The term “privatization” refers to the transfer of property and/or operations from state or public ownership and control into private hands. Among the principal reasons given to justify privatization is that private ownership and operation make a company perform more efficiently because its managers will be financially obligated to make the company accountable to shareholders. By contrast, government operations are often criticized for being inefficient, corrupt, and insufficiently responsive to the interests of the taxpayers who fund them. Advocates of privatization argue that the competitive environment of private industry fosters greater technological innovation, and that it pressures companies to introduce more stringent cost-cutting measures.
Privatizations of vital public services have become a lightning-rod topic in recent decades, most notably in countries where economic and political institutions have undergone radical structural transformations, for example in central and eastern Europe and in Latin America. Following the collapse of the Soviet Union, gas and oil industries were privatized and then became the focus of corruption scandals and civic unrest as former government officials and communist party leaders became wealthy “oligarchs” through massive stock acquisitions. Elsewhere, recent attempts to privatize water services have led to public outrage and riots, most notably in Bolivia in 2000. Government efforts to privatize universal health-care services, education, and other social services have also led to significant debate and protest in several countries throughout the world. In many poor countries, privatizations have taken place as a form of “structural adjustment” in response to pressures from the International Monetary Fund and the World Bank in exchange for loans.
The government of the United States has been in the global vanguard in promoting a political economic ideology that favors the privatization of state and public services. In its foreign policy initiatives, in bilateral and multilateral agreements, and as an influential model for other governments, the US government premises its global policy agenda on firm beliefs in the value of market selfregulation, liberalization, and privatization. The US government sub-contracts with private companies for the performance of sensitive government functions. Hundreds of prisons are run by large for-profit corporations, and the US military is supported by many private enterprises, from defense contractors who design and build hightechnology weapon systems, to “private military companies” (PMCs) who provide such support services as security forces, interrogation of prisoners, and training. The nature and extent to which private enterprise can be made to supplant state and public services seems to be unlimited, and the rationales and processes of privatization are especially relevant for understanding the economic and political history of the telecommunications and mass media industries. Many of the basic infrastructures and vital services in the United States are built and/or owned by private corporations, including telecommunications. US domestic policy historically has favored private ownership of media and telecommunications companies, and has tended to define the “public interest” according to shareholder interest, a view that is increasingly embraced on a global basis.
Privatization Of Broadcasting
Because media industries and related policies are widely considered vital to sustaining public life, there is strong and widespread opposition to regulating them as any other industry, such as steel, coffee, or coal. Instead, the governments of most countries in the world view media and culture as exceptional because of the role they play in sustaining public life and culture. For example, the argument in favor of a “cultural exception” by signatories of the UNESCO Convention on Cultural Diversity is in part a response to the actual or perceived threats to the sustainability of nationally based media industries that are dwarfed by global media empires. Although media privatization is on the rise worldwide, many governments tend to intervene by attempting to sustain the viability of their national media industries through import quotas and subsidies. Such policies are generally opposed by economists, and by governments and intergovernmental organizations that actively promote privatization and market liberalization.
Media industries have been privatized in many countries throughout the world for the past several decades, but the pace accelerated significantly in the 1980s and 1990s, particularly in post-socialist central and eastern Europe, throughout Latin America and much of Africa, and in India and selected East Asian economies. As well, liberal democratic welfare states in western Europe and other parts of the world have embraced media privatization. In the United States, the radio and television broadcasting system as a whole is overwhelmingly commercial, and the US system of public broadcasting, especially television, generally lacks stable and sufficient funding, or influence and importance as a vital stage for American culture and politics.
Historic resistance to socialism in the United States has provided an ideological framework for severely limiting government funding of media and cultural industries. By comparison, in many other countries, public service broadcasting has been articulated through government interventions, with reference to liberal democratic ideals, affirming a role for public leaders to develop and sustain political and cultural discourse through the media. Such systems have been well funded and insulated from political pressure (for example, through license fees rather than direct government appropriations), and have been much more central to national public life. The United Kingdom’s BBC, Germany’s ARD, Japan’s NHK, Canada’s CBC, and Australia’s ABC are among the systems that serve as public service models, particularly because of their commitments to innovative quality programming, and to the insulation of programming from direct government and market influence.
However, due to pressures from global competition and the rapid increase in the availability of new media sources, even where they are well established and relatively successful, public service broadcasters (PSBs) have found themselves having to compete for audiences in an unfamiliar commercial and multichannel media landscape. One result has been that PSBs have had to adapt at a faster pace to technological change, and to develop business models that enable them to compete with commercial networks. Such changes have led to concerns about the demise of the distinct identity and mission of public service broadcasting. Although not technically privatized, numerous PSBs have taken on more characteristics of private, commercial broadcasters, including paid advertising.
