U.S. MULLS WTO ACTION AGAINST COLOMBIA, MEXICO ON TELECOM TRADE

USTR said it also was monitoring telecom market-opening commitments in France, Germany, Italy, Japan, Spain and U.K. but set no deadlines for specific actions. In all, USTR received industry complaints involving telecom markets in 13 countries, more than in past, it said. “This is testament to the vigorous expansion of U.S. carriers into these markets,” official said. Unifying themes among competition concerns raised in those countries included obstructing incumbent carriers from network access by competitors, lack of independence of regulatory bodies and problems of new entrants’ trying to enter high-speed data business, including DSL, official said. In European Union, report documented “pattern of anticompetitive behavior by dominant incumbent carriers” that had started to hinder full competition, particularly for high-speed data. “This pattern, if left uncorrected, could result in serious setbacks for U.S. companies seeking to expand their service offerings in Europe,” report said. Report provides road map of telecom trade concerns that carry over from Clinton Administration and face USTR under Zoellick. He said “vigorous monitoring and enforcement” of trade agreements is needed to ensure competitive opportunities for U.S. operators.

For example, “serious concerns remain” over access to Mexico’s $12 billion telecom market, which had led U.S. to begin WTO dispute settlement process in Aug., report said. Second step, on which decision is due June 1, would entail U.S. seeking dispute settlement panel at WTO to litigate those concerns. Mexico, which also was highlighted in last year’s USTR telecom trade review, has reduced domestic interconnection rates and issued dominant carrier rules on Telmex, report said. It said remaining concerns included: (1) Mexico’s failure to implement offering of international interconnection at cost-oriented rates, preventing alternatives to settlement of all calls between U.S. and Mexico at 19 cents per min., exceeding cost by 15 cents. (2) Telmex’s continued violation of dominant carrier rules, including refusal to provide private lines in timely manner.

In Colombia, USTR is focusing on govt. commitments to open market for international carrier services, which include providing wholesale transmission capacity through undersea cables and other means to telecom operators and ISPs. Report said operators that had wholesale transmission capacity on undersea cables that landed in Colombia couldn’t obtain licenses in country to provide carrier services. USTR said that situation put “tens of millions” of investment dollars at risk. June 25 deadline was chosen because “we think it’s a reasonable time frame to straighten out whatever regulatory issues may be hindering the issuing of the licenses,” USTR official said. In S. Africa, issues are essentially same as those raised in last year’s report, USTR said. Since then, incumbent operator Telkom has provided additional capacity on its network to one competitor, but it has cut off capacity to other value-added network services providers (VANS), he said. S. African govt. places ISPs, data services providers, e-mail and voice-mail providers into VANS category, official said. Govt. is reviewing regulations in light of its WTO basic telecom services agreement and plans to promulgate changes as early as midmonth, USTR official said. Planned changes provide opportunity to strengthen rules, he said.

Because Taiwan hasn’t gained WTO entry, any action U.S. takes on telecom market-opening concerns would be under Sec. 1374 of 1988 Trade Act. USTR attorney said Mon. that allows USTR to identify trading partners that fail to provide mutually advantageous market opportunities in telecom sector. Under bilateral WTO accession negotiations with U.S., Taiwan pledged to liberalize its telecom market by July 2001, regardless of when WTO entry was granted. Report said Taiwan’s existing telecom regulations imposed “serious limitations” on competition and undermined ability of new entrants to compete. USTR review cited capitalization requirements for fixed line licensees, limits on constructing back-haul fiber links to urban centers from undersea cable landing stations, restrictions on selling capacity directly to end-users. “A lot of carriers are willing to bring bandwidth into Taiwan who aren’t able to get to their customers because they are required to go through a middleman,” official said. Liberalization of undersea cable landing regulations is one key to Taiwan’s meeting its deregulation commitments, official said.

Mix of countries has changed since last year as USTR is studying dates for whether to take specific cases to WTO. Last year, annual USTR review set similar deadlines for Germany, S. Africa, U.K. and Mexico, with initial step taken only in case of Mexico. This year’s report outlined continuing concerns over EU member states, particularly on local loop unbundling. U.S. plans to work closely with EU on monitoring compliance with regulations such as new European Commission rules on unbundling, report said. In Germany, report singled out progress in bolstering telecom competition, including govt. pledge to fully privatize Deutsche Telekom (DT), creation of task force to monitor colocation space and preparation of legislation to reduce licensing fees. “It would be unfortunate if that progress were defeated by further efforts by DT to stifle competitive entry,” report said.

In U.K., USTR said it was monitoring efforts by British regulator Oftel to implement full local loop unbundling. Concerns there involve failure of dominant carrier British Telecom to offer nondiscriminatory access to facilities needed for local loop unbundling, to offer line sharing and to price services competitively to rivals. USTR said, however, that U.K. appeared to be making “significant progress” in those areas. In France, report said, continued govt. ownership of 54% of France Telecom “affects the perception that the French regulator can act with full independence to address these issues.” Similar dominant carrier concerns were raised in Italy over Telecom Italia and in Spain over Telefonica.

In case of Japan, USTR report outlined telecom regulatory barriers that include lack of effective dominant carrier regulation, including retail price rules; lack of “fully independent regulator with effective enforcement powers”; burdensome license mandates and above-cost interconnection rates for wired and wireless markets. In particular, USTR officials expressed concerns about recent press reports that NTT is exerting political pressure to weaken draft telecom regulations. USTR is paying close attention to recommendations due next year by Japanese Govt. Committee, which was created to reform NTT cost- recovery mechanisms, report said. Recommendations are set for release next year on interconnection rate structure for next- generation data services.

In other countries, telecom market opening problems cited in last year’s USTR review have been resolved. Canadian regulators, for example, reformed universal service contribution regime. Last year, USTR raised concerns that system didn’t comply with Canada’s WTO obligations because it wasn’t administered in way that was competitively neutral and not more burdensome than needed, report said. Similarly, Peru reduced interconnection rates that were raised as concern in last year’s USTR review. In Dec., Peruvian regulators reduced fixed line interconnection rates to 1.68 cents per min., from 2.9 cents per min., report said. Rates are expected to drop to .96 cents per min. by July 2002.