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Hundt Chairman, Federal Communications Commission   January 16, 1995  X_- Introduction    I'm grateful to Fred Irwin of the American Chamber and to Hermann Neus of its telecommunications subcommittee for this opportunity to meet all of you on my first day in Bonn. I'm here for a telecommunications roundtable discussion that the American Embassy will convene tomorrow with senior German government and business officials. To strengthen the FCC's participation in global telecommunications policy arena we created last fall an international bureau. It is headed by Scott Blake Harris and staffed by more than 120 professionals drawn from different parts of the agency, from other parts of the U.S. government, and the private sector. It is a most able group. The FCC is moving ahead with a policy of competition on all five lanes of the information highway. I was present in Buenos Aires when Vice President Gore addressed the International Telecommunications Union and described his vision for a Global Information Infrastructure (GII). I will be discussing these ideas today and tomorrow with German officials.  Y-This afternoon I met with Dr. Boetsch, the Minister of Posts and Telecommunications, and with his deputy Dr. Laufs. We also discussed plans for the bilateral telecommunications  uKconsultations we'll be holding with German officials in# P7*P# #Xw P7ZXP#Washington on March 2223. Important policy issues are before us. These include:  Y-9 9 European Union and G7 discussions on liberalization and privatization;(#9  Y-9 9 Deutsche Telekom's restructuring;(#9  Y- 9 9 review of the proposed Sprint transaction;  Y-  9 9 and possible changes in Section 310, and other American 9 9 telecommunications developments. Let me share with you some brief comments on these subjects.  X(!- Telecommunications in Germany  Y"- I think everyone is impressed by Deutsche Telekom's extensive program to bring a modern telecommunications infrastructure to Eastern Germany. Nothing can do more to set the stage for future prosperity there than modern communications. We are also impressed by the separation of Deutsche Telekom's operational responsibilities from the regulatory mandate of the Ministry for Post and"'0*(((" Telecommunications; the end of crosssubsidization of postalrelated operations; and the initial round of privatization of DT in 1996. I understand that the initial 25% of shares to be sold should fetch $58 billion.  Y-# P7*P##Xw P7ZXP# But meanwhile the EU has a target date of not until 1998 for competition in infrastructure and facilitiesbased services. This reminds me of a football story with the EU cast as a football coach. It was the last play of the game, and the quarterback, his team losing, looked over at the coach for a play to call. The coach shrugged his shoulders, so the quarterback called his own play. The team scored a touchdown and won the game. Afterwards, the coach asked the quarterback how he had decided which play to call. "Well, I knew we needed seven points, so I put seven and seven together and called play #15," he told the coach. When the coach pointed out that made 14, the quarterback replied, "If I was as smart as you, coach, we wouldn't have won the game." In the USA, the telecommunications regulatory revolution will be far past the 1998 point by this year, with or without legislative reform. If Germany wants to lead in European telecommunications, it must set a faster pace than Brussels has so far. Perhaps Germany can be like that quarterback just call its own play to win the game.  X- European and Global Telecommunications Policy Developments As you know, the FCC, together with the Departments of State and Commerce, is also active in discussions with the EU and the Group of Seven (G7). When we met the European Commission in Washington in November, we were impressed with progress they have made in establishing an overall framework for telecommunications liberalization. We strongly endorse the thrust of the Green Paper prepared under the direction of Commissioner Bangemann.   We also strongly support the intention of the European Commission to use the G7 Brussels telecommunications ministerial in February to convey to the European public the benefits of an Information Society. This is consistent with VicePresident Gore's vision of the GII, which stresses privatization, competition and liberalization. That's why we told the Commission plainly that we were concerned about a proposed directive which could extend to multimedia services existing quotas on foreign programming carried by broadcast media. Limits on content, in the service of cultural protectionism, can only create disincentives for the private investment necessary to develop new communications networks and services. The contrast between the G7 cooperative effort in building the future Information Society and the Commission's proposed unilateral measure to limit the diversity of content"#'0*((P(" available through multimedia could not be more stark. We will be working hard in coming months to talk about the right road to go down. U.S. Regulatory Developments As I've mentioned, in the United States the FCC is working to establish the terms of competition on and among all 5 lanes of the information highway. The new Congress, meanwhile, is working on a comprehensive revision of the 1934 Communications Act, and hopes to pass legislation by July 4 of this year. As part of this exercise, reform of Section 310, the provision governing foreign ownership interests in common carrier radio licenses, is possible. One recentlyintroduced proposal would alter Section 310 by abolishing it. Another proposal would amend Section 310 by incorporating the principle of reciprocity. I'm not in a position to predict what will happen to Section 310, but it's obvioius that reciprocity is a notion with powerful appeal. As you may know, the FCC has before it Deutsche Telekom and France Telecom's proposal to acquire twenty percent of Sprint, the third major U.S. longdistance carrier. The Commission has authority under the Communications Act to consider the overall competitive implications of this transaction. Among the legal provisions at issue is Section 310(b)(4), which permits the revocation, if it serves the public interest, of an entity's common carrier radio licenses if more than 25% of its equity is indirectly held by foreign nationals. The proposed 20% stake of DT and France Telecom in Sprint, coupled with existing fractional foreign stockholdings, would exceed this ceiling. In July 1994 the Commission approved British Telecom's (BT) acquisition of a 20% share in MCI, after reviewing the potential for BT to leverage its UK market power to engage in anticompetitive practices against U.S. carriers competing with MCI. The openness of the UK telecommunications market generally and the flexible regulatory environment there was crucial to our finding that this transaction served the public interest. We found that the emerging competition to BT safeguarded against discrimination. Under this precedent, and the comments submitted by interested parties in the Sprint transaction, the issue of comparative openness of the German and French telecommunications markets must be considered. German leadership in liberalization would enable us to work together to urge our neighbors in the same direction.  X!- Conclusion Ultimately, of course, governments will not design the new telecommunications landscape; the forces of innovative technology are too strong for that. You and your companies know that; you are in the vanguard of an information revolution. But governments do have a role to play, and one of our most important tasks is to set"#'0*((P(" flexible regulatory policies which will facilitate your efforts in the marketplace. I invite your comments on how we can assist, and thank you for your attention.