Telecommunications Reform


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In the past, it has been shown that with each new wave of breakthroughs of communications technology, there has been a trend towards a change throughout the entire communications industry. Telecommunications is getting more personal, affecting the way that we view the world around us. As a result, the telecommunications industry has fragmented into specialized areas, each being better suited to providing certain services. This is a far cry from the time when foreboding monopolies with names like BT, ATT, and NTT ruled the industry. Now there are players such as GTE, Orbcomm, and Lucent. The playing field has become crowded, with many corporations vying for the space once occupied by only a chosen few. The term deregulation is invoked when a communications market that has been traditionally closed to outside competitors is opened for competition. Deregulation can also correspond to the loosening of controls on a particular communications product or service, or of the introduction of a new product or service into a traditionally closed market. Deregulation of the communications industry has been the language of the last fifteen years in countries such as the United States, the United Kingdom and Japan, and there are no signs that this trend will change or subside. If the past is any indicator, advances in communications technology will inevitably lead to continued deregulation of global telecommunications.


One may wonder why deregulation of the telcom industry is such a good thing. In the early days of modern telecommunications, many countries around the world would have not had any access at all to telephones if it weren't for a governmental monopoly on the industry. Governments of various countries involved themselves with local telecommunications to ensure that the development of the system was uniform, and that calls could be placed from one area of the country to another over reliable connections.


Having communications regulations in place could be important to a nation trying to prevent a "bleed" of its technology to other nations around the world. For example, until recently, most computers over a certain speed that had to be shipped out of the country to a nation such as the former Soviet Union needed an export license. This regulation was in place in order to prevent reverse engineering of American products. This applies to the American communications industry because tight controls are kept over cryptography products in order to prevent them from being sold to nations who In turn might use our strong encryption protocols against the United States.

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However, regulation has recently fallen out of favor with much of the developed world. A good example of this trend is FLAG, the Fiberoptic Link Around the Globe. FLAG will stretch over numerous continents in an attempt to create a high-bandwith link between the countries of Europe and the countries of Asia. FLAG will provide these countries with an Internet connection that is faster or just as fast as any connection available in the United States. The telecommunication company Nynex as well as local telecommunications companies around the world have spent large amounts of money to make sure that FLAG works as advertised for all parties involved. There is much at stake. The reason why FLAG is so monumental is because of its deregulatory impact on all of the local telecommunications systems that it touches. FLAG gives each one of the participating countries a chance to significantly increase its ability to compete in the global telecommunications market. Also, FLAG created a slight bit of telecommunications reform by passing through such countries as Egypt, which has traditionally been more stringent with its telecom resources. In all, FLAG is a monumental change for all parties involved. It will take time as well as effort in order to assimilate into the global telcom network. FLAG only eases this transition for several countries.

An example of the impact FLAG will have is the introduction of a greatly expanded local Internet to the nation of Malaysia. The local Internet of Malaysia, JARING, is tightly censored and controlled by the government. With FLAG cutting a route through Malaysia, it will be interesting to see if the Malay people will tolerate such a tightly censored system when they can have access to the whole of the worldwide Internet through the bandwith provided by FLAG. Governments such as Malaysia's will find it futile to censor their country's Internet connection due to the sheer amount of information pouring through it. In a still developing nation such as Malaysia, it seems that they would not be able to scale their censorship efforts up to the massive amounts of information that the Internet would bring to Malaysian shores.

Another example of technology aiding in telcom reform would be the creation of Iridium and Teledesic, two satellite communications systems. First up, we have Iridium. Conceived by the Motorola corporation to be a constellation of 77 communications satellites, Iridium would facilitate global communications by enabling a person who owned a $3000 handset to make a $3.00 per minute call from anywhere on earth to anywhere on earth. Since its inception, Iridium has been scaled back to 66 satellites, and prices on the handset might fall a bit.

Iridium's most noble accomplishment would be the ability to bring phone service to parts of the world that have never even seen a phone. In certain areas of Africa, it would be impractical to lay phone cables or even place cell phone towers. Iridium makes it feasible and fairly inexpensive to provide these areas with phone and data services. Providing telcom services to the Third World has often been dreamed of, but has not proven applicable until the development of satellite systems such as this one. On this promise, Iridium attracted investors not only from the U.S. but from Japan, China, Europe and many other telcos around the world. The goal is to have an operational test system by 1998. (Iridium)

