12:20 PM Nov 13, 1996
WTO TELECOM TALKS BECLOUDED BY US COURT RULING
Geneva 13 Nov (Chakravarthi Raghavan) -- Negotiators for an agreement on basic telecommunications services are meeting here at senior official level with the outlook beclouded by uncertainties over the ability of the US Federal regulators to "deliver" on any commitments that would cover regional "baby bell" operations. These were the former Bell Company telephone systems that had been broken up into separate units, and now have been enabled to compete with AT & T and other national operators and suppliers. The US Supreme Court on Tuesday declined to intervene to overturn an order of the Appeals Court in St. Louis, which had "suspended" FCC regulations that would have enforced on regional and local telephone operators in various states inter-connectivity rules so that national operators like AT&T, Sprint etc (and foreigners that could be allowed in) would be able to compete on equal terms in offering their services. The St. Louis Appeals Court had said that the Federal Communications Commission had exceeded its authority, and the baby bells were subject to state regulators and not FCC. While the Appeals Court has set a January date to hear oral arguments, before finally ruling in the case, the FCC chairman has been quoted in media reports as saying he did not think the court would rule in FCC favour and doubted the new FCC (deregulation rules) could be put in force for atleast another 18 months, if ever, while the jurisdictional battles are fought in courts. Also, beclouding the talks is the actual position of improved EU "offers" and the and the new offers that the US is to put in. The EU Commission's negotiator Mr.Karl Falkenberger had told a press briefing Tuesday that the EC is presenting a "substantial improvement" of its offer and that this would provide for full liberalisation of all its telecommunications services with no general restrictions. But the US negotiators seemed annoyed at the EC jumping the gun, and suggested Tuesday evening that the US-EC bilateral understanding had not yet been clinched. The negotiators are working to a 15 February 1997 deadline. No agreement could be reached by the earlier 30 April deadline - in view of the US position that there was not a "critical mass" of market opening offers to enable it to allow MFN access for foreign competitors to its own deregulated markets. At that time "offers" had been made by 34 participants (EU being treated as one). But an agreement was reached to leave the offers on the table, to reopen the talks (and open it to all WTO members), and make efforts to get all participants to improve their offers so as to achieve a "critical mass" -- a term difficult to define and lies in the eye of the beholder. All offers on the table will be re-examined in a month of intense consultations between 15 January to 15 February. On this basis a protocol will be signed, and opened for acceptance till 30 November 1997. The new pact, to be part of the Uruguay Round schedule of country commitments on services, would enter into force on 1 January 1998. In April last, when the deal was about to struck, US operators supplying services through satellites did not find offers on the table satisfactory for them and put pressure on Washington and Congress not to sign the deal. Trade officials say US operators of satellite services have now changed their views. But the negotiations then were also complicated by the US stance that given the situation in other markets -- where there are either state monopolies or the privatized former state sector enterprises were in a very dominant position, and this would affect international services -- the US would be better off by using bilateral reciprocity deals to open up markets abroad for US suppliers. Otherwise, the US felt it would be at a disadvantage in that one end of the market (US end) would be "free" and competitive, while at the other end there would be a monopoly or a dominant supplier and this would "distort" the market. The US thus wanted to retain the right to refuse licence ex ante to a foreign supplier, a monopolist or a dominant one in its own market, and thus undesirable competitor in the US market. The other alternative for the US would be to use the dispute settlement procedures to hit foreign markets where the benefits of a commitment is nullified by a local monopoly or dominant supplier. But for any deal to be clinched, the US will have to commit itself not to refuse a licence ex-ante. The outcome of the US internal debates and what would emerge is still unclear. But trade officials are clear that no deal is possible if the US seeks to retain a non-MFN prerogative under any deal. Recently, after an ITU-organized forum on satellite services, the head of the ITU suggested that a WTO deal on telecommunications services was not in the bag. But WTO officials disagreed, and suggested an agreement could be reached since the US providers of satellite services, who had originally been opposed to a WTO agreement, had now changed their views and saw some benefit to themselves in such an agreement. A major lever that the US has been trying to use is that its own market is deregulated, with several operators competing, and access to that market would be available to outside operators through a WTO deal. But the Supreme Court ruling, refusing to set aside the appeals court injunction on the FCC, also means that the US administration, and the FCC, would not be able to deliver on any commitments it makes internationally in the local markets which are the subject of state regulatory authority -- until and unless the US Congress intervenes to give the FCC full jurisdiction. A similar US position financial services, assuring foreign suppliers only existing access on an MFN basis, but keeping any new access for existing or future suppliers on an non-MFN basis, scuppered the accord. Under the EC initiative, countries who had made offers signed on to a deal, that is to be revisited in 1997, when they could revise their own offers in the light of the US and other developments. In telecom sector, no deal that does not commit the US to an MFN deal is seen as possible. Falkenberger told a news briefing Tuesday that the EC's new offer would improve the existing one by: * advancing the date of liberalization of all telecom services in Spain from 2003 to 1998; * eliminating direct foreign investment restrictions in Spain and Belgium, and the indirect restrictions in France; * withdrawal of all restrictions on satellite services; * advancing the liberalization of mobile services in all EU countries to 1998 - but with some regulatory specific provisions left in Portugal and Ireland; and * providing for no restrictions on the number of licences in any EU member -- the earlier Belgian restrictions have been eliminated. The EU's offer is conditional on improvements from its main trading partners. It would not be maintained, Falkenberger said, without a complete multilateral agreement, including international services and satellite based services, all on an MFN basis. Simultaneously, the EU presented its demands on its partners: * The US should withdraw all restrictions on submarine cable landing and undertake commitments for telecom services on a full MFN basis; * Canada should withdraw its current foreign investment restrictions (now 46.7%) and eliminate restrictions on submarine cable landing and undertake full commitments on satellite services; * Japan should undertake commitments on interconnection obligations applicable to major suppliers, and also commitments for all international services without any MFN restrictions. The EC also called for elimination of all FDI restrictions by Korea, Mexico and Singapore; Singapore top advance the date of its liberalisation to before 2000; additional commitments by Korea on all regulatory issues; liberalisation by Switzerland of all services as from 1 January 1998, and with no restrictions; Mexico to undertake additional commitments on all regulatory principles; liberalization of all telecommunication services by Brazil, especially international public voice services, from 1998 and with no restrictions; and Australia and New Zealand to eliminate restrictions on international services. The EC also asked Thailand to improve its offer, and Malaysia, Indonesia and South Africa (who have made no offers) to present offers.