Dependency Theory and Its Relevance Today: International Institutions in

Telecommunications and Structural Power

Author(s): Jill Hills
Source: Review of International Studies, Vol. 20, No. 2 (Apr., 1994), pp. 169-186
Published by: Cambridge University Press
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Review of International Studies (1994), 20, 169-186 Printed in Great Britain

Dependency theory and its relevance today:

international institutions in
telecommunications and structural power*
JILL HILLS

Introduction

The majority of political theories have arisen in opposition to existing theories a

the interests they represent. Dependency theory was no different in this regard

arose as a reaction to 'modernization' theory, which linked industrializatio

political development and to those theories of political development which the

selves represented American interests during the period of the Cold War.1 It ar

also in reaction to the economic theory of 'trickle down' which character

the post-war social democratic concern with economic growth and Keyne
economics in industrialized countries and which linked the poor in the in

trialized West with the poor in the non-industrialized South. In both, Keynesi

based, state led policies of capital investment were expected to provide t

locomotive for indigenous development.2

The Dependency school of thought was located in the 1960s and 197

an ideology around which newly independent countries, faced with the p

lems of the economic relics of colonialism could coalesce. The school conta

widely divergent theoretical perspectives, some distinctly Marxist and other m

structuralist. It varied from those theoreticians such as Andr? Gundar Fra

who argued that all developing countries were similarly affected by the h

archical structure of the world economy and failed to locate the relevance of
theories to the specificity of historical circumstances of particular countries, to

more state-centred approach of Latin American theorists such as Cardosa

the structural approach of Galtung and Sunkel.3 Each was concerned with

* A preliminary version of this paper was presented in the Political Economy and International
Communications panel of the Eighteenth Research Conference and General Assembly of the
International Association of Mass Communication Research, Guaruja, Brazil, 16-21 August 1992.
1 Samuel P. Huntingdon, Political Order in Changing Societies (New Haven, 1968); Lucian W. Pye,
Aspects of Political Development (Boston, 1966).
2 Albert O. Hirschman, The Strategy of Economic Development (New Haven, 1958); Harvey
Leibenstein, Economic Backwardness and Economic Growth (New York, 1960); Anthony Crosland,
The Future of Socialism (London, 1962).
3 See, for instance: Andre Gundar Frank, 'The Development of Underdevelopment', Monthly
Review, 9 (1966), pp. 17-30; Johan Galtung, A Structural Theory of Imperialism', Journal of Pe
Research, 2 (1971), pp. 81-94; F. H. Cardosa and E. Faletto, Dependency and Development in La
America (Berkeley, 1979).

169

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170 Jill Hills

explanation for the continuing inequalities between North and South and for the

widening gap between rich and poor. The common theme was the conceptualiz
ation of the exploitation of the 'periphery' by the 'centre', the differences lay in
how far they linked the external international economic structure to the internal
dynamics of the political and social formations of individual states.
As a political tool dependency theory both contributed to and reflected the unity
of the developing world within the Group of 77 and the Non-aligned movement,

and contributed to what then seemed a shift in the balance of economic and

political power towards the South. Coupled with a lack of direction within the
United States, still recovering from the debacle of the Vietnam war, developing

countries made gains, such as the setting up of UNCTAD, to represent their

interests in trade, and debates on the New World Information Order within
UNESCO.4 The academic attacks on the dependency school of thought coincided

with a rise of the Right within the United States, of a revitalisation of

the American defence budget, and of increased protectionism emanating from

Congress.5 Reflecting these trends was a renewed academic emphasis on 'realism'

and the role of the state in the international system.6 The major concern of
American theorists during the 1980s was the perceived decline in American
hegemony stemming from its inability to utilize its nuclear capability and its
economic decline as industries in Europe and Japan took increasing shares of its
previous world markets. In contrast European political scientists and in particular

Susan Strange argued that while the United States might have lost relational
power?that is the power to enforce its decisions?during the 1980s, it retained
structural power?that is on the basis of its dominance over the distribution of
resources, it retained the power to set the agenda and determine the parameters of
international discourse. She suggested that the United States retained power over
four structures: those of knowledge; of communications; of the military and of
finance. In each of these structures it had the resources to control the terms of
debate in its own interests.7

This article starts from Strange's conception of American structural power over
knowledge. It argues that, out of American structural power over economic debate,
a hegemony of economic orthodoxy has arisen. This orthodoxy reifies the virtues of
liberal markets and free trade.8 In turn, that economic orthodoxy is being used to
legitimate the conversion of American structural power to relational power over
communications through international institutions.

4 Marc Williams, Third World Cooperation. The Group of 77 in Unctad (London, 1991).
5 Paul Cammack, 'Dependency and the Politics of Development', in P. F. Leeson and M. M.
Mimogue (eds.), Perspectives on Development. Cross-disciplinary Themes in Development
(Manchester and New York, 1988), pp. 89-125.
6 R. Gilpin, US Power and the Multinational Corporation (New York, 1975).
7 Susan Strange, 'Cave! hie dragones: A Critique of Regime Analysis', in S. D. Krasner (ed.),
International Regimes (Ithaca and London, 1983), pp. 337-54. For a critique of the 'lost hegemony'
paradigm, see: Susan Strange, 'Protectionism and World Polities', International Organization, 2
(1985), pp. 233-57; Craig Murphy and Roger Tooze (eds.), The New International Political

Economy (Boulder, 1991).

8 Robert Cox, 'Ideologies and the New International Economic Order; Reflections on Some Recent
Literature', International Organisation, 2 (1979), pp. 257-67.

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Telecommunications and structural power 171

Structural power and economic orthodoxy

Coinciding with the ascendancy to office of not only Reagan in the USA, but
Thatcher in Britain, and neo-conservative governments in France and Sweden,
monetary policy replaced Keynesian economic policy. Both Reagan and Thatcher

were elected on the basis of rolling back the state. Both put forward the
nineteenth-century concept of the 'free market' as the correct mechanism for the
distribution of costs and benefits. To a much greater extent in Britain than in the

United States the mechanism of 'privatisation' became the means by which the
state could exit from the responsibilities it had accrued since the first world war.

