MANY COUNTRIES CALLED NONCOMPLIANT WITH TRADE PACTS

AT&T said it was very concerned about the “significantly above-cost” rates U.S. carriers had to pay to terminate calls on foreign mobile networks: “This fast-growing problem threatens to reverse progress toward cost-based international termination rates in the markets of many U.S. trading partners.” For example, it said in the last 2 years, the number of countries in which AT&T was required to pay additional mobile surcharges to its foreign correspondents had increased threefold to 90 countries. It said in 40 countries, the rates paid to terminate international calls on mobile networks exceeded the 1997 FCC benchmark rate, which it said was set, conservatively, far above current cost ceilings. “These high termination fees inflate the settlement payments of AT&T and other U.S. carriers and cause higher prices to U.S. consumers,” it said.

The rates to terminate traffic on a foreign mobile network often are much higher that those on a fixed network in the same foreign market, AT&T said. It cited a recent European Commission (EC) Implementation Report saying that fixed-to-mobile termination charges in EU member states remained on average 9 times higher than the average fixed-to- fixed termination charge. “Indeed, mobile calls account for only about 30% of Western European countries’ incoming international traffic, but represent 80% of their total cost of terminating all international traffic,” AT&T said. It insisted there was “no legitimate justification for the difference between fixed and mobile termination rates.” It said market forces didn’t, and couldn’t, constrain those high fees, which it said were “the direct result of the market power of mobile network operators in countries” with the “calling party pays” (CPP) system, because “the consumer who subscribes to the CPP mobile operator is not the same consumer who pays the CPP mobile operator for call termination.”

AT&T said it was “particularly concerned” by excessive mobile termination rates in Australia, Greece, New Zealand and Switzerland. It said: (1) Australian operators charged $0.17 to terminate international mobile traffic, which it said was “more than 10 times higher than rates paid to terminate calls on fixed networks” in that country. “There have been attempts to raise this mobile rate over the past year,” it said. (2) Greece’s incumbent international operator OTE had raised its mobile termination charge more than 50% over the last 2 years to more than $0.24. (3) Mobile termination rates in New Zealand were among the highest in the Asia Pacific region at about $0.23, which it said was more than 14 times higher than the rates paid to terminate calls on fixed networks in that country. (4) Mobile termination rates in Switzerland, which were among the highest in Europe, had increased steadily to more than $0.30 from $0.22 in Jan. 2002.

In a separate comment, TIA urged the U.S. govt. to continue its efforts, bilateral and multilateral, to bring about a fully competitive world market for telecom equipment that it said could be accomplished through the enforcement and expansion of existing trade agreements as well as the negotiation of new ones. It expressed concern that few countries still failed to comply with their WTO obligations.

TIA said that despite Chinese efforts the past few years to comply with WTO, a number of standards and conformity assessment policies and activities in the Chinese market weren’t in compliance with the Technical Barriers to Trade (TBT) agreement. It said standards development continued to be “fraught with unclear/overlapping authority jurisdictions, lack of transparency, lack of apparent planning and lack of open, well-publicized and meaningful comment periods.” TIA also said it was “deeply concerned” about an emerging tendency to use locally developed standards for protectionism.

TIA warned of China’s adoption of a new “single” and “unique” WLAN Authentication and Privacy Infrastructure (WAPI) standard for encryption of wireless LAN transmissions recently published by the Beijing govt., saying that “sufficient and widely used international standards already exist.” It said the WTO TBT agreement required that standards not create obstacles to international trade and that WTO members use international standards where they exist. TIA expressed concern that China hadn’t notified the WTO Secretariat of the pending WLAN standards and recommended that at least a 60-day notice period before adoption of those standards be provided to ensure that all parties had the opportunity to comment. “Since WAPI deviates from established international security standards, it will lead to incompatibilities and interoperability problems between products, hindering Chinese businesspeople engaged in expanding Chinese commerce beyond China,” TIA said.

TIA also expressed its frustration with the fact that “a long overdue telecom law [in China] is still not on the horizon.” Moreover, it said the current Chinese regulator (MII) couldn’t be considered “independent” because one of its primary functions continued to be supporting state enterprises: “As a result of this conflict of interests, the regulator, with the intent of protecting incumbent operators, has persisted in its traditional pattern of issuing edicts distinctly favorable to state-owned enterprises without allowing public discussion or comments from industry.”

