News media Information: 202 / 418-0500 Fax-On-Demand: 202 / 418-2830 Internet: http://www.fcc.gov ftp.fcc.gov Federal Communications Commission 1919 M Street, N.W. Washington, D.C. 20554 This is an unofficial announcement of Commission action. Release of the full text of a Commission order constitutes official action. See MCI v. FCC, 515 F.2d 385 (D.C. Cir. 1974). NEWS Report No. IN 98-58 INTERNATIONAL ACTION November 19, 1998 INTERNATIONAL BUREAU REPORTS ON DEVELOPMENTS IN INTERNATIONAL TELECOMMUNICATIONS MARKETS For many years, the Commission has promoted competition, open markets, and private investment in the international telecommunications service market. Today, the Commission took stock of these efforts, as it marked the one year anniversary of the implementation of the World Trade Organization (WTO) Agreement on Basic Telecommunications, one of the present Commission's first accomplishments. One Year Anniversary One year ago, the Commission took the critical steps necessary to implement the market-opening commitments made by the United States in the historic World Trade Organization Agreement on Basic Telecommunications. The WTO Agreement was designed to promote further competition in the U.S. and global telecommunications markets. The Agreement eases entry for new competitors into the United States and provides new opportunities for U.S. carriers overseas. In adopting the new policies, the Commission stated that increased global telecommunications competition promised substantial benefits for U.S. consumers by lowering prices, improving service options, and sparking innovation. The WTO Agreement, along with other bilateral and multilateral efforts, is beginning to show results. Competition is beginning to take root in global telecommunications markets. The significant liberalizing and market-opening steps taken prior to and since concluding the WTO Agreement are changing dramatically the nature of international telecommunications. The era of national monopoly telephone companies is ending. Prices are falling, and service is improving. People are making greater use of international telecommunications in their businesses and personal lives. For example,  Calls to Great Britain and other countries with liberalized telecommunications markets can now be made for as little as 12› a minute, down from over a dollar a few years ago.  International mobile satellite systems are now available that allow callers to make calls from literally anywhere in the world.  The number of wireless subscribers has increased from 55 million in 1994 to over 200 million last year, an increase of almost 300%. Not only have U.S. consumers benefitted from the increase in global telecommunications competition, but countries developing new telecommunications networks are benefitting as well. New technologies and increased investment are allowing some countries to double and even triple the number of installed access lines. U.S. companies are investing billions of dollars in markets around the world to provide cheaper, more innovative services than ever before. New investment is critically important to building the Global Information Infrastructure, which is increasingly creating new opportunities and driving innovation throughout the world. The Commission has taken an active role in helping to usher in the procompetitive developments that have come about over the past few years. The Commission has hosted over 400 foreign telecommunications officials in the last year and held dozens of consultations with foreign regulators. The Commission is also an active participant in the ITU and regional groups that form guidelines and agreements to help members face the challenges of introducing a competitive marketplace. Benefits brought by these changes Increased competition in global telecommunications markets will foster the same kinds of innovation and price reductions in international markets that we have seen in the U.S. domestic long distance market. Indeed, in just the past year, consumers have seen dramatically lower prices and new services for people making international calls. The greatest benefit from these steps in the last year are on the largest U.S. international traffic routes.  Carriers are providing service to Canada and the United Kingdom for as low as 12› per minute;  Carriers' rates to Germany declined from 35› to 29› per minute over the last year -- a 17% decrease;  Carriers' rates to Japan declined from 48› to 30› per minute -- a 38% decrease. In addition, some small carriers are competing and providing service to liberalized countries such as Germany, France, Australia, and New Zealand at less than half the per-minute rates of the large U.S. international carriers. At least one carrier is offering promotional rates for service to those countries for as low as 5› per minute. The Commission's new foreign participation rules, adopted to implement the United States' WTO commitments, significantly liberalized the policies for international telecommunications and satellite service. Since adopting the new rules last November, the Commission has granted over 700 applications to provide international service. This includes 48 applications granted to foreign telecommunications carriers to enter the U.S. market, 18 of which were from foreign dominant carriers. Under the old rules, such applications would have been subject to a lengthy approval process, or not been approved at all. The Commission also expedited its processing of applications to provide switched services over private lines (also known as international simple resale or ISR). Prior to adoption of the new rules, the International Bureau had authorized the provision of ISR only to five countries. Since the new rules were adopted, the Bureau has authorized the provision of ISR on an additional eleven international routes, allowing ISR on routes that cover 42% of U.S. international traffic minutes. In addition, the U.S. has issued licenses for domestic facilities to access Canadian and Mexican-licensed satellite systems in order to enable these companies to serve the United States. These new licenses will allow U.S. consumers to access a greater number of service providers with the consequence, we believe, of driving down prices. Applications from several foreign satellite operators in countries such as