Fresh offers boost hopes of world telecoms deal

Date: 13/02/1997

DIPLOMATS say they are on course to seal a market-opening world telecoms agreement at the second time of asking, ahead of this weekend's deadline for a World Trade Organisation deal.

A series of improved offers since the start of the year from key countries such as Singapore and Mexico, and first-time offers from the likes of Indonesia and Malaysia, have significantly boosted the chances of a deal.

Even before the raft of new offers and fresh proposals was put on the table, industry experts were putting the odds in favour of a telecoms deal at 60-40.

But, with just days to go before the Saturday (15 February) deadline for agreement, all eyes are still on the US response to the latest proposals.

The world's biggest telecoms market, with around half of global telecoms turnover, pulled the rug on an agreement last April, complaining that a 'critical mass' of offers had still to be reached.

The lack of offers from the far eastern 'tiger' economies was one of the problems highlighted by the US side at that time, with Malaysia's and Indonesia's booming markets picked out as particularly significant. But the US has never defined what critical mass means.

“It is a matter of perception - not of science - whether critical mass has now been reached,” said a close observer of the telecoms talks.

A WTO deal would call for signatories to lift limits on foreign ownership of telecoms companies and allow foreign subsidiaries to interconnect with local services on fair terms by January 1998 - the same target date as that for full competition within EU markets.

Perhaps even more importantly, it would establish an international framework within which disputes could be settled.

The US still has some reservations about the emerging deal, amid claims that its North American Free Trade Area (NAFTA) partners, Canada and Mexico, are not delivering such generous offers on foreign ownership as it is.

Canada is insisting on restricting foreign ownership to 46&percent;. “It would be difficult to sell a deal to Congress if the NAFTA partners were not opening up in the same way as the US,” said the Geneva observer.

But differences between the US and the Union have narrowed after both tabled improved offers last autumn, although two issues are still producing some conflict - the EU's insistence on excluding any commitment covering the transmission of video services signals and the treatment of satellite services.

The Union's stand on video services is interpreted in some quarters as backtracking, but the European Commission insists that it is merely acting in line with the 1994 Uruguay Round trade agreement which excluded traffic in audio-visual products. Bilateral talks between the two trade blocs were expected to defuse this issue before the deadline.

The satellite dossier centres on how some international telecoms bodies such as Inmarsat should be treated. But that too looks as though it is “on the way to being resolved”, according to officials.

A final US gripe is mainly aimed at third world countries. It maintains that international tariffs in these countries are excessive and would like the problem addressed as part of a WTO deal.

Most developing countries receive considerably more incoming international calls than they originate. Combined with their high prices, this provides a considerable boost to their foreign currency earnings when telecom companies share out the income from international calls.

The Union has also irritated the US with recent proposals to charge value added tax on call-back services - cheaper international phone links offered to Europeans by US firms taking advantage of their lower costs.

US diplomats say the EU is tackling the symptoms of the problem rather than the cause: the high cost of calling abroad in many member states.