TIA also criticized a situation in which: (1) Colombia had failed to honor WTO and contractual agreements, particularly with respect to establishing a transparent and nondiscriminatory regulatory process and an independent regulator. (2) Korea was involved in unfair standards development practices and a procurement process, which it said was “not transparent or fair” and discriminated against non-Korean suppliers. (3) Most of the Latin American and Caribbean countries, except for Costa Rica, El Salvador and Panama, had failed to sign the Information Technology Agreement (ITA). It asked the U.S. govt. to push for making the ITA binding in the FTAA or WTO Doha negotiations if Brazil and its neighbors wouldn’t join the ITA voluntarily. (4) Russia, which isn’t a WTO member and therefore isn’t obligated to comply with the WTO TBT Agreement, had continued to employ a long and costly process for certifying telecom equipment for domestic use. TIA encouraged the Russian govt. to “make a genuine effort to harmonize Russian telecom standards and procedures with those required by the WTO,” as well as to begin implementing transparent procurement procedures and rigorously adopting the nondiscrimination principles required for its accession to the WTO. (5) Taiwan wasn’t acting in compliance with the GPA. It urged USTR to continue to engage Taiwan in negotiations to resolve inequities and transparency concerns in Taiwan’s govt. procurement regime.

Several commenters criticized Mexico and India for failing to comply with WTO obligations. AT&T warned that the $14 billion telecom market in Mexico was being harmed by many barriers preventing telecom competition in that country. It said Mexico had failed to: (1) Establish a competitive international marketplace. (2) Ensure the availability of cost-oriented interconnection arrangements with its major supplier Telmex. (3) Maintain appropriate measures to prevent anticompetitive practices by Telmex. (4) Eliminate the prohibition on foreign control of Mexican facilities- based carriers. TIA said Mexico had failed to recognize and implement its NAFTA obligations to “recognize conformity assessment bodies in the U.S. and Canada under terms not less favorable than those applied to Mexican conformity assessment bodies.” AT&T also objected India’s having applied a high access deficit charge (ADC) to international long distance traffic of $0.093, which it said was “as much as 14 times higher than the ADC rates for domestic long distance traffic.”

Meanwhile, BellSouth, which has invested $500 million in the Ecuadorian cellular market, complained Ecuador hadn’t complied with various agreements, including the WTO Reference Paper on Basic Telecom, the Andean Trade Preference Act and the U.S.-Ecuador Bilateral Investment Treaty. For example, it said the Ecuadorian govt. recently introduced a new cellular competitor, Telesca, which it said had “the advantages of government ownership” in that country, presenting “serious concerns for our company. It represents the real and troubling prospect of a lack of independence between the regulator and our new competitor -- a prospect that seems to have already begun to manifest itself to our detriment.”

BellSouth also warned that regulatory entities in Ecuador were permitting state-owned telecom operators to ignore contractual interconnection obligations to BellSouth without any legal basis. For example, it said Pacifictel, with a regional monopoly to provide wireline telephony, owed BellSouth Ecuador more than $7.5 million for cellular interconnection fees for the period July 2002-Aug. 2003. BellSouth said it believed that Pacifictel’s failure to make the payments raised questions about its adherence to the U.S.-Ecuador Bilateral Investment Treaty and about whether Ecuador was prepared to enter into negotiations for and adhere to an Andean FTA. It said that regarding existing state-owned wireline companies and the new state-owned cellular venture in Ecuador, “true and meaningful competitive safeguards are required to ensure that Ecuador adheres to the principles of the WTO Reference Paper on Basic Telecommunications.”

Separately, the CompTel/ASCENT Alliance alerted USTR that 12 key trading partners weren’t honoring their market- opening obligations under the WTO General Agreement on Trade in Services (GATS), Basic Telecommunications Agreement and Reference Paper and related agreements. They are Australia, Austria, China, France, Germany, India, Japan, Mexico, Peru, Singapore, South Africa and Switzerland. It placed 12 other countries and regions on a “watch list” because of potential problems of which it said the USTR should be aware. They are Belgium, the Caribbean, Central America, Dominican Republic, Ecuador, Ireland, Italy, the Netherlands, Norway, Sweden, Spain, and Uruguay.

The CompTel/Ascent Alliance said high fixed-to-mobile termination rates, as well as pricing and provisioning of local access leased lines, were “a major impediment to the creation of competitive telecom services markets around the world.” In fact, it said, excessive international fixed-to- mobile termination rates cost U.S. consumers more than $368 million per year in 2001. The association also said subsidies transferred from the U.S. to carriers in Germany, France, the U.K. and Japan were $14-25 million yearly for each route.