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USTR Issues Telecom Barrier Review; Kirk Cites Progress in Mexico, Canada

Monday, April 9, 2012
 
Section 1377 Review of Telecommunications Trade Agreements
Key Development: USTR issues its 2012 annual report on barriers facing U.S. telecommunication providers
Next Steps: Report serves as basis for USTR monitoring and enforcement efforts in 2012

By Amy Tsui

The U.S. telecommunications equipment and service industry faces some serious hurdles in the year ahead, the Office of the U.S. Trade Representative said April 4 in its 2012 annual review of the operation and effectiveness of telecom trade agreements, required under Section 1377 of the 1988 trade act.

A trend toward imposing measures requiring suppliers to use locally manufactured or developed equipment, notably in Brazil, India, and Indonesia, is of growing concern, USTR said in a written statement accompanying the release of the report. Other concerns for equipment manufacturers are equipment standards, testing requirements, and conformity assessment procedures that act as barriers to entry, USTR said.

The agency cited China's multilevel protection scheme; Indian restrictions on use of strong encryption and security requirements for the importation of telecom network equipment; and mandatory certification and local testing requirements in Brazil, China, Costa Rica, and India.

Some Progress Seen
In the past year there has been progress on key issues in Mexico and Canada, as well as India and Germany, USTR Ron Kirk said in the written statement.

“In Mexico, through the efforts of USTR and all parties involved, providers have resolved several disputes with a U.S.-affiliated competitor and agreed to work on long-term solutions to pricing and access,” Kirk said. “In Canada, the government has recently proposed lifting investment limits on companies comprising less than 10 percent of the market. Approval of such a proposal could be a step toward bringing more competition and foreign participation into the Canadian market.”

The report said that foreign equity limits had been long-standing impediments to U.S. investment in Mexico and Canada. Mexico's government has proposed eliminating investment limits, and Canada March 14 proposed lifting investment limits on companies comprising less than 10 percent of the market, USTR said. It noted, however, that neither legislature has acted to approve the proposals.

In terms of India and Germany, Kirk said Indian regulators were reviewing rules governing access to submarine cable landing stations and that the German telecommunications regulator had proposed new rules to ensure fair access to “Next-Generation networks” like internet-protocol-based networks.

Seven Main Areas of Concern Identified
The report discusses seven areas of concern:

  •  issues affecting the telecommunications equipment trade;

  • cross-border data flows and internet-enabled trade in services, pointing to censorship and monitoring of the internet in China and Vietnam;

  • independent and effective regulators, citing Costa Rican commitments under the Dominican Republic-Central America-United States FTA (CAFTA-DR) to have its regulators authorize a U.S. company's license to provide internet services via satellite;

  • foreign investment limits, with a focus on Thailand, Canada, and Mexico;

  • access to major supplier networks such as problems trying to access an incumbent operator's network in Germany and Mexico;

  • increases in fixed and mobile call termination rates, focusing on problems in El Salvador, Ghana, and Jamaica; and

  • satellite and submarine cable systems, such as India and China's hindering of U.S. operators' ability to offer satellite capacity to customers through the monopoly by China Direct Broadcast Satellite Company on the license necessary to sell domestic satellite services, and timely competitive access to Indian cable landing stations.


China, Vietnam Restrict Data Flow
In the category of cross-border data flows, USTR said that China's implementation of a national firewall to ostensibly protect public order and morals had a direct impact on the ability of businesses to conduct commercial activity in China.

“The trade impact is hard to estimate, however, it is clear that the firewall operates broadly and blocks access in a way that goes well beyond any possible need to protect public order and public morals,” the report said.

USTR said that China had begun to articulate its internet policies more clearly such as by issuing in June 2010 a white paper on the subject at the Information Office of the State Council of the People's Republic of China. It is possible the new openness could be a mechanism to improve access, USTR said.

“With this in mind, USTR submitted a series of questions to the Chinese government in late 2011 to determine the basis for restrictions, mechanisms for appeal, and other possible avenues for minimizing the uncertainty and trade-distortive effect of unclear measures,” the report said.

The report said China had provided initial answers, but that USTR was seeking follow-up engagement to address the amount of content that remains blocked for unclear reasons.

The USTR report said that Vietnam also was illustrative of efforts to block the flow of data. While Vietnam had generally been open to major commercial foreign sites, businesses experience significant blocking of web sites, it said. “In particular, the social networking sector had experienced intermittent but significant blocking over the past year,” the report said.

“USTR has asked the regulator, the Ministry of Information and Communication (MIC) to publicly instruct ISPs not to block any legitimate website. The request had yet to be acted upon,” the report said.

Call Termination Rates
U.S. free trade agreements and the General Agreement on Trade in Services Telecommunications Reference Paper establish cost as the factor in determining how much another country's telecommunication provider can charge for completing an international call from the United States.

“Unfortunately, in this year and for the last several 1377 Reviews, we have seen various governments taking actions that serve to ensure an increase in the termination rates of calls into their countries. These actions adversely affect the ability of U.S. telecommunication operators to provide affordable, quality services to U.S. consumers and may raise questions regarding those governments' international trade obligations,” the report said.

The report called out El Salvador, Tonga, Ghana, and Jamaica for imposing charges for the completion of calls originating in the United States


The Section 1377 report is available at /uploadedFiles/Content/News/Legal_and_Business/Bloomberg_Law/Legal_Reports/1337report(1).pdf

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