EXECUTIVE SUMMARY

INTRODUCTION

This Briefing Report was written in preparation for the Regulatory Colloquium held at ITU Headquarters in December 1995, the fifth in a series begun in 1993. The report deals with the implications for national telecommunications policy and regulation arising from the "Uruguay Round" of global negotiations that took place between 1986 and 1994 within the framework of the General Agreement on Tariffs and Trade (GATT). The Uruguay Round was concluded by the "Marrakesh Agreement" [1] signed in April 1994. This Agreement established the General Agreement on Trade in Services (GATS), which applies to trade in services including telecommunication services. It also established the World Trade Organisation (WTO), the institutional framework within which the GATS operates. Active negotiations have been taking place since May 1994 within the GATS framework, aimed at further multilateral liberalization of trade in telecommunication services.

These developments have added a new and potentially powerful influence to the forces shaping national telecommunications policy [2] . How significant their effects on the telecommunications industry will be, what form these effects will take, and how soon they will be felt, remains highly uncertain. Nevertheless, it is not too soon to tackle these questions. On the contrary, it is important that decision-makers in the telecommunications field should understand what is involved before the outstanding issues have been settled. Such understanding is probably a precondition for success in the current negotiations, because success is likely to depend not only on achieving widespread agreement to extensive changes in the telecommunications policies of many countries, but also on gaining similar acceptance of major changes in the way that many national telecommunications regulators carry out their work.

The report therefore:

• Reviews the new institutions and processes for global trade negotiations concerning telecommunications that have emerged within the WTO framework since the beginning of 1994.
• Describes the provisions of the GATS and related documents, and addresses their implications for telecommunications policy and regulation.
• Identifies and discusses the key themes and issues currently being addressed by those members of the WTO who are participating in the work of the Negotiating Group on Basic Telecommunications (NGBT).
• Considers what the implications for telecommunications policy may be, depending in part on the outcome of current negotiations.

As with the Briefing Reports prepared for the four previous Colloquia, this report ("Briefing Report No. 5") represents the results of an independent study carried out to provide input for the discussions at the Regulatory Colloquium. It reflects the authors' views and not necessarily ITU policies or the conclusions of the Colloquium itself, which are to be found in the Chairman's report, a separate document. Nor does it necessarily reflect the views of the WTO or of individual national delegations to the WTO, the GATS, and the NGBT.

The authors would like to emphasise that they are not, and do not claim to be, specialists on the subject of international trade institutions, negotiations and agreements. They are telecommunications specialists, seeking to explain and interpret for the telecommunications community, in language intelligible to that community, the significance of the agreements already reached within the GATT framework, and the continuing negotiations taking place under WTO auspices.

The preparation of the Briefing Report, and the associated research, were funded by the Friedrich Ebert Stiftung, whose support is gratefully acknowledged.

OBJECTIVES OF THE REPORT

The aim of the Briefing Report is to explain and assess the WTO trade-negotiation process and its implications for telecommunications from the point of view of readers who are engaged in policy-making and/or management in the telecommunications industry (and most especially those concerned with regulatory affairs), but who are not familiar with the WTO process.

STRUCTURE OF THE REPORT

The Briefing Report, like this Executive Summary, is divided into four parts:

• Part I provides the essential background: an outline of the ideas, principles, and major organisational features built into the multilateral trade agreements negotiated through the GATT machinery and more recently the WTO.
• Part II discusses the WTO machinery and the results of the Uruguay Round (the Marrakesh Agreement) in the field of telecommunications: specifically the applicable provisions of the General Agreement on Trade in Services (GATS), the Telecommunications Annex to the GATS, and the Schedules of specific commitments. It also covers the Dispute Settlement Understanding (DSU) and the establishment of the Negotiating Group on Basic Telecommunications (NGBT).
• Part III concerns the themes and issues that are currently subjects of negotiation in the NGBT.
• Part IV concerns the practical implications for telecommunication policies and regulation in individual WTO member countries.

Expanding the scope of international trade negotiations to include services in general, and telecommunication services in particular, is a relatively new idea. In retrospect, however, its adoption now seems inevitable. The economies of advanced industrial countries have become more and more strongly oriented towards the production, distribution and export of information, and many of them have become large net importers of manufactured goods. It was therefore natural that the governments of these countries sought to link any further opening of their own markets for goods to some degree of progress in opening up markets for services on a worldwide basis. In practice, moreover, internationally-traded services are almost all concerned with information-handling: they either are telecommunications services, or, as in the case of banking or publishing, are very heavy users of telecommunications.

