FOREIGN TELECOM OPERATORS DISPUTE U.S. TRADE ALLEGATIONS

Allegations of excessive mobile termination rates (MTRs) and fixed-to-mobile termination charges in foreign markets were particularly criticized. Vodafone contended MTRs had been regulated in many markets “either implicitly or explicitly for some years.” It said neither AT&T nor CompTel/Ascent had sought redress under competition law, “a remedy which would clearly be available if such claims were well founded.” Vodafone said mobile termination rates had been falling at least 10% per year in most European markets identified by AT&T and CompTel/Ascent: “This reflects that mobile operators are obliged to levy ‘cost-oriented’ charges under EU legislation and that NRAs [national regulatory authorities] have intervened where appropriate.”

Vodafone said many foreign regulators had reduced MTRs and were in proceedings expected to lower them further. It said EU member states’ regulators were obliged to review MTRs in bringing in the new EU Communications Regulatory Framework. It acknowledged those proceedings would take time but said “USTR need only look at the [FCC’s] own efforts, particularly in the area of intercarrier compensation, to understand that the duration and complexity of these proceedings is not unique to foreign regulators. USTR should not prejudge the outcome of these proceedings.”

Vodafone said AT&T’s and CompTel’s attempts to compare MTRs with rates to terminate traffic on a fixed network didn’t withstand serious scrutiny: “Mobile networks have substantially different fundamental economics and functionality when compared to fixed networks… Fixed and mobile rates should [not] be the same.” Vodafone also “vigorously” disputed CompTel/Ascent’s allegations of “cross subsidization” and “price squeeze” effects of MTRs and “predatory” on-net call prices. “Concerns as to price squeezing could only be relevant if Vodafone competed in the same downstream ‘effects’ market as fixed line operators,” it said. “This is manifestly not the case, with the result that on net mobile to mobile prices are driven by competition between mobile operators, not by exclusionary intent.”

Telstra said that, pending review of regulation of mobile termination rates by the Australian Competition & Consumer Commission (ACCC), “it would be premature for the USTR to judge the efficacy of the ACCC’s activities.” It said the Australian mobile market was “highly competitive” and even assuming any Australian cellular providers could be considered “major suppliers” under the Reference Paper, “the Paper does not mandate any particular method for determining whether a supplier’s rates are cost-oriented.” Rather, it said, the GATS parties granted national regulators “a reasonable freedom of action to determine how best to implement the cost standard. In these circumstances… it is indisputable that the ACCC’s methodology is expressly designed to promote cost orientation at the wholesale level.”

DT said the criticism of mobile termination rates in Germany and other countries reflected a divergence in mobile charging regimes. It reiterated that “calling party pays” system in Germany and throughout Europe had been “enormously successful” in stimulating growth, leading to a continental penetration rate of nearly 80%, while “mobile penetration in the United States is still significantly below this.” It also said mobile termination rates in Germany were below the average in Europe, where they had been falling “at a significant percentage annually in recent years due to various factors, including new entry and market competition. Mobile termination rates in Europe continue to see a significant downward trend.”

DT argued that criticism of Germany’s decision not to designate any mobile operator as a “major supplier” was “misplaced” because the mobile market sector in that country was “intensely competitive.” It said the CompTel/Ascent claim that mobile operators must be “major suppliers” because they controlled the termination of traffic on their own networks was “overbroad” and would result in classifying virtually all telecom carriers, including U.S. CLECs, as “major suppliers.” It said national regulatory authorities should be the ones to determine which if any telecom carriers in their countries qualified as “major suppliers.”

Foreign carriers also strongly disagreed with local leased lines-related comments by CompTel/Ascent. Telstra disputed allegations its charges for local leased lines weren’t cost-oriented, in violation of the Reference Paper, saying CompTel/Ascent “merely recycle the outdated and misleading evidence.” It said more-recent data suggested Australia’s national leased line charges were about the same as those in nations with comparable topography, such as Canada. It said wholesale rates for local transport services provided by the Bell companies and Telstra were “closely comparable.” Specifically, it said its rates for a 10-mile 2 Mbps circuit in metropolitan areas was about $420, compared with $391-$510 for a 1.544 Mbps circuit offered by the Bells. In fact, it said Telstra’s term rates were less than those offered by the Bells, considering a 2 Mbps circuit was 30% larger than a 1.544 Mbps DS1 circuit.

DT said the CompTel/Ascent complaint that Germany was violating the World Trade Organization (WTO) Agreement because of DT took too long providing leased lines related to a “condition of the marketplace in early 2001, a period also characterized by a particularly high demand for leased lines… This condition no longer exists today.” It said significant improvements in providing leased lines “should alleviate any concerns that Germany is in violation of the WTO Agreement, particularly when it is recognized… that Germany has imposed on [DT] a much broader leased line obligation that the United States or other countries have imposed on their own incumbent carriers.” DT also argued that its leased line practices weren’t discriminatory, and it offered them to competitors on the same terms as to retail customers.

DT contended “Germany is in full compliance with its WTO obligations.” It said the issue was whether Germany “has liberalized its telecom market in a way that violates its WTO commitments… It has not. No party could reasonably disagree that Germany has fostered one of the most liberalized and vibrant telecommunications sectors in the world.” DT also said that if Germany decides to eliminate telecom regulators’ ex ante authority over DT’s rates, it wouldn’t violate obligations under the WTO Agreement: “The U.S. tariff system under the Communications Act of 1934 severely limits the ex ante rate-making authority of the Federal Communications Commission.” It said the U.S. laws and policies confirmed that “the existence of effective ex ante rate-making authority is not an essential ingredient of a liberalized telecommunications regime under the WTO Agreement and the Reference Paper.”