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Technological Convergence and the State

In this article, I am developing the idea that technological advances in communications are not inevitable, and that the state either helps or hinders the evolution of communications technologies. Indeed, communications policy and communications technology may be said to co-evolve. Co-evolution of policy and technology will be the subject of a later article...
Rapid technological convergence is creating a dilemma both for coordinating the deployment of new communications networks and regulating existing communications networks. The dilemma stems from the legacies of traditional institutions of the state which created ‘distinct regulatory structures for telephony, broadcasting, cable television, and satellites’ (Weinberg cited in Gillett & Vogelsang 1999: 297) at each stage of technological adoption. In the broadband era, these distinctions, made on the basis of the particular devices used to communicate, rather than communication per se (or the function performed by the different devices) are increasingly irrelevant. Broadband is a major enabler of cross-platform communication and its rapid deployment is creating ‘massive upheavals that challenge established institutional and industrial structures’ (Jussawalla 1993: 1). Nonetheless, the legacies of device-based industry structures persist in that government interventions targeting devices are pervasive in communications markets (OECD 2008: 12). Despite the dilemma for contemporary industry structures created by technological convergence, the social and economic impacts of the diffusion and application of broadband in particular mean that communications networks are a major concern for governments worldwide (OECD 2008: 7) and state intervention is inevitable in the foreseeable future.

State intervention in the deployment and use of communications technologies operates in three main ways. First, the state enables the deployment of communications technologies by effectively giving permission or providing resources for communications networks to be established. Second, the state coordinates the deployment and use of communications networks by establishing institutions which attempt to bring order to the deployment of the physical infrastructure and to determine who can access the infrastructure and associated services. Third, the state regulates communications networks to ensure that the behaviour of network actors and users conforms to laws or principles designed to operate in the public interest. The ways in which the state enables, coordinates and regulates communications networks may be referred to as the state’s communications policy.

For most liberal democracies, the ‘key goal of communications policy is to promote the welfare of… citizens, primarily through productivity gains’ (Hundt & Rosston 2006) and economic growth. In Canada and Australia, nation-building in the telegraph and telephone eras preceded the focus on the welfare of citizens: the dominions required infrastructure to facilitate national defence, national markets, and a united polity. In the early part of the twentieth century this had largely been achieved in both countries and communications technologies became public utilities, or essential public services. The deployment of widespread basic telephone services, commonly couched in terms of a universal service obligation, became for the most part ubiquitous by the 1980s. With each type of communications technology, the communications policy goals followed a particular path: from nation-building, in meeting the needs of the state; becoming public utilities, in meeting the essential service needs of citizens; to promoting competition, in the latter part of the twentieth century, in an effort to increase productivity and economic growth by providing more choices and lowering prices for businesses and consumers.

Competition policy in communications industries is a relatively recent development. Following the advent of the telegraph, communications technologies were, for the most part, believed to operate best as natural monopolies, in that the industry could only operate efficiently with one, heavily-regulated provider of the conduit used to communicate (Grossman & Cole 2003: 1). Natural monopolies reduced the duplication of telegraph and telephone lines, achieved economies of scale over a specified geographical area, and, in the case of regulated monopolies, guaranteed a rate of return on the provider’s investment. Since the advent of the telegraph, governments have tended to intervene in communications industries using a mix of two approaches: ex ante and ex post. The ex ante approach is anticipatory intervention which ‘is mainly concerned with market structure, that is the number of firms and level of market concentration, entry conditions, and the degree of product differentiation’, whereas the ex post approach is passive intervention which ‘is mainly concerned with market conduct — the behaviour of a firm with respect to both its competitors and its customers’ (ITU 2009).

Globally, the evolution of the respective communications industries has occurred through periods of punctuated stability. As new technologies have evolved, market structures have changed, and a degree of stability in communications industries has occurred when technology, market structure, and public policy are synchronised (Bolt et al 1990: 3). The dominance of Western Union in the North American telegraph industry, the Bell System in the telephone industry and Marconi in wireless communication demonstrate how ‘market power has accrued to the technology innovator’ (Bolt et al 1990: 1) which led to periods of stability until a new technology impacted upon the market structure. General periods characterised by multiple vendors or natural monopolies appear, at face value, to present a sufficient understanding of how the communications industries have changed over time. However, this view of the trajectory of communications technologies is only useful when examining a particular device-based industry.

