FCC broadens foreigners' access to U.S. markets American companies to benefit overseas

November 26, 1997|By BLOOMBERG NEWS

WASHINGTON -- The Federal Communications Commission voted yesterday to give foreign companies greater access to the booming U.S. telecommunications and satellite markets, the first step in a global effort to open communications markets to competition.

The United States is the first country to implement a broad World Trade Organization agreement under which 69 countries controlling 95 percent of the world's telecommunications trade revenue pledged to further open their markets. Under the FCC's rules implementing the accord, companies from all 132 WTO countries will be able to have up to 100 percent indirect ownership of U.S. telecommunications companies.

Companies benefiting from the accord include U.S. long-distance phone companies, such as AT&T Corp., MCI Communications Corp. and Sprint Corp., that want access to foreign markets to target customers making calls to the United States. In addition, it'll help wireless companies, such as Next-Wave Telecom Inc. and WinStar Communications Inc. raise money to help build their networks.

"U.S. companies are poised to be the prime beneficiaries of these rules because it's our companies that are poised to take advantage of these market-opening opportunities," said FCC Chairman William Kennard.

Consumers around the world will also benefit from the agreement, Kennard said.

"We know that when competition is introduced in markets, you get three very important benefits: Costs go down, consumers get choice, and industries are forced to innovate," he said.

The FCC's market-opening rules will go into effect Jan. 1. The European Union also plans to deregulate its telecommunications markets at the same time, putting Europe in compliance with the WTO agreement. However, some other countries that signed on to the accord agreed to open their markets six months or a year later.

Kennard said he has seen a study that shows international calling rates will go down 70 percent to 80 percent as a result of the accord. Those estimates take into account the expected reduction in rates U.S. companies will pay to foreign companies to complete international calls as a result of FCC rules adopted in August.

Under the rules implementing the WTO accord, the FCC would eliminate a test used to determine whether foreign companies wishing to enter the U.S. telecommunications market meet U.S. competition standards.

The FCC would retain, though, the right to put in place safeguards to prevent foreign companies from using their market power to "distort" competition in the United States.

The streamlined rules would allow applications by companies based in WTO countries seeking to enter the U.S. market to be processed within 35 days.

Not everyone is pleased with the FCC's approach. The European Commission, which conducts trade negotiations for the 15-nation European Union, urged the FCC to reconsider its proposal.

The European Commission does not like a provision that would let the FCC retain the authority to deny a foreign company access to the U.S. market based on an assessment of whether it is in the broad public interest. Still, the commission would file a WTO complaint only if the legislation leads to active discrimination against European firms, a senior commission official said.

"This [denial provision] is going to be used only in the most extraordinary of circumstances," Kennard said.

Struggling next-generation wireless phone companies could reap benefits from the accord. Companies that bid $10.2 billion last year for personal communications services licenses have had a difficult time raising money to pay their debts and build their systems.

"We see it as good for competition and good for capital investments," said Jennifer Walsh, director of industry affairs for tTC NextWave, which agreed to pay $4.9 billion for licenses in 95 markets.

In addition, giving foreign companies greater access to the U.S. market could help wireless companies, such as WinStar, that are seeking to build wireless networks to go head-to-head against local telephone companies.

Pub Date: 11/26/97

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