Global village rivals power of the state

FROM ANDREW MARSHALL

in Brussels

The Brussels meeting on the information superhighway ended yesterday with ringing calls from Washington and US industry for Europe to open its markets.

It underlined the growing pressure on Europe to tear down the structures of protection and government control that it has erected over the past century in one of the most sensitive of areas - telecommunications. The spread of new technology, competition from the private sector and the demands of industry are levering control away from governments.

The Group of Seven leading industrialised states - the US, Japan, Germany, France, Italy, Britain and Canada - agreed a bland statement of "core principles" and a series of pilot projects to promote a global information infrastructure.

But behind this there are simmering disagreements about how the information superhighway - a projected easily accessible network of computer databases worldwide - should operate.

The 11 pilot projects agreed by governments at the weekend are dwarfed by the research and development spending of the companies concerned. The real message of the Brussels meeting was that in information technology, governments are being pushed aside as the world's largest corporations jostle for power, influence and market share.

The biggest companies have revenues that dwarf the GDP of even medium- sized states. The top seven companies represented in the technology showcase - IBM, Sony, Hitachi, Toshiba, Siemens, Philips and Alcatel - had 1992 sales totalling more than $300bn.

The main reason why there is pressure for change is the explosion of new telecommunications services. The star of the show this weekend was the technology, not the politicians. The computer terminals spread throughout the European Parliament's new building were (mostly) up and running and the enormous technological obstacles involved in mounting such an exhibition were overcome.

The technology showcase was a vivid expression of what is possible, but regulatory obstacles mean that many are still in the future.

The US Vice-President, Al Gore, took the opportunity to announce plans to throw open American markets. "Whether by law or new regulation, we intend to open foreign investment in telecommunication services in the United State for companies of all countries who have opened their own markets," he said on Saturday. But, he emphasised: "The principle of reciprocity applies.''

That throws down the gauntlet to Europe, and in particular to France and Germany. The EU is committed to opening its markets for telecommunications services by 1998 but the US wants it to move faster. Britain alone in Europe has already liberalised its markets, privatising BT and allowing competition.

France and Germany have announced plans for their telecommunications operators - Deutsche Telecom and France Telecom - to merge aspects of their operations and to buy 20 per cent of Sprint, the third- largest US long-distance telecoms operator. The US proposals imply that without faster action in Germany and France, the plan may be in trouble.

The European Commission, the host of the Brussels conference, is also pressing for faster action. It is threatening to block the Franco-German deal if it does not get assurances that other companies will be able to compete in the French and German markets.

The Commission's powerful competition authorities are trying to persuade governments to open their markets, by allowing new competitors to jostle with the old state monopolies. "The information society will only be achieved if we unleash the forces of the market," said Martin Bangemann, Commissioner for information technology.

Unusually for an international conference, this meeting put the private sector and governments side-by-side, with a meeting of ministers and the heads of large companies.

Carlo de Benedetti, the chairman of Olivetti, said that the highest priority was removing trade barriers. "Now is the time for governments to take action to set clear rules on a global scale and create a favourable environment for a new wave of investment by the private sector," he said.

The corporations want open markets. What is at stake for the governments is how this process of liberalisation is handled. They fear that jobs will be lost, they are concerned about the prospects for their national cultures and they are worried about the loss of control that will come with the vast expansion of communications.

Liberalising Europe's telecommunications will not be easy: the sector employs about a million people across the EU and is highly unionised.

The European Commission is trying to emphasise the benefits to everybody of change through its idea of an "information society". This will provide jobs, education opportunities and a higher standard of living, the Commission says. "With the right approach, positive results can be achieved" on cultural diversity and employment, argued Mr Bangemann.

There was some practical, easily accessible and useful technology available at the conference: umbrellas. Distributed free by the event's organisers, they proved the hit of the weekend as the Belgian weather did its worst.

EIGHT PRINCIPLES AGREED BY G7

l Promote dynamic competition.

l Encourage private investment

l Define an adaptable regulatory framework

l Provide open access to networks

l Ensure universal provision of and access to services

l Promote equality of opportunity

l Promote diversity of content, including linguistic and cultural diversity

l Recognise the need for worldwide co-operation, especially with developing countries.