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date: 19 March 2018

International Communication Regimes

Summary and Keywords

International regimes are often described as regularized patterns of cooperative interaction or behavior among international actors such as nation-states. They also provide the most concrete instances of international cooperation. One example is the telecommunications regime, which grapples with issues such as satellites, radio and television broadcasting, surveillance, and sending of voice or data messages. Until the late 1970s or early 1980s, the international communications regime was dominated by state- or privately-owned monopolies in the communication industries. Recently, this cartel has unraveled and communication markets worldwide have moved toward privatization and liberalization, which led to changes in the International Telecommunication Union (ITU) and Intelsat. The ITU was initially seen as strongly resistant to liberalization, but the current view is that it eventually came around to supporting it. The ITU still remains the premier authority arbitrating interconnection protocols, frequency distribution and arbitrations, and weighs in on prices and standards. Intelsat, meanwhile, has become a much weaker organization as a result of the regime change toward liberalization. As competitive private and regional satellite systems have developed, Intelsat is now one among many telecommunication satellite carriers in the world, although it remains the largest provider of fixed satellite services. Various forms of Internet governance have also emerged, reflecting a mix of private and public authorities at national and international levels. In electronic commerce, the emerging regime reflects the overall rubric of the principles and norms of global liberalization.

Keywords: international relations, international cooperation, communication, telecommunications, liberalization, International Telecommunication Union, Intelsat, electronic commerce


International cooperation is indispensable toward understanding global politics. International regimes, frequently understood as regularized patterns of cooperative interaction or behavior among international actors such as nation-states, provide the most concrete instances of such cooperation. The overview presented here describes historical communication regimes in telecommunications, broadcasting, and more recently, electronic commerce. Regime theory as it evolved historically is discussed first. Theories of international regimes are currently overlapped and, at times, subsumed in theories of global governance.

Understanding Regimes

Regime theory, a product of the field of International Relations, arose in the United States in the late 1970s to conceptualize global cooperation in economic relations. It was thus no coincidence that regime theory achieved prominence just as scholars and practitioners began to pay heed to the political economy of deepening global interdependence. Until then, international relations researchers primarily studied security relations among nation-states.

Regimes Defined

The word regime comes from French meaning authority. As used in international relations, it refers to regularized cooperative patterns of interaction or behavior among international actors. However, most of regime theory concentrated on cooperation among nation-states, often at the behest of other actors such as international governmental organizations, firms, and non-governmental organizations. Regimes often serve to socialize international actors into cooperation and, in turn, are products of such socialization.

A well-accepted definition of regimes comes from the Stanford University scholar Stephen Krasner (1983) who notes that regimes are principles, norms, rules, decision-making procedures, and often times, institutions which are explicitly or implicitly agreed upon by international actors in specific issues (known as issue-areas). Principles, the most general part of regimes, are broad understandings or beliefs about the way the world works. Norms, a slightly narrower conception than principles, specify specific standards of behavior. Lately, international norm development has received a great deal of attention from scholars. Rules abet or prohibit certain courses of action. Decision-making procedures lay down guidelines for everyday interactions and dispute resolution.

Communication regimes are founded on the principles of sovereign interaction while encouraging smooth information flows among nation-states, especially for enabling international commerce (Zacher with Sutton 1996). Thus regime norms have encouraged reduction of barriers to information flows, sometimes involving cases where weak states have felt coerced to cooperate. Regime rules have often been spelled out in international agreements, conferences, and organizations. Decision-making procedures for these rules range from informal discussions, international law, international regulatory agencies, to formal dispute resolution bodies such as the one operating under the World Intellectual Property Organization for the arbitration of internet domain name disputes.

Why Regimes?

The motivating basis for international regimes is located in the mutual or convergent interests of international actors that tilt them toward cooperation to achieve their objectives. This departs from orthodox realpolitik reasoning about the international system as lacking central authority or being anarchic. Without such authority, nation-states have to fend for themselves and are thus constantly jostling for survival and locked in a struggle for power. International regime formation would then be considered suspect at least by nation-states as it takes authority away from them, and makes them suspicious of any breaches to their sovereignty. Such reasoning is, however, myopic on several counts. First, even nation-states must exist as a society in the international system and while no society is devoid of conflict, the obverse is also true. A society can also cooperate. Thus, the shadow of the future for an international society, where self-interest takes account of the long run, can often lead to cooperation and, consequently, international regime formation. This does not necessarily contradict realpolitik; it refines and deepens the analysis.

Regimes are often posited as intermediate factors, or intervening variables, between the self-interested motivations of international actors and the particular outcomes of international interaction. Thus, while regimes might find their basis in cooperation, the everyday outcomes arising under particular regimes need not be cooperative.

Theories of Regimes

Under what circumstances will international actors be motivated to create or sustain regimes out of self-interest? Here, several answers are often proposed from various theoretical perspectives.

State Power

Explanations rooted in state power either locate regime formation and sustenance in preponderance of state power or in convergence of state interests (Krasner 1991; Zacher 2002). Preponderant power, aptly described by Thucydides as the strong doing what they can the weak suffering what they must, leads to regime formation when a strong power, such as an international leader or a hegemon, shoulders the burden of getting other states to agree though moral suasion, incentives, or sanctions. At times, weaker states may be coerced to cooperate. Such explanations are favored by realists, especially in security regimes such as NATO where state power plays an important role.

The convergence explanation notes that state interests can lead to regime formation under a number of different circumstances. While realists emphasize commonality of interests, neo-liberals underscore their mutual adjustment. Neo-liberals find their intellectual rationale in theories of political idealism favored by Immanuel Kant and Woodrow Wilson, or those of free trade traced back to Adam Smith. First, where states must co-exist in the international society, the shadow of the future may make them cooperate. Second, as international regimes are a form of collective action, such action may be easier for a small group of nation-states to undertake. Thus, international summitry among the most powerful states (such as G-8, the OECD, or the European Union) may lead to cooperation with or without hegemonic persuasion. Another view is that states may see long-term or short-term benefits from cooperation that make them overlook the costs such as risks to their sovereignty. Finally, states may undertake regime formation at the behest of powerful lobbies in their territories. Instances of this include the many human rights regimes, such as the 1997 international ban on landmines treaty, or economic regimes framed because of lobbying from global businesses.