The dilemma created by device-based industry structures tends to inform how policy-makers understand broadband in an era of convergence. This is in no small part a reaction to the market power of the dominant providers of communications services, many of which established their position in the respective industries in the early days of the telegraph and the telephone. Indeed, Wilson (2000: 7) argues that ‘the early history of the telegraph and telephone industries is extremely relevant to an understanding of contemporary telecommunications’ and to understanding the industry structure, given that ‘many of the firms established themselves during this period and continue to be the dominant players in the industry today’. However, limiting this exploration to the telegraph and telephone industries is insufficient if we are to understand the larger effects of convergence in the broadband era.

Technological convergence is leading to convergence in other areas of the communications industries, ‘blurring the boundaries between media, information technology and telecommunications’ (Cunningham & Turner 2002: 117). Not only the distinctions between industries, but the ‘distinctions that had once linked systems of delivery to their characteristic content’ are increasingly meaningless (Cunningham & Turner 2002: 4). Traditionally, a distinction was made between the functions of industries, particularly process (information technology), content (media) and carriage (telecommunications); leading to what is referred to as functional convergence (Barr 2000 cited in Cunningham & Turner 2002: 5). Firms have reacted to technological and functional convergence by forming strategic alliances or undertaking mergers, creating what Barr (2000 cited in Cunningham & Turner 2002: 5) refers to as institutional convergence. Clearly, the behaviour of firms in a period of major convergence affects the state’s ability to develop policies which enhance productivity and protect the public interest.

The focus on competition as the primary driver of productivity and protecting the public interest has led to the development of the principle of technological neutrality in communications policy formulation. The principle is an attempt to promote cross-platform competition across the formerly divergent industries. Van der Haar (2007) examined the application of the principle in the European Union’s (EU) regulatory framework, where: ‘legislation should define the objectives to be achieved, and should neither impose, nor discriminate in favour of, the use of a particular type of technology to achieve those objectives’ (cited in Van der Haar 2007: 2, emphasis in the original). She identified four rationales for regulating on the basis of technological neutrality: (1) non-discrimination, where the state should not discriminate on the basis of technology; (2) sustainability, to prevent the regulatory framework from becoming quickly outdated; (3) efficiency, so that regulation can ‘evolve with changing market conditions in order to avoid inefficient regulation’, and (4) consumer certainty, so that consumers receive the benefits of regulation such as protection and universal service, irrespective of the particular technology used to access services.

Technological neutrality raises a number of issues which challenge approaches to state intervention in the traditional divergent industries. Technological neutrality is necessarily ex ante in establishing the rules of the game, and ex post in that it applies ‘the same rules across all sectors’ (ITU 2009). At face value, it is rational to assume that consumers will be able to choose the platform which best meets their particular communication needs in a technologically neutral environment. This, in turn, should encourage firms to innovate in delivering communications services to meet the particular needs of consumers. In practice, however, the principle of technological neutrality is applied, in varying degrees, using a mix of the four rationales. These different rationales tend to result in different outcomes in the market. Indeed, the OECD (2008: 12) suggests that ‘policy makers may need to re-examine whether technological neutrality is still an efficient policy structure’, given that technological bias is still evident in regulatory approaches throughout the developed world.

Despite technological, functional and institutional convergence in the communications industries, policies which focus on devices persist. A contemporary example is the adoption of digital television and radio in Australia, where licences have been issued to industry players with a guaranteed period of oligopoly to enable sufficient time for the incumbents to make an adequate return on the cost of upgrading facilities from analogue to digital capability. Digital radio and television services can already be delivered via broadband technologies, yet the distinct industry structures restrict innovation in terms of content delivery, leaving consumers to be passive recipients, rather than active participants, in content development and delivery. The one-to-many communications paradigm of television persists in the institutional structure despite major changes in the technology which enable interactivity. Where user-generated content (UGC) does occur, it tends to be restricted to the area of popular culture or the provision of commercial content to traditional producers for free (Ornebring 2008). Communications policy occurs in the domain of government and dominant businesses, working to exclude (or at least pay lip service to) citizens, interest groups and industry bodies from the policy process (ASTRA 2004).