Democracy, and the growth of lobby groups?the very pluralism so vaunted by

American political scientists in the 1950s and 1960s as the basis of democracy
became seen as the stumbling block to a more efficient state.9 Economic liberalism,
coupled with the strong centralized state, led to the concept of control through the

market of the Thatcher era. Micropolitics is the name given to a system of

privatization designed to control the behaviour of non-state actors through
alteration of the incentives governing their behaviour, resulting not in a diminution
of state power but in a diminution of the power to oppose the state on the part of
collectivities. Liberalization and privatization become mechanisms to undermine
pluralism and grouped opposition by the introduction of competition and indivi
dual incentives.10

While domestic conditions within the United States itself deteriorated, thereby
opening a widening gulf between rich and poor, the domestic political system's
fragmentation produced a stand-off in domestic policy. With increasing balance of

payments deficits, the one unifying ideology among American politicians sur
rounded the trade deficit. Here politicians and industrialists were able to castigate
other countries for their failure to adopt the principles of free trade. In tandem, the

United States itself introduced a series of protectionist measures to combat a

further loss of employment or restructuring of mature industries such as auto
mobiles, or the transfer of technology. These ranged from the Super 301 clause of
the 1974 Trade Act, which allowed action against any country complained of by an

industrial lobby, (even if there were no proof of damage to that industry) to

bi-lateral agreements on voluntary restraint of exports to the USA, to agreements
between the USA and Japan to carve up the world market for semiconductors.
Managed trade became the norm despite the liberal market ideology. Reciprocity

on individual products undermined the previous multilateral agreements and

previous economic consensus that 'comparative advantage' between countries in
production was the engine of international trade. In this new environment
individual developing countries could be picked off for exclusion from preferential
treatment in their entry to the American market and the Group of 77 fragmented
into a group of nations with individual interests.11 Opposition and particularly
collective opposition was undermined.
9 For an overview of theories of pluralism, see Christopher Hamm and Michael Hill, The Policy
Process in the Modern Capitalist State (London, 1986).
10 Madsen Pirie, Micropolitics (London, 1988); Privatization: Theory, Practice and Choice (London,

1988).

11 Scott Sidell, The IMF and Third World Political Instability (Basingstoke, 1988), p. 6; Paul Mosley,
Jane Harrigan and John Toye, Aid and Power. The World Bank and Policy-based Lending, Vol. 1

(London and New York, 1991), pp. 66-7.

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172 Jill Hills

Within the international political system the ideas promulgated by such institu
tions as the World Bank, the OECD, and G7 reflect this new economic orthodoxy.
Starting in the early 1980s, the World Bank began to press the 'conditionality' of
liberalization and privatization onto developing countries, as a means to reform
their state structures.12 But this article argues that the impact of micropolitics in the

international system, promulgated by the United States and its ally Britain goes

further. It is not only a mechanism to undermine collectivities of states in

opposition to the United States within international institutions, but also to
undermine the potential power to oppose American hegemony by the individual

sovereign nation state. And the tools to do this are economic orthodoxy, the
multinational company, protectionist threats, and international institutions.
Free trade, like all economic theories, acts in the interests of some, rather than
all. Those companies who benefit most from free trade are the largest companies,
able to take advantage of economies of scope and scale, able to sectorise markets
on a global basis, to enter into cost-sharing agreements on technology licensing,

able to merge and concentrate across adjacent sectors. Where multinational

companies from one country dominate a sector, it is those who benefit most from
free-trade. It is these companies, which, when allowed to operate within the world
as if it were one domestic economy, are then in the position to repatriate profits
into the home country, thereby offsetting visible balance of payments deficits with
invisible earnings. Foreign direct investment is crucial to this strategy. The rights of
such companies to operate with the minimum of regulation by nation states is also
crucial. The multinational becomes the key to the transfer of structural power over
economic discourse to relational power over sovereign nations.

But in order that they should be so empowered their interests have to be

represented by international institutions, which, in turn must be restructured to
represent those interests. Micropolitics within international institutions involves
their restructuring to reflect the new orthodoxy of liberal markets and the new
fragmentation of collectivities, and the interests of private capital as against those
of the nation state.

Dependency theory and economic neo-liberalism

To return to the concept of dependency, its argument that the centre ruled the
periphery and that the periphery was dependent on the structure of the inter
national economic system, is rejected by the neo-liberalist market enthusiasts. The

argument is that in the new international economic system all countries are
'dependent' to some extent on each other and the extent of that dependency cannot
be defined solely in relation to developing countries. Hence 'dependency' becomes
translated into 'interdependency'. Further, others have argued that the emphasis
within dependency theory on the structural hierarchy of the world economy failed
to take account of the role of the state within developing countries, or to account

for the success of the Newly Industrializing Asian countries in altering their
12 J. D. Aronson and P. F. Cowhey, When Countries Talk: International Trade in Telecommunications

Services (Cambridge MA, 1988).

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Telecommunications and structural power 173

ranking within the world economy.13 To these critics the role of the state and the
activities of elites within those states, whether corrupt or otherwise, were crucial to
understanding the relative failure of these countries. The argument revolved around
how much autonomy each individual state had in altering the impact of the world
economy on its domestic structural arrangements.
While not wishing to engage in the argument as to whether these critics were
correct in their assessment of the empirical validity of dependency theories in the
1970s, if it can be shown that the autonomy of poorer states is now minimal, then
the strictures of these latter criticisms are irrelevant to the 1990s. If it can be shown

that the domestic arrangements of such states are directly related to the structure
of the international economy, then dependency theory once again assumes import

ance as a tool of analysis.

