Message: 46
Date: 4.1.97
From: <nicholas@media.mit.edu>
To: <lr@wired.com>

Dear PTT

Most Americans don't realize that less than 10 countries in the world have private and competitive telephone systems. The rest have government-owned monopolies. These are usually part of a post and telecommunications ministry, commonly known as Posts, Telephones, and Telegraphs, and are run by civil servants whose government employer is both a telecommunications regulator and a service provider - clearly positions of conflict. The PTTs provide evidence, once again, that sovereignty and enterprise make strange bedfellows.

Because of government ownership, PTTs can get away with poor service and unilateral decision-making, while realizing handsome profits from sinful pricing. A recent six-minute local call from a pay phone in Switzerland cost me CHf17 (US$12).

During the summer of 1993, the Greek government fell to the socialists, largely because the New Democrat Party threatened to privatize the phone company. This would have resulted in downsizing in an economy where around 5 percent of the population are public employees. At the time, I was told that incomplete telephone calls make up 25 percent of the Greek phone company's income. Of course, there is no way for me to check this figure. But I wouldn't be surprised. Two years earlier, I actually received a monthly $2,000 phone bill for a period of time I was not in Greece and my phone was disconnected. "Too bad," they said. "If you don't pay the bill, we will cut off your phone service - don't bother contacting any of our subsidiaries, such as the police, the judicial system, or the better business bureau."

Sell-off boon - but for whom?
Such shenanigans will come to a halt as more phone companies are privatized and more telecommunications environments are opened to competition. This is elementary. But in the process of moving ownership and enhancing competitiveness to the private sector, what will be done with the money these countries realize from the sale of their telephone companies?

Western European privatizations in general were worth $43 billion in 1996, which included Deutsche Telekom's $13 billion IPO, Europe's largest ever. No government can ignore this opportunity to reallocate social assets. Future consumers will be better served by liberalization, and current politicians (or potentates) will be remembered for filling their nation's coffers.

But therein lies the rub - should this money be used to patch up the general indebtedness created by politicians, or should it be invested in the people who produced it in the first place? The Turkish government boldly states that it will use the money from the sale of its PTT to cover national debt and help cope with an inflation rate greater than 100 percent per year.

This seems very wrong to me. Turkish citizens have been paying high prices for poor telephone service for years. The value of a national PTT is due, in large measure, to the citizens who have been good and faithful clients. As shareholders in government and stakeholders in telecommunications, these citizens deserve better spending plans when their government receives such a large windfall. So, here is my suggestion in the form of a short open letter:

Dear PTT,

My sincere congratulations for your plans to privatize your phone company. But what will you do with the money?

Let me offer a suggestion: connect your elementary schools to the Internet and provide as many personal computers as you possibly can. If you put as little as 10 percent of this nonrecurring revenue into wiring your schools, you would be investing in your future.

Your children don't have access to enough books. Tomorrow they could have access to the world's libraries. Unlike us, they could grow up with a global perspective, seeing and learning from many different points of view.

What stands between kids and education is resolve - yours. It once was money, too. But you and your government are just about to get a basketful of that. Your biggest natural resource is the human capital of your children. Surely they deserve just a fraction of the proceeds from this historic event.

Reality check
From a macroeconomic perspective, one can argue that government money has no color - whether from taxes or the sale of public companies, it is all the same. However, from the taxpayers' point of view, there is a sense that government should honor its word, and a belief that, for example, a road tax should be applied to roads. Perhaps we can establish the same sense of accountability for a wired society.

Only $6 billion a year is needed to meet the worldwide need for basic, primary education, which currently reaches only 80 percent of children. Unicef strives to kindle a sense of absurdity by juxtaposing this modest $6 billion against the $40 billion per year spent on golf and the $85 billion a year spent on wine. But it's difficult to tax sports and drink spent in country A for education costs in country B.

My suggestion is largely an expedient, connecting cause and effect, using a one-time windfall as a one-time start-up cost, because it is likely that all countries will privatize their telecommunications within the next 10 years. In the United States we estimate that $10 billion to $20 billion are needed for the one-time charge to connect all K-12 schools. Vice President Gore is doing a good job of raising the sensitivity of the nation's citizens while providing incentives for companies to step in. Other nations don't fare as well because they are less digital - in terms of their citizens and their leaders.

Why are they less digital? Partly because of the PTTs. Germany is a good example: the old Deutsche Telekom made it prohibitive to be online. So, dear PTT, even if my argument does not stand up on logic, I hope you'll do the right thing anyway - out of a sense of shame and guilt.

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