U.S. Telecom Trade Allegations Disputed By Foreign Companies

Deutsche Telekom said CompTel and ECTA were “not correct” on several issues: (1) The German govt. doesn’t hold a direct and indirect ownership interest of 43% in DT as the groups claimed. The govt. decreased its interest to about 22.7%, and the KfW, a public bank jointly owned by the govt. and the German states, now holds 15.3%. “Additional steps to reduce the government share as soon as market conditions permit have been announced by the German government,” DT said. (2) It’s “not true” that prices for local leased lines in Germany are among the highest in Europe. Referring to the 10th Implementation Report published by the European Commission in Dec., it said: “Depending on the type of line, between 7 and 14 of the 17 measured countries have rates higher than those in Germany.”

Complaints about excessive mobile termination rates were particularly criticized. DT said fixed-to-mobile termination rates across the EU “have continuously fallen over the past few years, due to effective competition in the wireless sector in Europe.” It said in just a year the prices for mobile termination for significant market power (SMP) operators fell 14% and for non-SMP operators 13%. “They [prices] have on average fallen by 33% from 2001 to 2004 for operators assessed as having [SMP] and are continuing to fall,” DT said.

Vodafone noted that foreign correspondent carriers had “de-averaged” their accounting rates, separating the rates for calls that terminate on foreign mobile and fixed networks. Such an approach ensures more accurate price information for buyers, eliminates distortions that otherwise may arise from arbitrage activities and improves price signaling and transparency, Vodafone said, so de- averaging shouldn’t be “objectionable” to the USTR.

“The market for international telecommunications may benefit from measures to further improve transparency,” Vodafone said. Such measures could “encourage AT&T and other U.S. carriers to buy more effectively in that market than they appear to do today,” it said. It noted that AT&T and other commenters didn’t make such proposals in the proceeding and instead focused on the termination rates charged by foreign mobile operators to domestic fixed line carriers: “Vodafone would see merit, for example, in the development of accounting rate arrangements which would de-average such rates by reference to time of day and in a manner that distinguishes between the termination rates charged by different mobile operators, if these persist.” Vodafone also strongly disputed AT&T’s assertion that a ratio of 8:1 between mobile and fixed termination charges provides evidence of excessive pricing. It said CompTel’s suggestion that mobile termination rates should be reduced in line with fixed termination rates, implying a 1:1 ratio, was “wholly without foundation and does not appear to be supported by other commenters.”

India’s VSNL rebutted comments by CompTel, TIA and the U.S. Council for International Business (USCIB) that argued India violated Sec. 5(a) of the Annex on Telecom to the WTO Basic Telecom Agreement. Sec. 5(a) requires that each member ensures that “any service supplier is accorded access to and use of public telecommunications transport networks and services on reasonable and non-discriminatory terms and conditions.” CompTel, TIA and USCIB alleged that India didn’t comply with that requirement because VSNL constrained access to cable landing stations in India and prevented their upgrades. But VSNL said India wasn’t subject to the access obligations in Sec. 5(a), because Sec. 5(g) stated that a developing country member “may place reasonable conditions on access to and use of public [telecom] transport networks and services.” VSNL also said it “categorically rejects” allegations it had unreasonably constricted access to cable landing stations in India.

Verizon, which has presence in a number of foreign markets, urged the USTR to “recognize the positive trends in regulatory oversight and market competition” and to “refrain from adopting the sweeping conclusions suggested in some comments.” It noted that many requests for “the overreaching actions” weren’t required by law. “Views differ as to whether Section 2.2 of the Reference Paper applies to mobile services and, if so, whether a mobile carrier in a particular case should be deemed a major supplier in accordance with the definition in the Reference Paper. Similarly, it is far from clear whether Section 5(a) of the GATS Telecom Annex applies in this instance, and, assuming it does apply, what the requirement for ‘reasonable’ access can be construed to mean.” Verizon also urge the USTR to reject as “unsupported” the suggestions that a calling party pays (CCP) regime is a violation of trade agreements. It urged the USTR to focus case by case basis on practices in particular markets that impose barriers on access by U.S. companies to foreign telecom markets.

The International Telecom Users Group (INTUG) shared the concerns expressed by CompTel, ECTA, AT&T and others about the high cost of terminating calls on mobile networks in countries using the CPP system: “It is now time that the matter be brought to a head and that the issue be taken to the WTO… It is essential to act now, in 2005, rather than to endure a further wait.” INTUG urged the USTR to coordinate its work with the FCC on its Notice of Inquiry (IB 04-398): “The FCC can support regulators in key countries to address more effectively this problem, while the USTR can press governments to implement their commitments.”