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Remarks of Assistant Secretary Irving at the Malta Chamber of Commerce

New Opportunities in Telecommunications for the 21st Century
Valletta, Malta
March 26, 1998
"New Opportunities in Telecommunications for the 21st Century"
Remarks by U.S. Commerce Assistant Secretary Larry Irving
Before the Malta Chamber of Commerce
Valletta, Malta
March 26, 1998

Good Evening. Please let me extend my gratitude to President Farrugia, the Malta Chamber of Commerce, and the U.S. Embassy for arranging this opportunity to meet with you in the lovely surroundings of Valletta. I am especially honored to be joined by the United States Ambassador to Malta Kathryn Proffitt. Although Ambassador Proffitt has been in Malta only a short time, already she and her staff have been working diligently with you -- the business community -- to forge closer ties between our two nations. Also, upon entering the Chamber, I was delighted to see the statue of Giovanni Sciortinio, who, like me, is a lawyer and an Assistant Secretary.

I, too, have only been in Malta for a short time, as a member of the United States Delegation to the Second World Telecommunications Development Conference - otherwise known as the WTDC-98. The conference brings together over one hundred nations for a week of deliberations on ways to improve the participation of developing nations in the emerging Information Society. The forum is being held under the auspices of the United Nations' International Telecommunications Union and is being hosted by the Maltese Government and Maltacom. I also want to acknowledge the tremendous warmth and gracious hospitality of the Maltese people, which I have experienced throughout my stay. Unfortunately, I have not experienced any of your famous warm weather since my arrival, but it has not stopped me from enjoying all that Malta has to offer. I also want to express my gratitude to Michael Frendo. It is not every country where I get to have a tour of an historic city, such as Mdina, by a Member of Parliament.

Four years ago, when the conference organizers chose Malta, they couldn't have selected a more appropriate location to serve as the backdrop to the WTDC-98. Malta -- with its strategic location in the Mediterranean Sea - truly is at the crossroads of global economic activity and opportunity. Just as Malta is the "hub" of the Mediterranean, telecommunications and information industries are emerging as "hubs" for economic opportunity. We are privileged to witness and benefit from the convergence of the old analog technologies, such as television, telephone and radio, with new digital technologies --computer software and hardware, wireless and satellite technologies, and the Internet. And, just as Malta's rich history and culture is the culmination of thousands of years of experience and development, so, too, is today's multi-faceted telecommunications landscape the culmination of thousands of old, new and emerging technological advances.

The other night, I went to one of the discos in Paceville. What I found amazing is that here in the middle of the Mediterranean Sea, I was able to watch the Oscar's ceremony on one television, Italian basketball on another, while listening to the music of Puff daddy, an American rap singer. If you don't know who Puff Daddy is, I assure you that your children and your grandchildren do, thanks to the convergence of old and new technologies.

Tonight, I would like to challenge you to think outside the box on how your businesses and this remarkable country can take advantage of the new opportunities afforded by the explosive growth of the telecommunications and information marketplace.

First, allow me to provide some of the backdrop for this phenomenon. When I joined President Clinton's Administration, I had never been on the Internet. But I was not alone. The Internet back then (five whole years ago) was the province of scientists and engineers. However, it didn't take long for us to realize the power of the Internet and other emerging technologies for improving the global economy and benefitting society.

Upon entering office, President Clinton championed a vision for expanding the United States' national information infrastructure, much along the lines of the expansion of the U.S. highway system decades earlier. Soon, thereafter, Vice President Gore took that vision to the next level, and at the First World Telecommunications Development Conference, he called for a global information infrastructure - one that would bring all the benefits of faster, cheaper and more reliable communications to the fingertips of every citizen in the world.

One key component of this vision was and still is that the construction of this global information infrastructure would be led, not by government, but by industry. Because it is industry - from large multinational corporations to home-grown businesses -- that brings a wealth of technical and financial expertise and innovation to the table.