Just as the preponderance versus convergence explanations differ on regime creation, they differ along exactly the same lines as above on regime sustenance, too. A famous book by neo-liberal Robert Keohane, After Hegemony, in 1984 argued that hegemony is not a necessary condition for regime sustenance. For realists, regimes mostly fail if hegemons do not sustain them; for neo-liberals, regime institutions, once created, have a life of their own and thus enhance cooperation.

Economic Interdependence

Theories of economic interdependence find state mutuality of interests to be their point of entry for analysis, thus overlapping with the explanation provided above, but they move beyond states in noting the many other factors that lead to regime formation and sustenance. First, international institutions can play a big role in bringing about mutuality adjustment of interests. Examples include the role of the European Commission in convincing member states to agree to cooperative measures or that of the WTO (World Trade Organization) in bringing nation-states to the negotiating table. Second, domestic and transnational actors can often be forces in their own right for international cooperation or they can move states toward it. Examples of the former include the accelerating trend toward setting of standards privately among firms instead of going through states or international. The recently formed Internet Corporation for Assigned Names and Numbers (ICANN) is an example of increasingly private forms of international governance. To take another example, states and international organizations are also allowing for industry “self-regulation” as in the Safe-Harbor agreement crafted between the United States and the European Union for data privacy issues in trans-border data flows. All these instances will be discussed in detail later. Third, the role of users of telecommunication services, especially large users such as MNCs, is particularly important for communications regimes. Some of the most important changes domestically and internationally have come about owing to the needs of users. The need for private computer networks for large users finally led the International Telecommunication Union (ITU) to its Recommendation D-6 to allow such independent networks to emerge, often resisted by the state-owned monopoly telecommunication carriers. Large suppliers can play a role, too. Many large telecommunication service providers and equipment manufacturers have led the way since the 1980s in liberalizing telecommunication markets worldwide.

Conceptually, interdependence theory also borrows from models in institutional economics in positing cooperation. Most of these theories are rooted in notions of market failure. The reason that regimes exist for enabling international transactions and exchange is because markets are unable to do so by themselves. The way for actors to cooperate and forge mutually beneficial outcomes is via regime formation. The rationale of mutual benefits is often located in the reduction of transaction costs for actors involved in any particular issue-area. Thus, if ITU coordinates the allocation of radio frequencies to different countries, it reduces the transaction costs for all involved rather than each actor seeking a series of bilateral agreements. Regimes thus also help to resolve problems of collective action. Here, the task of regime formation starts with an influential core (or powerful) group of states, which is then “multilateralized” to include other actors.

Collective Understandings

This explanation of regime formation takes into account many of the cognitive processes involved in actors mutually adjusting their interests. It points to the role of the many factors that may produce an intersubjective understanding of cooperation among actors, which facilitate regime formation. Various scholars variously conceptualize these collective understandings as socialization of agents, hegemonic ideologies, or epistemic communities. The latter refers to a small group of influential members, organizations, or actors agreeing upon a particular cognitive framework. For example, in the case of the global environmental accord to reduce CFC transmissions into the atmosphere, the role played by the epistemic community of scientists in trying to convince policy-makers and public about the risks of the depletion of the ozone layer was important (Haas [1990]). Often, the ascendance of liberal ideas in policy-making since the late 1970s with the Reagan–Thatcher era, supplemented by the push by agencies like the World Bank and the IMF for liberalization, are taken to be the collective understandings that lead to regime change in the 1980s in telecommunications. Even in prior periods, there is now evidence that the reason that a monopoly model in telecommunications was accepted was because of the collective understanding of engineers staffing these carriers (whose self-interest was best served by such a market structure).

Another central insight coming out of these schools of thought is that before turning to how interests lead to regime formation, we need to understand how these interests arise in the first place. Processes of collective interest formation mentioned above then give a sense of the social purpose to actors involved. In such scenarios, individual interests of actors are secondary to the formation of the social sense of purpose.


The nature of, and changes in, communication technologies are factors in their own right in understanding communication regimes. While seldom taken as a singular explanation, technology, along with other factors, is often is taken to account for the origins of interest of various international actors. The “natural” monopoly in telecommunications which led to the institutionalization of this market structure for over a hundred years rested on the technological rationale that telecommunications networks required large amounts of investments and users to be profitable. The monopoly model, in fact, broke down, when technological innovations began to challenge the notion of high investment costs. Technological explanations are at the heart of just about every regime feature. For example, content controls in satellite broadcasting have been hard because satellites leave their footprint over large areas. On the other hand, national authorities have often tried to control for content by jamming broadcasts or by tinkering with receivers in radio and television. The decentralized governance model of the internet is often connected to the technological decentralization of the internet itself. More recently Cowhey and Aronson (2009) argue that communication networks are now modular: they can be broken down and network functions – infrastructural conduits or content-related flows – can be broadly distributed, allowing for broad transformations in communications governance if politics would allow for it. In their analysis, technology is the necessary conditions for change, but politics and policy specify the exact direction.

Critique and Synthesis of Theories

Each of the explanations mentioned above by themselves are found to be lacking in one respect or the other and thus scholars often provide a synthetic explanation to account for regime formation. Power-based theories are often too state-centric, coercion based, and fail to account for the mutual convergence of interests in many circumstances. Interdependence theories, on the other hand, are critiqued for being naive about power and failing to account for instances where mutuality of interest might have existed but regimes did not come about. Theories rooted in collective understandings often do not tell us when and how regimes will come about. Finally, as noted above, technology-based explanations need to be modeled through their effects on actors to explain particular outcomes.

A couple of well-known theoretical syntheses may be mentioned. Stephen Krasner’s (1991) explanation of power-driven regime formation in communication brings in the technological aspects to account for several variations in regime variation. Mark Zacher (2002) combines state-power with interdependence and technology to provide a complete account. Peter Cowhey (1990) finds most of his rationale in interdependence factors but also accounts for the inter-subjective understandings of epistemic communities (of engineers, economists, and policy-makers) that provided the conceptual and intellectual rationale for the particular nature of regimes. Singh (2008) combines varying conditions of power, both from states and markets, with collective understandings to show how international negotiations lead to variable outcomes for communication and global governance.