Privatization Of Telecommunications
Perhaps even more dramatic than the changes to broadcasting have been the trends in privatizations of telecommunications infrastructures and the convergence of mass media and telecommunications infrastructure ownership. In the past 20 years, many governments around the world have privatized their postal, telegraph, and telephone companies (PTTs), resulting in numerous subsequent mergers with and acquisitions by larger foreign companies. As well, foreign telecommunications firms have entered new markets in which privatizations and market liberalization occurred. For example, foreign direct investment poured into post-socialist central and eastern Europe to construct new landline and wireless infrastructures, sometimes in partnership with PTTs and also through new, private companies. Telecommunications infrastructures are viewed widely as vital tools for developing the economies of the global south, which is why key intergovernmental organizations, such as the Organization for Economic Cooperation and Development (OECD), the International Telecommunications Union (ITU), and the World Bank have been active in promoting this sector. The World Bank in particular has been an advocate of telecommunications privatization, which it has advanced through a “toolkit” developed expressly for this industry sector. Given the limits of public funds in many poor countries, privatization initiatives are geared mainly toward attracting foreign direct investment.
Although it would be an exaggeration to attribute global trends in telecommunications privatization to the influence of the United States, many patterns and controversies related to deregulation, liberalization, and privatization throughout the world reflect pre-existing patterns of policymaking in the United States. The US telegraph and telephone industries historically have been privately owned, with little exception of note, whereas PTTs throughout most of the world have functioned as government-owned and operated agencies. Despite the fact of private ownership, under heavy government regulation to control prices and insure quality of service, AT&T, the national telephone monopoly, functioned in many ways like a PTT. When a federal court decided in 1982 that AT&T should be broken down into several smaller companies, the results were very much like a privatization. The break-up was intended to promote a more competitive, innovative, and open network environment. The breakup contributed to the destabilization of familiar distinctions between telecommunications and the mass media, and since then, US telecommunications policy has moved in the direction of encouraging the “convergence” of previously separate industries and technologies, and the promotion of cross-industry “synergies.” Also since that time, the US telephone industry has undergone a process of reconsolidation, resulting in new vertically integrated firms that combine media content production and distribution systems.
As in the case of cable television systems, US telephone companies now have a conflict of interest in that their own content providers compete with other content providers needing access to the same infrastructure. Today, public interest advocates worry about the possibility that the telephone/telecommunications industry in the United States is losing its historic neutrality as a “common carrier” by having a vested interest in the success of its own content subsidiaries, which are in competition with other content providers on the same system, potentially resulting in discriminatory pricing and lower quality of service provided to competitors needing access to the same infrastructure. Whereas an original goal of the breakup of AT&T was to promote a more “open network,” subsequent vertical integration of content and infrastructure has introduced a disincentive for telecommunications carriers to keep their networks open and accessible to all content providers.
Not surprisingly, similar concerns have emerged in Europe and elsewhere over the question of whether privately owned networks can serve as neutral carriers of the content of their competitors. Another important development in media privatization has been the growth of the Internet. A significant global policy concern has been the disproportionate de facto control the United States has over Internet governance through the US-based Internet Corporation for Assigned Names and Numbers (ICANN), which is self-described as being “responsible for the global coordination of the Internet’s system of unique identifiers.” By having control over these identifiers, ICANN possesses the capacity to shut down a country’s access to the global Internet. In the wake of the UN World Summit on the Information Society, governments around the world have begun to take steps to increase multilateral control over Internet governance, particularly in response to ICANN.
Questions Of The Future
In the twenty-first century, distinctions between ownership of media content and infrastructure are completely blurred, and a new wave of privatization has emerged. While in the 1980s and 1990s, privatization was typically undertaken by public trading in the stock market, a new pattern of private equity investment in media and telecommunications has emerged. Through speculative forms of investment, private equity firms and majority shareholders have managed to take some of the world’s leading media and telecommunications companies off the publicly traded stock market, resulting in the removal of these companies from regulatory reach or public scrutiny. This new airtight form of privatization has raised concerns about the lack of transparency in how companies operate, and the weakening of any form of public interest regulatory oversight (Noam 2007).
Beyond the question of whether media are privately or publicly owned is the matter of the changing relationship between media and the state. As telecommunications firms develop increasingly sophisticated capacities for surveillance and data mining, they are able to use that information not only to place their services at a competitive advantage compared with content provided by other firms on their networks. Telecommunications firms now provide surveillance services to governments through the use of data gathered about the communication patterns and information-seeking behavior of average citizens. These developments illustrate that media privatization does not necessarily signal an absence of government control or abuse of powers, nor does it insure greater public accountability.
- Bortolotti, B., & Siniscalco, D. (2004). The challenges of privatization: An international analysis (Oxford: Oxford University Press).
- Kessides, I. N. (2006). Reforming infrastructure: Privatization, regulation and competition. Washington, DC: World Bank.
- Noam, E. (2007). Private equity is a problem for public media. Financial Times. At www.ft.com (February 19), accessed September 20, 2007.
- Petrazzini, B. A. (1995). The political economy of telecommunications reform in developing countries: Privatization and liberalization in comparative perspective. Westport, CT: Praeger.
- Rhodes, S. (2006). Social movements and free-market capitalism in Latin America: Telecommunications privatization and the rise of consumer protest. Albany, NY: SUNY Press.