SESSION I:
Industry Restructuring
A. Dave Newman, CWA, Local 1101
TRENDS IN THE RESTRUCTURING OF THE U.S. TELECOMMUNICATIONS INDUSTRY
Hola compañeros y compañeras. Hello brothers and sisters. I bring you solidarity greetings from my fellow activists in CWA Local 1101 in New York City.
When I attended the last trinational meeting of telecommunications unionists in Oaxtepec two and a half years ago, I was working for NYNEX. Not long before that, I was working for New York Telephone, a subsidiary of NYNEX. Before that, I was working for New York Telephone, a subsidiary of AT&T. By this time next year, if I am lucky enough to still have a job, I will be working for Bell Atlantic. And by this time next year, some of you, particularly if you work in Mexico, may be working for Bell Atlantic too. In any event, in the near future, many of us in telephone, regardless of who our current employers are and regardless of what country we work in, will be working for some component of some restructured, multinational telecommunications corporation. Furthermore, it is likely that many of us will be working for the same corporations, and that those corporations will be U.S.based.
Only 15 years ago, when I worked for a subsidiary of AT&T, virtually all of the world's major telecommunications networks were either stateowned or stateregulated monopolies. Today, they have been or are being privatized or deregulated in what has been called "perhaps the largest liquidation of public property in the history of capitalism."1
The new information industry, which is really telecommunications redefined to include the computer and mass media sectors, constitutes the largest and most rapidly expanding segment of the global economy. Three of the 4 largest companies in the world and 13 of the largest 50 companies in the world are telecommunications companies. It is quite possible that in the near future only 3 or 4 of the larger multinational companies, through ownership or association, will control most of the others.2 Most of the larger telecommunications multinationals are based in the U.S., and virtually all the rest have significant business operations there. The telecommunications market, the laws, and the regulatory structure in the U.S. to a large degree determine the direction taken by the telecommunications industry worldwide.
What does all this mean for us as telephone workers? As union activists? What does it mean for consumers and the general public? What changes have occurred in the domestic and international operations of the telephone corporations? In the regulatory structure? In the quality of telephone service?
TELECOMMUNICATIONS "REFORM"
Before the first breakup of AT&T in 1984, the Bell System was a privatelyowned, governmentregulated monopoly. Regulatory agencies and the law allowed the phone companies to make decent, and virtually guaranteed, rates of return. In return, they were legally obligated to provide universal service, ie, to enable anyone to have telephone service at his/her residence at a reasonable cost. This was generally achieved by setting the rates for long distance services and for business equipment rentals above their actual costs and by using resulting revenue surpluses to reduce the price of basic residential service. As these crosssubsidies were eliminated with divestiture, residential rates rose by over 60% between 1982 and 1992, while long distance rates fell by 40% and long distance traffic doubled.3 The primary beneficiaries of rate and regulatory reform in the 1980s were the large corporations that are the major users of the long distance network.
The 1984 AT&T divestiture was fueled by the convergence, through digitalization and broadband, of voice, data, text, and video transmission. With technological barriers to new markets removed, the various corporate players, chiefly AT&T, were largely able to rewrite the regulatory structure. As a result, the long distance market was opened to competition and restrictions were loosened on new business ventures by AT&T and the Baby Bells. At the same time, state rate structures embodying guaranteed but capped rates of return were gradually replaced by incentive plans that limited rate increases but removed all restrictions on profits in essence, rewarding a company for automating and for reducing its workforce.
The enactment of the Telecommunications Reform Act this year is the most recent step in this process. This misnamed piece of legislation essentially deregulates virtually the entire spectrum of telecommunications services and makes a theoretically selfregulating free market, rather than public policy, the determining factor for the future direction of the socalled information superhighway. With little substantive or public debate, and certainly with no discussion of the effects of "reform" on employment in the industry, the future of telecommunications in the U.S. has been turned over directly to the major corporate players. The newlyconverged industry local and long distance telephone, cable TV, entertainment, broadcasting, publishing, and computing together have approximately 2 million workers and $300 to $500 billion in annual revenues.4,5 As the industry has been transformed, the rate of unionization has fallen, from between 80 and 90% in telephone 15 years ago to 80% in local telephone, 30% in long distance, 10% in broadcasting, 5% in cable TV, and less than 1% in cellular and wireless.6 Thus, convergence is resulting in a drastic downward pressure on labor costs in the suddenly small unionized sectors.
DOMESTIC ACTIVITY
In the U.S., we have a fourtiered telephone service market: local calls, toll calls (within Local Access and Transport Areas [LATAs] but beyond the local calling area), long distance (between states or between LATAs), and cellular and wireless. Competition in the long distance market was opened with the original breakup of AT&T in 1984, although the resulting regional Bells were prohibited from entering the long distance market at that time. The toll call market has since been opened piece by piece to all comers, as has cellular and wireless. The Telecommunications Reform Act of 1996 completes the process by incrementally permitting the entry of the regional Bell operating companies (RBOCs) into the long distance market while completely opening the local calling market and further deregulating cable TV, the broadcast media, and the newspaper industry.
The $70 billion domestic long distance market is still dominated by the big 3 AT&T, MCI, and Sprint which together process 90% of the calls.7 AT&T alone still handles 60% of long distance traffic.8 However, due to deregulation, there are currently over 500 carriers that resell the services of the big 3. The end result has been the creation of a long distance infrastructure with significant overcapacity, duplication of services, and what one analyst calls "triplication of long distance network facilities."9 The newly competitive market also drives the long distance companies to invest heavily in advertising, which cost them over $1 billion in 1994.10 The big 3 long distance carriers have branched out into cellular and wireless and are poised to compete in the local call market. AT&T, for example, purchased the biggest cellular company in the U.S., McCaw Cellular, for $12.6 billion, instantly making itself the largest player in the cellular market and positioning itself to roll out advanced wireless services should wireless phones begin to replace hardwired. At the same time, hedging its bets, AT&T is aggressively entering the local call market, renting network facilities and capacity from the RBOCs.
