The future of telecommunications

Dan Kohn (
Fri, 3 Jan 1997 10:55:20 -0800

[* People don't realize it, but the Economist is the funniest periodical
published today. - dan *]

>"Telephone sex may be good for development." Who says? The
>International Telecommunication Union (ITU), the staid club of national
>telephone operators. While Virtual Dreams and its handful of
>competitors offer live colour video pictures of lightly dressed lasses
>(and lads, who are what one caller in five wants to watch), a larger
>and more established business sends live or recorded sex chat across an
>ordinary telephone line.
> Customers may pay in one of two ways: through the cost of the call
>(in which case the bill appears on their ordinary telephone bill--or
>their employer's) or by credit card. To escape regulatory constraints,
>companies using the first method frequently run their services from
>faraway places with strange-sounding names, many of them penurious
>developing countries. Others use domestic premium-rate lines.
> The industry reckons that 1.5% of all international traffic is
>telephone sex, with a global turnover of around $2 billion a year. The
>key to the business, explains the ITU (whose interest in it is purely
>academic), is a settlement system which ensures that the country in
>which an international call originates and the one in which it
>terminates share the revenue from the call.
> This settlement system means that the public telephone operator
>(PTO) of a small developing country can benefit hugely if it can
>generate a large amount of incoming traffic. The PTO splits its share
>of settlement payments with the service provider, who drums up business
>and provides the girls. Often, the calls are routed back over a leased
>line (on which there are no settlement payments) to the country where
>the call began. The amorous fellow thus pays for an international call
>to talk to a woman who may be just a few miles away.
> The prize example is Guyana, a dirt-poor country in Latin America
>(GDP per head around $2,000 a year). Since the country's PTO was taken
>over in 1991 by ANT, an American company, it has increased its volume
>of incoming calls from 23.8m minutes to 139.7m in 1995, a compound
>annual growth rate of 56%. As a result, its yearly revenue from
>telecommunications services is now around $130m, or the equivalent of
>40% of the country's 1993 GDP, or--to put it another way--$700 per
>household. Not all the revenue stays in the country, but with the money
>that does the PTO has been building one of the region's finest
>telephone networks.
> The ITU points to a couple of even more extraordinary instances.
>Niue, a New Zealand protectorate in the South Pacific, handles many
>calls from Japan, one of the fastest growing markets for telephone sex.
>The island has more lines than inhabitants. Some of the lines are
>connected to answering machines rather than human operators. Others are
>routed back to a call centre in Toronto which is manned by operators
>who can speak English, French, Spanish, Greek, Italian and Swedish.
>Like many other countries in the business, one of Niue's selling points
>is that the tiny size of its population guarantees short telephone
>numbers. Dial the international access code of 683, and another four
>numbers will connect you to your heart's desire. It would be easy for
>the naive or ignorant to imagine they were making a local call.
> The Dutch Antilles, in 1994, was receiving the equivalent of 2,600
>incoming minutes of calls for every telephone subscriber in the country
>and generating at least $1,000 a head from settlement payments. Since
>Germany alone accounted for 47% of its incoming minutes in 1994, the
>tiny country will have been badly hit by Deutsche Telekom's decision in
>1995 to clamp down on international sex calls--part of an effort to
>clean up before privatisation.
> Germany is a big loss: all told, it accounted for about a third of
>the 60m minutes a month of the world's international sex calls. After
>the German clampdown, the United States is now the biggest caller.
> Even with Germany knocked out, more poor countries are crowding
>into the chat trade. Should PTOs be in this business at all? Those in
>the developing countries are, says Stuart Sharrock, editor of Voice+,
>one of the main trade magazines, "quite open about it. They are often
>in a tough commercial situation, and this allows them to invest in
>equipment that allows all sorts of facilities for their domestic
>customers. Many of them are well-run organisations with slick
>operations and published accounts." And, because they split their
>takings with the service providers, they make less from the business
>than the telephone companies in the rich countries where the calls
>originate, which pocket the other half of the settlement payment.
>Tren Griffin <>
>+1.206.803.1402 <voice>
>+1.206.803.1404 <fax>