The Marrakesh Agreement that resulted from the Uruguay Round included four key elements dealing with telecommunications:

• The General Agreement on Trade in Services (GATS), which lays down a broad framework of ground-rules concerning trade in services, together with institutional arrangements for administering these rules and negotiating additional market-opening measures subsequently. In the GATS there is a mixture of "general obligations and disciplines", which apply whether or not a member [3] of the WTO has made commitments to market-opening measures concerning specific telecommunications services, and other provisions that only apply where such specific commitments have been "scheduled" (i.e. are included in a particular member's Schedule).
• "Trade in services", as defined by the GATS [Art. 1], comprises four distinct "modes" [4] of trade:
• Mode 1, "cross border supply", consists of the supply of a service from the territory of member Country A into the territory of member Country B. For example, a service supplier of Country A provides service inside Country B, though A's service supplier is not "present" inside Country B, i.e. maintains no subsidiary, sales office, or sales staff in Country B. Providing an on-line database service to Country B via the pre-existing public telephone network is an example of a Mode 1 activity.
• Mode 2, "consumption abroad", consists of the supply of a service by a service supplier of member Country A to a "service consumer" of member Country B who is present in Country A. Here, as in Mode 1, A's service supplier is not "present" in Country B. This Mode covers (for example) the case where a manufacturing company of Country B uses the pre-existing telephone network in Country A.
• Mode 3, "commercial presence", consists of the supply of service by a service supplier of member Country A to service consumers in the territory of member Country B, where A's service supplier is deemed to be "commercially present" in Country B. This is the case if the service supplier owns a company, representative office or branch in Country B, or participates in a partnership or joint venture based there. If a telephone company from Country A operates services or builds a network within Country B, that is a Mode 2 activity.
• Mode 4, "presence of natural persons", consists of the supply of service by a service supplier of member Country A to service consumers in the territory of member Country B by way of the presence in Country B of people who are themselves service suppliers of Country A, or employees of A's service supplier organisations.
• The Telecommunications Annex of the GATS, which addresses in more detail several issues affecting market entry in telecommunications (for example, regulation, licensing and certain aspects of network interconnection) in general terms.
• The Schedules of specific commitments provided by members. These commitments mainly concerned value-added services such as electronic mail or database access services, but some members also made commitments on basic services. In principle the Schedule of a member formally records its commitments concerning "market access" [5] and "national treatment"[6] for foreign providers of services, applying pro-competitive principles of the GATS and the Telecommunications Annex to specific markets for telecommunications services[7]. Such a commitment may in practice represent a change in the direction of greater openness of national markets to international competition, or it may simply codify the "status quo". In practice, the contents of the Schedules on telecommunications entered into as part of the Marrakesh Agreement represented in most (but not all) cases little or no advance in the direction of opening up national markets for telecommunications services to international competition. However, this is not to say that the process of negotiating those Schedules had no value. On the contrary, the Schedules have practical value in three distinct ways:
• They codify many unilateral steps which members had already taken to open their national markets.
• For the services included in any particular national Schedule, they represent a "standstill" agreement: their effect is to commit members not to change national laws, regulations or other "governmental measures" in such a way as to make national markets less open to international competition than shown in the Schedule.
• For the services that were "scheduled", the Schedules record the remaining obstacles to open international competition arising from national laws, regulations and other "governmental measures" (in WTO parlance, "limitations" on market access and national treatment), thereby defining a clear, well-documented "baseline" for future negotiation of further steps in opening markets to international competition. In most countries, these limitations have so far remained very extensive.
• An agreement to continue negotiations on telecommunications, initially through a newly-established WTO forum, the Negotiating Group on Basic Telecommunications (NGBT), with the objective of achieving substantial progress towards open markets.

It would be a mistake to assume that the GATS Telecommunications Annex and its Schedules are unimportant, just because they have not instantly produced a major acceleration of movement towards more open telecommunications markets. In the nature of most international agreements, especially those dealing (as this one does) with economic and social matters of far-reaching importance, their full effect is felt only over an extended period of time. In the case of the GATS and the Telecommunications Annex, there are at least three and possibly four mechanisms through which major movement towards open markets could occur in the mid-to-long term (possibly as early as 1997):

