JAPAN, MEXICO, S. AFRICA STILL RAISE TELECOM TRADE CONCERNS

U.S. Council for International Business (USCIB) urged USTR to work closely with China, which ascended to WTO Dec. 11, to create regulatory body that was separate from any basic telecom supplier. Regulator should be “capable of issuing impartial decisions and regulations affecting the telecommunications sector,” USCIB said. “Given that the Chinese government owns and controls all of the major operators in the telecommunications industry, it is inherently impossible for China to establish a regulator that is truly independent.” China has agreed to 6-year schedule for phasing in direct foreign participation in value-added and basic services markets, USCIB said. Country also agreed to be bound by obligation to create impartial regulator and “procompetitive regulatory regime,” group said. Regulatory body in China should have defined process “as it has done for interconnection, to decide commercial disputes in an efficient and fair manner between telecommunications suppliers that are not able to reach mutually acceptable agreements.”

Provincial independent telecom regulators established in 2000 by China’s Ministry of Information Industry (MII) will face “enormous challenge” in remaining neutral toward all carriers now that China has entered WTO, Telecom Industry Assn. (TIA) said. U.S. companies have faced problems in Chinese market before WTO accession, which TIA said it hoped international body would address “in the near future.” TIA recommended U.S. monitor: (1) Previous recommendations by Chinese regulators that foreign equipment suppliers must transfer technology, create joint venture with local partner or establish manufacturing plan if they wanted to supply equipment to China for certain new telecom services. Such requirements are outside legal standing of those agencies, TIA said. (2) Standards and certification processes in China that create problems for U.S. companies, which need to understand clearly how those requirements are set. (3) Standards work that now lacks transparency. TIA would like foreign companies to be able to participate “in full and not just as correspondents” as members in national standards groups. (4) While MII has made progress in introducing transparency into regulatory proceedings, “many foreign telecom companies remain confused as to current regulations on many issues, a situation compounded by the fact that the telecom industry is evolving so quickly.”

Mexico was among countries singled out as being most intransigent in meeting market-opening commitments. AT&T said USTR had made “major efforts” to bring Mexico into compliance with its WTO obligations for basic telecom services, but “major problems remain to be resolved concerning Mexico’s failure to allow fully open markets in both international and domestic services.” Mexico is 2nd largest U.S. international route, AT&T said. AT&T said Mexico still hadn’t removed regulatory barriers to international competition or provided cost-based, nondiscriminatory termination rates for cross-border calls. Mexico’s regulations allow Telmex to maintain monopoly over negotiation of settlement rates, meaning all Mexican carriers must use those rates, AT&T said, preventing use of alternative commercial arrangements for origination and termination of switched international traffic over international private lines outside of settlement rate system. Such barriers contravene Mexico’s WTO commitments and cost U.S. customers $650 million annually in subsidies to Mexican carriers because of lack of competition or alternative termination arrangements, AT&T said.

AT&T and other commenters said Mexico also hadn’t created level playing field for domestic services as required by WTO obligations. Among issues for domestic services, it said, are that Mexican regulator Cofetel has failed to enforce its regulations and ensure that Telmex doesn’t abuse its market power when it deals with competitors. AT&T said Cofetel hadn’t ensured that competitors to Telmex be able to interconnect with incumbent’s network at any technically feasible point under nondiscriminatory terms and at cost- oriented rates. AT&T said Cofetel still hadn’t taken action to enforce dominant carrier regulations issued in Sept. 2000. New regulations provide no new means of enforcement to regulations already in place, it said. It also said Telmex had appealed those rules in Mexican courts, meaning their implementation was further held up.

New World Network (NWN) said Mexican long distance market improved after Telmex and competitors Avantel and Alestra reached agreements on interconnection rates last year. NWN completed installation of undersea cable system connecting U.S. with Mexico and other Latin American countries in Dec. “There are still numerous areas where the Mexican telecommunications market lacks transparency and imposes onerous conditions to new entrants,” company said. Mexico’s licensing framework imposes significant foreign ownership restrictions and Mexican law “requires new entrants to interconnect with their own facilities at least 3 Mexican states within a specified period of time.” Even after concession is obtained to provide long distance services in Mexico, NWN said regulators imposed special project fees that could add tens of millions of dollars in additional costs for new entrants.

In other countries: (1) AT&T raised concerns about providing value-added network services in S. Africa, which carrier said was only telecom services sector open to competition there. Incumbent provider Telkom continues to deny new telecom facilities to AT&T and other suppliers of value-added network services (VANS). “The South African government has still failed to prevent this blatant abuse of monopoly power, although USTR emphasized the need for such action” in 2001 telecom trade agreement review. Provision of VANS is critical to use of telecom facilities that form backbone networks, AT&T said. (2) BellSouth reiterated concerns it had raised to USTR about lack of transparency by Peruvian telecom regulator, calling lack of progress “deeply troubling.” BS said regulations often were issued without public dissemination or comment. Efforts to obtain information from regulator are “often rebuffed,” carrier said. “BellSouth continues to believe that Peru is in violation of its WTO commitments to maintain an independent, impartial regulation, as well as to maintain competitive safeguards by not making available to all service suppliers on a timely basis” technical and commercial information, carrier said. (3) Commenters such as USCIB said Japan had made significant progress since basic telecom agreement went into effect in 1998. “Nonetheless, Japan has yet to provide the full market access and national treatment promised for value-added and basic telecommunications services suppliers that it promised,” USCIB said. TIA said Japan’s Ministry of Public Management, Home Affairs, Posts & Telecommunications didn’t function as impartial independent regulatory authority. “NTT exerts undue influence over policy,” TIA wrote. It said there still was lack of transparency on conditions, tariffs and cost basis for interconnection.