Hong Kong, France, Brazil, and Argentina are now pending before the Commission. U.S. consumers are not the only ones to benefit from telecommunications competition. Consumers around the world also benefit from increased development of and investment in telecommunications networks. For example, in 1993, the Philippines liberalized its wireless and wireline telecom markets. At the time there was just one carrier and only 700,000 access lines in the country. There are now 10 carriers operating in the Philippines. Since 1993 the incumbent and the new operators have installed over 4 million access lines, many of them for wireless communications, and are continuing to build more. In Chile, which opened its doors to competition in 1994, there have been dramatic increases in telephone traffic, an indication that consumers respond to lower prices. Prior to the introduction of competition, each Chilean made, on average, the equivalent of one 30 second call to the United States annually. In 1996, each Chilean made an average of 5.4 minutes of calls to the United States annually. Creating Opportunities for U.S. Business Abroad In most regions of the world, individual countries are taking significant steps to bring competition to their telecommunications markets. For example, until January 1998, only three countries in Europe allowed competition for basic voice service. Today, thirteen European countries have introduced competition for local, national, and international basic voice service. These countries are allowing foreign investment, licensing new entrants, setting up independent telecommunications regulatory agencies, and adopting rules for interconnection. Certain European carriers now offer interconnection to their national networks at rates lower than 2› per minute. Although there remain significant problems in many parts of Europe, the progress so far has been substantial. U.S.-based carriers are aggressively pursuing European ventures. MCI WorldCom currently has local network facilities in London, Brussels, Amsterdam, Paris, and Frankfurt, with five additional city networks scheduled to become operational in early 1999. New York-based Viatel is spending over $800 million to construct a pan-European broadband fiber optic network connecting thirteen cities in Belgium, the Netherlands, Germany, France and the United Kingdom. U.S.-owned Global Crossing also has announced plans to build a $700 million pan-European network, connecting 18 cities, to be completed in 1999. In Germany, the largest European telecommunications market, as of June 1998 licenses for 81 new service providers had been issued to operators of fixed line networks, and more are pending. Deutsche Telekom has recently announced price cuts of up to 63%, and new competitors have taken about 20% of the German long distance market. In France, newcomers like Omnicom and Esprit expect to offer service by the end of the year and are in the process of building their own networks. In the cellular area, competitors have taken 51% of France Telecom's market share since the loss of its mobile monopoly. Latin American markets are also opening to foreign investment and taking pro-competitive steps, albeit at a slower pace than some other regions. In Mexico, AT&T and MCI WorldCom, combined, have invested close to $2 billion in joint ventures, promising customers cheaper and more efficient service. Although AT&T and MCI WorldCom's Mexican subsidiaries have faced significant problems competing in the Mexican market, they have managed to take 25% of Mexican long distance market from Telmex. In Brazil, MCI WorldCom recently paid $916 million for its 52% voting share of Embratel, the long distance carrier in Brazil. In the Asia Pacific region, significant procompetitive steps have been taken in Australia, Japan, New Zealand, and Hong Kong. Japan, in particular, has taken great steps to liberalize its international telecommunications market by adopting a pro-competitive regulatory approach and licensing multiple competing foreign carriers, including MCI WorldCom and British Telecommunications. MCI WorldCom is building a fiber-optic network in Tokyo, and has announced plans to lay an independent fiber network along side the existing trunk lines of the incumbent, NTT. We were particularly pleased to conclude bilateral agreements with Mexico and Argentina, to expand access to satellite services - accelerating access to their markets for satellite services. Indeed, satellite companies are reporting positive market and regulatory developments in all regions of the world. Licenses for global satellite services have been granted to U.S.-based operators in many countries, including Senegal, Argentina, Korea, and New Zealand. As countries establish independent regulatory bodies, they are adopting non-exclusive licensing arrangements. Several U.S. companies report that regulators have solicited industry views as to how best to craft national regulatory procedures. Regulators have shown a particular interest in enabling broadband capacity to provide consumers basic and interactive services. Several countries, including South Africa and Peru, are considering or have adopted measures to ensure the domestic availability of spectrum for new services. In light of this encouraging international regulatory environment for satellite services, satellite manufacturers are changing satellite design and configuration to increase the coverage areas that may be served. The FCC: An Expert Advocate for Pro-Competitive Reform The Commission shares its expertise with regulators from other countries in a variety of ways, including our regulatory workshops, participation in multilateral dialogs, and new market access agreements. Regulator-to-Regulator Dialog The Commission is widely respected in the international telecommunications arena as having important expertise in developing pro-competitive regulatory policies. The Commission and its staff are sought out on a regular basis to provide valuable expertise to foreign governments in developing pro- competitive telecommunications regulatory policies. In one of our first efforts to support the effective implementation of the WTO Basic Telecom agreement, the Commission hosted five workshops for 44 representatives of 41 nations, including Ecuador, Brazil, India, Tanzania, Russia, and