In as much as the neo-liberal economic orthodoxy has failed to take account of

the political and social needs of individual countries, the argument is half-proved.
In as much as the IMF and World Bank prescriptions for restructuring have been
similar, whether the country be in Africa or in the previous Soviet Union, the

implication is that the domestic relations of individual countries must be sub

ordinated to the requirement that each and every country restructure its domestic
economy, not to meet the needs of its people, but to meet the needs of those who
run the international economy. Such restructuring involves devaluation, export led
industrialization or export led agricultural or other commodity production, cuts in

public expenditure on education and health and a general subordination to the

requirements of foreign exchange for debt repayment. It also involves the opening
of the domestic economy to foreign direct investment and loosening of controls on
the repatriation of profits. In states previously subject to centralized command
control, market mechanisms must be introduced.14

The overwhelming concern therefore of the neo-liberal orthodoxy is the inte

gration of all states into one capitalist world system in which the free market reigns

supreme and all adopt similar economic policies. Given that the free market

benefits the strongest and largest, be it companies or states, the implication is that
the neo-liberal proponents are intent on developing a hierarchical world in which

the largest shall benefit most, in which the autonomy of states is eroded by
centralized control of economic policy from Washington. In such a scenario it
would need to be shown that states were unable to utilize resources in a bargaining
relationship with the IMF or World Bank?in other words 'interdependency' which
implies that both partners can bring resources to the negotiating table had been
replaced by 'dependency', in which one partner had relational power over the
other. Hence one needs to show that there have been changes in the domestic
resources of developing countries, and in the resources of the industrialized which

could lead one to argue that relational power has replaced structural power.
Following that logic this article will go on to argue that American structural power

13 See, for instance: Tony Smith, 'The Underdevelopment of Development Literature', World Politics,

2 (1979), pp. 247-88; S. Lall, Ts "Dependence" a Useful Concept in Analysing

Underdevelopment?', World Development, 11 (1975), pp. 799-809; John Browett, 'The Newly
Industrialising Countries and Radical Theories of Development', World Development, 1 (1985),

pp. 789-803.

14 Dharam Ghai (ed.), The IMF and the South. The Social Impact of Crisis and Adjustment (London,

1991).

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174 Jill Hills

over knowledge; communications; finance and the military is being turned into
relational power through international institutions.

Structural power into relational power

In particular four factors have led to a situation where the American control of
resources is central to the promulgation of American interests and to a direct form
of American neo-colonialism.

First the break up of the former USSR and the Gulf War have had a direct
impact on the power of the United States. In a world where the East-West axis of
power has been removed, the break up of the USSR has affected the structural
power of developing countries. Whereas previously issues fell into the East-West

issues of military hegemony and the North-South relations of economic ex

ploitation, today all issues, including those between the two previous military
contenders, are now North-South issues. Worse, the previous countries of the

Soviet bloc are themselves no longer collaborators, but competitors, of the poorest
developing countries for international finance, as well as for preferential treatment

in terms of trade. Countries in Africa are in competition with the newly in

dependent Central and East European states for multilateral funding.15
Second the impact of international financial liberalization which stemmed origin
ally from the United States has been to produce a generalized tightening of credit
and shortage of capital. The ensuing recession has, in turn, led to an increase in

protectionism on the one hand and a renewed emphasis on the exports of the
industrialized countries on the other. At one and the same time the industrialized

countries are attempting to export out of recession while retaining barriers to such
exports from the non-industrialized world. Coupled with falls in commodity prices,
the effect is a flow of funds out of the poorest countries at the same time as a

reduction in state income from exports.16 Hence the autonomous power of

developing states has been undermined.
The ongoing debt crisis has exacerbated this outflow of funds from developing
countries. While the outflow of funds from the poorer countries of the world in
debt repayments denominated in dollars rose in the 1980s, multilateral development
aid reduced. Hence, the outflow of funds exceeded the inflow. Even the poorest
countries have benefitted only marginally from rescheduling of debt.17
The debt crisis and the shortage of multilateral and private capital for investment

has in turn led to the increased structural power of the IMF and World Bank,

where the US is hegemonic.18 Responding to American Congressional concerns, the

International Finance Corporation of the World Bank has taken on renewed

importance and shifted its stance from financing private sector development within
15 In total in 1991 investment by overseas business in Eastern Europe came to $2.3bn compared to
$2.7bn in Africa. Financial Times, 16 June 1992.
16 Hartmut Elsenhams, Development and Under development. The History and Politics of North-South

Relations (New Delhi, 1991), pp. 112-13.

17 Thomas Klein, 'Innovations in Debt Relief, Finance and Development March (1992), pp. 42-3;
Susan George, A Fate Worse Than Debt (London, 1988); Fantu Cheru, The Silent Revolution in

Africa (London, 1989), pp. 16-17.

18 Bartram S. Brown, The United States and the Politization of the World Bank (New York, 1992).

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Telecommunications and structural power 175

developing countries to the financing of takeovers and privatization by Western
companies of developing country assets.19 Nor do developing countries have much

choice in whether they adopt such policies. Without IMF and World Bank

approval, they cannot raise finance from regional banks or private capital sources.
Even to reschedule debt repayments which they are unable to meet, they must

accept IMF and World Bank prescriptions. Selling parastatals to multinational

companies is one mechanism to meet these prescriptions.
In general we can say that the trend within the past five years is for the United
States' power over the knowledge structure in the field of economic theory to be
translated into relational power through the mechanisms of protectionism, of the
debt crisis, and of its hegemony over the IMF and the World Bank. Under the new
world order the incentives are for developing countries to compete, not cooperate,

with each other. Hence the micropolitics of reducing aid from the centre and
transferring responsibility for distribution onto the market mechanism has in turn

increased the power of the United States to control the individual actions of

countries.

This alteration of incentives to developing countries through the free market

orthodoxy, and the restructuring of their domestic economies, has undermined the
collectivities of developing countries and the institutions in which they developed a
concept of their own interests against those of the industrialized. Responding to the

new economic realities, in 1987, UNESCO adopted the concept of 'free flow' of

information. In 1992 the role of UNCTAD as an international institution acting as

a forum for the trade-related concerns of developing countries is under review. It
has also accepted the legitimacy of the economic mechanisms of liberalization and
privatization.20 Hence the international institutions in which developing country

interests have opposed those of the USA and other industrialized countries are
being undermined by economic theory which supports the political interests of the

United States.