The other key component is that in order to foster the growth of this dynamic sector and all of the important by-products, governments around the world need to develop pro-competitive policies. Such policies, in our view, provide the incentive for entrepreneurs to challenge old systems and take new ideas to market.

As business and local leaders, I know that you can appreciate the effort required to making this vision a reality. But you also know how great the rewards can be once the vision is achieved. We see the rewards of a global information infrastructure as endless. Whether you are a business wanting to improve customer relations, sales or product development or a government entity striving to improve the economic and social well-being of your citizenry through improved delivery of services, fast, reliable, and affordable communications has become essential for realizing these and many other opportunities. Companies like Yahoo, America Online, Dell and Worldcom/MCI -- these were unknown 20 years ago. Now antitrust authorities on two continents are worried about the competitive impact of the Worldcom/MCI merger. This new information economy means that virtual unknowns are becoming global powerhouses practically overnight. Also, it use to be that cities such as Dallas, Detroit, and Washington, D.C. were the drivers of growth in the economy. All that has changed dramatically. Santa Clara County in California -- home to Silicon Valley -- has become the greatest engine for creating wealth in the history of the world, producing 62 new millionaires every day. This is all driven by the convergence of technologies and underscores how important the telecommunications and information technology sectors are to the global economy.

And let's also look at how Malta's telecommunications landscape has changed over the past 10 years. Malta has made great strides in improving and expanding its telecommunications and information infrastructure, so that today Maltese citizens can enjoy state of the art telephone and data networks. The movement toward joint venture relationships to provide cellular communications means that you and your customers and suppliers can always remain in contact.

Malta also is home to nine Internet service providers, who are pressed to meet the growing demand for instant access to vast information and to tools such as e-mail. I've been told that the The Malta Independent now reviews websites on the Internet and encourages readers to send in their favorite websites. This alone represents a fundamental shift in how businesses of old are using the technology of new to improve customer relations.

Malta also has access to some of the best news, information and entertainment programming through a state of the art cable television system - which also looks forward to the day when it can compete for your Internet business. I am proud to say that your cable system is the result of a joint venture with U.S. partners, who brought the extensive experience and expertise of the U.S. cable television industry to the doors of Malta's businesses and villas.

Clearly, Malta is no stranger to the changes happening in the telecommunications marketplace. In fact, the changes have really only just begun. On the horizon, we see the MaltaCom IPO set for June, which will result in the separation of MaltaCom's operations from its former regulatory powers. We view this as an important - no essential -- step toward bringing greater choice, innovation, and lower prices in the local telecommunications marketplace.

I speak from experience on this front. In 1996, the United States the Telecommunications Act of 1996. This major legislative reform paved the way for greater competition in our telecommunications marketplace, which in turn increases the range and accessibility of new technologies and services available to consumers. In the United States, we have a national policy priority to ensure that all of our citizens have access to these new technologies and services, so that they gain the important tools and skills needed to succeed in this global economy. The reality is that technology literacy is becoming just as fundamental to a person's ability to obtain a good job as are the traditional reading, writing, and math skills. Increasingly, for Malta to attract major corporations to her shores, bringing hundreds of new high-wage jobs, you must be prepared to supply a pool of talented, skilled workers or run the danger of those corporations looking elsewhere.

Malta's achievements and challenges for fully integrating into the new information economy is a microcosm of what is happening around the world. Throughout the globe, more people are signing up to use the Internet -- the latest estimates point to over 110 million users, 20 million of which are in Europe and 1 million in Africa. China alone witnessed an Internet growth rate of 400 percent in 1997. In the United States, more than a quarter of our citizens have access to the Internet either through home or work connections and our high-tech industry for the first time became our largest industry in 1996. Our communications services industry grew 43 percent from 1990 to 1996, while our software and computer-related services industry contributed more than 450,000 new jobs between 1990 and 1996, bringing the total up to 1.2 million jobs.