• The implementation by WTO members of the "general obligations and disciplines" they have already agreed to (discussed in Part II of this summary), for example, those concerning the "transparency" of regulatory rules.
• The NGBT negotiations, through which some WTO members (possibly including those accounting for a very large share of world telecommunications traffic) may make (through new Schedules) further commitments to open their national markets to competition.
• The GATS process of "Progressive Liberalisation", which provides for further "rounds" of negotiations in future. From the beginning of the year 2000 at the latest, the member countries of the GATS are pledged to enter "successive rounds of negotiations" aiming to achieve "a progressively higher level of liberalisation". Before each such round, the GATS Council will assess the progress of liberalisation up to that time and will, on that basis, set out guidelines and procedures for the forthcoming "round".
• Possibly, future efforts by WTO members to change the behaviour of other members in order to reduce obstacles to competition, by challenging certain of their policies, laws or practices via the WTO's dispute settlement processes as being contrary to the general obligations that WTO members have accepted by agreeing to the GATS and the Telecommunications Annex and/or the member's specific commitments. Whether or not the "general obligations and disciplines" are too general and too hedged about with limitations to be used in this way, and whether WTO members will wish to do so in any case, remains to be seen.

By the "WTO regime", as it affects telecommunications, we mean the set of rules and institutional arrangements that a country which has ratified the Marrakesh Agreement thereby accepts concerning:

• The access of its individuals and companies to the markets for telecommunication services in other member countries.
• The rights of individuals and companies from other member countries to operate in its territory (or to provide telecommunications services to or from its territory), in specified markets and under specified conditions.

These obligations and institutional arrangements are complex in detail. However, the most essential points can be stated fairly concisely. We do so under two headings:

• The "general obligations and disciplines" to which all WTO members agree.
• The "specific commitments" made by particular members concerning particular services.

"General Obligations and Disciplines"

The key obligations undertaken by WTO members in relation to telecommunications include:

• Most-Favoured Nation (MFN) treatment
• Transparency

These obligations are discussed below. In addition, other important (though very general) obligations require governments to ensure that their regulatory policies and practices do not "constitute unnecessary barriers to trade", and that the telecommunication monopolies under their jurisdiction (if any) do not "act in a manner inconsistent with that Member's … obligations … and specific commitments".

Some of the general obligations and disciplines apply unconditionally; others apply only to those combinations of members and services where specific commitments have been made. (This is explained in detail in the full Briefing Report.)

Most-Favoured Nation (MFN) Treatment

The GATS (Article II) specifies[8] that the government of each WTO member must accord to service suppliers based in another member treatment (in terms of effective access to compete in the national market) "no less favourable" than the treatment it accords to "any other country". This provision, long-established in international agreements concerning trade in goods, would have far-reaching implications if applied to telecommunications. However, its application in the case of telecommunications in a WTO context is suspended until the work of the NGBT reaches a successful conclusion or the NGBT reports that it has failed to succeed[9].

Today, in the virtual absence of MFN in telecommunications, governments or telecommunications regulators, even in most of the countries where a pro-competitive telecommunication policy is in force and multiple competitors participate in the market, allow companies from other countries to participate only on a restricted basis[10]. Whether or not companies from other countries are allowed to participate in the market in such country (Country A) typically depends on the policy being followed by the government and/or by telecommunications regulators in their home country (Country B). For example, the national government or regulator in Country A may be concerned with whether monopoly market power in Country B is being abused, or international accounting rates[11] are being kept at an excessive level. It may also be concerned with whether companies from Country A are afforded opportunities to participate in Country B's market to a degree comparable to the rights of companies from Country B to participate in Country A. As these examples illustrate, international trade-policy relationships in telecommunications today are usually bilateral, and predominantly managed on a basis of reciprocity.

The GATS obligation on members to accord MFN treatment to all other members will (to the extent that it is carried into practice) replace the current system of predominantly reciprocal bilateral arrangements with a system of multilateral agreements embodying the MFN principle. It is inherent in the MFN principle that such agreements will sometimes require Country A to extend to carriers from Country B rights which are not yet made available reciprocally in Country B to carriers from Country A. MFN will thus tend to enhance and accelerate the process of opening up national markets to freer trade in telecommunication services than would likely be achieved through a patchwork [12] of bilateral reciprocal agreements.

However, just how far MFN will apply in practice depends on two important limitations on the application of MFN to telecommunications:

• The application of MFN is suspended until the intended completion of the NGBT negotiations in April 1996.
• WTO members can avail themselves of opportunities to take "exemptions" limiting how far MFN will apply to them, using a procedure which is explained in the full Briefing Report.

Transparency

The GATS requires each member to publish all of its laws and rules that affect trade in services. The Telecommunications Annex specifies that transparency, as defined, requires publication of further information about ,among other things:

• Tariff and other terms and conditions of access to and use of a member's "public telecommunications transport networks and services" (PTTNS).
• Technical interface requirements.
• Requirements for notification, registration, and licensing and other forms of recognition or approval needed before foreign service suppliers can do business lawfully in any particular member country.