many others. Topics ranged widely from general regulatory reform to specific discussions of introducing independent regulatory bodies and how to license satellite and wireless telecommunications systems. Representatives of the Commission also participated in dozens of meetings with their foreign counterparts over the past year. These meetings ranged from formal bilateral meetings and high level face-to-face dialogs to video conferences and detailed staff-level discussions of technical and regulatory issues. In addition, the Commission has played a critical role in providing expert advice in drafting U.S. Government comments in foreign regulatory proceedings. The Commission has filed comments or provided expert input for U.S. government comments in twelve regulatory proceedings in seven countries on topics including interconnection (Germany), resale (Japan), and satellite services (Philippines). These comments complement the Commission's ongoing dialog with foreign regulators worldwide on critical regulatory issues. Finally, the Commission hosts visiting private and public sector officials and provides opportunities for education, exchange of ideas and information gathering. Since January 1998, the Commission has hosted 440 visitors from 89 countries. Visitors from countries in all regions of the world, including such countries as Vietnam, Indonesia, and Turkmenistan, came to discuss a wide range of issues, including spectrum licensing, digital television and telecommunications regulation. Many international businesses and government leaders view the United States telecommunications market as a model that offers a wealth of information on approaches toward regulating -- or not regulating -- domestic and international telecommunications. These discussions with foreign officials give the FCC the opportunity to respond to this demand and to provide crucial guidance for countries introducing their own pro-competitive reforms. The Commission also works closely with multilateral organizations to further the goals of global competition and worldwide network development. The Commission takes an active role in fostering the development of telecommunications networks worldwide through its work in the International Telecommunication Union (ITU) as well as the Organization of American States' Inter-American Telecommunications Commission, or CITEL, which provides guidance on telecommunications policy throughout the Americas. The Commission also plays an active role in the Asia Pacific Economic Cooperation (APEC) efforts focused on telecommunications. The FCC holds a leadership position in the APEC Steering Group responsible for creating concrete policy recommendations to liberalize telecommunications policy and regulatory regimes in APEC member economies. This Steering Group has focused on principles of universal service, interconnection, the establishment of transparent licensing regimes and rules against anti-competitive conduct. This work provides a reference for countries in those regions that are seeking models of how other countries have translated their WTO commitments into concrete policies that will promote competition and universal access. New Agreements The WTO Agreement also has sparked the initiation, and in some cases, successful conclusion of bilateral and multilateral initiatives to open foreign satellite markets to U.S. companies. In June 1998, the U.S. and Argentina concluded an agreement under which both countries will open their markets for fixed, direct broadcast and direct-to-home satellite services. These services were not covered by the WTO Agreement. The agreement with Argentina marked a major market-opening breakthrough by allowing U.S. satellite operators full access to the Argentine market. One concrete example of the benefits of such a protocol was the broadcast of the 1998 World Cup to many more Argentine viewers than would have previously been able to watch this exciting global event. Under the agreement, U.S. satellites will have the same rights to provide service to, from, and within Argentina as Argentine-licensed satellites. Likewise, under the agreement, the United States would permit Argentine-licensed satellites to provide service in the United States. Now, companies including PanAmSat, Loral and other U.S. fixed satellite service operators will be able to provide service to Argentina under the same rules that apply to the Argentine provider, Nahuelsat. The entry of Argentine-licensed satellites into the U.S. market will provide added competition and offer increased satellite television programming to U.S. consumers. The momentum behind the WTO Agreement and its implementation were instrumental in the development of the Global Mobile Personal Communications by Satellite (GMPCS) Memorandum of Understanding (MoU) and Arrangements, to date signed by over 100 parties. The world's regulators realize the potential of these exciting new global satellite systems to deliver service to those traveling throughout the world or living and working in sparsely populated and rural areas. More than 100 administrations and industry members have signed the MoU to date, and a number of nations are implementing the actual Arrangements. These commitments are designed to ensure that terminals associated with GMPCS systems would be able to transit borders and "roam" freely, an essential element of a successful GMPCS system. Challenges for the future The preliminary results of the WTO Basic Telecommunications Agreement are encouraging for consumers and carriers here in the U.S. and abroad. Nonetheless, significant challenges lie ahead to ensure that the pro-competitive developments of the last year are but the first steps. The Commission is focused on ensuring that competition and telecommunications network expansion is allowed to take hold and flourish worldwide. The Commission intends to continue to provide expert guidance to countries around the world. The Commission will share experience and expertise with countries to ensure that the encouraging developments of the last year continue and that U.S. consumers receive the full benefit of the changing international telecommunications marketplace. News Media contacts: Rosemary Kimball (202) 418-0500International Bureau contacts: Tracy Weisler at (202) 418-0744, Robert McDonald at (202) 418-1476