PRESS BRIEF

BASIC TELECOMS

    Hopes are high the Singapore Ministerial Conference will provide a substantial political push to the WTO basic telecommunications negotiations permitting these talks to end of schedule on 15 February 1997. In November the United States, European CommunitiesSee footnote 1 and Slovak Republic tabled new offers, the first breakthrough since thenegotiations collapsed in April 1996. A number of participants say they expect to announce improvements or to table new offers either before or during the Singapore meeting, or by the time intensive negotiations resume on 15 January.

    Offers from 34 participants (counting the EC as one)See footnote 2 are on the table to open or keep open markets on a range of telecoms sectors, such as normal voice telephones, data transmission and satellite services. The offers would become international legal commitments under the General Agreement on Trade in Services (GATS). In many cases, they represent liberalisation and deregulation policies introduced in countries all over the world. Once agreed the commitments would be binding. The 48 countries (counting the EC as 15 countries) include all the major markets and account for some 90% of world telecoms revenue. The objective of the negotiations is both to improve the content of the existing offers, and to have more countries make commitments.

    At stake is access to a market that the International Telecommunications Union estimates to be worth $513 billion in 1994. Equally important are the interests of telecommunications users: financial institutions now transferring $2.3 trillion or more electronically every day, companies conducting business, educational and research institutions exchanging data and information, users of the rapidly expanding internet, individuals phoning their families and friends or sending e-mail, and so on. Telecommunications are now a vital part of almost all business transactions. The telecoms markets will survive failure in the WTO talks. But success could have a considerable impact on the costs, prices and efficiency of the sector and of all other industries, and on investors' confidence about competitive opportunities.

Background

    The present negotiations are about new or improved commitments to open up or keep open basic telecoms markets. The principles defining how this is to be achieved have already been agreed. They are set out in the General Agreement on Trade in Services (GATS) and its annex on telecommunications, both documents resulting from the Uruguay Round. The GATS created for the first time ever a set of rules for all trade in services _ an area of international trade that had not been covered by the rules and disciplines of what was then the GATT multilateral trading system The telecommunications annex deals with the right of a service supplier to link up with or to use public telecoms networks (once market access is committed for that service, for example as a result of the present negotiations). It also requires participating countries to make their regulations transparent, including clear statements of prices charged for use of networks.

    Basic telecommunications is one of three service sectors that have been the subject of negotiations since the Uruguay Round. The other two are financial services and maritime transport. For basic telecoms, participants agreed not to negotiate market access during the Uruguay Round, but to start afterwards. They expected that the extra time would allow commitments on more liberalization following rapid reform and deregulation in many countries and rapid advances in technology that impact on the way the sector is organized. Negotiations began in May 1994, with 30 April 1996 set as the deadline for conclusion. But by the April deadline, agreement could not be reached and the talks were extended.See footnote 3 The commitments offered at that stage were frozen and the talks were extended to 15 February.

    Although categorized as a single negotiating subject, "basic telecommunications" covers a wide range of different activities with different economic and technical structures, many undergoing rapid technological change. Traditional telephone line networks in most countries are reserved for government monopolies. Some have now been privatized, but not necessarily involving competition between several companies. Other activities also described as "basic" telecoms are easier to open up to competition.

Which telecoms are being negotiated?

    There is no standard international definition for "basic telecommunications". At the outset of the WTO negotiations, participants agreed to set aside the different definitions they use domestically, and negotiate all telecommunications services except those considered to be "value-added" or "enhanced". Such services may involve storage and retrieval such as electronic mail or on-line information and database retrieval, or those that involve some types of conversion of the information being transmitted).

    The market access commitments being negotiated cover not only cross-border supply of telecommunications but also opportunities for foreign firms to set up operations in the host country ("commercial presence"). That includes owning and operating telecoms networks and infrastructure.

    Among the services being negotiated are:

        *    voice telephone services

        *    data transmission services

        *    telex

        *    telegraph

        *    facsimile (fax)

        *    private leased circuit services

        *    cellular mobile telephone services

        *    mobile data transmission

        *    personal communications systems.

    Participants have recently agreed that commitments on any of these services would mean that any form of technology could be used (including traditional wire-based networks, fibre optic cables, cable TV infrastructure, radio systems or satellites) unless there is a written indication that a certain technology is explicitly excluded from a commitment.

What are the commitments being negotiated?

    The tables of commitments (officially known as "schedules") being negotiated contain each member's offers to provide market access and national treatment to foreign companies providing services in their countries, whether from outside or inside the country. The commitments do not need to say that entry will be completely open _ the schedules can specify limits on national treatment and market access. Once commitments have been made, the extent of market-opening is stated clearly, and companies can be assured that protection will not arbitrarily be imposed beyond the committed limit.

    Market access (covered by Article XVI of GATS) is defined mostly in terms of quantitative restrictions (numbers of companies allowed in, etc), but also includes some other forms of limitations such as limits on foreign ownership in an eligible company. National treatment (Article XVII) means treating foreign and domestic companies (or services) equally. Additional commitments (Article XVIII), deal with any other possible limitations. Many offers contain additional commitments on the future regulation of the sector ("regulatory principles").

Current position

    A successful conclusion to the present negotiations would mean a considerable improvement over the situation at the end of the Uruguay Round. But even since the end of the round, market-opening commitments on telecoms have been in force because when the round ended in 1994, 67 governments agreed to attached to the GATS 56 sets of lists of commitments (the "schedules") _ the EC, at that time with 12 members, submitted a single set. It is those commitments that are now in force, and most major telecommunications markets are included. However, the commitments mainly cover value-added or enhanced telecommunications services. Even the countries that could have made commitments on basic telecommunications at the time chose to wait for the outcome of the extended basic telecoms talks.

