The following is the text of a breakfast speech given yesterday to the Computer Society of Bermuda by Minister of Management and Technology, the Hon.

Dr. Grant Gibbons.

I'd like to try to do two things during the next half an hour or so. The second of them is to describe the telecommunications dilemma which faces Bermuda as we approach the 21st Century and the rewards which are waiting for us if we handle the dilemma well.

But in order to do that, I think that first, I have to establish some kind of context, to explain my understanding of what is happening in the wider world, so that you will have a better understanding of Bermuda's situation against that background.

I am not going to be speaking simply about telecommunications, because that implies a narrow piece of what is in fact a much larger whole. That whole is the information superhighway, if that is a phrase you like, or simply information technology, which is a less dramatic, but more accurate phrase.

All of the products and services which make up information technology -- telephone, computer hardware and software, cable and broadcast television and satellite services -- are now related so closely that none can be seen as entirely separate from the others. They are all streams feeding into a single river.

It is a huge industry. Over half the jobs in the US work force are now information-based. The telecommunications and information sector of the US economy now accounts for more than 12 percent of the gross US domestic product.

It is the fastest growing sector of the American economy, and surely what grows fastest in the United States will eventually also grow fastest elsewhere, including Bermuda.

When AT&T first got into the cellular phone business, they predicted that by the year 2000 there would be 900,000 cellular phones in the US. In 1993, there were 13 million cellular phones in the US, and the current projection for 2000 is that there will be something like 60 million.

No one knows exactly how many people are on the Internet. The last figure I heard was 30 million. I don't know how anyone could know, but whatever the number is, nobody dreamed that computer technology would spawn so enormous, so valuable and so...well, the only word is so eccentric a resource, and certainly not in such a short time.

Jean-Luc Picard opens Star Trek with the words "Space, the Final Frontier.'' Although I think Gene Rodenberry was a very clever man, I believe he was wrong to imply, as those words do, that the only frontier man has left to conquer is outer space. Someone once said: "Where there is an open mind, there will always be a frontier.'' At the very least, we've got cyberspace to deal with before we deal with outer space.

When the wild west was in full swing in the 1800s, one of the things that made it so exciting was that man moved west faster than the law could follow. What made the west such a potent force in the creation of the culture of the United Stated, then, was the way people and systems grew, largely in the absence of the forces of law and order.

Where the products of information technology are concerned, it is much the same today. The networks are the wild west of the 20th century. It's going to take longer than the five years left to us in the 20th century to tame them, if that is what we are going to do. Many feel the success of the networks has much to do with the absence of regulation, and attempts to impose regulation are met with vigorous opposition. Remember the Clipper Chip? On the other hand, all seem agreed that the industries and companies that produce the technology which created the networks are mired in a sticky mess of American bureaucracy which discourages growth and rationalisation. One of the things hindering what seems to be an information technology marriage-made-in-heaven -- the joining of telephone and cable companies -- is what many businessmen see as meddling by the FCC. It is not the only reason, I agree, but it is a significant one.

Most concerned are agreed that what is needed in the information marketplace is de-regulation. The American government is now moving quite rapidly in that direction, and you can expect that governments around the world will follow their lead, because they have to. This is, plain and simple, a global village matter -- a relatively new concept for lawmakers.

In other ways as well, the lawmakers of the world have been left, struggling to keep up in the wake of the extraordinary spurt of progress that information technology has provided in such a short time.

Such basic issues as the legal status of computer documents, what information should be in the public domain and what kept private, what is ethical computer behaviour and what not, how to deal with the export beyond national borders of electronic intellectual property...it wasn't so very long ago that nobody could formulate the questions, far less answer them. But they are now concerns for governments around the world.

There are other issues as well, which are entirely new to us, and which are therefore particularly challenging. The Internet, for example, does not belong to anyone. It is not run by a single person or organisation. Yet out of this apparently chaotic situation emerges an extraordinary intelligence and creativity. The Internet grows and shifts, accommodating itself to changing technology and changing needs at a savage speed. The process has spawned a new world -- adhocology.

Some of the gurus of information technology believe not only that the Internet should not be subject to any kind of regulation, it is already beyond the ability of Governments and corporations to control. It is an interesting thought. In whose jurisdiction does the Internet exist? Whose responsibility is it to control the Internet? John Perry Barlow, one of the high priests of cyberspace, believes the principal implication of networks like the Internet is that corporations as we know them will disappear, replaced by new economic structures based on individuals exchanging information beyond the reach of any central, external authority. He believes that governments will as well, but we'll pass over that thought in silence. Mr. Barlow believes this emerging new system will cause changes for the human race more profound than anything since the capture of fire.

