Bridging open markets in the "big bandwidth" era: a blueprint for foreign broadband Internet deployment.

AuthorYang, Qiusi

TABLE OF CONTENTS I. INTRODUCTION 77 II. BACKGROUND 79 A. The Basic Telecommunications Agreement Has Allowed the United States Access to Foreign Telecommunications Service Markets, But It Is Probable Most Developing Countries Will Not Agree to Incorporate Global Connect's Procompetitive Regulatory Principles by 2020 80 B. World Trade Organization Members Who Have Not Yet Committed to the Basic Telecommunications Agreement Are Free to Liberalize Their Markets on a Sector-by-Sector, Mode-by-Mode Basis Under the General Agreement on Trade in Services 83 C. United States v Mexico Likely Will Serve as a Precedent for the Global Connect Initiative When Investing in Other Basic Telecommunications Agreement Members; Its Application, However, Has Limitations 85 III. THE FCC'S REGULATIONS ON FOREIGN CARRIERS' ENTRY INTO THE U.S. TELECOMMUNICATIONS MARKET MAY SERVE AS A MODEL TO PROPOSE RECIPROCAL TREATMENT WHEN NEGOTIATING INVESTMENT AGREEMENTS UNDER GLOBAL CONNECT 00 87 A. The FCC Is the Expert Agency on Issues Relating to Broadband Internet Access Service 87 1. The FCC is an Expert Agency in Making Policy and Business Judgment to Leverage Foreign Markets' Restrictions in Future Trade Negotiations 87 2. The FCC is Also an Expert Agency in Settling Investor-State Disputes and Enforcing Procompetitive Regulations 90 B. The Open Entry Standard, Along with Other Measures that the FCC Has Taken, Offers a Three-Step Model for Other Countries to Fulfill Their World Trade Organization Commitments Through Broadening the Scope of Foreign Entry and Lifting Burdensome Application Requirements 93 1. Under the United States' Basic Telecommunications Agreement Commitments, the FCC Has Adopted the Open Entry Standard to Replace Its Effective Competitive Opportunities Test Licensing Requirements 94 2. The FCC Can Analyze a Host Country's Procompetitive Obligations by Examining Its World Trade Organization Commitments, Existing Regulation for the Service or Facility, and Existing Licensing Requirements for Foreign Entrants 96 3. In Turn, Host Countries, As Partners Contemplated Under Global Connect, Will Be Pressured into Agreeing on Competitive Safeguards by Their Most Favored Nation Obligations and the Global Market 98 IV. CONCLUSION 101 I. INTRODUCTION

Do you need a Federal Pizza Commission to control how to have a piping hot pizza delivered - in small, medium, or large size? (1) The former Chairman of the Federal Communications Commission (FCC), Reed Hundt, agrees with you: "No one thinks that pizzas are best delivered by a single monopoly." (2) Like pizza, "no one should think that personalized home or business bandwidth needs are best served by the old regime of regulated monopoly." (3) To deliver better pizza on the global information highway, on September 27, 2015, the U.S. Department of State unveiled a new initiative called "Global Connect" with the objective of bringing 1.5 billion people online by 2020. (4) Through this initiative, the U.S. government will work with other national governments, development agencies, nongovernmental organizations, and the private sector to acknowledge the economic importance of Internet access and integrate this goal into their countries' development strategies. (5) Under this initiative, people in developing countries will also be able to get anything they want on their "big bandwidth networks" --through voice, image, text, or data in any other combination. (6)

The announcement of the Global Connect broadband deployment initiative opens a discussion over the FCC's regulatory authority: while the FCC currently has presumptive regulatory authority over broadband deployment pursuant to Section 706 of the Telecommunications Act of 1996, this authority only covers broadband services in the United States, requiring the FCC to rely on other treaties, regulations, and rules to govern U.S. companies' entry into foreign markets. (7) Because of the involvement of foreign states' own regulatory interests, the Global Connect initiative and the anticipated direct investment projects will require the FCC to employ different rules and policies on U.S. basic telecommunications service providers and suppliers. (8)