Another example of a satellite system designed to blur local phone company boundaries is the Teledesic network. Teledesic is a grandiose idea that is subsidized by two of the richest men in technology today: Microsoft chairman Bill Gates and cellular pioneer Craig McCaw. Teledesic aims to place one thousand satellites in orbit by the year 2002. These satellites will be in low earth orbit, and will enable the users on the network to have extremely high-bandwith communications. Teledesic literature describes it as a pseudo "internet in the sky." Teledesic does have some validity to this statement. It is a communications network that is impervious to anything that happens on earth. Fires, floods, earthquakes...Teledesic would still be able to maintain their network and the data that travels on it. Even a trans-oceanic cable can be cut; how can you cut a connection to a satellite? However, the concept of the Teledesic network is not as ominous as it sounds. It is possible today to assemble satellites in an assembly line fashion, giving a company the ability to continuously manufacture satellites. (In fact, the Iridium system is also being assembled on an assembly line.) A capability like this would be needed for a system like Teledesic, because satellites would be dropping out of orbit all the time. Also, the task of placing one thousand small satellites into orbit seems daunting at first, but it is revealed that the military had been working on a similar technology called "Brilliant Pebbles" as part of the SDI program. This program would have involved the launching of thousands of small satellites as missile interceptors. Some slight modification would enable the launching technologies developed for this program to be used for Teledesic's communications birds. (Teledesic) Satellite systems such as the ones mentioned before do not care what country, province, county or municipality they are over. They only care if the person has a phone that can connect to their service. This ability will cause countries around the world to allow satellite communications providers to set up ground stations in their countries to interface with the satellites. This will force the ground-based local telcos to be just as competitive as the satellite service. The main deregulatory effect of satellite communications will come from thousands of people carrying around handsets, being able to make the call from anywhere. The sheer masses of people partaking in satellite communications and data transfer will show local telecommunications companies how communications is not dependent on their local wires, but on points of transfer to the rest of the world.

As evidenced in the past, large scale application of technology has an effect on all facets of life. Recently, the communications opportunities created by the Internet have created entirely new industries virtually overnight. These opportunities are not unique to modern times; in fact, they were happening when the first trans-atlantic cable was built. (Stephenson 144) Technological breakthroughs have created new industries, which have created new businesses, which has created governmental communications deregulation through the successful manipulation of the various governing bodies of the world. Much of the credit for communication deregulation should be given to corporate lobbyists who have successful pushed through legislation which has furthered their products. A second example is how telcom reform makes for profitable business in areas which have not been open in the past. One example is cryptography tools. Put plainly, cryptography (crypto for short) is the disguising of messages into a form unreadable by anyone who does not have the proper decryption sequence. Encryption has been around since the dawn of time, when the early Romans used ciphers to send messages out to the battlefield. Encryption has taken on a new form in the digital age, with the advent of digital cash and many other items which require authentication. The United States is a country which has a vested interest in developments in digital crypto, for we are the country from which most of the current digital crypto standards have sprung. However, we are also among the most stifling when it comes to a coherent crypto policy.

To understand this story, it is required that we start from the beginning. In the 1970's, DES (Data Encryption Standard) was developed by IBM under the code name Lucifer for the purpose of a digital encryption system. This system was antiquated by today's standards, but it was remarkable in it's time. Early DES systems made provisions for a 56 bit key, a key being the numerical sequence needed to decode the message being sent. The length of DES keys has the distinction of being the maximum exportable key length. Any encryption system above a 56 bit key is classified as munitions by the U.S. government, and any person who exports software that has the capability to encrypt a message using a key that is longer than 56 bits is subject to prosecution under United States law. This law is in place due to the pressure of several governmental agencies, most notably the NSA (National Security Agency), the organization charged with decoding encrypted messages, foreign or domestic. Its widely believed that the NSA has the ability to crack 56 bit DES and has had this ability for many years. The NSA would most certainly not like to see every other nation in the world with the ability to create strongly encrypted messages (even though some countries have no restriction on encryption software and already can).

Enter RSA Data Security, Inc. RSA Data Security sells encryption products which are based on the Rivest-Shamir-Adelman public key encryption algorithms which were developed at MIT in the 1970's. Public key encryption is far superior to single key systems, as it does not require both parties to own identical sets of keys. RSA Data Security would like to be able to peddle its 128 bit key security products to the rest of the world. However, currently, it cannot due to U.S. encryption policy. RSA is part of a growing number of corporations that are leading the charge to liberalize U.S. encryption policy. The governmental response has been most interesting.