The persistence of device-based state intervention questions the usefulness of technological neutrality as an organising principle for policy makers. No doubt entrenched interests play a major part in restricting policy options for state intervention (ITU 2004). Indeed, the dominant view that competition can deliver benefits to consumers in all aspects of communications is being challenged by the concept of high-technology natural monopolies which may exist at the networks that connect the consumer to the local exchange, known as the local loop (Ferguson 2004: 203; Gillett & Vogelsang 1999: 284). The ‘local loop is a high-initial cost infrastructure’ which relies on physical labour such as ‘trench digging, cable laying, delivery and installation of electronic boxes, physical maintenance and so forth’ (Ferguson 2004: 203), and necessarily situates the delivery of broadband technologies amid a variety of local conditions. This is true for ‘telephony, television, and Internet’ services (Gillett & Vogelsang 1999: 284; see also Nakamura 2000); therefore the local element of broadband networks is a policy issue affecting all levels of the state, not just the central administration.

Broadband represents high technology in that it is contemporarily the peak of communications technological development. Yet the problems facing policy makers in enabling, coordinating and regulating broadband networks tend to reflect, in principle, the same problems faced by policy makers since the advent of the telegraph. The distinctions between process, content and carriage have been dealt with by states in the past, bringing about the regulatory concept of the common carrier, where communications services are available to the general public at non-discriminatory rates and the provider cannot control the content of messages (BCAP 2009). Issues of convergence are not new; rather the concentration and scope of convergence brought about by broadband networks bring the issues into sharp relief (Australia Press Council 2009). What is occurring, however, is a ‘collision… of the regulatory paradigms’ which have governed the historically distinct communications industries (Hogendorn 2005: 19).

The term legacy is often used to refer to previous generations of communications networks and devices, but it can equally be applied to the policy framework in the contemporary era of convergence. Whitt (2004) argues that communications networks have not evolved into the discrete networks which are presupposed by the legal and regulatory legacies of the state. For Whitt (2004), communications networks are horizontally integrated in three layers: the lower layer of the physical infrastructure, the middle layer of enabling technologies such as Internet Protocol (IP), and the upper layers of content and user applications. The legal and regulatory legacies, on the other hand, view communications networks divided by industry labels such as ‘wireline telephony service, wireless telephony service, cable television service, broadcast television and radio service, and satellite broadcast satellite service’ formed on the basis of the old industry distinctions. These distinctions have the effect of creating ‘vertical silos’ in communications policy communities that do not match the ‘market reality’ in which businesses operate.

In addition to the general legacies of industry distinctions which exist throughout the developed world, particular legacies exist within nation-states which impact upon the way that communications policy addresses the two key goals of increasing productivity and protecting the public interest. Invariably, these particular legacies within nation states, or ‘national regulatory traditions and policy styles’, continue to exert a determining influence on policy outcomes ‘when much conventional wisdom might have expected them to be smoothed over by technological change’ (Levy 2001: 19). Historically, communications policy has tended to react to the evolution of communications networks. Noam et al (1994: 17) suggest that network evolution can be identified in distinct stages:
1. The cost-sharing network. Expansion is based on the logic of spreading fixed costs across many participants, and increasing the value of telephone interconnectivity.

2. The redistributory network. The network grows through politically mandated transfers among users.

3. The pluralistic network. The uniformity of the network breaks apart because the interests of its numerous participants cannot be reconciled, and a federation of subnetworks emerges.

4. The global network. Various domestic subnetworks stratify internationally and form networks that transcend territorial constraints.
Network development, then, tends to be unilinear, in that there is ‘a single, consistent path of development or progression’ from ‘the primitive to the more advanced’ [dictionary references – need to elaborate].

Noam et al (1994: 17) argue that most states ‘are still engaged in the cost-sharing and redistributory’ phases of network evolution. The unilinear concept is useful in that it does not rest on the logic of devices operating on discrete networks. For instance, faith in regulated monopolies to deliver universal service at uniform prices met, for a long time, the policy goals of nation-building and providing public utilities. Promoting competition necessarily stimulates the evolution of a pluralist network, where participants compete for resources and benefits (for example, from regulation) and will attempt to overcome the particular legacies which exist in the market. Technological convergence facilitates the removal of artificial industry barriers and enables global networks to evolve. Indeed, broadband technologies have enabled multiple networks which ‘transcend territorial constraints’. Social networking tools such as Facebook and collaborative repositories of knowledge such as Wikipedia are striking examples of the growth of such networks in the upper layers (code and content) of communications networks, but concerns for national security and national culture restrict the growth of private networks in the lower (infrastructure) layer (see Whitt 2004, discussed earlier). Despite the obvious growth in the upper layers of communications networks, it is difficult to prove that the evolution of communications technologies is necessarily inevitable: the role of the state is significant in helping or hindering network evolution (Noam et al 1994: 28).