Although the newly restructured and deregulated market has switched the focus of most RBOCs to long distance, providing basic local service continues to be their primary revenue source, bringing in $40 and 90 billion a year. Access charges paid by long distance vendors for use of local networks brings in another $19 billion annually, while the toll market accounts for another $10 billion. However, unregulated business ventures already account for 20% of RBOC revenues and continue to rise.11,12
Thus, the regional Bells are transforming themselves from selfperceived public service utilities into aggressive, marketdriven, profithungry competitive business organizations. For example, immediately following enactment of the Telecommunications Reform Act, U.S. West announced its planned acquisition of Continental Cablevision in a $10.8 billion deal, positioning U.S West to enter a variety of local call markets by utilizing Continental's (and Time Warner's from a previous deal) 16.2 million home cable TV lines in cities such as Boston and Atlanta, as well as to become a major player in the cable TV industry.13 SBC Communications (formerly Southwestern Bell) is acquiring Pacific Telesis. SBC's strategy has been to concentrate on the cellular market and it now has 3.2 million cellular subscribers, the most of any Baby Bell, in many nationwide markets, including Boston, Chicago, and Washington D.C.14 NYNEX, in the process of being taken over by Bell Atlantic, has become the first RBOC to carry long distance traffic out of its region.15
While this corporate freeforall of takeovers, mergers, and joint ventures has brought record profits, it has not resulted in higher productivity. In the predivestiture years of 1950 through 1983, productivity growth in telecommunications led that of all service industries, averaging 6% or better per year. Since the breakup, it has dropped to less than 4% per year, due to downsizing and to overcapacity generated by multiple players.16
IMPACT ON SERVICE QUALITY
As the telecommunications giants speed us boldly down the information superhighway into the twentyfirst century, they are concentrating their investments in network facilities and fiber optic cabling in the corporate business centers and welltodo suburbs that have the greatest potential for immediate profit. With the universal service mandate eliminated from public policy, there exists the real danger of the development of a twotiered telecommunications society and a retreat from the high point of 94%, nearuniversal coverage. The poorer urban areas and the more remote rural communities continue to be served by deteriorating copper outside plant with little prospect of upgrade in the near future. According to CWA, 6 million American families still have no regular phone service. Twenty percent of U.S. customers still have rotary phones, which means they cannot use enhanced digital services.17
In New York City, with the most advanced telecommunications system in the world, more than 200,000 families have no telephones, and in some poorer neighborhoods, as many as 20% of the residents have no phone.18 Service quality is declining across the board. Customer repeat troubles tabulated by the Federal Communications Commission have soared, as have complaints to local regulatory agencies. Earlier this year, NYNEX was fined $50 million by the state Public Service Commission for failure to meet service level commitments.19
As the telecommunications corporations seek out new ventures and new markets, the Internet beckons both for the potential to expand telephone usage and as a new market in its own right. However, market research data show that most Internet users utilize the Web to access public service materials such as health or government information or news, while only a small minority desires movies on demand or interactive shopping.20 Nevertheless, the commercialization of the Web proceeds apace, the epitome of the conflict between the potential for greater public access to information and the corporate yearning to own and control it.
GLOBALIZATION
Of course the reason all of us are here at this conference is that everything I have mentioned is occurring in the context of the globalization of the telecommunications industry. Telephone companies in the U.S. and elsewhere are transforming themselves into aggressive multinational corporations competing in a world market. Each of the big 3 long distance carriers is enmeshed in joint international ventures with other carriers. MCI is partnered with British Telecom, which bought a 20% stake in MCI for $4.3 billion. Their joint operations are valued at $33 billion. France Telecom and Deutsche Telekom together own 20% of Sprint and their combined ventures are worth $69 billion. AT&T has its World Partners Network, valued at $67 billion, in which 10 European and Asian telecommunications companies will market AT&T services. The trend is towards global production and distribution of information by only a handful of multinational corporations, which Ken Peres, Research Director of CWA District One, calls the Information Globalopolies.21,22 Here in Mexico, Bell Atlantic has so far spent over $1 billion buying into the cellular market through part ownership of Grupo Iusacell, one of the largest U.S. investments in Mexico since NAFTA. Its goal is the establishment of a Mexicowide service using regular hardwired telephones connected to a radio transmission network instead of to cables. 23 And these are just a few examples.
However, while we are talking of globalization, high tech, enhanced services, information superhighway, etc., let's try to keep it in perspective half of the people on this planet reportedly have never made a phone call.
CORPORATE STRUCTURE AND MANAGEMENT
The RBOCs have followed AT&T's lead in organizational restructuring, centralizing strategic decisionmaking at a higher corporate level and consolidating offices, personnel, and functions from the state entities to the regional corporate level. Simultaneously, the numbers of lower and middle level management have been reduced, while those remaining have been "empowered" through decentralization to allow increased discretionary control over their local "turfs," from which they are expected to compete against other turf managers within the same corporate organization. Responsibilities of bottomlevel managers, in turn, are frequently shifted to the nonmanagement workforce, often through selfmanaged teams, sometimes by default.
CORPORATE LABOR STRATEGY
In the U.S. there is an expression "road kill" which refers to animals killed by cars. Telephone workers are beginning to talk of "road kill on the information superhighway." For anyone who doesn't get it, that's us. Shrinking the permanent, or core, workforce, particularly the unionized workforce, has become a primary goal. In the first decade after divestiture, employment in the U.S. telecom industry declined by 10%. In 1983, there were 965,000 telephone workers; in 1992, 872,000.24 By and large, the jobs that were lost were union jobs. Between 1984 and 1994, AT&T eliminated 127,000 jobs, a 33% overall cut which dropped its level of unionization to just 60%. In just the eight months between August 1993 and March 1994, GTE and the RBOCs announced job cuts totaling 75,000. 25,26 Between 1992 and January of this year, telecommunications companies announced 190,000 job cuts.27 At the same time, they are shifting work to nonregulated, nonunion business ventures.
