Analytical Note, June 2005

Issues of Interest to LDCs in the WTO Services Negotiations – Series No. 2: Telecommunications Services.

The telecommunications sector is of crucial importance in every economy. Almost every other sector of an economy depends on telecommunications services in their economic activity. Most businesses today rely to a great extent on data transmission by information and communication technologies for their operations – in other words, functioning without telecommunications services is inconceivable for most business operations.Moreover, the rapid spread of knowledge and information is very desirable in the development process, be it for economic or personal reasons, and contributes in a positive way to the well-being of a population. For example, fast transmission of information can allow businesses, organizations and individuals to better understand global issues and problems.

Furthermore, reaction to events, such as decline of commodity prices or exchange rates, would be more prompt with modern telecommunications services enabling domestic adjustments to external developments in a timely manner. Therefore ensuring a sustainable well functioning telecommunications sector needs to be an important consideration in a country’s national development policy.

In section two this note focuses on the characteristics of the telecommunications sector, particularly its important features of imperfect competition and the need for regulation. Additionally, the state of telecommunications in least developed countries (LDCs) is briefly explained.

In section three, the paper focus on liberalization, discussing arguments in favour of liberalization as well as pointing to the risks that such an undertaking could entail. The role of the WTO Telecommunications Reference Paper within the context of GATS negotiations is also discussed.

Finally recommendations are outlined together with questions that LDCs should consider in deciding what strategy to pursue in GATS liberalization of the telecommunications sector.

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