National information infrastructure


INSTITUTIONS AND COORDINATION



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INSTITUTIONS AND COORDINATION

Markets versus hierarchies


The NII is bringing about changes in the institutions used to achieving coordination in the information industries. In telecommunications and the broadcast media, coordination of public and private monopolies traditionally has been achieved through regulation by government bureaucracies (hierarchies). Monopolies were permitted to exist in order to achieve the economies of scale needed for investment and expansion of networks and services. The current round of liberalization in telecommunications and the media is recognition that technology has changed the economics and therefore, governments are separating the regulatory and operations functions of government PTTs, setting up regulation as a government function but privatizing operations, and bringing in other providers to compete with the former monopolies. It is believed that competition will result in reduced prices, upgraded technologies and, once again, expanded networks and services. It is also assumed that free market competition will provide all the coordination that is needed and prevent monopolies from developing.

In computing and on-line services, coordination has been achieved largely through the free market with only occasional government intervention. In Japan, MITI, MPT, MOF and NTT coordinated R&D, investment and procurement to develop a domestic computer industry. In the U.S., the industry was developed mainly by private sector procurements, but military and civilian agencies supported R&D and engaged in steady computer procurements thereby helping to create the strongest computer industry in the world. However, the Justice Department regulated IBM for over twenty years to break its monopoly power domestically. In France, the central government supported its national champion, Groupe Bull, through procurements and subsidies. However, the PC era of computing has been relatively free of government attempts to coordinate development of the industry in the five countries in this study.

Actual liberalization has been much less than the rhetoric would suggest. In Japan, the MPT has encouraged new common carriers to enter telecommunications, but NTT continues to dominate with over 80% of the domestic market, thus leading to recent MPT proposals to breakup NTT to encourage further competition. Although Singapore claims to be market driven, the country case shows that the government is actually driving things. The Singapore Telecommunications Authority has privatized Singapore Telecoms and given licenses to three internet service providers (including Singapore Telecoms) that are still state-owned enterprises (around 50%). The government seeks to create capacity and to be ready for demand; it seeks to build demand first through multinationals and regional business and then through households; it seeks to train people, bring in media content multinationals to train local staff and develop local capabilities; and it seeks to build strong domestic enterprises that can compete with multinational giants. In short, the Singapore government remains very much “in the driver’s seat.”

While the POTS market in Korea changed from the Korea Telecom (KT) monopoly to the duopoly of KT and Dacom, the process of privatizing KT has been very slow. The Economic Planning Board’s 1987 plan for privatization of public corporations (including KT) called for the government to hold only 51% of KT ownership by 1992. However, no KT stock had been sold by that time, and only a small fraction of the government’s ownership was sold in 1993 and 1994. Thus, Korea has yet to really liberalize its telecommunications whereas France and the United States have recently taken big steps that are real by any measure.


Back to the future


There are strong elements of “back to the future” in the NII developments in all the countries studied. By back to the future, we refer to the tendency of countries to revert to earlier technological efforts and institutional regimes in their NII efforts. On the technology side, countries try to build upon and to succeed with new plans in areas where they might have failed before. This is seen clearly in the Japan case where current NII trials essentially attempt to improve upon earlier failed experiments with new media communities and teletopias in the mid-eighties; these experiments in turn sought to improve upon earlier trials with video on demand in the mid-seventies.

Beyond repetition of earlier technology trials, and much more significant, is the institutional aspect of the back to the future phenomena. NII developments are shaped by existing institutions in the information and communications sector, and by the institutional rivalries that characterize the major actors. These institutions include government agencies for telecommunications regulation, industrial policy and telecoms provision as well as private corporations in the computer, communications and content industries. Rivalries among these players can be major stumbling blocks to developing policy and implementing the NII. Even if focused only among government agencies, they send poor signals to the private sector in that warring government agencies may not generate their own demand or stimulate public demand for private services. If the government rivalries engulf the private sector, they may tie up private innovation and investment. The result in either case is decreased social efficiency if not the killing of private investment.

Although institutional rivalry is present in all of the countries, it is most apparent in Japan in the continuing competition between MITI, MPT and NTT and in the alignment of various public and private forces with these rivals. The effect is bureaucratic and policy gridlock which greatly slows down development. In the United States, the gridlock was centered in the Congress and the President, and in the competing telecoms providers such as AT&T, the regional Bell operating companies and the cable television industry, and together these institutions prevented a basic overhaul of communications legislation for two years after its initial introduction in January 1994. Rivalry between the Ministry of Information and Communications (MIC) and the Ministry of Trade, Industry and Energy in Korea seems to have been settled with the ascendance of the MIC to dominance in the computer and communications arena. Singapore was particularly effective in foreseeing the potential for institutional rivalries between its computer, information and communications agencies and acting quickly to restructure its coordination mechanisms to avoid them.



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