As the companies downsize, they make extensive use of a disposable workforce outside contractors, consultants, retirees, temps. CWArepresented NYNEX service reps in Boston who earn $19 an hour plus full benefits work side by side with temporary reps making $8, with no pension or job security. As NYNEX eliminates almost 17,000 jobs through buyouts and attrition, it backfills many of those slots with temporary workers hired through agencies, which typically charge NYNEX $10 or so per hour and then pay their workers eight.28 In some cases, contract workers are actually former telephone workers, doing the same work but at lower pay and on a temporary basis.29
According to AT&T's Vice President for Human Resources, "People need to look at themselves as selfemployed, as vendors who come to this company to sell their skills... We have to promote the whole concept of the workforce being contingent, though most of the contingent workers are inside our walls." He said he is aiming for a society that is "jobless but not work less."30
The telecoms are not just utilizing but creating a new technology, the express purpose of which is to destroy jobs. Bellcore's stated goal is "end to end automation" and a "selfdiagnosing, selfhealing network," one which requires no human input from the time a subscriber originates a request for service until the service is operative.31 Whether this goal can be realized remains to be seen.
I will not go into the accompanying deskilling, forced transfers, and elimination of promotion opportunities, but I must mention the increased use of jointness, qualityofworklife programs, and common interest forums. Particularly insidious is the ideology of partnership in competition, which fosters acceptance of the notion of competition driven by lowering labor costs.
CONCLUSION
The very place where society has been promised new jobs, new skills, and new opportunities the information superhighway is the place where we are seeing the greatest job loss. As David Noble observes, the very workers who are building the new information superstructure are among the first to go. At the very time when technology seems to offer such great potential for expanding communications and for democratizing access to information, the fundamental questions of how telecommunications should be structured, for what purposes, and for whose benefit, have effectively been removed from the social agenda. These questions must shape our discussions at this conference, and solidarity and concrete action must shape our response.
B. Germán Sánchez Daza; Economics professor, Universidad Autonoma de Puebla.
COMPETITION IN TELECOMMUNICATIONS
1) The competitive global framework
Without a doubt, telecommunications have become one of the most important markets in the world, due to their high profitability as much as for their long term development potential; becoming one of the strategic points for competitiveness among countries and the advance of the internationalization of the capital [globalization]- for the following reasons:
they are the base for the transmission of information; modern telecommunications mean the transmission of voice, image, texts and data; they have become the freeway by which the strategies and decisions of the multinational companies are conveyed, which are the base of the economic globalization; their innovative capacity, telecommunications by being part of the microelectronic revolution are a clear illustration of the technological convergence, to the point of being the prime focus of most important scientific and technological research in laboratories worldwide an example is ATT in United States and the CNET of France and have a strong impact in the economy; increasing economic importance in terms of investment and production, telecommunication has a much higher rate of economic growth than the average, for the OCDE their rate of investment grew from 1.82% to 2.4% between 1980 and 1994; in addition to its high marketability, hence attracting huge capital income (OCDE 1995); it serves as the medium that tie diverse social services: health, education, social communications, etc. (NTIA, 1991).
Telecommunication in the nineties is displayed as a sector totally novel, because in the previous decade a wide process of restructuring that even today continues. This process was guided by a deep technologic change and a dynamic and complex demand.
During those years, in several developed and underdeveloped countries, were carried out processes of modernization technological, deregulation, privatization of the public companies, labor and organizational flexibility, that they transformed the sector totally, thus we find that the characteristics telecommunications have in a good number of countries, they are:
* a very wide competitive structure, depending as much on the
segment of the market as on the applied policies, stretching from the existence of a duopoly until that of a wide competitive structure;
* predominance of the economies of scale and scope, conserving in second place those of scale; in other words, the case is now to
tend to a segmented demand through the flexibility and diversity of the services, instead of depending in one alone;
* fixed prices based on its costs; seeking for a flexibility in these and in particular in the labor cost;
* internationalization of their companies, the former public operators become private global companies, in particular
the companies operators of the developed countries become
big multinational conglomerate with global strategies;
* drastic reduction of the state participation to the basic regulation. (Sanchez, 1992). We should say that their development has been based on the advance of the microelectronic and the information technology, carrying out an accelerated process of innovative technology in all and each one of the parts of the infrastructure as much as the telecommunication services. This innovative capacity has been translated into the generation of a tendency that consists of the technological convergence with diverse branches of production, hence, its analogy to the technology of the information to telecommunication, computation and information. Convergence technological and the global infrastructure from the information. Thus, one of the concepts used in the last years is that of "Information Superhighway of the information," which refers to the new path through which globalized capitalism will be transmitted and the hegemony of the developed countries.
It is of such importance to the contemporary economy that from an American point of view, it is proposed as "the transcontinental railroad that turned the United States in a world economic power in the XIX century, this infrastructure of the information has the potential of placing the economy of States at the head of the rest of the world in the XXI Century." (Arnst, 1996).
This is how the government of United States in 1995 launches the proposal for a world plan for the creation of the "Global Information Infrastructure" (Gore, 1995), in which five basic principles are contemplated:
1) stimulate the investment of the private sector,
2) promotion of the competition,
3) leave access opened to the networks for all the suppliers of
information and users,
4) create a flexible regulatory frame that could permit the fast market and technological change and last,
5) assure the universal service.
These principles express the tendency put forth for the so called global infrastructure of the information (GII), in one hand it is recognized the growing economic weight of the technology of the information and thus, a growing investment is required, that is highly profitable, for which the participation of the private sector is promoted, second, should be carried under a competitive structure in order to guarantee the technological innovation, competitive prices and quality of the services, restrict the action of the State to the flexible regulation that allows the assurance of the functioning of the market and, last, that the GII be able to serve all the users and for all the services.
As we can see, the proposal of the American government goes according to the contemporary policies of privatization and deregulation. The theory behind it, is that the efficiency and
profitability is guaranteed by the safe functioning of the
market; however, a point of discussion is the social and economic repercussions of such, at a world level and for each country.
The proposal that the American government has been developing, is the idea of promoting the GII from the perspective of a open market, global, and where the capitals more efficient and productive are at the head of the construction and administration of the "freeways of the information." However, the GII comes to deepen the sharp competition that exists in the areas of computation, telecommunication, information, diversion;
the mergers and acquisitions, the alliances and agreements of
cooperation, etc., They are frequent relations between capitals,
trying to assure a piece of the "virtual pie"; the vertical integration, is another strategy, putting together production, programming and distribution of the information.
In order to give us an idea of this GII, we see that the revenues from some of the convergent sectors in the GII telephonic, television via cable, cinematography, newspapers add a total of 98 billions per year (CWA, 1994) other sources estimate that the total of the convergent sectors could earn as much as a trillion dollars by the year 2000 (Arnst, 1996).