Strength and Scope of Regimes

Regimes vary in the levels of compliance (strength) and number of issues (scope) that a regime covers. Rules may exist at the international level but if they are not implemented at the national or sub-national level, this may result in weak regimes. For example, Euro-wide directives for telecommunication liberalization issued from European Union headquarters in Brussels were not adhered to by member states. Similarly, a complex telecommunication accord fashioned by the WTO in 1997 in telecommunications was deemed by a few scholars to be too complex and difficult to be implementable. On the other hand, that each nation would have a monopoly can be seen as a mutual agreement that nation-states adhered to vis-à-vis each other until the late 1970s. Sometimes, regimes encompass a number of institutions of varying strength. The UN-convened Internet Governance Forum (IGF), that has convened multiple stakeholders including governments, businesses, and civil society since July 2006, is often viewed as more of a “talking shop” to address concerns regarding US domination of internet governance, whilst the de facto authority of governance rests with ICANN.

In terms of scope, scholars until the turn of the century found it convenient to speak of a telecommunications regime, which includes issues such as satellites, radio and television broadcasting, surveillance, and sending of voice or data messages. The fact that the prime international institution dealing with all of these sub-issue areas was the ITU (at least until the late 1980s) also made it possible to speak of all of them as if they were one regime. Convergence of technologies also made it hard to speak of separate regimes. A satellite can carry voice, date, and images and to speak of a satellite regime in broadcasting versus one on telecommunications, when both are often affected by the same rules, is thus difficult. In dealing with the history of communication regimes, this essay follows the dominant academic convention of positing a telecommunication regime that includes a range of issues. However, it does depart from this reasoning toward the end of the essay in positing regimes in internet and electronic commerce, which are no longer centered around the ITU or governed by the same set of rules as earlier regimes. (See Tables 1 and 2 for important dates and glossary of terms.)

The Historical Telecommunications Regime: 1865–1980s

The story of the dominant international communications regime is a familiar one. It was dominated, until the late 1970s/early 1980s, by state- or privately owned monopolies in communication industries. A tacit agreement at the international level sanctioned this monopoly cartel. Recently, this cartel has come undone and communication markets worldwide have moved toward privatization and liberalization. The following analysis points out major features of the regime with reference to the major technologies that underlie it.

Table 1 Important dates for international communication regimes


Telegraph invented


First telegraph message


Telegraph cable laid under the English Channel


Telegraph channels laid across the Atlantic and the English Channel


Founding of the International Telegraph Union (ITU)


Alexander Graham Bell’s telephone patented


Radio signal sent across the Atlantic by Marconi


Radio broadcasting begins


International Radiotelegraph Union (IRU) formed


Telephone service begins across the Atlantic


International Telecommunication Union formed by merging the earlier ITU with IRU


FCC created with the Communications Act of 1934


TV broadcasting begins


Voice of America broadcasts begin


One of the first computers, ENIAC, performs complex calculations


Transistor invented


ITU is made part of the United Nations. International Frequency Registration Board (IFRB) comes into being taking over work from the Berne Bureau


Color television broadcasts begin


Network computer SAGE introduced


Voice messages sent across transaltlantic cables


Microchip invented


Birth of Intelsat


Signing of Outer Space Treaty


ARPANET, precursor to internet, formed


World Administrative Radio Conference recommends keeping satellite broadcasting flows to a minimum


IBM PC introduced


Consent Decree leads to break-up of AT&T


Major ITU conventions reformulate rules to allow digitization and liberalization


World Wide Web comes into being


ITU allows firms’ networks to operate under same rules as telephone companies


European Community’s liberalization begins


US privatizes internet governance


Passage of US Telecommunication Act


Signing of the Fourth Protocol for telecommunications liberalization of GATS

Foundations of the Regime: Telegraph and Telephone

The invention of the telegraph in 1837 coincides, not accidentally so, with the growing strength of the commercial and industrial revolutions. The fit between communications technologies and the intra- and inter-organizational needs of capitalism are regularly noted. Mark Zacher has noted that capitalism came with the “mandate for interconnection.” This mandate is explained differently in various paradigms (as noted above); nonetheless, its roots in capitalism as fostered by nation-states are undeniable. Capitalism fostered economic and other exchanges among peoples that led to new regimes in issues such as transportation and shipping, trade, posts and telecommunications, and migration and slavery.

Table 2 Glossary

basic services

Telecommunication services where the content of the message does not change during transmission


International Radio Consultative Committee at the ITU


International Telegraph and Telephone Consultative Committee at the ITU


Direct Broadcasting Satellites

domain name

Name identifying internet site. It usually has two parts: one on the right is the top-level domain name (the most general), the one on the left is the second-level domain name (the most specific)

geostationary orbit

Orbit circling the globe 36,000 km above the equator where satellites are positioned and move with the Earth’s rotation, thus appearing to be stationary

global commons

Resources such as the sky and the seas owned and used collectively by nation-states


High definition television


International Frequency Registration Board at the ITU


International Telecommunication Satellite Organization

Most Favored Nation

Clause in the WTO articles noting that favors conferred by one nation to another must be conferred to all member-states of the WTO


Bi-lateral agreements among telecommunication service carriers for division of revenues governing jointly provided (international) services

value-added services

Telecommunication services in which the content of the message is changed or value is added during transmission

Principles and norms of capitalism and the sovereignty of the nation-state, upon which capitalism rested, found their way early into the design of the international telecommunication regime and still remain its guiding pillars. It was not long after the invention of the telegraph that the need for a regime arose. By the mid-1860s, telegraph cables spanned the Atlantic and the distance between London and Calcutta. Napoleon III called for a conference in Paris in 1865 which led to the birth of the International Telegraph Union (precursor to the present day ITU) to ensure that flows of communication will supplement the freer flows of commerce. It was at this time in Europe that the major powers, including Britain, France, Prussia, and Italy, reduced their tariff barriers for each other. The telegraph’s spread demanded, and the ITU began to provide, rules for interconnection, equipment standardization, pricing agreements among countries, and a mechanism for decision-making to address all these needs. The latter became even more important after the invention and spread of the telephone after 1876.

The emphasis on national sovereignty in Europe directed the shape of everything that the ITU designed. An early compact was that each nation would own its own monopoly in telecommunications and, depending on national capacity, its own torchbearer for equipment manufacturing. The monopoly rule would later be buffered by the cost calculation of engineers who argued that network benefits could be optimized only if there was a single “natural” monopoly in every nation. What the regime ensured was that these monopolies would be interconnected with each other. The rules of joint provision of services (where two nations were sending messages to each other) and joint ownership (of cables and, later, wireless networks) extended the sovereignty principle to international communications. Bilateral agreements (known as settlements) on division of revenues, usually divided equally between the states involved, were also regularized through the ITU.