Structural power to relational power?the communications sector

If we turn now to the communications sector, how far can we say that similar

factors are at work to increase the power of multinationals, to restructure

institutions and to impose market mechanisms on the distribution of costs and
benefits within the international system? How far can we say that the structural

power of the United States in this sector, remarked on by Strange, is being

converted into relational power?
In answering the question we need first to look at the changing international
political economy of communications and what overall arrangements in the sector

would best suit the corporate strategy of multinational companies. It is this

corporate strategy which provides the linkage between national governments and

international institutions, and has raised the saliency of those institutions to

19 W. Ambrose, P. R. Hennemeyer, J. P. Chapon, Privatizing Telecommunications Systems, Business
Opportunities in Developing Countries, World Bank Discussion Paper No. 10 (Washington D.C.,

1991).

20 'Unctad at the Crossroads', Development Forum, 2 (1992), pp. 1, 7.

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176 Jill Hills

national economies. What is particularly remarkable about the telecommunications
sector is the pace of internationalization over the past ten years, so that companies
which were once 'national' have become international in their corporate strategy.

So, for instance, AT&T was released from its previous regulatory containment
within the USA in 1984, and BT, of the UK, has similarly set out to become a
global operator.
Lying behind this change in strategy have been changes in the economic
opportunities offered by technology and alterations in domestic regulatory arrange

ments. These changes have been coupled with a recession in the industrialized
countries which has produced a need for cost-cutting on the part of large
companies, and their further internationalization in order to decrease unit costs
from a wider market penetration, or to reduce labour costs by location in low wage
economies, or bypass tariff barriers. Communications has increased in importance
to these companies as they seek to control subsidiaries or joint ventures from their

headquarters in the industrialized West. Additionally, cost-cutting has hit the

provision of communications itself. As the relevant expertise to run international

corporate networks has increased in cost, so companies are turning to 'out

sourcing'?that is the provision of their international communications by specialist

companies. In turn previous national monopoly network operators compete with
each other, and form collaborative agreements to bid for the business engendered

by international user companies.21 Each is intent on creating global private

networks to cater for these companies' internal international communications.
These private networks will use leased lines from national telecommunications
operators within and between nation states?that is lines subject to a discount for
bulk carriage and paid for per line rather than by time and distance. In an ideal
world for both global network provider and user these private networks would be

seamless?that is not subject to national regulation or to differing national

standards of provision. And in an ideal world those network operators with global
aspirations would like to be able to enter any market, provide their own networks

and service multinational companies. The most beneficial scenario would entail
global operating companies gaining the right to invest wherever they chose,

regardless of the national government, and to operate private networks which were
not subject to national regulation and not required to contribute to the cost of the
host country's public network.

Within the industrialized countries the question of whether networks used

primarily by business should contribute to the cost of delivering access to the
population in general has been part of the telecommunications debate in the 1980s
and 1990s. Starting in the USA the concept of 'cost-based' tariffs was taken up in
Britain, where this particular mode of charging had been operational between the
wars. Briefly, the concept involves separating the 'costs' of long distance from the
'costs' of the local network and charging individual customers a monthly access
charge to pay for the capital involved in establishing the local network (the most
expensive part of the network). Long-distance users then pay only for the capital
and running costs of the long-distance network. This conceptualization of 'costs' in

a network where 70-80 per cent of costs are common is a mechanism to lower
21 Aine Nishuilleabhain and Richard Kramer, 'An Emerging Global Monopoly? Market Structure,
Finance, Corporate Culture', Paper to European Communications Policy Research Conference
(Soro Storkro, Denmark, 21-3 October 1992).

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Telecommunications and structural power 177

tariffs for business users, and for the existing national operator to meet competition

from new operators on long-distance lines. Leased lines for bulk users can be
charged at a commensurately cheaper tariff. The effect is to raise monthly rentals
and local-call charges, and to lower long-distance rates. A further variant of the
scheme allows the 'de-averaging' of tariffs between heavily used (thick) routes and
lightly used (thin) routes, on the basis that unit costs differ. The effect is to increase

charges to rural areas.22

The initial incentive for this scheme came from the threat of private networks
'bypassing' the public network in the USA. A further incentive came from the
increasing commercialization of national network operators and, in Britain, the
privatization of British Telecom. In general large users produce more than 70 per
cent of the transmission revenue of these operators, and therefore commercial

incentives are to keep them happy. In the USA, the scheme was defeated by
Congress, and AT&T was not allowed to de-average tariffs. In Britain although
initially allowing rebalancing of charges onto residential customers, in 1991, the
head of the regulatory agency came out against 'cost-based' tariffs and argued that
the network must be seen as one whole.23

Despite these setbacks the concept of 'cost-based' tariffs is kept alive by the
OECD and the European Commission, by large user lobby groups and by aspiring
national operators.24 On an international level a division of the network along such

lines would entail the separation out of the international transmission from

national networks. International users would then escape paying any contribution
towards the capital costs of national networks. For developing countries, where 70
per cent of revenue may come from large international users, the impact would
entail huge increases in domestic charges.
In establishing that dependency theory is applicable to the telecommunications
sector, we are therefore looking for evidence that the system of international rules
and regulations established to protect national public networks are being under
mined to reflect the interests of multinational capital, rather than the interests of

poorer nation states. We are looking for evidence that those poorer states
are increasingly powerless to alter an international political economy of com

munications which penetrates their domestic arrangements and undermines their

sovereignty. The following discussion is of international institutions and regulations
where such changes can be said to be taking place.

The International Telecommunications Union

One of the major international institutions in the regulation of international

telecommunications is that of the International Telecommunications Union. The

ITU originated from the expansion of the telegraph by the imperialist nations
(Britain, France and Germany) and from the overlapping of radio frequencies in
Europe. It was taken into the family of United Nations agencies after the Second
22 Jill Hills, 'Universal Service: a Social Construct', Communications and Strategies (1993) forthcoming.
23 Bryan Carsberg, 'The Integration of Telecommunications and Broadcasting Regulation in the UK',
Paper to The Economist Conference on Telecommunications (London, 17 September 1990).
24 Council Recommendation 86/659/EEC, 22 September 1986.