Globalization and inequality:
However, telecommunications present a double aspect. On one hand
we have a huge dynamism and capacity, but on the other, its great market concentration. The growth of the market of telecommunication goes along with a great concentration in a few countries, so much in terms of revenue of the sector as in the availability of basic services. Thus, 15% of the world population has 70% of the lines of telecommunication, and 85% of the revenues come from twentyfour industrialized countries, that represent 16% of the population. The International Union of Telecommunication considers that this will cause by the end of the century a disparity of information posing a great challenge: How realistic is it propose a world economy of information when the majority of the population does not have direct access to basic telephone service (UIT, 1995).
In this context, we find some indicators that point to the development of the telecommunication in these developed countries by 1994:
* lines for each 100 inhabitants: Canada 59.2, United States
57.4, France 53. 6, United Kingdom 49.4, Japan 46.8, Germany 45.7 and Italy 41.8.
* digital line: France 86%, Canada 80%, United Kingdom 75%,
Japan 72%, United States 66%, Italy 57% and Germany 37%,
* cellular subscribers for each 100 inhabitants: United States 6.2, Canada 4.8, United Kingdom 3.8, Germany 2.2, Italy 2.1, Japan 1.7 and France 1%.
* connections to the digital network of integrated services per each thousand: Germany inhabitants report 3.71, France 1.93, Japan 1.91, United Kingdom 0.69, United States 0.34, Italy 0.5 and Canada 0.05. (UIT, 1995).
This reveals the data which points to the fact that big regions of the developing countries have a penetration of lines ten or twenty times under the average of the capitalist hegemonic countries.
As far the rest, it is clear that those who can control the production and distribution of the information, will be those that are capable of dominating the global market. Hence, we find that the big operator companies of the world are established in the developed passes, concentrating the larger number of lines and most revenue: Japanese (1), American (11), Europeans (5), underdeveloped countries (2) and Australian (1), which does not alone mean the domain of the market. Another characteristics we find is that those national operators have become big multinational companies, that have taken advantage of the markets of telecommunication of the countries in development in order to enlarge their profits. We must remember that in the decade of the nineties, privatization of public operators peaks in Latin American, asian and African countries. Companies are acquired through capitals of CNTE, France Telecom, Baby Bell, Motorola, Italtel, etc.; those countries sell their telephone assets in order to get out of debt with the financial international capital and carry out processes of deregulation in order to attract multinational capital in order to modernize their systems of telecommunication and improve their account status, all this under the neoliberal justification of efficiency and competitiveness and the promise and that the market will provide revenue (Cowhey, 1994). As an example, we can cite some Latin American cases where the multinational capital is present in the several segments of the telecommunication: Argentina with interventions of CNTE, STET and France Telecom, in Bolivia and Paraguay investments of Millions are placed, in Chile, CNTE presence is evident, in Venezuela we find GTE, CNTE, ATT. .and the list can become endless (Wellenius, 1994).
What is clear is that the process of reformation, deregulation and privatization is not yet finished. Case most evident is that of the EEC (European Economic Community ), where there is a great diversity of ownership and management. The tendency, however, is towards the opening and the privatization of the different segments of telecommunications.
On the other hand, we see that the globalization of the telecommunications market comes about also by taking advantage of the conformation of economic blocs. Thus, there is a process in which the companies that make up one bloc try not only to secure their market share, but also to invade other blocs.
Nevertheless, there are still differences in regards with the opening of markets. There are variations in cultural preferences and regulating institutions or systems. These differences create conditions so that companies join together to break into another market or in order to take over a segment through technological innovation. It is for this reason that we see a constant trend of merging among diverse telecommunications companies. Obviously, it is the multinationals who play the leading role in this process.
The way the multinationals go about taking over the market is through a strategic, global concept based on technological innovation, managerial flexibility and above all labor flexibility. An indepth analysis of this strategy would be the substance of another, major document. For right now, we shall focus only in the study of the North America market, where there is being structured one of the world's regional economic blocs, with the predominance of U.S. funds.
Before I present the experiences of the three countries that make up this bloc, l would like to add one element that l consider fundamental: multinational corporations achieve world dominance not only because they have the capital resources, but also because they have concentrated great capacities that enable them to stay on top of the wave of technological innovation. Thus, insofar as direct investment, multinationals appropriate themselves of a substantial part of the capital surplus generated in underdeveloped countries, via profit sharing and interests. Also, multinationals absorb another portion of the value generated in telecommunications through the sale of technology and equipment.
This process repeats itself, and the underdeveloped nations are unable to keep up with technological innovation because their capital resources are `insufficient' so as to keep in step with the tempo set by multinational, global capitalism. In the degree that this process unfolds, the multinational corporations reinforce their dominance and turn themselves into a mechanism that transfers resources from the poor to the rich countries and generates profound inequalities, as we have said before.
Let us now move on to see the case of telecommunications in the North American bloc so that, later on, we can reflect on what that experience has meant for us.
2. Telecommunications in Canada: deregulation, market opening, unemployment and transnationalization.
In Canada, service is provided by diverse companies in the different provinces. The main name is Bell Canada, with its subsidiary Northern Telecom. These companies furnish Canada its domestic telecommunication; international service is provided by Teleglobe Canada, and Telesat Canada handles the satellite traffic.
Up until 1991 regulation would vary from one province to another. Only three companies were under common federal control through CRTC (Canadian Radio & Telecommunications Commission). In 1991 the government empowered CRTC to regulate all long distance service (Farrell, 1991).
The companies that make up the list are those that can provide local and long distance phone service. Their cable operation is restricted, and as to services such as data transmission, cellular & mobile, etc., they can provide them, but under competition with other companies under the scheme laid out by the liberalization process promoted by the big users and the Conservative administration. In 1979 CNCP was allowed entrance to the private networks. Commercial users were permitted to hook up with the public network in 1982 and also in that year, CRTC ordered the phone companies to allow the connection with the cellular companies (Mosco, 1991).
This market segment starts developing in 1985. By 1991 there were already 610,000 subscribers. The two national companies were Rogers Catel and Cellnet Canada, made up by the provincial cellular subsidiaries.
