Sage, London. Foster, CD. (1992): Privatization, public ownership and the regulation of natural monopoly. Blackwell, Oxford. Garnham, N.. Joosten, M. and Owen, J. (1994): 'Le dveloppement du service public au Royaume-Uni dans les tlcommunications et l'audiovisuel'. Rseaux n 66. CNET. Huber, P. (1992): 'Le rseau godsique'. Rseaux n 56. CNET. Mueller, M. (1994): 'Le service universel dans l'histoire du tlphone, une recons truction'. Rseaux n 66. CNET. Noam, E. (1987): The public tlcommunications network - a concept in transition'. Journal of Communication Vol 37.1, pp.30-48. Rallet, A. (1994): Telecommunications and Competitiveness', Rseaux: The French Journal of Communication n 2(1). John Libbey, London. Simon, J.-P. (1993): The Invisible Hand', Rseaux: The French Journal of Communication n 1(2). John Libbey, London. Wolton, D. (1990): Eloge du grand public. Flammarion, Paris. Notes France 1 On and the England, origins of seethe Flichy. public 1995. telegraph in 2 The reader is referred to Bustamante et cd. (1993) for a contemporary presentation of telecommunications management in Europe. 3 On this point see Rallet. 1994. 4 On this point, see Fischer. 1992 and Flichy. 1995, chapter 5.

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