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178 Jill Hills

World War and is subsequently governed by sovereign states. With the granting of

independence to previous colonies, so the developing countries have come to

dominate numerically.
In the post-war period, the ITU has always operated on two levels. On the one
hand are Plenipotentiary Conferences where nation states, the voting entities,
decide such matters as the election of the Secretary General and alterations to the
Convention. Such Conferences have been the forum for trading votes and symbolic
politics and result in treaties. On the other hand, the process of standardization

and regulation of equipment and networks has taken place at the level of

committees and working parties, where the main participants have been engineers
from government-owned network operators (PTTs) and private manufacturers.
These have come primarily from industrialized countries.
In the 1980s the convergence of computing and telecommunications affected

the work of the ITU. The growing economic importance of the international
standardization of telecommunications networks and equipment increased the
salience of that activity to the industrialized countries and their manufacturers. At
the same time the international standardization of the Integrated Services Digital

Network (ISDN) and its broadband successor, which brought together the trans
mission of voice, data and video, impacted on manufacturers of computing
equipment and on the sovereignty of national governments to set network stand
ards. Reacting to this threat to its sovereignty and its manufacturers the USA led

pressure to replace the ITU's standardization activities with those of standards

bodies within each of the triad of industrial nations (USA, Japan and Europe).25

The ITU responded by restructuring its standards activities and giving them
greater importance within the organization. But this trend to give standardization
increasing budgetary allocations was resisted by the developing countries. They
were concerned that, because ITU contributions are on a voluntary basis, and the

six richest countries contributed less than 50 per cent of revenue, developing
countries would be subsidising the standardization of advanced equipment while
they were still struggling to provide their populations with the basic telephone.26

These tensions began to be voiced in the 1950s and have been increasingly

reflected within the ITU Plenipotentiary meetings. In 1959, following pressure from
developing countries, the technical cooperation department was established within

the ITU to administer projects financed by the United Nations Development

Programme. Subsequently at the 1982 Plenipotentiary the ITU's Convention was
altered to include 'technical assistance to developing countries' among the organiz
ation's goals. At the same time the Independent Commission of Worldwide
Telecommunication Development (Maitland Commission) was established to ascer
tain how a more equitable distribution of telecommunications could be achieved on
a global basis and a Special Voluntary Programme for Technical Cooperation set
up to bring in aid from industrialized countries. Following the Maitland Report the

developing countries were successful in the establishment of the Centre for

Telecommunications Development within the ITU, but unsuccessful in gaining it

an ITU budgetary allocation. Finally in 1989 they succeeded in gaining further

25 For a discussion of ISDN, see Jill Hills with Stelianos Papathanassopoulos, The Democracy Gap
(Westport, Connecticut, 1991), pp. 145-63.
26 George A. Codding Jr., 'The Nice ITU Plenipotentiary Conference', Telecommunications Policy, 3
(1990), pp. 139^19.

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Telecommunications and structural power 179

concessions from the industrialized countries with the initiation of the Tele
communications Development Bureau which was to receive $10 million from the

ITU budget.27
The establishment of the Telecommunications Development Bureau in 1989 was

a setback to the efforts of the then Secretary General, Richard Butler, to

restructure the organization. He argued that, 'if ITU is to continue to play the role
of the major conductor, coordinator and supporter of international, regional and
concerted actions, it will have to adapt its structure to the new conditions'.2* It is
unclear exactly what form Butler anticipated the restructuring should take, except
that in what has sometimes been termed a 'federal' organization because of its
decentralization, he wanted to increase the power of the secretariat.29
In 1988 he appointed an advisory group of individuals to undertake an overview
of structural changes in the global telecommunications sector and to report both
on how governments and the ITU should respond to such changes. The advisory

group contained academics, consultants, industrialized and developing country

PTT personnel, and a representative of the World Bank. The ensuing report was
wideranging. In its recommendations to governments it supported increased com
mercialization of PTTs, (including performance related pay for staff) cost-based
tariffs, and liberalization of services?more or less taking the World Bank line at
the time. In relation to the ITU itself the report concluded:
Despite . . . fundamental changes in technology and services . . . and despite the arrival on
the scene of a multitude of new network and service providers, the structure and working
methods of ITU have remained fundamentally unchanged. This state of affairs cannot
continue if ITU is to be responsive to the new telecommunications environment and to
maintain its supremacy as the forum for promoting and guiding global telecommunication
development.30

It did not however recommend any particular structure.

At the 1989 Plenipotentiary Conference, after considerable dispute, a High Level

Committee was established to look at ways to restructure the ITU. The report
proposed that the work of the ITU should be organized into three sectors,
Development, Standardization and Radiocommunication. Each was to be served
by an elected director, have its own budget, and hold its own World Conference
supported by Study/Working Groups, but radiocommunications was downgraded
with only a part-time director. The Secretary General's overall coordinating role

was to be enhanced and he was to be supported by a new Strategic Policy and

Planning Unit and a Business Advisory Forum 'through which he could conduct a

dialogue with business leaders'.31 The committee employed a management con

sultancy and, according to one supporter of the final proposals, 'there is very much

27 Jean-Luc Renaud, 'The ITU & Development Assistance', Telecomunications Policy, 4 (1987),
pp. 179-91; George A. Codding Jr., 'Financing Development Assistance in the ITU',
Telecommunications Policy, 3 (1989), pp. 13-23.
28 Richard Butler, quoted in George A. Codding Jr., 'The Nice ITU Plenipotentiary Conference',

p. 143.

29 George A. Codding Jr., 'The Evolution of the ITU', Telecommunications Policy, 6 (1991), p. 283.
30 International Telecommunications Union, The Changing Telecommunications Environment, Report
of the Advisory Group on Telecommunication Policy (Geneva, 1989), p. 30.
31 International Telecommunications Union, Report of the High-Level Committee to the ITU
Administrative Council, 'Summary' in Telecommunications Policy, 6 (1991), pp. 269-70.