To understand the state’s role in the deployment of communications technologies, it is first necessary to briefly examine some of the theories concerning the interaction of society and technology. Contradicting theories concerning the interaction of society and technology abound (Kraft & Vig 1988: 4) and the major views can be summed up as follows:
Technological determinism: The phenomenon where ‘a technical innovation suddenly appears and causes important things to happen’ is known as technological determinism. It may be regarded as ‘an approach that identifies technology, or technological advances, as the central causal element in processes of social change’ (Croteau and Hoynes 2003: 305). Technological determinism can be categorised as ‘hard’ and ‘soft’ on the basis of the extent of technology’s agency in societal change. Hard determinism refers to the agency imputed to technology, where ‘the advance of technology leads to a situation of inescapable necessity’. On the other hand, soft determinism refers to ‘the presence of a particular communication technology [which] is an enabling or facilitating factor leading to potential opportunities which may or may not be taken up in particular societies or periods (or that its absence is a constraint)’ (Finnegan 1988: 38).

Technological constructivism: Technology does not occur in a social vacuum. Technological constructivism suggests that human action shapes technology, and technology cannot be understood without understanding how that technology is embedded in its social context. ‘Social and cultural forces determine technical change’: technology does not determine social change (Hughes in Smith & Marx 1994: 102).

Technological momentum: Technological momentum adopts a position which falls between technical determinism and social constructivism and ‘infers that social development shapes and is shaped by technology’ (Hughes, T. in Smith & Marx 1994: 102). Technological momentum is a ‘more complex concept than determinism or social construction’ and it is also time dependent (Hughes, T. in Smith & Marx 1994: 102). It can also refer to the ‘increase in the rate of: 1. the evolution of technology, 2. its infusion into societal tasks and recreations, 3. society’s dependence on technology, and 4. the impact of technology on society’ (Dyer 1995: 255). Technological momentum is a useful concept in explaining the evolution of technology in response to societal needs and the infusion of technology into work and leisure activities.

The state, through its coercive powers, has the ability to apply ‘accelerators and brakes’ (Winston 1998: 15) which help or hinder the deployment of communications networks. Communications policy is formulated to address ‘social necessities’ or to apply ‘constraints’ to communications networks (Winston 1998: 15), often framed in terms of economic development or the public interest. However, the intervention of the state cannot determine or construct technological development entirely. Rather, it tends to react to the ‘supervening social necessities’ which include the ‘consequences of other technological innovation’, the ‘concentration of social forces working directly on the processes of innovation’, and the ‘[s]trictly commercial… needs for new products and other limited marketing considerations’ (Winston 1998: 9). The state, then, represents the ‘continuation, despite the bombardments of technology, of all the institutions of our culture in forms subject to alteration but not revolutionary change’ (Winston 1998: 13). Technological advances may occur rapidly but the deployment and infusion of new technologies tends to be mediated by the institutions of the state.

Nonetheless, states tend to announce communications policies in terms of the unavoidable consequences of technological inevitability. For example, the 1981 Canadian Department of Communications report, The Information Revolution and Its Implications for Canada, stated that ‘like the industrial revolution, the information revolution is unavoidable. Consequently, the objectives of public policy should be not to prevent the revolution from occurring, but rather to turn it to our advantage’ (Serafini and Andrieu, 1981:13 cited in Brannigan & Goldenberg 1985: 166). Technological determinism is also used to explain changes in ‘the nature and structure of corporations, industry, government industry relations and the values and norms that make up our idea of ourselves and of progress’ (Schon 1967: xiii cited in Brannigan & Goldenberg 1985: 170). Neither technological determinism nor social constructivism sufficiently explain the complex interactions which occur in the development of communications policy, or in the structure of markets for communications infrastructure, goods and services which are established or maintained by the institutions of the state. Technological momentum, as a way of conceptualising the interaction of technology and society, accommodates the state’s ability to influence outcomes in the communications industries, while allowing for technological advances to influence, and in turn, be shaped by, society.
The state does not follow an inevitable path paved by technology.
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