Another legacy of the early years of the ITU, and its basis in national sovereignty, is its one-nation, one-vote principle. (Later, we will examine how this principle differs from voting weighting according to shares in the Intelsat or particular constituencies as in ICANN.) The system of voting would benefit the weaker powers, especially in the postcolonial times. As with any other regime, the system of national monopolies interconnected with each other were political bargains legitimized through international institutions. For Cowhey (1991), the system was held in place by the epistemic community of engineers and bureaucrats at the ITU and national authorities in telecommunications.

Deepening the Regime: Radio Broadcasting

The principles of the telecommunications regime, as listed in Table 3, carry over into radio (and, later, television broadcasting). These principles – unimpeded information flows, development of global commons, standardization, and sovereignty – all began to be developed with respect to radio broadcasts from the early years of the broadcasting regime, formally inaugurated with the founding of the International Radiotelegraphy Union (IRU) in 1906.

Just as the ITU came about a couple of decades after telegraph messages being sent, IRU developed after radio signals began to be sent in the 1890s and radio broadcasts began in 1900. The basis of radio came from the identification of electromagnetic radiation by James Clark at Cambridge in 1864 and confirmed by the German physicist Heinrich Hertz in 1888. Commercial exploitation of this wireless technology began with Guglielmo Marconi’s efforts in the 1890s when the technology began to be deployed for maritime communications. The eponymous Marconi Company tried to become a global monopoly, supported by the British and Italian governments, through aggressive pursuit of patent suits disallowing stations using Marconi equipment from interconnecting with others using different equipment. An ITU conference in 1903 and the founding of the IRU in 1906 both tried to check the power of the Marconi Company. However, it was not until tragedies like the Titanic and stock-trading scandals involving Marconi that Britain finally caved into the interconnection issue at an IRU conference in 1912.

Radiotelegraphy and broadcasts brought up the issue of interference among broadcasts. The first action taken by the IRU was to start reserving particular bands of the electromagnetic spectrum for specific services, starting with one for maritime communications in 1906. By the 1980s, there were 35 such bands (including aeronautics, cellular, radar). IRU allotted frequencies within certain bands to assure the safety of maritime and aeronautic travel. Second, the IRU began to register certain frequencies if they were not in use, on the principle of first-come-first-served, although some concessions were made to reserve a part of the spectrum for developing countries in the post-colonial era. The third major feature with broadcasting concerned the development of understandings on the issue of broadcasting jamming. Almost all the major powers used jamming of some sort in the 1930s. However, a minimal interference understanding developed in the post-war era, even as debates over jamming continued, whereby states more or less accepted that radio broadcasts to their territories are not illegal but that they have the sovereign right to jam them if they deem them to be security threats or hostile. The latter rationale was often used by the Eastern bloc and Soviet Union and, at times, by developing countries.

Table 3 Features of the international communications regime

Regime features

Monopoly era (1865 to early 1980s)

Liberalization era (early 1980s to present)


Telecommunications, broadcasting, electronic commerce, and internet


Telecommunications: strong

Broadcasting: weak to strong depending on issue

Telecommunications: strong

Broadcasting: increasingly strong

Electronic commerce: weak to strong depending on particular issue

Internet: strong

International institutions

Telecom and broadcasting: ITU, UNESCO (1970s)

Satellites: Intelsat

Telecom and broadcasting: ITU, GATT/WTO

Satellites: Intelsat


Standards: ISO

Principles and norms

Unimpeded flows of international commerce

Global commons

Interconnection and standardization

National sovereignty (sometimes in conflict with other principles and norms)


National monopolies in telecom services and equipment

International coordination for allocation of frequencies and orbital slots

International agreements for prices and interconnection/joint provision of services

Joint ownership for international cables

Liberalization of telecommunication markets

Moves toward cost-based pricing settlements

Privatization and liberalization of cable and satellite providers

Decision-making procedures

ITU: one-nation, one vote: via standing bodies, committees, and important conferences

Intelsat: voting weighted by share-holdings

Multilateralization of decision-making: ITU, GATT/WTO, ISO, WIPO, OECD involving international agreements

ICANN: internet governance provided through a mix of private and public authorities

The efforts at regime expansion and deepening described above were eventually formalized through organizations, most of them located within the International Telecommunication Union (created in 1932 by merging the old ITU with IRU). As mentioned before, the principle of one-nation, one-vote was followed. Nonetheless, major powers and users exert more influence. The rule-making at the ITU develops out of its conventions and administrative conferences. Of these, the World Administrative Radio Conferences (WARC) and Worldwide Administration Telegraph and Telephone Conference (WATTC) are historically important. Telecommunications rules submitted for approval at these conferences come from the International Consultative Committee for Telephones and Telegraph (CCITT) and the International Consultative Committee for Radio (CCIR) in the ITU. Furthermore, the International Frequency Registration Board (IFRB), and its successor the Radio Registration Board (RRB), were key for frequency allocation. All of the bodies mentioned in this paragraph were re-organized by the ITU in 1992 (see later).

Regime Challenges: Satellite and Television

The politics of the origins of global satellite and television broadcasting follow from two great interstate rivalries, east–west and north–south, in the post-war period. The lead taken by the Kennedy Administration in the United States toward installing a global satellite system was partially the result of stealing the show from Soviets with this technology after the latter launched the first satellite in space, Sputnik-1, in 1957. The use of the satellites for surveillance and espionage and the difficulty, at least until the 1980s, of obtaining such imagery for civilian uses further underscores power politics. Nonetheless, beyond the impetus provided by the Cold War, another set of satellites developed for commercial uses. The latter’s development and influence on the communication regimes goes beyond east–west rivalry. As for north–south politics, direct broadcasting satellites, beginning with NASA’s ATS-6 broadcasts to remote areas in the United States and to villages in India in the 1970s, were soon resented by developing countries who contended that television broadcasters must seek their permission before beaming these signals to their territories. These two contentions brought in new concerns to the communications regime, resulting in rule and decision-making procedures that diverged from the old. In Peter Cowhey’s words, satellite technology “was the first challenge to the ITU system.” The overall character of the regime, however, centered on state-cartel monopoly provision of services, remained the same.