On the one hand, one instinctively mistrusts this kind of prophesy. But on the other hand, none of us knows where all this is going to lead. As long ago as 1991 -- a very long time in the world of information technology -- people were taking note of the fact that networking had an effect on the way people work together, and on the way they made decisions.

A study referred to in Scientific American in September of that year noted that although people took longer to make a decision when they met on the network, as it were, the influence of social responses and especially of business's hierarchical structures diminished sharply. On a network those involved in decision-making enjoyed more equal participation, they proposed more ideas and they were more prepared to be passionate about their ideas than they were face to face.

Perhaps this one of those apparently simple facts whose significance is more profound than we are now able to realise.

Whatever one thinks of the significance of these extraordinary advances of technology and understanding, it is plain that Information technology is not just another business-generated gimmick like the hula hoop or the Frisbee. It isn't simply something to be produced and consumed for a profit.

Douglas Engelbart, the founder of the bootstrap Institute, a non-profit research organisation and one of those who developed the ARPANET, the precursor to the Internet, says what are being produced by the information industry are tools to speed up and improve our skills of innovation, and to raise our collective IQ. That is a concept which, to my surprise, many American businesses apparently have difficulty with, but one I think all of us in this room will understand instinctively. Mr. Engelbart sees the value of information technology primarily in its ability to increase knowledge -- as an instrument of education, in other words. While business plays a very substantial part, certainly, in its creation, the end uses of information technology ought not to be controlled by the corporate community or even, perhaps, by governments.

Certainly the business writer Peter Drucker seems to be in basic agreement with Mr. Engelbart in what he says in his book, Post-Capitalist Society, published in 1993, in which he traces people's evolving perception of what a manager does from what was true in the 1940s -- a manager is someone who is responsible for the work of subordinates; through the 1950s -- a manager is someone who is responsible for the performance of people; to today, when our newly accumulated wisdom leads us to define a manger as someone who is responsible for the application and performance of knowledge.

That change of definition, says Mr. Drucker, points to our new understanding of knowledge as the essential resource of our time, and that land, labour and capital are now important chiefly because of their influence as restraints.

The change obviously also underscores the importance of information technology as we move into the 21st century.

I think most people would agree that the educational aspect of information technology is of great importance. In recognition of that fact, the Clinton administration is on record as intending to create an environment that stimulates a private system of free-flowing information conduits.

In a statement published early in 1994, Vice President Al Gore said the environment the American Government was trying to create would give individuals and public institutions the best possible opportunity to provide and receive information at reasonable prices. American deregulation has much the same object as that which is urged on the Bermuda Government. Increase competition, drive prices down and thereby ensure that the price of making use of technology is as reasonable as it can be.

The US administration's proposals for legislative change have five principles.

First, encourage private enterprise.

Second, promote and protect competition.

Third, provide open access to the network.

Fourth, avoid creating a society of information haves and have-nots.

Fifth, encourage flexibility.

Those are sound and sensible principles, in support of what is obviously a sound and sensible aim. No one would have difficulty embracing them.

But as Mr. Gore says, it's one thing knowing where you want to go, it's quite another knowing how to get there. Let me quote three paragraphs from his statement, which I stress, relates to the situation in the United States.

"It is during the transition period that the most complexity exists and that government involvement is most important. It's a so-called phase change, like moving from ice to water. Ice is simple, and water is simple, but in the middle of the change there is a mixture of both, in this case part monopoly, part franchise, part open transition.

"We want to manage that transition,'' he goes on to say. "And so I am announcing that the Clinton administration will support the removal over time and under appropriate conditions, of judicial and legislative restrictions on all types of telecommunications companies -- cable, telephone, utilities, television and satellite. We will do this through both legislative and administrative proposals, prepared after extensive consultation with congress, industry, public interest and consumer groups, and state and local government.

"Our goal,'' says the American Vice-President, "is not to design the market of the future, it is to provide the principles that shape that market, and to provide the rules governing this difficult transition to an open market for information.'' Let me repeat his last paragraph.

"Our goal is not to design the market of the future, it is to provide the principles that shape that market, and to provide the rules governing this difficult transition to an open market for information.'' That is exactly the role I see the Government playing in the development of information technology in Bermuda.

There is, however, a big difference between our situation in Bermuda and the situation the Clinton administration is trying to deal with. In the US, the de-regulation of the information industry is going to be difficult, to be sure, but if the US Government makes a mistake, it can correct it, over time, without causing major damage to the country's infrastructure.

The Bermuda Government does not have that luxury. A mistake here could easily cause damage, quite literally, on a catastrophic scale.

