EC confident US will join telecoms deal

This article, and the article that follows gives an account of the state of negotiations on basic telecommunication services at the WTO, prior to the signing of the global basic telecoms accord in Geneva.

by Chakravarthi Raghavan


GENEVA 12 FEBRUARY: The European Community believes that the various offers on basic telecommunications services, covering about 93% of the world revenues, makes it impossible for WTO members not to conclude the negotiations, and that the United States will be on board this time, the EC's chief negotiator said on 12 February.

In providing a positive assessment of the negotiations, to conclude on 15 February, Mr Carl Falkenberg said he believed the US's mood in February 1997 was different from that in April 1996 (when the US refused to join the agreement) and that the agreement would be concluded this weekend.

But if, in a worse-case scenario, the negotiations fail, this would mean that sectoral negotiations are not capable of being brought to a successful conclusion, and it would have a negative impact on the financial services negotiations due to recommence in April. It would lead WTO members to the conclusion that there is need for at least an overall services negotiations, if not a broader one, to achieve further liberalization, he added.

In the EC's view this time around, the US has come to realise that the improvements in offers and the clarifications achieved since last April was such that they would join. Despite the shortcomings in various offers, including that from Canada restricting equity ownership, the major US companies were present and active in the Canadian market, he noted. The equity restrictions in the Canadian offer, and the inability of Canada to change it (enabling majority ownership) was unlikely to be a "deal-breaker". Even the US negotiators have acknowledged that the offers by countries had to be judged in their totality, and the US recognized that the market access commitments made in the Canadian schedule, in different ways was an improvement, and they had offered solutions to some of the limitations.

On 11 February, the EC presented its final revised offer for liberalization of all basic telecommunications sub-sectors - for transport of any electro-magnetic signals, irrespective of whether the services consisted of transport of sound, data or images.

But offering of sound or visual broadcasting to the public would be excluded - since audio-visual services were not covered by the telecom sector in the GATS.

The EC's revised offer, Falkenberg explained, had made technical adjustments, presenting the scheduled commitments in a technologically natural manner. The restrictions on market access commitments being "subject to availability of frequency/spectrum" had been removed. (There is agreement within the Group on Basic Telecommunications that even without a specific qualification or limitation, the offers and market access would depend on availability of the finite resource of frequencies/spectrum).

While the quality of several offers on the table varied, and the EC would continue to press on its partners to improve them, at the end of the week there would be an agreement.

As for the US "benchmark" guidelines, the FCC is to issue, to regulate the payments US operators would transfer to other administrations for bilateral settlements, the EC has taken up bilaterally its views with the US. The EC has reiterated that it would reserve its rights in this matter under the GATS, and the compatibility of the US rules with the GATS. At the moment, it was only a US proposal, and was unlikely to be finalized before the summer of 1997.

The EC had problems on whether national regulations should set the price in international transactions between liberalized markets. In the EC view the competitive environment should be allowed to operate and set the prices. The EC has also some doubts about the way the FCC would be creating differences (in treatment) of different partners and whether this would be compatible with the MFN obligation under GATS.

The EC negotiator said, while the EC too, would like the offers from the other participants to be improved, there was a need to be realistic. The US and the EC each accounted for one-third of the global revenues in telecommunications. The Japanese market accounted for half of the US or EC market. Together, the three accounted for 75% of the revenues, while the next ranking member accounted for about 2%.

"It will not make a lot of sense for our respective industries to see these negotiations fail because of a lack of commitment from a player which accounts for less than two percent of world telecom revenues," he added.

The EC's own internal market liberalization would be effective from next year. The EC's offer would enable all its partners to participate fully in this market, and there will be no differences between the various operators. But this could not be taken for granted if there was no basic telecom accord.

While the EC has presented its limitations on audio-visual services in a particular way, others had done so in different ways. Canada, for example, had defined the telecom services coverage in terms of its national law defining such services, while Japan had done so with reference to its legislation. The EC felt that its approach was better, since it made clear the position now, and five years later.

In commenting on the quality of various offers from developing countries, Falkenberg noted that while the market openings of all participants were not the same, and/or not much, it had to be recognized that the developing countries were taking on the regulatory framework commitments.

But a factor of "disturbance" to the EC was the Indian insistence, so far, of maintaining its MFN exemption in respect to international accounts settlements and bilateral agreements.

The EC had tried to convince India that differing rates would prevail in other administrations too, but this did not need an MFN exemption. But India had not changed its position in respect of the settlement rates set by bilateral agreements within the ITU framework. (SUNS3922)