The categorization and acceptance of the outer space, as equivalent to maritime space, and therefore a type of global commons, helped the United States ensure the safety and functioning of satellites in space. This started with efforts by the United States in the 1950s and pushed via an important report in 1955 from the National Security Council that advocated the launching of a scientific satellite “as a test of the principle of ‘Freedom of Space.’” This was codified by the Outer Space Treaty of 1967, which noted that outer space will be “free for exploration and use by all states.” The system of assigning slots to satellites in geostationary orbit (GSO) followed that of the assignment of radio frequencies in organizing the global commons taken up by the ITU. The principle was that of “first-come, first-served” though, over time, the developing world succeeded in reserving a few spots for itself for use in the future through successive international agreements.

The way the satellite services themselves began to be owned and provided, however, differed from the traditional ITU regime. The United States led the effort, in a race to prevent the Soviets from doing anything similar, to develop a global satellite system with the quick passing of the Communications Satellite Act of 1962 which created the Communication Satellite Corporation (Comsat). The next move was to create the International Satellite Organization (Intelsat), a global consortium, in 1964 in which the US had a 61 percent share though West European powers succeeded in instituting rules that sought to constrain the US influence. Thus, while country shares weighted Intelsat voting, voting rules required that any important motions must be supported by at least 12.5 percent of the votes in addition to those of a country with the highest share of votes. Thus, the United States could not carry its resolutions with simple majority voting which it did possess. The 1964 agreement creating Intelsat was an interim agreement and was replaced by permanent agreements in 1969 and 1973 with more than 100 countries joining in. The shares in Intelsat were owned by national telecommunication monopolies and services were regulated as jointly provided.

The next challenge to the communication regime arose in the 1970s from developing countries (supported by a few developed countries) concerned about DBS flows into their territories. Before the satellite era, TV signals, at the most, went to contiguous states. DBS-TV had a large footprint. What emerged from these negotiations was that DBS broadcasts needed to be based on “prior consent” of receiving countries. The 1971 World Administrative Conference was the first to rule that such broadcasts be minimized, subsequently followed by resolutions from United Nations Educational and Scientific Organization (UNESCO). The DBS issue was itself became part of a larger challenge from the developing world that culminated in 1976 with the calls for a New World Information Communication Order (NWICO) which sought to correct the one-way flows of information from the global north to the south and also called into question the negative news about the developing world. The Soviet Union supported NWICO. Information flows from north to south were often equated with cultural imperialism. The forum of these demands was the ITU as well as UNESCO. Beyond raising the consciousness of the world about the plight of the developing world, the NWICO issue itself did not yield any important gains for these countries.

Telecommunications Regime Change: 1980s to Present

This section documents the liberalization phase from the late 1970s to the present. While the origins for this change lie in technology changes, the main impetus came from the remarkable coalition of powerful states and large users who called for a liberalized competitive marketplace in telecommunications.

Telecommunications technology by the 1970s had evolved to a point that a monopoly argument was increasingly unsustainable at national or global levels. Judicial and Federal Communication Commission (FCC) rulings in the United States, starting with the late 1950s, had begun to affirm the rights of potential service providers and large users to own and operate their own networks and interconnect with AT & T’s monopoly network. This task was aided by innovations in telecommunications technology as, for example, in the license obtained by Microwave Communications Inc (MCI) to provide service between St. Louis and Chicago in 1969. Nevertheless, the workings of these technology changes were played out through states and service users, which are detailed below.

It needs to be emphasized, however, that the regime change has come in the form of changed rules and decision-making procedures (see Table 3) and not so much in terms of the principles and norms. In fact, the calls for a liberalized telecommunication marketplace, detailed below, were in harmony with regime principles and norms in as much as the latter called for unimpeded flows of international commerce, creation of global commons, and ensuring global interconnection and standardization. The only principle to change significantly, and there are a few who argue that it has not changed, is that state sovereignty has declined in telecommunications as a number of authoritative functions that states performed have now moved to international organizations or to private firms.

Coalition for Change and “Big Bang”

A powerful coalition for regime change arose on behalf of large users (multi-national firms) of telecommunications services who accounted for a majority of the long-distance telecommunication traffic in the world. These users, most of them using data-based networks for their operations, had found themselves increasingly hamstrung by the inefficient way in which most of the telecommunications monopolies operated. They were mostly run as overly bureaucratized government departments not that concerned with either expanding or improving the quality of the infrastructures. The irony was that the services were in high demand (facing inelastic demand curves) and thus the government monopolies were often used, especially in the developing world, as “cash cows.”

The large users, located in the developed world, put pressure on their home governments for international regulatory reform. Several factors helped their task. First, neo-liberal or pro-market ideas were on the rise in policy-making, academia, and international organizations. The large users saw their needs best met through a competitive marketplace rather than monopolies. Their calls found easy reception initially in those home governments, which had already begun to liberalize many sectors of the economy. The cases of President Ronald Reagan in the United States and Prime Minister Margaret Thatcher in the United Kingdom are particularly important. Second, and relatedly, the demand for international reform followed the liberalization of domestic telecommunication in key countries such as the US, UK, and Japan, which accounted for nearly two-thirds of the global telecommunications market. The United Kingdom was the first in 1982 to privatize its monopoly, British Telecom, and introduce duopolistic competition by licensing a second common carrier, Mercury owned by Cable and Wireless. AT & T was broken up in 1984 and competition introduced in long-distance services. Japan began the privatization and competition process in 1985 but the state retained a big oversight role in introducing particular forms of competition in the various service markets. Third, as telecommunication markets opened up in these countries, competition began to develop among service providers and the preferred national equipment manufacturers, even in countries which had not liberalized then, who now wanted to get into international territories in search for revenues. These service providers and equipment providers joined the large users in the international coalition for reform. Finally, the European Community (now European Union) began to cajole member states and move member states toward liberalizing their telecommunications. This came on the heels of several important national and European Commission reports and policy initiatives that touted the benefits of liberalization. A Green Paper in 1987 urged telecommunications reform and pushed countries toward adding telecommunications to the creation of the European Union in 1992. While individual countries started moving toward liberalization and privatization in the 1980s, the marketplace did not become competitive until 1998. Nonetheless, the early European efforts aided the coalition mentioned above.

GATT/WTO Negotiations in Telecommunications

One of the most significant changes in the structure of the telecommunications regime is the shifting of authority away from ITU to involve institutions like GATT (General Agreement on Tariffs and Trade)/WTO in officiating over the regime. As the pressure for telecommunication liberalization arose among states such as the US, UK, and Japan, it was felt that ITU would have its hands tied from instituting meaningful change. Its close connection with national monopolies would stand in the way. Furthermore, pressures in telecommunications were part of a broader set of pressures for liberalization of services (banking, hotels, airlines, etc.) in general. The Uruguay Round of the GATT (1986–94) was instrumental toward designing a framework for services liberalization through its Group on Negotiation of Services (GNS). This framework served as the backdrop for the WTO telecommunications negotiations from 1994 to 1997.

