The international telecoms industry is on the cusp of a meltdown, driven by the triple pressure of massive costs for gaining the next-generation "3G" licences, anti-competitive regulatory regimes, and trade barriers erected to stifle foreign firms entering national markets (particularly in the US) warn two industry experts in a book published today.*
However, the arrival of George Bush in the White House allows an excellent opportunity for the slate to be wiped clean and the over-aggressive American triumphalism in trade policy of the Clinton/Gore administration stopped. So far America's FCC (the Federal Communications Commission - its powerful equivalent to Oftel) has been particularly aggressive in keeping overseas companies from competing in the US, whilst demanding full access for US companies around the world!
Co-author Mark Naftel (a telecommunications lawyer with international solicitors Norton Rose), said: "The telecommunications sector is only one component of the continual skirmishing between the US and Europe over access to each others markets. But the fundamental importance of the sector as trade internationalises, particularly through the Internet, coupled with the sector's fragility through debt, would make a trade war here particularly damaging to both continents' economies."
Co-author Lawrence J. Spiwak (President of the Washington, D.C.-based Phoenix Center for Advanced Legal & Economic Public Policy Studies) lamented, "The reality is that over the past several years, many politicians never really wanted to promote new entry or competition. Why? Because entry eliminates economic rents, and if you eliminate economic rents, then you can't extract 'voluntary' commitments from the industry to achieve pet political agendas by threatening those very rents."
In THE TELECOMS TRADE WAR: THE UNITED STATES, THE EUROPEAN UNION AND THE WTO (Hart Publishing 2001), published today, authors Naftel and Spiwak detail how many countries signed the WTO Telecoms Treaty to increase competition to deliver better and cheaper services, but most have actually pursued policies of reducing competition to the clear detriment of business and consumer users.
Mark Naftel said: "Politicians keep promising us the global information society, yet at every step of the way national governments throw a boulder in the way. A robust, dynamic and integrated telecommunications network around the world is clearly essential for the growth of e-business. Instead, we have restrictive barriers to prevent competition and many telecommunications companies burdened with huge amounts of debt. In Britain, for example, the slow introduction of high speed internet links is just one consequence of this."
Lawrence J. Spiwak noted: "While we realise that the Telecoms Trade War may be met with huge incredulity, we are not happy to tell this story - but we do believe it to be an accurate one. Unfortunately, our prognostications are coming true. No matter how much you slice it, so long as the underlying market structure is not conducive to new entry and not capable of sustaining tangible competition, then the realisation of the Information Society remains a quixotic dream."
Mark Naftel added: "While no country has been innocent, the United States has been particularly guilty through its over- aggressive stance of using trade policy and regulation to advantage incumbent U.S. telecoms carriers, to the detriment of all businesses and customers, both in the U.S. and abroad. Ironically, the overly-protective U.S. trade policy hurts U.S. consumers as they do not receive the competitive benefits foreign entrants would bring.
"Now is the perfect time for President Bush to step in and open up the U.S. telecoms market and end the 'beggar my neighbour' approach that prevailed under the Clinton administration. So far the signs are good, with President Bush signalling that the U.S. will be purposeful, but humble - a welcome change from past arrogance. Furthermore, many in his newly arrived administration have good free trade credentials."
Lawrence J. Spiwak: "While former FCC Chairman Reed Hundt's hubris and Bill Kennard's aversion to action have certainly contributed greatly to both Capitol Hill's cognitive dissonance and America's trading partners anger about US telecoms policy, this is no excuse to throw the 'baby out with the bath water.' Instead, if competition is ever to be realised, then a return to analytical solemnity and economic first principles is required."
* The Telecoms Trade War: The United States, the European Union and the WTO, priced at £50, is a detailed study of the conflicting regulatory and trade policies of the past several years. Published by Hart Publishing Ltd, the book is available on 01865 245533. To see a preview - as well as the scholarly and press reviews - of this book, please go to
Issued by Kelso Consulting on behalf of Norton Rose.
For more information or a photograph of Mark Naftel please contact:
Mark Naftel, telecommunications partner
020 7729 7595
Mark Naftel, telecommunications partner
020 7283 6000
Notes to editors
Norton Rose is a major international law firm with over 520 lawyers in a network of offices in London, Paris, Brussels, Milan, Moscow, Bahrain and Singapore and associate offices in Athens, Jakarta and Prague.
Recent major assignments where Norton Rose has advised include:
· Advising Wannadoo & France Télécom in relation Wannadoo's £1.6 billion recommended share exchange offer for Freeserve
· Advising France Télécom on the £25.1 billion acquisition of Orange
· The US$5.5 billion investment by France Télécom in NTL as part of the NTL/Cable & Wireless cable merger
· Advising France Télécom in respect of the auction of One2One by Cable & Wireless/MediaOne, the largest ever UK private disposal, where France Telecom was eventually outbid by Deutsche Telecom (£8 billion)
· Advising Mannesmann on the £19.5 billion bid for Orange and the subsequent £113 billion hostile offer by Vodafone AirTouch, the world's largest ever unsolicited offer
· Advising on 265 million financing of members of the CompleTel Group
· Advising Ericsson, Celcom's equipment suppliers and Lucent Technologies to put in place new credit facilities to finance Celcom's capital expenditure program.
· The RM1.75 billion (US$800m) financing for Celcom, the Malaysian telecommunications company and the country's largest GSM operator
· Advised Siemens AG on its acquisition of a large interest in a very substantial telecommunications joint venture in the UK with The General Electric Company plc
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