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180 Jill Hills

an air of corporate restructuring with a sort of non-executive role for outsiders in
this reform package, which is to be welcomed'.32
The overall effect is to isolate developing countries within their own section of
the organization, talking to themselves. Although Plenipotentiaries will continue to
be held every four years, the major decisions will already have been taken at World

Conferences. Coupled with changes at the 1989 Plenipotentiary which separated

out the Constitution (setting out the functions and structure of the ITU and

the basic regulations governing telecommunications networks and radio

communications) and a Convention, with the former requiring a two-thirds
majority for alteration, the power which accrued to the numerical majority of
developing countries at those meetings has been drastically curtailed.
At the same time the influence of multinational capital within the organization
has been enhanced. Companies have always played a role within the organization.
They form part of delegations to the ITU and in the case of the United States may
numerically outweigh delegates from government agencies. But it has been nation
states which have held voting rights. Organizations, such as the international user

group, INTUG, (International Telecommunications User Group) representing

multinational users, have held observer status only. Such groups will now be
represented within the Business Forum, but, in response to those who argue that
'the relative roles of governments with bureaucratic power within borders and of
global enterprises with wealth-creating business power beyond are changing', it is

not surprising that work is continuing within the ITU on how multinational
business can be given voting rights equivalent to those of nation states.33
One can interpret these changes within the ITU as the beginnings of a form of

privatization of international institutions, where the existing sovereign nation

concept begins to be undermined by the pressure to admit private interests into
negotiations. Where international institutions are based on a consensual decision
making process such entry will inevitably mean a compromise with the interests of
the multinationals, thereby involving less regulation and more freedom to compete

with nationally based Post and Telecommunications Administrations (PTTs). For

those developing countries which have looked to the ITU for international
regulations which would help protect their PTTs and strengthen their hand in
dealings with multinationals, their bargaining power will be diminished.

International regulation
Throughout the nineteenth century and on into the 1970s telecommunications was
controlled by governments. The international agreements which allowed national
systems to interconnect through international 'gateways' reflected the primacy

accorded to national communications. States held sovereignty over their com

munications networks. They decided standards, they set tariffs and they invested in

the growth of networks and penetration. In general, the political settlements

32 Jonathan Solomon, 'The ITU in a Time of Change', Telecommunications Policy, 6 (1991), pp. 372-5.
33 Solomon, 'The ITU in a Time of Change', p. 373; See also: James Savage, 'The High Level
Committee and the ITU in the 21st Century', Telecommunications Policy 6, (1991), pp. 365-71;
Pekke Tarjanne, ITU Secretary General, Interviewed in Public Network, 3 (1991), pp. 19-21.

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Telecommunications and structural power 181

reached within the industrialized countries prioritised the diffusion of the telephone,

and up to the 1980s benefited residential and rural users. To achieve such increased
penetration a form of economic transfer took place from large business users and
urban areas. But as the recession of the 1980s took hold, and business sought to
decrease its costs, this transfer was increasingly questioned. Liberalization of the
network in America, Britain and Japan was followed later (but retaining mono
polies over voice service) by other EC countries, thereby advantaging large users.34
Just as in domestic telecommunications systems so in the international network a
similar system had evolved through the mechanism of international accounting
rates. These rates, determined on a bi-lateral basis, split the cost of transmission of

an international message between sender and recipient PTT (sometimes with a

transit PTT as well) on a 50/50 basis. The sender paid the recipient. Hence those
countries with subscribers who initiated telephone calls tended to make payment to

those who received. In general, high accounting rates benefited the recipient
country and low accounting rates the sender.
In the post-war years, until the 1990s, the system went unremarked. The USA
paid out billions of dollars to other countries for transmission of its subscribers'
messages.35 Because European countries benefited, the issue was not raised by them

within the ITU. Also benefiting were developing countries who relied on inter
national traffic and the high charges they levied for profits to expand their network.

Although the ITU recommended that accounting rates should be in line with
costs, as the costs of international transmission decreased similar decreases in
accounting rates did not occur. The issue was drawn attention to by the ITU's
Maitland Commission on the global development of telecommunications. The
Commission saw accounting rates as a means by which the industrialized West
could contribute to the expansion of the network in developing countries, by the
contribution of more than 50 per cent of the 'costs' of transmission.36 This proposal

was subsequently taken up by the developing countries themselves, who argued

that their 'costs' of line provision were far in excess of those in the industrialized

world. In turn, the industrialized countries argued that inflated costs reflected
overmanning and incompetence. However, by drawing attention to the issue
developing countries drew a backlash from the USA. During the 1990s the Federal
Communications Commission (the US regulatory body for telecommunications) in
conjunction with the State Department, has sought to undermine the existing
regime and to establish one which reduces its outflow of payments and allows its
companies to evade the cost of accounting rates on international transmission.
In 1991 a campaign in the international financial press, which seems to have been

instigated by the Federal Communications Commission, began to term the bi

lateral international agreements as an international 'cartel' operating against the
interests of the individual consumer. In 1992, after years of American pressure, an
international agreement has been reached that accounting rates should be decreased
over the next five years. However, the American demand that international tariffs
34 Jill Hills, Deregulating Telecoms, Competition and Control in the United States, Japan and Britain

(London, 1986); Jill Hills with S. Papathanassopoulos, The Democracy Gap, pp. 47-73.
35 Figures for US payments as the originator of calls vary from $2.6bn to $3.0bn. Jennifer L.

Schenker and Karen Lynch, 'Resale a Means to Drive Down Prices', Communications Week
International, 16 December 1991.
36 Independent Commission for Worldwide Telecommunications, The Missing Link (Geneva, 1984).

