USTR Release Report on Anti-Competitive Regulations in Telecom Sector

March 31, 2005. The Office of the U.S. Trade Representative (USTR) released a document [10 pages in PDF] titled "Results of the 2005 Section 1377 Review of Telecommunications Trade Agreements".

Peter Allgeier (at right), the acting USTR, stated in a release that "We are deeply concerned by the tepid commitment some of our trade partners have shown to competition in the telecommunications sector. This is especially true in countries such as China, India and Japan where national operators are already competing on a global level, but remain protected at home by relatively closed markets. It is very hard to see a legitimate reason why these markets should not be open to full and effective competition".

The report focuses on the costs of interconnecting calls to wireless networks, restrictions on access to leased lines and submarine cable capacity, regulatory requirements, burdensome testing and certification requirements, and the governmental mandate of particular technical standards.

The report criticizes the People's Republic of China's burdensome regulations. It states that the "USTR has serious concerns regarding licensing requirements maintained by China that severely restrict the ability of U.S. telecommunications companies to compete in the Chinese marketplace. USTR urges China to take steps as soon as possible to: (a) eliminate burdensome capitalization requirements; (b) specifically authorize the offering of basic services on a purely resale basis; and (c) eliminate restrictions on the entities with whom a foreign licensee can partner." The PRC requires a domestic capitalization of about $240 Million, which the USTR states has no justification.

The report criticizes India regarding access to use of submarine cable capacity. It states that "problems persist based on the continued control by India’s dominant international operator, VSNL, over access to all but one submarine cable landing station in India. Commenters argue that VSNL’s persistent refusal to permit interconnection at its cable landing stations, and its failure to activate additional capacity on these cables, result in artificial shortages of bandwidth into and out of India and inflate prices, hampering the provision of robust global telecommunications services."

The report criticizes Japan's high mobile interconnection rates, which are "about 11 to 13 cents per minute, depending on the point of interconnection". The report states that "These rates represent a 3 percent annual decrease and follow last year’s 4 percent cut, which shows a slowing rate of change that may soon put Japan’s rates well above most OECD levels. These rates are already three times the level of its neighbor, Korea."

The report also addresses the lack of technology neutrality in wireless standards. First, it addresses the PR China, and its Ministry of Information Industry (MII). The report states that "By the end of this year, MII is expected to announce terms and conditions for new mobile wireless licenses in the 2 GHz band. Despite MII’s repeated assurances that it will award licenses on a technology-neutral basis, there is widespread concern that MII will reserve up to two of the likely four licenses for China’s home-grown 3G standard, TD-SCDMA. USTR continues to urge China to leave technology choice decisions to operators and not use these decisions as an opportunity to exercise protectionist industrial policy."

The report also states that "Korea’s regulator, the Ministry of Information and Communications (MIC), recently awarded three licenses for a broadband wireless service (“WiBro”) and established a requirement that all licensees use a single standard selected by the Korean Government. This has had the effect of limiting the scope of technology that can be marketed in Korea, thus limiting licensee and consumer choice, as well as the ability of U.S. and other firms with proven technologies to compete in this dynamic market."

This report does not examine U.S. telecommunications regulators.

The USTR has also published in its web site the public comments, and reply comments, that it received.