U.S. Pushes Free Trade in Telecommunications

U.S. executives and officials expect a bonanza from free trade in telecommunications

If U.S. diplomats can negotiate a free trade agreement for telecommunications, the worldwide market will easily double to at least $1 trillion per year, predicted Reed Hundt, the chairman of the Federal Communications Commission.


"With [international competition] we can easily grow the $550 billion global communications market to more than a trillion dollars per year, easily double the $50 billion market for international long distance calls...[and] catalyze the continued explosive growth of the Internet," Hundt told an information technology conference Sept. 18 in Washington, D.C.

With the talks in progress, "we see enormous opportunities abroad," said Bert Roberts, chairman of the $15 billion, Washington-based MCI Communications Corp., at the conference. To expand in the global market, MCI has allied itself with British Telecommunications PLC, a $22 billion phone company based in London.

U.S. equipment makers also stand to profit from free trade. "The expectation is that there will be more competition, which means... more products are needed," said Eric Nelson, a lobbyist at the Washington-based Telecommunications Industry Association. The association represents the manufacturers of telecommunications equipment.

But in talks slated to conclude in February, U.S. officials are still seeking better proposals from Germany, France and Japan, Hundt said.

Other countries in Southeast Asia, such as Malaysia, Indonesia and Thailand, are also reluctant to open up their telecommunications markets to free trade, said Nelson.

The trade talks are being sponsored by the multinational World Trade Organization, which the U.S. joined in 1995. The talks were originally scheduled for completion last April, but disagreements among the governments caused the postponement of the final meeting until February.

"We were disappointed they couldn't reach an agreement [in April] and we're hopeful they will reach agreement in February," said Michael Jaffe, an analyst for the Computer and Communications Industry Association, based in Washington.

If the governments can't narrow the gap between their positions, the February meeting will be postponed. However, "people are somewhat hopeful... there is guarded optimism," partly because governments in Europe and South America are expected to offer concessions, he said.

In Southeast Asia, local government-backed phone companies "don't see a whole lot of benefit in the talks" because they have no plans to compete in the U.S. market, said Nelson.

During the talks, U.S. negotiators are trying to ensure that overseas telecommunications companies, such as Deutsche Telekom in Germany, charge realistic prices for connecting their customers to phone calls made from overseas. To ensure free trade, these interconnection fees must be "cost based," said Hundt.

Currently, local phone companies can charge a high price for connecting outside lines, effectively preventing foreign companies from offering competitive phone services.

U.S. officials also want to relax overseas curbs on foreign investment, and on U.S. ownership of foreign phone companies.

These limits largely bar U.S. companies from buying a stake in a foreign nation's main phone company, said Nelson.

Without these curbs, companies in the United States could build new networks and companies to rival existing foreign phone companies, he said.


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