The deregulation of the long distance market was a topic of debate at the beginning of the decade. By January 1992, the market was opened and Unitel was admitted. The following year, CRTC was empowered to protect the users' interests, overseeing and regulating competition. It was to have federal authority over provinciallevel decisions. Foreign capital was allowed in. Up to 20% for operators of basic services; as for other services, it could be unlimited (TWV, 19935).
In 1994 a new revision of the pertaining legislation is carried out (shniad, 1995a). These are some of the actions taken: An annual increase of two Canadian dollars of the monthly rental fee is established for three years; an increase of the local rates and a lowering of the long distance fees; removal of control over companies' profits: now, any cost reduction goes directly to profits whereas before it was mediated by the government and could result in user's benefit. Also, the local services market was opened to all sorts of suppliers, including cable television companies. All telecommunications companies can provide all types of services. Along with this deregulation process, privatization was also carried out with Teleglobe Canada in 1987 and Telesat in 1994. The provincial government of Alberta also sold 60% of the regional company.
As for as internationalization, we see that the companies that have moved in that direction are Bell Canada, Telesat and Teleglobe. However, multinational foreign capital plays a bigger role in Canada. In 1993 ATT bought 20% into Unitel's capital. MCI acquired 20% of Bell Canada. This year, ATT has bought part of Unitel's debt, changing its name to "ATT Canada". Furthermore, there is Baby Bell money in other segments such as mobile, cellular telecommunications.
There have been consequences of the processes we have been describing. In the first place, we find that employment levels have been decreasing: 113,000 in 1983 to 97,000 in 1992. This is clearly seen in Graphic number 3 (RTT, 1993). The 1995 regulations reinforce the tendency; in February of that year Unitel lets go one fourth of its work force. Bell Canada notifies its decision to terminate 10 thousand workers.
During the 1980's the Canadian telecommunications business underwent its most intense period of modernization. There were job changes as well as modifications in job requirements and classifications. Now, in the 1990's, the stress is on work organization, on topics such as Quality Circles, for example.
In the specific case of British Columbia there was implemented, from 1990 to 1992, a reorganization project. For two years there were negotiations with the union (TWV). Management tried to push the project without negotiating, moving employees around. Towards the end of 1994 the reorganization is not functioning; some managers are fired. BCT had to go back to the concept of multifunctionality, reduced its equipment and acknowledged the failure of its reorganization (Shniad 1995b). There are two last consequences here that are important and on which Canadian unions have put special emphasis.
The first one is that, after signing NAFTA, Canadian telecommunications authorities have been forced to modify their regulatory framework both in terms of deregulation as in opening of markets. This has brought about a tariff increment and, in some cases, a drop in service quality. For this, authorities have called for the formation of a common front with Union people to stop this process.
The second consequence is that the opening represents a transnationalization of services; foreign capital is playing a bigger role in telecommunications; besides, it is a threat to employment for in different occasions U.S. companies have tried to sell services intranationally a matter still being debated today. For all this, different authors and unions claim that the control over this sector has been lost (Shniad, 1992).
3. Telecommunications in the United States: Development of Global Corporate Strategies.
The telecommunications market in the U.S. until January of this year has been structured according to the so called deregulation, implemented since January 1, 1984. Until then, ATT had the monopoly on practically all services and it was also equipment producer. However, on October 7, 1981, the US. Senate voted for deregulation and in January of 1982 the Justice Department and ATT reached an agreement. ATT would break down its 22 exploitation companies and a new grouping would be made with seven regional companies: Baby Bell, Ameritech, Bell Atlantic, Bell South, Nynex, Pacific Telesis, Southwestern Bell and US West. There would be retained only Bell Laboratories (research a technological development labs), Western Electric (producer of equipment) and the exploitation of long distance services (Baugchum, 1989). For ATT, all this meant getting rid of two thirds of its assets but only one third of its earnings.
Baby Bell companies were authorized to render local and intraregional services but were not permitted to provide voice and data storage, data processing and retrieval, video text services, email and long distance; they were not allowed to produce equipment either. This structuring was rejected from the start, both by ATT and by Baby Bell. It would be only until January of this year when these restrictions were lifted and a total market opening went into effect. So we have that, up until this year, the local services market was controlled by Baby Bell plus one more company that emerged as the result of the merging of CTE with Contel. The long distance services market had been opened since 1972; however, by 1984, ATT was clearly the leading force with a 90% share of all operations. MCI had 4.5%, Sprint 2.7% and the rest, 2.6%. By 1992 the percentages were, respectively, 59.8%, 16.4%, 9.5% and 14.3% (CWA, 1991 and FCC, 1993).
In regards with other services, the competition is also concentrated along the most profitable segments. For example, in the case of mobile, cellular services, at the beginning of the 1990's nine companies were in control of 79% of the market. Eight of these outfits were the ones mentioned before as providers of local service. In this way, the socalled 'opening' to the competition became a struggle among a handful of oligopolistic companies striding swiftly towards their internationalization. Thus, the fight is on not only over the U.S. market but internationally; the big companies have developed penetration strategies on a global scale. For instance, by early 1995 Baby Bell had obtained licenses to operate in more than 20 countries, specializing in the latest added value services, cellular, directories and network management (Sánchez, 1995).
On the other hand, the long distance companies promoted a series of coinvestments and mergers in order to establish global networks. Such is the case of the alliance of British Telecom and MCI, Stentor, to penetrate the Canadian market; or, those of ATT which has entered different agreements to break into equipment markets in Europe. As an outcome of all this, American companies rank now among the major operators in the telecommunications of the world. Two more items would appear on scene and thus widen the battle field: the development of GII and the new Telecommunications Law. In regards with GII, we can observe that in the last two years alliances between Baby Bell and long distance operators with cable, entertainment and newspapers have been on the increase. As for the Telecommunications Law, the situation now is that there is an interest to penetrate the segments that were once vetoed for both types of companies. Now they are offering a combination of local and long distance service, interactive and information tv; however, it would seem Baby Bell is placed in a more difficult situation for it has only 71% of digital lines, whereas long distance companies are 100% digital. Furthermore, it will take Baby Bell a longer time to be ready for long distance than it will take the long distance companies to be ready for local services (Elstrom, 1996).