The government's response to calls that it liberalize encryption policy was met with the proposal of the Clipper chip. The Clipper chip is a microchip which was designed by the government for the express purpose of encrypting and decrypting messages. It sounded like a good idea, except for that one catch. The catch was that each Clipper chip would be imprinted with a distinct ID, which would be kept in escrow at the Justice Department and at another federal agency. In the case a warrant for a wiretap was issued, a law enforcement agency could seize the ID and use it to decrypt any transmission through the chip. This proposal raised sharp criticism from people in all walks of life and government, as it reeked of a "Big Brother is Watching" mentality. What if a hacker was able to discover the key and use it to read your conversations? Would there be a guarantee that there would not be an increase in wiretaps under this new system? There were too many questions, and not enough answers. Eventually, the Clipper chip proposal was shot down, and it made all those involved, from FBI Director Louis Freeh to the President himself, look like fools. Recently, the Clipper proposal has mutated into more of a key recovery system, and less of a key storage system. Most people will still feel threatened under this new system.

Another example of cryptography policy stifling economic development is the WebTV box. The WebTV box enables anyone with a television set to browse the WWW in a limited fashion. However, the WebTV box uses a cryptographic key of 128 bits, making it unsuitable for export. Until the situation is resolved, WebTV boxes cannot be sold in countries other than America. Is it right to limit the goods that American firms create to America only simply because the NSA wants the right to break the communications? This practice is unfair to American business as well as the rest of the world, where millions of people could possibly purchase this device. Do we want to stifle the marketing of excellent products because of antiquated regulation?

A final example of buffoonery in U.S. crypto policy would be the strange case of one Phil Zimmerman. Phil Zimmerman wrote a little piece of software that he called Phil's Pretty Good Privacy (PGP for short). PGP was distributed freely over the Internet, so anyone anywhere in the world could download it. The software had two problems, however. Unbeknownst to Phil, the software violated some of RSA's patents. A nasty situation was averted when Phil stripped his program of the offending code and replaced it with a freely licensable version of the RSA encryption library. The other problem was that PGP was being downloaded by people all over the world, and because it could generate a key of any length that you desired, it was classified as munitions by the U.S. government. The government waged an expensive legal war with Zimmerman, and eventually, all charges against Mr. Zimmerman were dropped. Wouldn't it have been a lot less costly for the government to liberalize its encryption policies as opposed to fighting an expensive legal battle it had little or no chance of winning? You make the judgment call. The liberalization of United States cryptography policy will lead to an increase in the quality of the world's cryptographic products. Corporations in the US would be free to sell their high quality encryption to the rest of the world, and other nations would be encouraged to develop cryptographic products of their own. The advances of technology that would concur with the development crypto protocols would lead other governments around the world to deregulate their crypto products as well in order to be competitive. On a side note, the widespread availability of cryptographic products will also lead to greater sense of security for the people who use them. Most of the people of the world seem to value their individual security. Communications deregulation can take many other forms. One of these is the creation of private entities out of corporations that were once monopolies on their countries. One example comes from America: the breakup of ATT. ATT once held a stranglehold on the American telcom industry, being the sole provider of local as well as long distance service. Eventually, ATT was broken up into several regional "Baby Bells", such as Bell Atlantic and Nynex. Since ATT's breakup, the Baby Bells have created more innovation than ATT could have ever dreamed of. One example is our local telco, Bell Atlantic. Bell Atlantic, since it's inception, has undertaken many interesting projects that probably would have never happened had it been part of ATT. On of these is video-on-demand trials in Maryland. Bell Atlantic has experimented with the idea of sending video over phone lines to a person's phone, skipping the normal methods of broadcasting. This development has the potential to create large amounts of competition for the cable as well as broadcasting industry. What would prevent Joe Citizen from receiving his programming over the phone lines? Nothing in a deregulated industry.

In conclusion, the deregulation of global telecommunications has led to some of the most innovative ways for a citizen of this world to reach out to another citizen of this world. Because of the incredible pace of technological development, regulatory bodies have had little time to react. Most have just given up, realizing that their powers were limited in this age of technology. Why should inflexible rules be established if past experience says that they will be broken and trampled on? It is better for the rules to be eliminated, or not enacted all together. This is the thrust of communications deregulation; the ability to place advances in technology into the hands of global citizens in order to further their development as people.

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O'Malley, Chris. "The Wireless World." Popular Science November 1995: 57-62.

Brock, Gerald W. The Telecommunications Industry: The Dynamics of Market Structure.
Cambridge: Harvard University Press, 1981.

Ganely, Oswald H., and Gladys D. To Inform or to Control? The New Communications
Networks. New York: McGraw Hill, 1982.

Burstein, Daniel, and David Kline. Road Warriors: Dreams and Nightmares Along the
Information Superhighway. New York: Dutton. 1995.

"Teledesic Corporation Overview". http://www.teledesic.com/overview/overview.html
(10 February 1997).

"RSA Position Statement Regarding the Adminstration's Recent "Key Recovery Initiative"
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