The Internet is fast becoming an important vehicle for conducting trade. A recent "European Business" study showed that almost 50 percent of businesses in Malta used the Internet to source suppliers and conduct business. Around the world, there are now 3 million people trading stocks on the Internet and this number is projected to grow to over 14 million by the year 2002. It is also predicted that, in the new millenium, two thirds of those seeking loans will go on-line to find a suitable lender. We know that in 1997, consumers purchased eight billion dollars worth of goods on the Internet. It is estimated that they will spend $327 billion more by the year 2002. In Europe, where 4.3 percent of its citizens are online, it is predicted that on-line home buying will climb from $1 billion in sales in 1997 to $30 billion in sales by the year 2001. Last year, 14 percent of autos buyers in the U.S. used the Internet for research; 4 percent bought their autos on-line. All of this means that business and countries must adapt to the reality of this new paradigm or be left behind. Amazon.Com, an on-line bookseller, did not exist four years ago; now it has a market capitalization of 1.9 billion U.S. dollars, and is the largest on-line seller of books in the U.S. or Europe.

The massive change in the way ordinary people are conducting ordinary business only means one thing: tremendous opportunity for those willing to harness and exploit its potential. Electronic commerce is the ultimate entrepreneurial vehicle, used by individuals the world over. And, this growing demand for goods and services over the Internet is forcing businesses to devise creative solutions to meet this demand. Here in Malta, the world marketplace literally is at your fingertips. While I was in Mdina the other day, I had the pleasure of visiting the Mdina blown-glass factory, where I found many wonderful gifts. When I go home, my friends will see these pieces and will want some of their own, or I might want to buy some more. If the factory was on line, I could purchase the products direct from the factory for probably far less than the product sells in retail stores in the U.S. Using the Internet for on-line shopping is taking out the middleman, which means that your business can garner higher prices for your products and you get to keep the profits, not the middleman.

We want to see the benefits of a global information economy reach all of Malta's and the world's citizens. Malta is in a good starting position, having reached its goal of a telephone in every household. By international standards, Malta enjoys a high telephone penetration rate of 48 per 100 people. In stark contrast, however, many countries, particularly in the developing world, are in great danger of having their citizens fall behind, creating a gap between the technology rich and technology poor. To address this issue, more nations are adopting policies designed to close this gap and ensure universal service, so that everyone can have access to basic telephone service and advanced telecommunications technologies regardless of geographic location, income, race or gender. In doing so, they are discovering new ways on how to bring access to even the most poor or remote communities and villages. Today, I met with Jay Naidoo, South Africa's Minister of Telecommunications. He has the enormous challenge of trying to bring just one telephone to every one of their remote villages, where telephones often do not exist. He knows that just the introduction of a telephone in those villages immediately lifts the economic potential for those villages, because for the first time, people are able to communicate across vast distances. He also wants to introduce fax machines and computer access centers in each village, which will expand the range of skills among the people and put the entire village on the path to economic self-sufficiency. Minister Naidoo has tremendous challenges in realizing this vision, because there are many skeptics who do not think the investment is worth it. But what we know is that the introduction of technology into a community can and will make a difference in the economic and social well-being of those citizens.

Another good example involves Ethiopia, Uganda, Zambia and Senegal, which are successfully experimenting with the use of telecommunications and information technologies to create and manage new relationships and collaborations -- at work, school, and home. The effects of full Internet connections showed greater collaboration and resource-sharing between academic and research institutions at lower costs. This wider connectivity and collaboration is improving the wealth of knowledge among the participants and promoting positive developmental changes for these countries.

Back in the United States, my agency funds a pilot project that is helping to establish a public "webmarket" for rural residents and businesses in the State of Ohio. The on-line market helps small businesses and local organizations experience with electronic commerce and marketing on the Internet. Companies and cottage industries from all over the region are represented and selling their wares. For the first time, these depressed communities have an opportunity to create healthy, sustainable economies.

Cities of Malta benefit greatly from their access. But, Malta's businesses and residents would enjoy even greater access to new and better technologies and services through adoption of pro-competitive policies in the telecommunications market. The transition from a monopoly provider of telecommunications services is never easy. We are discovering that in the United States. But countries around the globe are undergoing that transition, and the World Trade Organization Agreement signed by 69 countries last year evidences a global commitment to competition. Some of those 69 countries have decided to "phase-in." But even a phased-in approach to competition acknowledges the imperative and inevitability of competition.