Yet, steps have been taken. The following fusions or mergers have been announced: ATT and sprint, to provide local service. Southwestern Bell and Pacific Telesis which, together, carry 21 million dollars of business and have 30 million lines. Bell Atlantic and Nynex; they have 26 million customers and are planning to cut down 3 thousand jobs. In this perspective we can see ATT's restructuring of last year, whose objective was focusing on services (El Financiero, 1996). Nevertheless, globalization and diversification are only one part of the picture of the total business strategy. Kenneth Peres summarizes it as an attack on both consumers and workers. (Peres, 1994).
Let us now take a brief look at three elements: tariffs, employment and changes in the work processes. In regards with tariffs, since the 1984 deregulation, there has been a trend towards raising the cost of local services and lowering the long distance ones. Also, we find that in the first years of deregulation, the index of local services is higher than the index of consumer prices (CWA, 1991 and FCC, 1993).
This has an important consequence. Deregulation brings about a conceptual change about the service: instead of being a social means of communication one phone line in every home it is now seen under the profit angle; socialoriented cost transfers are no longer possible. This obviously affects the lowerincome sectors and benefits the big companies. Moreover, restructuring has had quite negative repercussions in the U.S. employment level. 205,200 jobs lost between 1981 and 1993. The Baby Bell companies dismissed 83,135 persons form 1984 to 1992 and between 1984 and 1992, ATT shrank from 385,000 to 257,800 employees.
This process is still on. According to its restructuring plan, ATT is considering cutting off another 40 thousand jobs. Retirement has been offered to 7,400 managers; 4,000 workers will go as part of the package of subsidiaries to be sold and 30 thousand employees will be discharged directly. Likewise, the merger of Bell Atlantic and Nynex means the trimming of close to 3 thousand jobs. Clearly, job security is no longer. ATT Director, Robert Allen: "Employment used to be a lifelong commitment between both parts, the employee and the company; however, our people must realize that this contract, the implicit promise of job security in exchange for hard work and loyalty, does not exist any more" (voces, 1996)
Another form of facing competition has been the encouragement of deunionization and the hiring of more nonunion workers.
For example, Baby Bell cut down 158,281 jobs between 1984 and 1992 in their Union plants or places of work. During same period, they opened 74,985 nonUnion jobs in their subsidiaries (CWA, 1995).
Companies see unions as a cost item, and hence their strategies. In the name of cost reduction, efficiency and competition, they have implemented the following practices: dequalification, automatization, consolidation, forced transfers, category changes, quality programs, new universal categories, reengineering of processes, forced degradations, forced stoppages. Again, Peres concludes: "Technological change cannot be seen as a thing in itself. It is part of a wide process, the result of specific decisions. Essentially, technological change in telecommunications represents the total corporate struggle for the control of both the market and the work post." (Peres, 1994).
4. Telecommunications in Mexico: stable and growing employment; flexibility and transnationalization.
The Mexican telecommunications restructuring began in the early 1980's with the introduction of technological change, which came to modify work conditions, job qualifications, the makeup of the work force, etc. However, it was until 1989 when the modifications in the processes and work posts were formalized. Thus we have, at least three core changes: common agreement, deregulation and privatization.
The breakingoff processes. In regards with the common agreements, they took place in 1989 and can be summarized as follows:
1) 57 department agreements are turned into 31 job specialties. 2) From a previous 247 job categories, we have now 134 work posts. 3) The tasks assigned to each work post are very general and they include ambiguous concepts, such as the term "inherent". 4) Mobility is established at the different work centers and/or localities. 5) Workers in higher categories must now do the work of lesser categories. 6) There is now included a legend that states that secondary activities derived from primary ones shall be carried out. 7) Lesser categories shall "assist" higher ones.
Ever since those years there was talk about a new service philosophy. The formation of Quality Circles was proposed, without much success. The "Agreement on Quality, Productivity and Training" was signed in 1991 and thereafter Tel Mex's efforts have focused on raising productivity through agreements with the union. At first, lack of expertise was reflected in the 1992 General Program of Incentives to Quality and Productivity. However, things would be improving with the active participation of the workers. Incentives as well as collective and individual goals were implemented by work centers, specialties, companies' general goals, etc (Sánchez, 1993).
We propose that the 1989 Common Agreement laid out the basis to move on to modify the work posts as well as the existing labor structure. The agreement also fostered the integration of the workers within the perspective of competition and productivity. The key element in all this, however, is the breaking off of the existing labor regulations and the establishing of new ones, under the perspective of competition.
In regards with telecommunications, Mexico's Secretariat of Communications and Transportation (SCT) issued, in October 1990, the Ley de vías generales de comunicación, which contained all the proposals tending to the deregulation of the communications sector as well as the introduction of competition in the rendering of services. It also reflects the shift from a universal service concept (one telephone in every home) to a concept of profit. This legislation was preceded by a restructuring of the secretariat (SCT) and by the creation of Telecom (source: SCT, 1990a). In fact, the first steps are taken so that SCT becomes an Office that coordinates the functioning of the market through concessions to private parties, functions of normalization, competition promotion and research. The Mexican government reserves the right to render telegraphic service, as well as the rights to establish, operate and control satellite communications. The rest of the services can be subject to concessions or permits.
The services object of concessions are the basic ones: local, radiocommunication and long distance via ground networks. On all these, the government reserves the right to promote competition. Local service is open since 1990 and long distance will be opened in 1996. The services object of permits will be classified as follows: added value, local complementary networks; radioelectric stations and private networks. The grantees of these permits cannot carry long distance signals between third parties but those who have obtained concessions of public networks are authorized to render added value services.
As regards with tariffs, crossed subsidies between services object of concessions are vetoed. Its tariffs will be authorized by the Secretariat (SCT). The tariffs of services object of permits will be free of control. Likewise, companies who have obtained concessions pledge themselves to provide minimum basic service with at least one public phone station in the small towns or villages.
Three months later the concession title that Tel Mex held since 1976 is modified to bring it up to date. These modifications include the following pledges by Tel Mex: Yearly 12% expansion of service from 1990 to 1994; linking up with telecommunications all population centers with 500 inhabitants (at least with one public phone station); setting up pay phones to reach level of 2 for each one thousand inhabitants by 1994; reduce the waiting time for new hookups; raise the quality of service to international levels (source: SCT 1990b).
