Many Americans don’t travel outside their country and, thus, have the ignorance to assume that everything in the United States is the best in the world. We see that in our Congress almost daily in things such as the refusal to consider health practices in places that have better outcomes then we do. One area we like to assume we own is telecommunications equipment and services. A symptom of that attitude is the requirement, annually since 1988, for the Office of the U.S. Trade Representative (USTR) to prepare the so-called Section 1377 Review about barriers in other countries to our telecom services and gear. USTR is not required to consider U.S. restrictions. If you have lived or worked overseas, you know that the United States is neither the best nor the worst when it comes to telecoms.
The 1377 Review is still a useful look at places that manage the industry worse than we do. But it is too bad that the Congress doesn’t require that the review look at best practices around the world, but only at the negative stuff. You can read the latest full review here, but I’ll give you some teasers.
Recent years have witnessed a growing trend among our trading partners to impose localization barriers to trade designed to protect, favor, or stimulate domestic industries, service providers, or intellectual property (IP) at the expense of imported goods, services, or foreign-owned or developed IP – and this trend is evident in the telecommunications sector. This year’s 1377 Review highlights the concern that U.S. equipment manufacturers may be disadvantaged by the growing use of local content requirements in countries such as Brazil, India, and Indonesia. It also outlines a range of other telecom barriers that USTR has spotted and intends to tackle with increased monitoring and enforcement in the coming year.
~ Acting U.S. Trade Representative Demetrios Marantis, 4/3/2013
Among the measures that USTR is concerned about, in no particular order:
* Local content requirements in Brazil as a condition for winning new mobile telecom licenses.
* International termination rates for long-distance calls. This means that foreign telecom operators charge an inflated rate to the U.S. supplier for calls to their country. Of course, those added charges get passed on to American consumers. The review lays into Pakistan for this, but also names El Salvador, Ghana and Jamaica.
* Worldwide concerns about restrictions on cross-border data flows and Internet-enabled trade in services.
* China may be the most egregious example, but USTR is concerned that too many countries do not have effective telecom regulators that are fully separated from the interests of their telecom operating entities.
* Many countries impose limits on the percentage of equity in local operators that can be owned by a foreign company. The 2013 review emphasizes China in this respect. Canada and Mexico get kudos for progress on their foreign investment rules.
* State-owned or state-favored competition is always a concern. This year’s review focuses on China, Colombia and Mexico.
* China and India are particular concerns for U.S. satellite operators trying to sell in their markets. A common complaint is that governments force foreign satellite companies to sell capacity only through their state-owned telecom companies, not directly to the private sector.* India gets mixed reviews for its handling of submarine cable landings. Access for users has been greatly improved, but there are still questions about fees levied on foreign telecom companies using the cables.
* Trade in telecommunications equipment has long been plagued by differing product standards which, when combined with testing and certification regimes, can slow down market entry or simply make it not worth the cost of entering some markets.
* Brazil, India and Indonesia each maintain local content requirements for telecom equipment.
* China has extreme security requirements (including incorporation of a Chinese encryption algorithm in some equipment), and redundant and less-than-transparent testing rules and product standards. India, though not as bad, is right behind the Chinese.
* Mandatory certification and local testing requirements are problems in China, Brazil, Costa Rica and India.
All this gives USTR’s trade negotiators plenty to do and think about during the coming year.
Of course, USTR’s mandate is to look at restrictions that other countries impose on trade and investment – not at U.S. practices. That falls to the Federal Communications Commission, which may or may not have any interest in liberalizing U.S. regulations. Things have loosened on possibilities for foreign companies to buy a controlling interest in American telecom companies, but foreign investors must be vetted by the FCC. I am not sure what other U.S. practices might attract the ire of foreign suppliers. It is up to them to figure that out and then try to open negotiations with Washington.