At the international level, the Basic Telecommunications Agreement (BTA), (9) entered into force in 1997, is the first concerted effort by sixty-nine members of the World Trade Organization (WTO), including the United States, to welcome foreign competition into some or all of their basic telecommunications service markets. (10) This agreement differed from earlier treaties (11) by providing sanctions to enforce compliance, mandating the development of operational services as well as breaking up legal monopolies on "infrastructure, standardized services, terminal equipment, and type approval" in each signatory's telecommunications market. (12) Two decades later, the United States has only experimented open telecommunications market in a four-year-long WTO dispute resolution in United States v. Mexico (13) and a FCC authorization of license application in Telefonica Order and Authorization. (14) As of today, the regulatory model set by the Telecommunications Act of 1996 has not been fully tested, even as U.S. Internet service providers, (15) one of the stakeholders under Global Connect, will soon advance into foreign markets to provide terminal equipment and operational services. (16)

This Note explores how the FCC should exercise its regulatory authority over U.S. companies' involvement in the provision of terminal equipment, operational services, and monetary assistance or capital contribution under a foreign host country's competition laws and policies. Section II of this Note describes the BTA commitments and other WTO obligations that the United States may utilize when negotiating with other WTO member states, as well as the regulatory impediments that U.S. company AT&T faced in providing long-distance calling services under Mexico's interconnection rate regulations. This Section examines the historical context of how the FCC's current regulations on foreign carriers' entry into U.S. telecommunications market may serve as a model to propose reciprocal treatment when negotiating investment agreements under the WTO framework. Section III discusses how the FCC--an expert agency well-positioned to regulate, implement, and remedy U.S. companies--is fulfilling the WTO commitments of the United States and how the post-BTA telecommunications market pressures developing countries into offering reciprocal treatments. Finally, this Note concludes that in carrying out negotiations with developing countries under common WTO commitments, the FCC should form a coalition with newly industrialized countries when proposing reciprocal procompetitive regulations and establishing competition safeguards.


    The Internet is an essential element of every country's infrastructure, but even today, open and secure Internet access remains a great challenge for nearly sixty percent of the world's population. (17) Article 19 of the Universal Declaration of Human Rights provides: "Everyone has the right to... seek, receive and impart information and ideas through any media and regardless of frontiers." (18) Statistics have shown a positive correlation between a country's gross domestic product and its Internet penetration. (19) Internet access is also a modern form of free speech. (20) With the Internet shortening the distance for all aspects of service provision, restrictions, and limitations on Internet interconnection, (21) a monopoly on Internet infrastructure is a nontariff barrier to economic growth in today's global market and defeats the Internet's purpose as an equal-access, nonexclusive platform for communication, collaboration, innovation, productivity, and improvement. (22) An ongoing clash with different countries' regulatory regimes and crossborder network providers' appeal to a laissez-faire global market, therefore, call for a procompetitive regulatory regime.

    Over the last three decades, the United States has taken the lead on efforts to privatize telecommunications services. (23) With the passage of the BTA, the FCC concluded that its previous "effective competition opportunity" (ECO) test resulted in unnecessary time and regulatory burden for foreign carriers entering the U.S. market. (24) As a result, the FCC adopted an "open entry" standard. (25) The FCC's modification on market access policies, however, does not universally apply to all foreign countries; it is reserved for WTO members only. (26) Despite the FCC's liberalization efforts, U.S. companies, in contrast to their foreign counterparts, are not guaranteed nondiscriminatory treatment under different host countries' regulatory regimes. (27)

    1. The Basic Telecommunications Agreement Has Allowed the United States Access to Foreign Telecommunications Service Markets, But It Is Probable Most Developing Countries Will Not Agree to Incorporate Global Connect's Procompetitive Regulatory Principles by 2020.

      In response to numerous countries' appeals to open market access in basic telecommunications, the BTA was concluded in 1997 to implement procompetitive regulatory principles to promote competition, connectivity, universal service, transparent licensing practice, independence of the regulator, and efficiency in source allocation." (28) The BTA places emphasis on market access for delivery of telecommunications services in cross-border trade. (29) Under the BTA, "market access means more than just a removing of barriers," it means making the entrance of telecommunications services an enforceable right. (30) As a result, the BTA removed many obstacles in the market for cross-border services, including broadband Internet services, by entrusting domestic networks to foreign carriers and providing assurance against expropriation. (31)

      The United States began its procompetitive regulatory experiments in the long-distance services...

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