While the GNS agenda applied to many service industries (including financial services and shipping), the agreement which emerged from its deliberations, the General Agreement on Trade in Services (GATS), is particularly important in the case of telecommunications. The implications of the agreement for telecommunications for global governance (or regimes) are seen as a central feature of GATS. Formally, GATS consists of 29 articles, 8 annexes, and 130 schedules of commitments. The annexures cover specific sectors, including telecommunications. GATS is enforceable through the dispute settlement body of the WTO and overseen by one of three new councils established, the Council for Trade in Services. Two thousand pages of “specific commitments” which pertain to progressive liberalization (market access and fair treatment) schedules were tabled by countries, which like the schedules of tariffs under GATT, are considered legally binding upon member states. These commitments pertain to eight sectoral annexes, including one on value-added or specialized telecommunications (others include those on financial services, transport, audio-visuals, and labor mobility). The benefits of GATS are only allowed for signatory countries (there were 106 in 1994) but member states may ask for exceptions for up to ten years.

Sixty-seven governments made commitments in the telecommunications annexure of GATS in 1994, which covered value-added services. Initially, the annexure was to cover basic services, too. Developing countries found coalitional partners among the Europeans who were also averse to basic services being negotiated just then. The US also wanted to impose cost-based pricing schemes in telecommunications. Developing countries, whose cause was spearheaded by India in Geneva, would lose important revenue bases if these schemes were introduced immediately. Again, the Europeans helped the developing countries’ causes by not agreeing themselves. Finally, important issues on satellite uplinks and downlinks (which would later almost derail the WTO telecom negotiations) were also not negotiated because of opposition from many states. GATT’s Uruguay Round of trade negotiations created the WTO and instituted the GATS agreement, which called for in-going sectoral negotiations.

The WTO telecommunication negotiations, begun in May 1994, took up the unfinished agenda of GATS related to the liberalization of basic services. Three years of complicated negotiations followed, almost coming undone in April 1996 when the United States responded to weak liberalization offers from others by walking out of the talks. Nonetheless, the February 15, 1997 accord was hailed by the United States and WTO as a major victory. Ninety-five percent of world trade in telecommunications, at an estimated $650 billion, would fall under WTO purview beginning January 1, 1998, the date of implementation.

The WTO telecommunications accord, signed by 69 countries in 1997 including 40 less developed countries, formalized the new regime in telecommunications. A hundred governments had joined by end of 2008. Historically, telecommunications sectors were controlled or operated by national monopolies. The new regime allowed this sector to be governed by global rules underlying WTO processes. Among other things, cross-national investments in telecommunications are allowed (or hastened given that this process precedes 1997), and trade in basic and many value-added telecommunications services are governed by free trade norms, both features backed by WTO rules of transparency and Most Favored Nation (MFN).

An important feature of the Fourth Protocol was the Reference Paper that introduced regulatory disciplines to observe the WTO rules. Nicolaides (1995:270) notes that “the GATS does not address the central obstacle to effective governance of the global information economy: the problem of regulatory fragmentation among national jurisdictions.” The Fourth Protocol allowed countries to make market access and national treatment commitments for their telecommunications sectors: the Reference Paper was perhaps the most important outcome of the negotiations in providing regulatory teeth for the market access and national treatment commitments. The Reference Paper was ready by October 1995 and reflected mostly regulatory frameworks in the United States and the European Union although its Universal Service (access for everyone) feature reflected significant input from countries like India. It was divided into six provisions: competitive safeguards, interconnection, universal service, public availability of licensing criteria, independent regulators, and allocation and use of scarce resources. It reflected the general obligations of GATS such as MFN and transparency in its language. However, in terms of appending it to GATS, it would be difficult to amend GATS to accommodate regulatory scheduling; therefore, member states decided to append the Reference Paper as a set of additional commitments along with those of market access and national treatment. While 69 countries signed the accord in 1997, 53 countries signed the Reference Paper appended to the Protocol.

Currently, WTO’s Fourth Protocol is understood to be the major regime in telecommunications. Several well-known disputes through the WTO dispute settlement have further deepened the rules and decision-making procedures governing the regime. ITU, the major institution, that harbored the old monopoly regime is now involved mostly with technical standards and interconnection protocols governing the regime. As we will examine later, it had recently pushed for involvement in internet governance through encouraging the World Summit on Information Society.

Changes within the ITU and Intelsat

As the thrust of the global telecommunications regime shifted toward liberalization and WTO, major changes took place in the ITU and Intelsat.

The ITU was initially seen as bombarding liberalization but the current view is that it eventually came around to supporting it. Its member states, having signed on to the WTO agreement also could hardly not support ITU as it shifted its stance. ITU still remains the premier authority arbitrating interconnection protocols, frequency distribution and arbitrations, and weighs in on prices and standards (see below). A major organizational restructuring also took place at its 1992 plenipotentiary conference to make its decision-making simpler to allow it to adjust to the new regime. Its work was rationalized along three sectors. Telecommunication Standardization (ITU-T) took the place of CCITT, Radiocommunciation (ITU-R) took over from CCIR and IFRB, and Telecommunication Development (ITU-D) was created to streamline the many activities of the ITU addressing the digital divide.

Intelsat, meanwhile, is now a much weaker organization as a result of the regime change toward liberalization. As competitive private and regional satellite systems have developed, Intelsat is now one among the many telecommunication satellite carriers in the world, although it remains the largest provider of fixed satellite services. The share of the United States was less than 20 percent in 2001 from the high of 61 percent when it was created. In fact, most developed countries now do not think of Intelsat as that important to their interest. Technological innovations in, and the laying of, undersea fiber optic cables have further eroded Intelsat’s primary position in international telecommunications traffic from almost 100 percent of the traffic in 1964 to single digits currently. Intelsat was privatized in 2001 after PanAmSat, a commercial competitor, lobbied the US Congress to pass the Openmarket Reorganization for the Betterment of International Telecommunications (ORBIT) Act in 2000. In July 2007, Intelsat merged with PanAmSat. Collectively, it now owns a fleet of 52 satellites in the GSO and generated a revenue of $2.4 billion in 2008 (Intelsat 2009), a fraction of the total revenues in international telecommunications and video-transmission.