Besides, Tel Mex could ask for authorization to render the services of mobile, radiotelephonic communications; added value; distribution of TV signals; manufacturing of telecommunications equipment and computation and electronics through subsidiaries. Also, Tel Mex could offer basic services and commercialize all kinds of terminal equipment.
As for tariffs, the elimination of crossed subsidies is ratified. A basic package of services is created. Its prices would rise according to the National Consumer Price Index. However, from 1997 on, there should be a decrease on tariffs according to a productivity factor.
On the other hand, in September 1989, President Salinas announces that Tel Mex would be privatized. During all the time it was under official control, he said, the State did not have enough resources to finance its expansion. From 1989 to 1994, 10 thousand million dollars would be required to modernize the system (Excelsior, 1989). The presidential resolution included six conditions for its implementation:
1) Guarantee that the State maintains control over the country's telecommunications.
2) Radical improvement of the telephone service to the public.
3) Guarantee the workers' rights.
4) Expansion of service: yearly growth, 12%; installing 4 million new lines from 1990 to 1994, raise phone line density from 5 to 10 lines for each 100 inhabitants a 10 thousand million dollars investment. This would be financed 70% with internal resources.
5) Carry out scientific and technological research.
6) Remain under Mexican majority control; foreign investment accepted up to 49% of capital. Profits would depend on productivity.
In 1990 the sale is completed, corporate structure remaining as follows:
5.2% of stock, Grupo Carso, headed by Carlos Slim, stockholder in more than 15 companies.
5.2% of stock, Mexican partners, among which are: Angel Lozada, Bernardo Quintana, Rómulo O'Farril, Beatriz and Jorge Alemán, Manuel Espinoza Yglesias, Carlos Abedrop Dávila, Antonio Chedraui.
5.0% stock, France Cable a Radio, subsidiary of France Telecom.
5.0% stock, Southwestern Bell Co.
According to information provided by the new management, there is a "natural" division in the organization: Carso will specialize in legal, social and real estate matters. Southwestern Bell will see to the commercial aspect, mobile systems and the issuing of directories. France Cable a Radio will focus on modernizing the network and will take care of the satellite operations.
Given the new structure, this group would have the control of management, with only 20.4% of the social capital, even though some of the other stockholders acquired "L" stocks, as it was the case with France Cable. Furthermore, the Carso Group has tried to maintain its position as majority Mexican group. By 1995 it had 8.4% of "AA" stocks and is aiming for 12% of those shares. Thus, multinational capital, together with bib Mexican financiers, is once again in possession of Mexico's telecommunications (Sánchez, 1993). As we can see, technological modernization, deregulation, privatization, labor flexibility, are the processes that allow the development of a new telecommunications sector whose main axis is the market, the upsurge of competition and the establishing of efficiency, profits and productivity criteria.
The 1995 Telecommunications Law ratifies these concepts and states, also, that satellite services can be object of concessions. Tariffs can be fixed freely after registering with the SCT. Foreign investors can participate with up to 49% of capital in the companies (SCT, 1995 and Mejía, 1995).
A very active competition... for the profitable, big user markets. We can observe that in Radiocommunications the struggle has increased substantially in the last few years; it is mostly middlesize outfits that are fighting over regional markets, which are in turn controlled by one or two companies.
Nevertheless, the most dynamic segments remain the long distance ones, as well as added value (which is furnished via local and long distance infrastructure) and cellular systems. As for local services, it is worth noting that although they were opened to competition in 1990, it wasn't until 1996 that the first concession was granted, the reason being the large initial investment required and the low return rates at the beginning. However, new technologies may make this segment more dynamic in the near future.
Concerning cellular, mobile service, we find that at the beginning, in 1990, eight concessions were granted to companies that had a combination of local, regional, national and multinational capital. Actually, the competition by 1995 was centered around two companies: Iusacell (26%) and Telcel (57% of market share). The remainder of the market was disputed among the rest. Competition has ranged from advertising wars to tariff reductions; also, they have used low impact unions and a large portion of nonunionized personnel.
There has been a big debate over the opening of long distance services. First came the authorization of concessions and then the interconnection points and costs. What we want to stress here is that, again, this competition is oligopolistic and there is a basic interventionism of foreign capital.
Point in fact is to recall how Alestra was formed. In the first place, it emerges as the alliance between Alfa and ATT with 51% and 49%, respectively, of social capital. Later, Unicom is absorbed. The new distribution is like this: Alfa 24.6%; Bancomer 24.4%; ATT 22%; GTE 14.5%; Telefonica Internacional 14.5%.
Shaped in this way, we can see which is the new capital structure in telecommunications: The Mexican financiers are interested in not losing their part of the profits in the new infrastructure of information. However, they lack the necessary technology; therefore, the alliances with multinational corporations which are interested in active participation even as minor partners, for they will complete their share investing in other segments and other countries. For example, ATT has now four entities: Networks Systems, Global Information Solutions, ATT (Maquiladora or inbond plant) and the new merger.
Alestra will offer the following services: national and international long distance, leasing and subleasing of installed capacity, card services, commuted 800,900; virtual network, personalized number, access to international communications networks, package transmission, private lines and frame relay. Alestra started doing business in the following cities: Mexico City, Mexicali, Matamoros, Zacatecas, León, Cuernavaca, Monterrey, Cd. Juárez, Chihuahua, Aguascalientes, Celaya, Pachuca, Guadalajara, , Nuevo Laredo, Saltillo, San Luis Potosí, Querétaro, Puebla, Tijuana, Reynosa, Torreón, Cd. Victoria, Toluca, Reynosa and Morelia ( El Financiero, 1996).
The other competitors are planning to participate in practically all the same segments and cities with corporate structures of alliance between national and multinational capital. Thus we have a situation of specialize services which are requested by the great oligopolistic corporations. This demand is spread out throughout the more important Mexican cities and population centers. What we have here is a dispute to take over Tel Mex's big clients, in a market considered to be worth between 10 and 12 million dollars. Northern makes the following breakdown of the total pie as follows:
Mexican Telecommunications Market for year 2000:
Services 20 thousand million dollars for infrastructure.
Equipment 6 thousand 500 million dollars.