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182 Jill Hills

should take account only of the costs of providing international transmission, (i.e.
cost based tariffs on an international level) which would have deprived developing

countries of including the capital costs of their national networks, was un

successful.37 Nevertheless, one can see quite clearly that the intention is to have one

private world infrastructure for the richest companies backed by the richest
countries and for them to contribute nothing to the poorest.
Crucially, debate has centred around the D series recommendations of the ITU's

previous standardization committee?the CCITT. Historically, an international

organization to serve the coordination needs of government-controlled monopoly

PTTs, these D series recommendations prevented other than those entities or

Recognized Private Operating Companies (such as AT&T) from providing inter
national communications. For most countries high international tariffs paid for
lower domestic rates, for capital investment and the high equipment prices of

national suppliers, and sometimes for subsidies to national treasuries or postal

services. High tariffs relied on the PTT monopolies of international communi
cations. The inauguration of the world banking electronic network SWIFT in 1977
and slightly later that of the world airline network SITA were presented to the ITU
as fait accomplis, to which it had to accommodate its previous protection of PTT

interests. Through Recommendations Dl and D2 of the ITU's Consultative

Committee on international telegraph and telecommunications (CCITT) for the

first time in 1980 privately operated international networks were given legitimacy.38
But while transnationals could lease international lines from public operators, they
could not lease that capacity and resell it to others change in the early 1980s by

another fait accomplis. It ruled that private companies could lease lines both
domestically and internationally and could resell that capacity to third parties. It
was forced to leave this proposal on the table for international lines, such was the
outcry by European governments on behalf of their PTTs and such the fear of a
backlash by the potential beneficiaries.39
In late 1988 the ITU held another plenary meeting termed WATTC88 to update
the international regulations governing telecommunications. Backed by Britain, the

United States pressed once more for the maximum freedom possible for its

transnational companies, calling for a wording which would have allowed them to
establish networks for international telecommunications in other countries subject
only to national law.40
For many developing countries the prospect of transnational companies enabled
at will to bypass their national networks would have spelt financial disaster. The
final compromise allowed the establishment of private value added networks where
both countries agreed, but avoiding harm to third countries. An Opinion attached

to the Article took into account the fears of developing countries concerning
national sovereignty. The United States alone voted against it.
Under these regulations bi-lateral agreements could be reached between countries
to introduce simple resale of capacity on leased lines. Subsequently, simple resale
37 Schenker and Lynch, 'Resale'.
38 ITU, CCITT, Red Book, Vol. II Fascicle 11.1, General Accounting Principles. Charging and
Accounting in International Telecommunications Services Recommendations of the D Series (Geneva,
1985), pp. 915, 267.
39 Jill Hills, Deregulating Telecoms, pp. 162-3.
40 WATTC 88, 'Butler Draft' Article 9 (Geneva, April/May 1988).

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Telecommunications and structural power 183

agreements have been reached between the USA and Canada, and between the
USA, Britain and Japan, thereby lowering the costs of international telecommuni

cations for transnational corporations who no longer contribute to national

network infrastructures via the accounting rate system. Finally in 1991 the USA
and Britain achieved their aim in relation to the D series recommendations. Under
the new series resale was allowed where both ends of the connection was agreed as
was sharing of resources and the interconnection of private into public networks.
In addition, tariffs for leased lines were to be flat-rate based, rather than based on
volume of data passed?an agreement obviously in favour of transnational.41
As increasing numbers of companies bypass the international public network we
are witnessing the gradual transfer of the international network into one which
resembles that of the United States?fragmented public and private provision in
which the private pays nothing towards the public. In this new world order the
possibility is raised that national network operators may not be able to retain their
commitment to domestic universal service.42

Intelsat
Intelsat was established by the Kennedy administration in the 1960s as a co
operative to provide access to international satellite communications to all states. It

reflected US interests at the time as the country with a monopoly of satellite

building and launching capability. Intelsat, a treaty-based organization, became the

primary outlet for US satellites and its member states paid for American com
panies' research and development. A cooperative in form, its users (PTTs) share the
profits made by Intelsat according to usage, with a 13 per cent return on capital
invested. Under its treaty Intelsat must charge averaged tariffs?the same price for
the same distance transmission irrespective of whether the route is heavily used or

not. This provision meant that the trans-Atlantic traffic cross-subsidised the
traffic to developing countries. Intelsat was further protected by the Federal
Communications Commission ruling that the major international carrier AT&T
must put half its traffic over satellites, rather than by submarine cable.
However, the United States' position and influence within Intelsat was eroded by
the influx of smaller states at the same time as its porition as dominant supplier

and launcher of satellites was challenged by the European space industry and
Ariane. European governments and those of developing countries were no longer
prepared to contribute to the research and development of American companies.
Then, because it bought the cheaper, old technology of C band satellites, rather

than the higher more expensive Ku band, Intelsat could not respond to the
demands from large businesses for company to company communications. As a
result a process of restructuring began in the 1980s. Intelsat became demonized
within American academia as a monopoly, and there were actual suggestions that
41 Jennifer L. Schenker, 'CCITT Reaches Leased-Line Accord', Communications Week International,
1 April 1991.
42 Stephen Mclelland, 'The International Dimension: PTTs', Telecommunications, International

Edition, 6 (1992), pp. 25-8.

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184 Jill Hills

since as an international organization it was headquartered on American soil it
should be subject to American anti-trust law.43

Within a decade the US government mounted pressure on Intelsat to allow

private satellites to operate internationally. Such satellites could boost its flagging
satellite industry and provide a cheaper leased line service to international business.
In turn, the threat of competition turned Intelsat's attention to satisfying the needs
of its largest users, rather than the majority of its poorer signatories.44
In addition, in 1990 the American and British together with the Australians
succeeded in gaining an alteration to the Intelsat constitution which opened the
door to private regional satellites to compete head to head with Intelsat. In this
instance it is the national telecommunications operators with expansionary am
bitions, which, whilst the marketing agents and beneficiaries of Intelsat's capacity,
are lining up to compete with it.
At the same time as its government first moved on private satellites the FCC
allowed that privately owned submarine cables might be laid across the Atlantic
and Pacific, taking leased line traffic and competing with the cables of the national

telecommunications operators. Although these cables were not laid the FCC
permission swung AT&T into action to increase trans-Atlantic cable capacity. The
impact of that increased capacity has been to lower tariffs for large business users
(and the American government) and to place increased pressure on Intelsat, which
for the first time in 1990 reported a drop in profits. In turn this drop in revenue

provoked an attempt by the British and American governments to privatise

Intelsat, thereby attempting to turn de facto control by transnational business into
de jure control and to further marginalize the public access needs of developing
countries.45 Despite the failure of this move, with increased submarine optic fibre
capacity, with private and country owned satellites competing for large business
customers in the growth area of the Pacific Basin, and the prospect of satellite

competition on its Atlantic route from BT and others, the stage is set for

transnational to have cheaper international communications and poorer countries

to bear the costs. It seems unlikely that Intelsat can survive in its present form.