Prices and Standards

Telecommunication prices and standard-setting have both moved toward cost and market-based solutions respectively and parallel the general direction of the liberalized telecommunication regime.

As noted before, telecommunication prices (or “tariffs” as they are formally known) were decided according to historical settlement principles. Especially as regime change came about, the costs of terminating calls in many countries, mostly developing ones, were quite high compared to what competitive carriers in other countries charged their customers for the cost of these calls. For countries like the United States, this resulted in settlements deficits (calculated to be about $6 billion in 1997). Efforts by the United States during the GATS negotiations to move countries toward cost-based pricing proved to be unsuccessful. Consequently, the United States, via the Federal Communication Commission, issued its now famous “benchmarks” order for international settlements in 1997, which barred settlements above a certain level. This unilateral move, while severely criticized by other countries, did result in the reduction of international tariffs worldwide and jump-starting talks (at ITU, OECD) for cost-based pricing schemes. Pricing principles, in areas other than telephony, are already quite market driven. Lease and resale of capacity over international networks are faceless and achieved via electronic bids (much like airline prices). Currently, traffic over the internet is also governed by market-based pricing methods.

In order to ensure smooth international protocols, standard-setting has been one of the chief activities of the ITU since the 1920s. As new technologies grew and others converged, standard-setting became increasingly more complex. As with regime change, users and carriers demanded smooth information flows for technologies including the radio, television, satellites, computers, data networks, fiber optics, cellular phones, Third Generation (3–G) Wireless, and, more recently, Web 2.0 and cloud computing applications. Arbitrating among powerful economic interests behind standard-setting was often hard and it has always been a somewhat political process. The processes of frequency allocation and determining slots in the GSO can be viewed as stand-setting exercises. In fact, what comes out of ITU is known as a “recommendation” and not even called a standard because of the difficulty of reconciling conflicting constituency interests. ITU also often has to confer with other agencies such as the International Standards Organization (ISO) and industry consortia in order to decide on standards. ISO may even be more important than ITU now for information technology standards. Sometimes, important standards are set by national or regional (for example, European Telecommunications Standards Institute) authorities and then “internationalized.” Of late, standard-setting is increasingly becoming private. The slow pace of the standard-setting agencies nationally and internationally is the cause of this. It is easier for firms to decide on a standard among themselves than wait for agency arbitration. This can vary from standards set by a dominant single producer (for example, Microsoft), to “standards wars” (for example, HDTV and cellular standards in Europe versus US), to those involving negotiations and consensual decision-making (as in many interconnection and open standards like UNIX and HTML).

Internet Governance

The internet has become exponentially important for commercial and social purposes. The many emerging forms of internet governance reflect a mix of private and public authorities at national and international levels. This section first reviews the emerging arrangements for internet governance and then for electronic commerce. The two are not mutually exclusive as electronic commerce depends on the internet and the issue of domain names in internet governance is directly related to commercial trademarks. However, internet governance is now centered on one organization while electronic commerce reveals a patchwork of arrangements spanning its many facets.

Internet Corporation for Assigned Names and Numbers (ICANN)

ICANN, located in Marina Del Rey, California, was founded in November 1998 to regulate internet domain names and the associated internet protocol addresses used for transferring messages. It is a private organization, which is overseen by a 19-member board of directors. Hailed as a model of self-regulation, it is sometimes seen as a major shift away from intergovernmental organizations serving as regime institutions. The corporation is housed in the US and provides its government with considerable oversight. However, pressures from the EU led to the creation of the Governmental Advisory Committee (GAC) that somewhat diluted the US government’s insistence that the corporation remain totally private. Nevertheless, critics of the US domination of ICANN continue to propose alternatives, especially through the United Nations auspices.

A closer look at this emerging regime reveals indeed the influence of powerful political and economic interests (Mueller 2002). ICANN would not have been possible had the US government, through its Department of Commerce, not intervened to arbitrate the claims of rival coalitions seeking to assert their dominance over the internet. Such struggles can be traced back to 1992 but they became especially severe after the introduction of the World Wide Web in 1994 led to a proliferation of domain names. Network Solutions Inc., a private firm, received a five-year contract from the US based National Science Foundation to provide these domain name addresses. A rival coalition, centered around Internet Assigned Names Authority (IANA), started with academics and engineers but was able to get, after a couple of failed attempts at establishing its cause, a number of important players on board after which it was called the International Ad-Hoc Committee (IAHC). The US Department of Commerce White Paper on domain names and IP addresses resolved the IAHC-NSI posturing. The White Paper mostly legitimized the IAHC-led coalition. Mostly at the behest of the European Commission, it also requested WIPO to set up a service to resolve domain name disputes, which WIPO did through its Arbitration and Mediation Center and it is known as the Uniform Domain-Name Dispute-Resolution Policy (UDRP). The early history of ICANN’s global functioning has been messy politically, even if the actual task of assigning domain names is somewhat easier. The direct elections for the five directors for At-Large Membership were seen by some as international democracy, and by others as messy populism, and were soon discontinued. Critics also do not think that ICANN reflects bottom-up practices in decision-making as it claims to do. The US government has a lot of de facto power in the decision-making. The World Summit for International Society (WSIS) is particularly important in questioning US domination.

WSIS began in 1998 as an International Telecommunication Union initiative to examine digital divide issues. Quite soon, it became the forum for addressing the grievances of developing countries for being left out of domain name governance and a host of other issues, many of which – spam, child pornography, data privacy, freedom of speech – went far beyond the ICANN mandate. The main demand of the international coalition, to which the EU lent support in mid-2005, was to bring ICANN under the United Nations. The US government and ICANN, supported by business groups worldwide, resisted these moves and without the support of the incumbents, the moves eventually failed.

Internet governance began to emerge as a salient issue in the planning toward the Prepcom meetings for the first of the WSIS summits to be held in Geneva in December 2003. The move was led by influential developing countries such as China, Brazil, India and South Africa. The second WSIS summit, held in Tunis mid-November 2005, pushed this further. The United Nations Secretary General created an Internet Governance Forum led by Special Advisor Nitin Desai to convene “a new forum for multi-stakeholder policy dialogue” reflecting the mandate from WSIS processes (Internet Governance Forum 2009). The IGF features a unique gathering of multiple-stakeholder diplomacy with the forum convening annual meetings and consultations among states, business, and civil society organizations. The fourth annual meeting will take place in November 2009 at Sharm El Sheikh, Egypt. However, critics dismiss IGF as a talking shop and WSIS as ineffective in challenging ICANN dominance. On the issue of internet governance itself, the United States government remains opposed to considering any alternatives to ICANN, while the European Union tries to balance its business groups’ support for ICANN and member states’ varying levels of support for WSIS and IGF.