Why competition? Based on our experience in the U.S., we believe that monopoly providers can become complacent and static; that they often fail to remedy low telephone, television, and Internet access rates. On the other hand, there is empirical evidence of a direct corrollation between the introduction of competition into the telecommunications marketplace and overall economic growth. It seems axiomatic to us that countries failing to adopt market-oriented principles will not be able to compete in the emerging telecommunications and information industries. And failure to develop competitive telecommunications and information industries will cause overall business productivity to suffer as well.

We know that Malta has begun to adapt some of these policy principles to your market environment. And, let me commend you for the progress you have made. But I also want to challenge you and encourage you to continue to work with your government to encourage even greater levels of competition. For example, Malta could ascribe to the World Trade Organization's Agreement on Basic Telecommunications Services.

Why should you care? Because, for many countries, and I believe Malta would be such a country, this Agreement is a critical first step in building the underlying telecommunications and information infrastructure that will be essential for a host of economic and social applications to develop, including electronic commerce, distance learning and telemedicine. In other words, this change is not just about the telecommunications companies; its about business productivity across all sectors. The practical implementation of the WTO Agreement will mean real savings to businesses and tangible benefits to your nation's economy. Experts predict that in a few years, as a result of the Agreement, the average cost of international phone calls will drop 80 percent, from $1 per minute on average to 20 cents per minute.

Prices and bandwidth are key factors when multinational companies are looking to locate facilities. Companies will locate where costs are lowest or relocate from places where costs are too high or facilities are inadequate. That's why using 28 megabyte computer modems and copper telephone wires aren't going to cut it anymore. Just look at the European market where on-line shopping is expected to surge from $3 billion this year to $26 billion by 2001 - a 800 percent increase! And I believe that both numbers are underestimates. In order to compete in the new information economy, countries must take the steps necessary to ensure that their telecommunications and information infrastructures are equipped to attract and support businesses and the emergence of applications, such as on-line commerce.

And, it isn't only the large multinationals that are benefitting. Take Schuhhaus Eduard Meier, a German shoe retailer that lets customers view video clips of how it makes shoes by hand and see available models in 3-D images that can be turned and seen from all angles. Another is Rombach und Haas, a German maker of cuckoo clocks, who turned to the Internet to boost sales. Shoppers around the world can use its website to view its clocks from all angels and hear their distinctive chimes before pointing and clicking their way to an online order. Bandwidth is required to listen to the sound and see 3-D images of those clocks. There are also more than 1,000 radio stations providing audio programming and hundreds of video providers on the Internet, all requiring bandwidth. Telemedicine, distant learning, public safety, reducing the cost of the delivery of government services -- all these applications require the capacious bandwidth that only can be provided by an advanced telecommunications and information infrastructure.

As Malta transitions into a competitive telecommunications marketplace, it also is imperative to institute structural changes that will ensure that competition takes hold and thrives. For the past 61 years, the United States has had a tradition of an independent telecommunications regulatory agency, called the Federal Communications Commission. This structural arrangement - together with pro-competitive policies, private sector investment and universal service goals - has resulted in the world's best telecommunications system and services.

An independent regulator helps ensure that the government does not make market decisions and does not favor one company or industry over another. Those companies that can offer the best products at the lowest prices are the winners, not those which have the ear of the government officials. Such regulatory authority should be provided with sufficient power to enforce laws and regulations necessary to safeguard competition. And businesses must be accorded a fair and equal opportunity to participate in the development of rules and regulations governing their industry.

I understand that there is an old Maltese saying that, roughly translated, means "it will get fixed." Only with your help and vigilance - by calling for a competitive telecommunications marketplace - will your business, your country, enjoy all of the inherent economic and societal benefits of the new information economy. Add this "fix" to your business plan today and you and your children will reap the many benefits of the Information Society for years to come.

Thank you.