    When the April 1996 deadline for the post-Uruguay Round talks expired, agreement could not be reached. Some countries, notably the US, were dissatisfied with the number of countries that had submitted offers and with the quality of the offers on the table. Difficulties also remained on satellite services and international services.

    As part of their decision to extend the negotiations beyond April 1996 to February 15, 1997, participants agreed that all of the offers currently on the table would be maintainedSee footnote 4 in order to preserve the economic value of the offers. The month from 15 January 1997 to the new deadline would be an opportunity to re-examine the offers and to amend, improve or withdraw them. Consultations started in July 1996. The objective is for the commitments still to take effect from 1 January 1998, preserving the original target date for implementing the results of the post-Uruguay Round talks.

Recent developments

    Four topics, some of them related, have dominated recent negotiations: satellite services, international services, countries' domestic regulations, and the quality of the offers.

    

     On satellite services, the aim of the of discussions has largely been to clarify a number of technical issues such as standardising the schedules of commitments, how to handle existing services that are covered by separate international treaties _ such as the INTELSAT and INMARSAT communications satellites _ and how to deal with frequency allocations for radio links and similar questions. Proposed solutions for these are already being discussed. One of the objectives is to avoid turning the allocation of radio frequencies or related licensing procedures into trade barriers.

    On international services, one of the objectives has been ensure that the negotiations promote competition without creating the opportunity for monopoly operators in one country to distort prices when they gain access to another country's open markets. Some participants suggested that distortions of this kind could arise if a foreign monopoly were to use its access to another market in order to engage in "one-way bypass of international accounting rate payments" _ i.e. a monopoly using its facilities in an open market to take its own telecoms traffic off the accounting rates system, while its competitors are unable to do likewise. Negotiators want to solve this without having one set of policies for trading partners with monopolistic systems and another set for those with competitive systems _ that would violate the GATS non-discrimination principle known as most-favoured nation treatment. Some participants suggest that the problem may be temporary, particularly as global liberalization of telecommunications continues, and if progress can be achieved in other international organisations on reforming the "accounting rates" system of calculating payments for international calls.

    How countries' regulations might be handled has also been discussed at length. These regulations include licensing, interconnection, competition safeguards, transparency, independence of regulatory bodies, radio frequency and numbering, standards and type approval, tariffs (i.e. charges for calls, etc), rights of way and planning, and universal service objectives. Participants are concerned that in some cases these regulations could undermine the market access and national treatment commitments. Negotiations have produced a text that deals with a number ways of disciplining regulations. In their offers, participants have included some or all of these disciplines.

Footnote: Standstill and MFN

    Normally, a country's commitments on services (like those on goods) apply equally to all its trading partners. This is the principle of non-discrimination known as most-favoured nation (MFN). But services are complex and many countries have special policies, or special agreements with specific trading partners, in these sectors. WTO members therefore agreed that they could exempt specific measures that they implemented in favour of other countries from MFN treatment. Some members have listed these "MFN exemptions" in annexes to the GATS. Making these lists was a single, non-repeatable event. WTO members agreed that they would not add to the lists. The exemptions will be reviewed no later than 2000 and should in principle be eliminated five years later.

    The MFN exemptions were signed along with the rest of the Uruguay Round agreements in April 1994. But for the extended services negotiations (including basic telecoms), members agreed they could revise their MFN exemptions before the negotiations were completed. For basic telecoms, the final negotiating phase of 15 January to 15 February 1997 will also be a period for countries to re-examine their MFN exemptions. Their decisions are expected to depend on how good they consider the revised package of offers to be.

    In April 1996, participants also agreed that while their offers remained on the table, they would "stand still", i.e. they would not adopt measures that are more protectionist than those committed in the offers, even though the offers were still not being implemented.

Selected Glossary

Some of the terms that frequently appear in documents on telecommunications:

accounting rate Charge made by one country's telephone network operator for calls originating in another country.

binding Commitment under GATT or GATS to keep market open, specifying maximum level of trade barriers (and in the case of GATS the level of national treatment). Requires negotiation and possibly compensation if a trade barrier is to be raised beyond the bound ceiling.

GATS General Agreement on Trade in Services

GBT Group on Basic Telecommunications (the negotiating group after April 1996, comprising all WTO members).

MFN Most Favoured Nation: basic non-discrimination between trading partners.

national treatment Non-discrimination between one's own nationals and foreigners.

NGBT Negotiating Group on Basic Telecommunications (the negotiating group up to April 1996, with voluntary membership).

offer A country's proposal for binding its market access levels.

schedule List of a country's market access bindings.


Footnote: 1    In WTO affairs the European Union is known as the European Communities.
Footnote: 2    Argentina, Australia, Brazil, Canada, Chile, Colombia, Côte d'Ivoire, Czech Republic, Dominican Republic, Ecuador, European Communities and its member states, Hong Kong, Hungary, Iceland, India, Israel, Japan, Korea, Mauritius, Mexico, Morocco, New Zealand, Norway, Pakistan, Peru, Philippines, Poland, Singapore, Switzerland, Slovak Republic, Thailand, Turkey, United States and Venezuela.
Footnote: 3     The new timetable also involved a change in the way the negotiations were organized. Previously, they were conducted in a Negotiating Group on Basic Telecommunications, a group that was open to all WTO members, but required them to take the initiative to participate. By April 1996, 53 countries were full participants, with another 24 observers. After April, a new Group on Basic Telecommunications was formed, automatically including all WTO members.
Footnote: 4    They were attached to the Fourth Protocol of the General Agreement on Trade in Services (GATS).
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