Electronic Commerce

If capitalism depends on information flows, its electronic counterpart would not have even emerged without information networks. The emerging regime in electronic commerce reflects the overall rubric of the principles and norms of global liberalization in communication, but it also goes a step further in diffusing authority among several constituencies and organizations (Singh 2008).

Electronic commerce needs not just an information infrastructure but also an enabling set of sectors that facilitate the flow of commerce over the networks. It is for this reason, that many countries and regions appoint e-commerce czars to coordinate the activities of the many sectors. In the United States, Ira Magaziner is believed to have played this role during the crucial time that the Clinton Administration made available its seminal report, “Framework for Global Electronic Commerce” on July 1, 1997. Figure 1 summarizes the three layers that are necessary for electronic commerce to take place (Singh and Gilchrist 2002). As can be seen from the figure, the old layer, the information infrastructure, falls under the rubric of the telecommunications and internet regimes discussed above.

International Communication RegimesClick to view larger

Figure 1 Three layers of the electronic commerce network

Many regional and international arrangements and negotiations are on-going to provide rules and decision-making procedures for electronic commerce. Many examples can be given. Postal services are becoming competitive in developed countries. The WTO imposed a moratorium on customs duties on electronic commerce in 1998. Encryption, both as an engineering exercise as well as a political purpose, is a priority internationally to ensure the security of transactions. The Safe Harbor Agreement of 2000 concluded three years of negotiations between the United States and European Union over data privacy issues. Interestingly, the agreement favors industry selfregulation with minimal government oversight in order to protect privacy. This speaks again to the development of private authority in international regimes. Others note that the de facto standard of data privacy is emerging from regional and national levels of data privacy governance in the EU, thereby questioning the importance or domination of US-led standards (Newman 2008).

The events of September 11, 2001 brought to fore security concerns regarding data flows underlying electronic commerce and the first challenge to the Safe Harbor agreement mentioned above. Although prior to 2000, the US government had argued for unfettered data flows, a dramatic reversal in its position came about after 2001. The first challenge after Safe Harbor came from the new US requirement to turn over vast swathes of passenger data or passenger name records (PNR) to the newly created US Department of Homeland Security. The airlines complied; the EU hedged and worked out a negotiated compromise with the US in May 2004. However, in a ruling on May 30, 2006, the European Court of Justice ruled on behalf of the European Parliament and member states’ European Data Protection Supervisors (EDPS) and annulled the agreement between the Council of Europe and the US as overstepping the Council’s competency or jurisdiction. A new EU–USA agreement on PNR was signed on June 28, 2007. It made PNR transfers permissible for law enforcement reasons. Nevertheless, there is considerable skepticism within the EU on this position. Data privacy is becoming an important aspect of internet governance and especially with the diffusion of surveillance and biometric technologies. One example is radio-frequency identification (RFID) technology tags being used increasingly in shopping malls, transportation systems, and passports.


This essay has described the international communication regime from the workings of the telegraph to the transactions of electronic commerce. Except for the declining sovereignty of nation-states, the other principles of the regime have remained fairly stable in promoting international commerce, global commons, and interconnection. However, regime rules and decision-making procedures have changed from national monopolies that held sway until the 1980s to allow for a liberalized and competitive marketplace in communications.

A few future trends may be also be discerned from the features of the liberalized communication regime described above. First, as economic interdependence deepens, any residual monopoly features of the communication regime will fade away as users and firms seek seamless networks facilitating information flows. If internet governance is an indication of the future, the international regime will feature multiple stakeholders including states, firms, civil society organizations, and international organizations. Second, regime institutions seem to be governed by diffused authority distributed among several organizations rather than, for example, the ITU as used to be the case. The erstwhile international communications regime is now best described as a set of mini-communication regimes in old- and new-issue areas such as telecommunications, standards, privacy, and surveillance. Third, there is also now evidence that private authority will play a role in governance along with governmental and intergovernmental authorities in regimes. The case of private standard-setting and ICANN was described above. Fourth, international negotiations will become increasingly important in setting the rules and decision-making procedures for regimes. When rules cannot be made by fiat, international negotiations are important. This seems to be the case, especially with the emerging forms of regimes. These negotiations also increasingly feature concerns regarding the de facto US hegemony in issues such as internet governance, or challenges to US domination of the marketplace such as telecommunications. Fifth, evolving communication technologies allow for interconnections and collaborations across infrastructural platforms and geographic distances. This allows for a wide variety of players in any issue-area of the communication regime rather than a vertically organized monopoly as the case used to be.

There is a shift in the current literatures away from the notion of regimes to global governance. Whereas regimes tended to focus on global institutions in the context of rules and decision-making procedures, a global governance lens focuses on the processes underlying coordination, collaboration, negotiations, and problem-solving (Singh 2002, 2008). Global governance also emphasizes the intersubjective element often overlooked in regime theory. In Rosenau’s (1992:4) words governance is “a system of rule that is as dependent on intersubjective meanings as on formally sanctioned constitution and charters.” Especially with the decline of power politics understood from the perspective of nation-states, global governance models will increasingly emphasize governance at the diffused levels of socialized intersubjective understandings. At this level, power politics takes on a whole new dimension as in Bourdieu’s notion of “diffused power” or Foucault’s notion of “governmentality” wherein the structuring power relations are almost invisible but nevertheless preponderant.

Future scholarship will need to attend to the evolving features of global governance and also answer another question that this essay has avoided: is there anything conceptually unique about international communication regimes? Or is it qualitatively similar in other issues-areas such as security, environment, and human rights? In answering the latter question, the role of technologies and networks, multiple stakeholders, and intersubjective understandings will be important. Increasingly, scholars will also need to answer interstitial issues between communication and security regimes, and human rights concerns associated with surveillance, privacy, and the digital divide.


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An initial draft of this essay was presented at the International Studies Association annual convention in 2008. The author thanks the discussant Ken Rogerson and participants for useful comments.