The United States and nearly 70 other countries agreed Saturday to open up their telecommunications markets, paving the way for an unprecedented wave of competition in phone service worldwide.
The deal, reached at the Geneva-based World Trade Organization (WTO) after more than a year of stop-and-start negotiating, will allow the highly competitive telecommunications giants of the United States and Europe to enter each others’ markets, and will also permit them to invade many Third World markets where phone service has been controlled by inefficient, state-run monopolies.
Such intensified competition will reduce the cost of phone service dramatically in many developing countries. Even in the already-deregulated U.S. market, it will sharply lower the cost of making a call overseas, according to government and industry officials. In addition, it will create vast new opportunities for U.S. firms in the rapidly growing markets of Asia and Latin America.
“This agreement represents a change of profound importance,” said Charlene Barshefsky, the acting U.S. trade representative, who directed the U.S. team in the negotiations. “A 60-year tradition of telecommunications monopolies and closed markets has been replaced by market opening, deregulation and competition.”
The accord goes into effect next January, and experts said Saturday that consumers could begin seeing some price cuts on international long distance bills as early as next year. However, it will likely take “several years” before the full impact of the accord is felt in the international marketplace, they said.
At a news conference in Washington, Barshefsky predicted that the pact’s market-opening measures will lead to the creation of approximately 1 million U.S. jobs over the next 10 years because U.S. companies “are the most competitive telecommunications providers in the world.”
The agreement is also “great news for American consumers,” said Reed Hundt, chairman of the Federal Communications Commission. Today, the average cost of an international call is almost $1 a minute. But, Hundt said, “the process advanced by this agreement will, over time, reduce that price by 80 percent.”
The glowing assessments of the benefits of the pact offered by Barshefsky and Hundt were seconded by a number of industry representatives who joined them at the news conference and heaped praise on the Clinton administration for negotiating the pact.
“With this treaty, the global village is on the verge of becoming the international metropolis,” said Harris Miller, president of the Information Technology Association of America.
Jonathan B. Sallet, chief policy counsel for MCI Communications Corp., noted that his company has built its name through the introduction of competition to the once-monopolized long-distance market. Now, he said, the lower prices and greater consumer choice resulting from that competition will be made available on a global scale.
“For the very first time, this agreement recognizes that this simple truth of competition knows no national boundaries; that the benefits of competition can - and should - flow to consumers located across the globe,” Sallett said.
The original deadline for completion of the accord was last April, but the United States walked out of the discussions on the grounds that other countries were not offering enough concessions in exchange for Washington’s offer to effectively end the legal limitation of 25 percent foreign ownership of U.S. telecommunications firms.
Then, in succeeding months, Barshefsky and her Geneva-based deputy, Jeffrey Lang, continued to adopt a hard-nosed position by threatening to scuttle the talks a second time unless the other parties put more on the table. Saturday Barshefsky said that her stance had paid off handsomely.
“The United States last April put a halt to the talks because we felt that there simply was not enough reciprocity for us to bind open our market,” she said. “At that time, we had offers from 47 countries. This agreement covers 70. The previous offers covered 60 percent of global telecommunications revenues, of which we were half. Now we are covering 95 percent of telecommunications revenues.”
Negotiators in Geneva reached their final agreement just hours before the midnight deadline as last-minute haggling ensued between the U.S. team and representatives of Canada, Mexico, Japan and South Korea.
Barshefsky acknowledged that she was “disappointed” by Canada’s refusal to allow foreigners to control more than 46.7 percent of existing telecommunications facilities, and she also chided Japan for refusing to raise a 20 percent ownership limit on its dominant long-distance and international carriers.
But she said Canada had made substantially improved concessions in recent days, and she noted that Japan - a nation known for its rigid bureaucratic controls over telecommunications - had agreed to a new deregulatory scheme under the pact, and promised to allow 100 percent foreign-owned companies to enter the Japanese market.
“The change in Japan is monumental,” said John R. Hoffman, senior vice president for external affairs at Sprint Corp.
However, not everyone agreed that the measure was a coup for U.S. interests. “There is just not that much there,” said an aide to Sen. Ernest F. Hollings, D-S.C, the ranking Democrat on the Senate Commerce Committee and a frequent critic of trade deals. “We’re disappointed with the Canadians, Mexicans and Japanese.”
The deal’s impact is likely to be felt most keenly by consumers in developing countries, where it can cost several dollars a minute to call a neighboring town. The overall benefit to consumers, resulting from both drastically reduced phone bills and improved service, will total $1 trillion between now and the year 2010, according to the Institute for International Economics, a Washington-based think tank.
By making cheap phone service more widely available in a world in which half of all people have never made a phone call, “this deal goes well beyond trade and economics. It makes access to knowledge easier,” said Renato Ruggiero, director general of the WTO.
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