Pain of liberalisation offset by new opportunities

Date: 22/04/1999

By Tim Jones

DEREGULATION hurts. The overnight loss of protected markets and the conversion from civil servant to standard contracted worker cannot help but upset those at the eye of the storm.

Only last week, Italian information technology company Olivetti announced its plans for turning around Telecom Italia if its controversial take-over bid is accepted. The cost: 13,000 jobs.

However, nobody still tries to argue that there are no gains in the longer term.

Two years ago, the grand-daddy of them all, AT&T Corporation, announced a staggering 40,000 job cuts, bringing net employment reductions at the company since deregulation in the mid-Eighties to 70,000.

That bare fact suggests that jobs are being lost on the altar of the free market - until AT&T's competitors are taken into account. Over the same 12-year period following deregulation, the company's rivals created as many new posts as AT&T shed. Further afield, cable television and broadcasting firms added 100,000 new employees to their payrolls.

In the UK, where deregulation came first and most radically on to the European continent, the former monopoly operator was competing with more than 130 licensed rivals by the end of last year.

The ripple effect of deregulation goes much further. The cell-phone industry did not exist 15 years ago. Today, it employs nearly half a million people.

Just as highway, rail and canal systems stimulated the development of industries during the industrial revolution, fibre-optic cabling, mobile systems and the Internet are creating a new information economy. The sky is the limit, with turnover from telecoms services expected to grow from €500 billion today to €1.6 trillion in 2010.

European Commission President-designate Romano Prodi recently highlighted the knock-on effects of commercialising communications. "A teleworking population of 6 million is undoubtedly one of the factors behind the more dynamic trend shown by the American economy vis-à-vis the European and Japanese," he said. "In Europe, teleworking is still rare. But in six years we will create 10 million teleworking jobs and the EU will have a more flexible, efficient and dynamic labour structure."

Prodi, who sat on Industry Commissioner Martin Bangemann's high-level information society group before he became Italian premier, believes this will have consequences well beyond IT. He argues that more people working at home should reduce traffic congestion and pollution, so improving the environment.

Acting Competition Commissioner Karel van Miert, who oversaw the opening up of the EU's telecoms market last year and now acts as its policeman, is in no doubt about the growth and jobs impact.

" The net impact - direct and indirect - is positive," he said last year. "In parallel, new entrants and neighbouring industries working in the information society are recruiting strongly. Newspapers are full of advertisements from telecoms operators, systems companies and new media groups for qualified and well-paid jobs - the type our young graduates are expecting."

Governments throughout the world are listening. Germany, France, Italy and Australia sold up to one-third of their phone giants last year and they are expected to be followed this year by China, Portugal and India.

A central aim of the 1998 package of EU reforms was to bring the Union up to the competitive level of the mighty US majors. Most of Europe's former monopoly operators still have some way to go. The shake-outs caused by the first steps of privatisation are as nothing to what is coming.

The convergence of communications media is throwing up brand new competitors for the telecoms giants. No longer can they only worry about aggressive foreign rivals like AT&T or BT. These days, they must also keep an eye on diverse companies such as Microsoft, Toshiba and German electronic engineer RWE.

Article forms part of a survey 'Converging technologies', p13-20.