Jobs
230 thousand lines for each 100 inhabitants
As it can be observed, in the specific case of long distance it is considered feasible for only four or five companies to stay on and hold their ground. Some projections estimate Tel Mex will lose out 35% of its long distance earnings. The alliances established with MCI and ATT appear as the strongest ones. They pose the bigger threat to Tel Mex in the fight for the market's control. Again, the competition problem is taken care of via cost reduction; particularly; technology, management and, of course, labor. So far, what we can say about the new companies that are positioning themselves is that they try to hire qualified, young people that belong to corporate unions, the socalled "sindicatos blancos" that is, managementcontrolled unions. In no case has the old union, the Sindicato de Telefonistas (STRM), obtained a contract.
We consider these strategies will be reflected in their labor costs, which will be much lower. On the other hand, Tel Mex itself has been preparing for all this. Among other actions, it is undertaking the following ones (Tel Mex, 1996):
* technological modernization: 87.6% of lines are digital; optic fiber national network; automatization of financial a administrative services; setting up of a network for data transmission and package commutation.
* administrative restructuring: more flexibility, better service for the big users.
* consolidation of alliance with Sprint; plans to operate not only in Mexico but also within USA Also, closer ties with international network Global One.
We must keep in mind that since Tel Mex went private, a number of changes have occurred in its financial structure. In the first place, as to the origin of revenues, these are modified. There is now an increase in the income from local services, and a decrease in the earnings form long distance, specially in the case of international service. This is an outcome both of tariff modification and the setting of world criteria about charging according to cost. Another aspect is that, since 1992, the participation of new services show an increment. This is in function of the diversification of the added value services.
We can observe that salaries levels diminished in the first years. Nevertheless, profits went up from 1991 to 1993. The last year, however, breaks the tendency due to the crisis that without any doubt our country is going through. Yet, the determining elements for the new competitive structure will be labor costs. Thus, once again, in April of the current year, Tel Mex negotiates a new collective contract, based on the experience it had with the medicine of productivity and its dealings with unions. In a direct style, Tel Mex's CEO stated: "The most important achievement in this contract is the flexibility that from now on, we shall have in labor relations; more flexibility to carry out functions among different specialties and more flexibility to execute tasks of lesser categories... it was agreed to extend the retirement age, recognizing thus that the experience and commitment of its people are one of Tel Mex's major assets. This flexibility, coupled with the new productivity program, must result in a more productive and competitive corporation that will finally bring its human resources up to the same level it now has in its technology" (Chico Pardo, 1996).
Raising productivity is the central axis of management's strategy to increase profits. This year there has been a revision of the productivity concepts, placing greater emphasis on the importance of the "customers" with the idea, it is said, of giving more and better service. However, this also means more dedication and more effort on the part of the workers. Thus, the competitive efficiency and the profitability are achieved through labor cost reduction, increments in the work load, more participation of the workers in the company's objectives, lower salary benefits and, eventually, personnel reductions. So far, Tel Mex's union has been able to hold the staff cuts, but the question is until when?
Although there hasn't been an official reduction, it is clear that they have increased the number of nonunion workers. This can be a first step in a larger strategy. Therefore, Tel Mex workers have clear in their mind that it is necessary to search for new ways of bargaining so that they can keep the present employment level.
Finally, it is worth nothing that another of Tel Mex's strategies has been centering the focus on the big clients, the ones that generate the higher profits. These clients are the "premier" customers; they are looked after by Telecorp and their needs are fulfilled "custommade" style, as expressed by one of Tel Mex's corporate directors (Sotomayor, 1996).
We would like to point out one more consequence of this neoliberal approach in Mexican telecommunications. With the application of these measures, the polarization in the rendering of basic services tends to grow. The current tariff rates make it impossible for the majority of Mexicans to afford a telephone at home. Maybe Tel Mex is considering for them the possibility of a pay phone interspersed in the poor neighborhoods or remote rural villages. In this sense, we can see how since 1989 the price index for telecommunications is higher than the Consumer Price Index. This ratifies the tariff structure that makes for higher costs for local service. We can also note that, since 1995, Tel Mex has experienced a drastic slump in its growth. This is due not only to the crisis, but also to the fact that the potential customer base with purchasing power is constantly getting smaller. Whereas Mexico City has 24.6 lines per 100 inhabitants, Chiapas has only 2.2 lines a tenfold difference.
5. One perspective of globalization: multinational competition, polarization and labor sacrifice.
As we have seen, globalization in telecommunications means the shaping of a global infrastructure of information and a converging of technology. The foundations have been: deregulation, opening of markets and, first of all, labor flexibility.
We see that the global corporate strategy is the form in which multinational companies reap the benefits of technological advancement and take over their countries' markets and advance internationally. Also, they use this strategy to maintain and reproduce this state of things.
From the workers' perspective, the inset of global competition has meant a lowering of the employment levels, higher work loads and a weakening of union power. We also have to keep in mind that now efforts are being made to impose standards and parameters of productivity and quality where there are deep dissimilarities in the social, economic and cultural aspects. For that, it is the big, multinational corporations that with capital and know how, reap the wealth generated in telecommunications. They are the ones that have the power to impose their will.
We thus find that in the configuration of the North America market, one thing was very clear: the idea was to open up international borders so that the big American multinationals could apply their strategies throughout the entire region (Industrial Outlook, 1993).
However, the Mexican and Canadian governments chose the possibility of jumping in immediately and reap juicy benefits instead of the possibility of generating peopleoriented policies.
The lack of symmetry is substantial. Whereas the U.S. has 1.8 inhabitants per line and Canada 1.7, Mexico has 15.3 inhabitants per line. The innovation capacity of capital is nonexistent in Mexico; selective in Canada and very large in USA. And yet, the elements they are trying to make equal are profitability (return rate on investment) and productivity... and they are achieving it, but, at the expense of the workers and of a very strong market segmentation, tilted heavily towards the big users. All this reinforces even more so a reproduction model with a high degree of polarity.
Challenges for the workers have been spelled out in different ways. Number one, gear up a resistance of the same caliber as capital; that is to create a multinational resistance strategy. A strategy that embraces the defense of telecommunications as a universal service, and the emergence of a different growth policy.
Translated into English from the Spanish
Original by: Jesús Sepúlveda Sagaón.
Monterrey/II/97 3586705 / 3592292
Previous Section - National Reports
Next Section - Session II - Safety and Health
Return to TecsChange home page