World Bank
This trend towards private control of infrastructure has been further exacerbated
by the debt crisis and American demands within the World Bank for a greater role
for private enterprise in developing countries. The World Bank's International
Finance Corporation has pressed privatization and liberalization of networks onto
developing countries.46 With multilateral funding more difficult to find against
43 Hills, Deregulating Telecoms, p. 161.
44 Intelsat Annual Report (Washington D.C., 1992).
45 Dawn Hayes, 'Intelsat Goes Into a Spin', Communications Week International, 27 May 1991.
Intelsat's revenue dropped from $614m in 1989 to $499m in 1990.
46 Richard Stern, 'The World Bank's Role in Fostering Telecommunications Development', in
Telecommunications for Development: An International Forum (Washington D.C., 1986), pp. 166-72;
Gerald Sussman, 'Telecommunications for Transnational Integration: The World Bank in the
Philippines', in G. Sussman and J. Lent (eds.), Transnational Communications. Wiring the Third
World (London, California, New Delhi, 1991), pp. 28-91.

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Telecommunications and structural power 185

increasing competition, many of the newly democratic countries in the East

European bloc, together with those in Latin America and Asia have succumbed to
the concerted pressure of the IMF and World Bank. For such countries, with a
poor internal capital market, privatization in general means, not flotation of equity,
but the sale of the operation to a foreign company. Mexico, Argentina, Chile, and
Jamaica are among those countries which have taken this route. Those planning

such privatization include the Czech and Slovak Republics and Hungary. Those
under current pressure to do so include Uganda, Bangladesh and Brazil.
Without effective regulation, both privatization and liberalization as mechanisms
of gaining international investment hold the concomitant political costs of loss of

sovereignty over internal communications. Also, often in agriculturally based

communities, privatization promises the development of long-distance and urban,
not rural, networks. Large business is the beneficiary?both transnational users and

those industrialized country network operators which have bought into these
networks. In this regard, the American Regional Bell Operating Companies have
been some of the most aggressive. In turn it is these companies which demand
representation within country delegations to such international institutions as the

ITU.47

GATT and services

The increasing importance of communications to large companies and the lobbying

power of companies such as IBM, Citibank and American Express, brought the
issue of trade in services onto the GATT agenda in the early 1980s.48 Services were
included in the Uruguay Round over developing country objections. However, the
original group of objectors led by India and Brazil was split as individual countries
faced potential or actual trade sanctions by the US administration. The American
position demanded the right of foreign investment for American companies and for
their treatment to be equivalent to that of domestic companies. Industrial, or infant
industry policy, in which states helped promote domestic industries through direct

or indirect subsidies would be a thing of the past. The provisions entrench the
power of existing multinationals over those of nation states.
In the telecommunications sector negotiations the United States was originally
following through on the demands of its large information service suppliers for a

replication of its domestic market worldwide. However, reflecting the failing

economic base of the original protagonists, in 1992 the US government responded
to the concerns of AT&T and withdrew basic telecommunications service (voice
transmission) from GATT.49 Unless other countries are prepared to introduce a
market structure which allows the entry of foreign companies into all aspects of the
network, the USA will not sign a GATT agreement on telecommunications.50 If
47 Eileen Mahoney, 'Trade and International Telecommunications Policy', Paper to International
Association of Mass Communication Research, Guajera, Brazil (16-21 August 1992).
48 Jill Hills, 'Dynamics of US International Telecom Policy', Transnational Data Report, February

(1989), pp. 14-19.

49 Jill Hills, 'US Hegemony and GATT: The Liberalisation of Telecommunications', Media
Development, 2 (1993), pp. 8-12.
50 Official US text submitted to GATT secretariat, Transnational Data Report, May/June (1992), p. 5.

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186 Jill Hills

these conditions are agreed then the resulting international communications system

will be drawn up to benefit the very largest companies, with the losers being
sovereign nations.
Added to these provisions is the American desire to keep its power to impose
retaliatory tariffs on the exports of any country which it considers to be failing to
fulfil its obligations. Hence the American concern is to gain legitimation for its
policing of the interests of its multinationals. Whether such a bid is successful will

depend on how the three regional blocs reach accommodation within the GATT
negotiations. It will not depend on how developing countries regard the prospect.
These countries have already been sidelined within GATT by the structure of the
negotiations, where consensus within the 'Green Room' participants is imposed on
those not present, and where developing countries have once more been subject to
the individualized incentives of 'special treatment' or its revocation.51

Conclusion
Just as in the United States and Britain private infrastructure for the richest
companies is replacing public infrastructure, so this system is being introduced
within international telecommunications. As the regulation of international tele
communications is lessened, and international institutions are restructured to allow
multinationals greater voice against nation states, so the ability of nation states to
retain the autonomy and finance to meet the needs of the poorer sections of their
population is undermined. Within poorer nation states, the hegemony of the IMF
and the World Bank, and the privatization and liberalization which they legitimate
by the neo-liberal orthodoxy, are in fact political mechanisms representing the
interests of the industrialized West and their multinational companies against the
interests of the poor within the developing world and against the interests of the
poor in the developed. As micropolitics is used by the United States to fragment

opposition and to increase incentives for individual states to break ranks and
compromise with American interests, so we can say that American structural
hegemony over communications is being translated into relational power, that in

the communications sector the world is being shaped in the American market
image. And so we can safely argue that the concept of 'dependency', in the sense
that the autonomy of individual poorer states is minimal, and that their internal
domestic arrangements are increasingly shaped by the international economy, is
more relevant today in the communications sector than it has ever been. While the
United States retains control of its own domestic political settlements through the
international role of the dollar and its structural financial power, and the indus
trialized countries formed into regional blocs control enough resources to negotiate
with the USA, for the poorer countries of the world such possibilities are being
stripped away.

51 Chakravarthi Raghavan, Recolonialization. GATT, the Uruguay Round and the Third World

(London, 1990).

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