Our Achilles heel is our small size. The amount of money in this market is finite, and our dependence on single companies to provide services, particularly, is much greater than that of a country like the United States.

We can't afford the luxury of trying to legislatively do away with monopolies.

We have to hew to a very fine line between encouraging enough competition to keep prices down, but at the same time, ensuring that competition doesn't strip away the rewards which must be there for a company which is going to be innovative, invest in improving its own infrastructure, be responsive to its customers and the marketplace -- in short, which is going to provide a quality service...and please note my use of the word quality.

There cannot be anyone in this room who does not understand the connection between the quality of our infrastructure and our success as a country. Many of those places which are in competition with us, as a tourist destination and as a centre for international business, struggle with difficulties we simply don't have and have never had -- daily power outages, fluctuations in the power supply, never knowing whether the telephone will work when you pick it up.

These things don't necessarily occur because of the arrogance of monopolies.

They occur because there isn't enough money in the market to allow the companies involved to invest in improving their plant and equipment.

If we allowed half a dozen businesses to operate a local telephone service in Bermuda, we'd certainly put downward pressure on the rates. I have no doubt that we would continue to have a local telephone service, although there might not be six providers for very long. But I doubt that any of the companies left in business at the end of the day would make enough of a profit to continue to give us a quality service for very long.

So in Bermuda, we have a basic and very difficult question to answer: How much competition is too much? It isn't an easy question to answer and, as you know, I'm not here this morning to announce that I have yet decided on a solution. One thing is clear.

Bermuda is not the place to try to find a solution by a process of thoughtless experimentation. Our ability to be successful, our ability to be competitive in the world markets for tourism and international business, depend fundamentally on our ability to provide first class communications facilities and on a guarantee that we will continue to do so.

The two reports of the Telecommunications Commission recommend that Bermuda proceeds in certain directions, and recommend that I deal with individual licence requests in certain ways. I am not bound to follow their advice, but I do believe the Commission's suggestions, certainly where the principles of what I should do are concerned, are a good blend of business sense and an acceptance that we must march in step with the rest of the world.

I said earlier that moves to enable the information industry to respond easily to market forces were global village issues. They really are. The decisions are being made in the United States, perhaps, but they reverberate around the world. No country which hopes to compete and progress with the rest of the world can swim against the stream. We certainly cannot here in Bermuda. We make approximately 70 million long distance telephone calls a year here. In terms of long-distance volume, that makes us the equivalent of a US town of about 300,000 people.

We don't necessarily have to slavishly copy every piece of American legislation that impinges on information technology, but we certainly ought to abide by the spirit of the principles the Americans have accepted. We must take our cue from what is going on in the US, and I think the Telecommunications Commission realises that as well as anyone.

The Commission has made 24 individual recommendations. They have been made public, and perhaps there is no need to go over each in detail. But there are three which I believe are key, and on which I would like to comment.

Its members feel we should permit the introduction of controlled, limited competition in the provision of both domestic and international telecommunication services. Where international service is concerned, they have recommended we licence three service providers.

They feel we should selectively license a limited number of wireless cellular and personal communication providers, but that we should license only those organisations who will add functionality or connect with services not currently available.

They feel we should not permit the operation of callback or international simple resale.

Where this last recommendation is concerned, it is important to understand that the Telecommunication Commission is not trying to discourage competition by recommending we do not get into call-back and international simple resale.

Telecommunications opportunities in Bermuda Let me take a minute to define call-back and simple resale, so that we are all on the same wavelength. In callback, a caller in Country A, which has high international charges, telephones a switch in Country B, which has cheaper rates. The switch captures the caller's telephone number and calls him or her back, enabling a long distance call at the rate applicable in Country B.

In simple resale, a company leases private lines from a facility-based carrier and sells a switched service on those lines to its clients, at a lower price than that which normally obtains.

In neither case has the telephone infrastructure been improved. Both types of service are essentially parasitic, and not in accordance with the recommendations of the International Telecommunications Convention.

If we were to license call-back or simple resale, we would put ourselves in breach of our international commitments and obligations. We would also no longer be sure of being able to guarantee our telecommunications partners make sufficient investment in our international telecommunications facilities to enable us to continue offering a quality service. Where simple resale is concerned, the Commission acknowledges that things may change, and that they may have to take another look at some time in the future. But for now, they recommend we not get involved.

The Commission recommends we go from one long-distance provider in Cable and Wireless to three, in Cables and Wireless, the Telephone Company and TeleBermuda.

This really is a watershed recommendation. Once we move in that direction, there is no going back.

Will this provide the lower prices, increased market responsiveness and innovation that we want? Or will it produce three weak carriers, none of which will have the where withal to re-invest in the infrastructure so important to us? It's a hard decision to make. All 24 recommendations require detailed and thoughtful consideration, but this is the important one, the pivot.

Perhaps in recognition of how small is the margin of error, the Commission has recommended that, especially during this period of transition from Bermuda's traditional telecommunications methods to a new, more competitive atmosphere, the Government should keep a very close watch on the industry here.

They have recommended a series of mechanisms for oversight, principally by Government, which will enable us to keep in the closest touch with what is going on in the industry. I am sure that in this the Commission wants to be certain the government is able, first, to make decisions based on the most detailed information possible, and second, to give the government an opportunity to fine tune its decisions, and to alter them if it becomes clear that that is necessary.

If one were to encapsulate the commission's recommendations in one sentence, it would be "Leap, but look before, during and after.'' Vice President Gore emphasised the importance of the last of his five principles -- to encourage flexibility. Technology, he said, is advancing so rapidly, and the structure of the industry is changing so quickly that policies put in place now must be broad enough to accommodate change as new needs emerge.

This is very important to us in Bermuda. We see the traditional providers of telecommunications services in Bermuda -- Cable and Wireless and Telco -- as partners in the business of Bermuda. We believe they see the need to move into a new telecommunications era in Bermuda as well as we do. And we believe that if we manage the transition carefully and sensitively, the partnership will continue to be pro ductive both to Bermuda and to its telecommunications partners.

Now I said at the beginning that I was going to talk about rewards that may accrue to Bermuda as a result of this terribly rapid progress in information technology.

A very substantial spur to thinking in these terms is, of course, the pending return of the military base lands to Bermuda's control. We are about to come into a very substantial inheritance, the virtually vacant possession of about a tenth of our total land area. In the United States, this would be the equivalent of being handed new land areas almost the size of the states of California, Arizona and Nevada put together. It's really quite incredible, when you think about it.

The problem is more complex than simply thinking of how to use the land. We also have to think of how to make money to pay for all the new responsibilities that come with it. We believe there are ways in which we can use this land to create opportunities for additional information technology ventures in Bermuda. We are looking at what advantages our geographic position might give us in the world of cyberspace.

Given the high quality of the current telecommunications infrastructure and the excellent connections we have to Europe and North America, we are looking at a number of ideas that may be loosely defined as the storage, distribution and manipulation of intellectual property. Related software development is also an area that is being explored.

It may have occurred to you that there really is no connection between exploring these ideas and taking over all that new land, but the closure of the bases, coming hard on the heels of the Commission on Competitiveness's call for diversity, has been a powerful catalyst.

We have created a small working committee of representatives of both Government and industry to look at these and other possibilities in telecommunications and information technology. We are also talking with organisations and individuals, both here and abroad, that have an interest in this area. Whatever we come up with, it is critical that any initiative be driven by the private sector, albeit facilitated by Government.

The reinsurance business, now such an important sector of our economy, began in the same way. A small group of companies worked with the Government to create a legislative and regulatory environment that attracted others, and eventually created a very powerful industry here, one which has been cloned in a variety of other areas.

But I have to stress, because people sometimes find it easy to forget, that Government is not in the business of itself starting these ventures, or of investing in them in one way or another. This is the business of private enterprise. There are opportunities all over the place. but every opportunity requires an entrepreneur, not a politician, to make it come alive.

Grasping business opportunities is your business, not the Government's.

I have read, with great interest, copies of some of your well-produced and impressive newsletters, and I understand the stress you are beginning to put on your role as champions in this community of computer technology.

With what Mr. Engelbart says about the information industry's part in pulling our collective IQ up by the bootstraps in mind, I wonder whether you might go a step further and champion information technology as an educational tool in Bermuda. The success of the company we recently licensed as an Internet provider indicates that Bermuda has quite a large pool of what you might describe as enlightened computer users. However, most of them are whose who have gained their understanding through using computers as a business tool.

Computers are rapidly becoming much more than aids in business, however. There are many Bermudians who do not understand their new educational role, and who are unlikely, because of their lack of natural contact with that world, to find out.

I see this as a role, one which is truly vital to the community's future well-being, as one which you in the computer society could and perhaps should fill -- reaching out to those who might otherwise become our information have-nots.

As we enter the next millennium, Bermuda's success, particularly in knowledge-based industries, will depend increasingly on its human resources.

Only if Bermudians develop competence in these areas, will this community reap the full harvest that information technology promises in the 21st Century.

The Hon. Grant Gibbons.