Transparency is obviously a vital requirement for effective opening of markets. At the least, publication of all the laws, rules, regulations, and other conditions affecting entry into a market lightens the burden that potential entrants must carry when considering entry. At the worst, absence of transparency can enable a country's policy-makers, regulators, and others wilfully to delay entry of foreign services or service suppliers or to permit entry only on discriminatory terms that put foreign services or service suppliers at a competitive disadvantage vis a vis domestic services and service suppliers.

It seems likely that the general transparency obligation of the GATS will have considerable effect on the practices of telecommunications regulators in WTO member countries, and thus in spreading information about members' laws, rules, regulations and the like. Regulators in countries where regulatory rules are already published need not drastically alter their behaviour in order to conform to Article III of the GATS. By contrast, very few countries ordinarily publish, or require their PTO to publish, such matters as "tariff and other terms and conditions" for use of the PSTN; and consequently, conforming to the transparency obligation of the Annex will require significant or even radical modification of their existing regulatory regimes. It remains to be seen whether and how soon members will be willing and able to make such modifications.

"Specific Commitments"

The GATS provides for members to make, via national Schedules to the Marrakesh Agreement, commitments on specific services, as described at the beginning of this summary. The Schedules can subsequently be amended in such a way as to further reduce obstacles to international competition for the services already included, and/or to include additional services. Agreement to do this is now being pursued through the NGBT negotiations.

A key specific commitment concerns "national treatment".

National Treatment

National treatment requires each WTO member to treat services and service suppliers of other members no less favourably than its "own", but only in market segments that a member has "inscribed in its schedule, and subject to any conditions and qualifications set out therein" [Art. XVII, § 1]. It only applies where a member has specifically agreed, in its Schedule, to apply it to a particular service. Unlike MFN, which is in principle an obligation necessarily undertaken by every member of the GATS (subject to exemptions referred to above), the national treatment obligation does not apply comprehensively.

Although the national treatment obligation can thus be avoided by not "scheduling" it, the work of the NGBT clearly aims to induce as many participants as possible to agree in practice to unqualified acceptance of the obligation. Otherwise international trade and international competition in telecommunication services would be severely hampered. Accordingly, if the NGBT's efforts arrive at a successful culmination, the participants in the resulting agreement will probably have moved considerably toward accepting the widespread application of the principle of national treatment.

Moreover, whatever the outcome of the NGBT process, movement toward widespread application of the principle of national treatment will eventually take place if the GATS procedure for "progressive liberalisation" (discussed in Chapter 3 of the Report) operates as expected. However, as progressive liberalisation rounds need not begin until the year 2000, widespread achievement of national treatment may be considerably delayed, and with it the fuller opening of members' markets for telecommunication services.

Institutional Arrangements

The key elements of WTO institutional arrangement (other than the Secretariat), so far as they affect trade in telecommunication services, are:

• The NGBT, at present the main arena for negotiations concerning trade in telecommunication services. The NGBT is open to participation by all WTO member countries. Its "full participants" (as distinct from observer participants) are committed to actively negotiating market-opening measures.
• The Council for Trade in Services, to which the Marrakesh Agreement delegates authority to administer the GATS. More particularly the Council is charged by the GATS with a duty to establish "disciplines" to ensure that national regulations concerning licensing of other members' service providers, as well as other similar requirements, are objective, transparent, and neither unduly burdensome nor restrictive of cross-border competition in a manner inconsistent with the GATS principles.
• The Dispute Settlement Body (DSB), has power to settle disputes by interpreting agreements "in accordance with customary rules of interpretation of public international law". The first step toward resolving a dispute that has been notified to the DSB is for the members to enter into consultation [13]. If the consultation and settlement process has not resolved the issue the DSB may, after investigation and determination of facts by a "panel" appointed by the DSB, authorize the aggrieved member to suspend the application to the offending member of "concessions or other obligations" previously entered into by the aggrieved member. Alternatively the offending member may offer compensation to the complaining member on terms that are mutually acceptable, though compensation is voluntary.

Of these three elements of the WTO machinery, the NGBT is, at least for the moment, the most important in terms of its likelihood of making a major difference to telecommunications policy in the Participants of the NGBT during the next five years.

The NGBT's working methods are described in detail in Chapter 7 of the report. The centrepiece of the NGBT process is the negotiation, by "full participants", of "offers" of market-opening measures, which will eventually become commitments if the NGBT negotiation is successful. Offers are put forward by governments of NGBT Participants or, in the case of the 15 countries of the European Union, by the European Commission. All offers follow, with minor variations, a standard format, shown in Exhibits ES1 (which represents the blank format) and ES2 (which reproduces the NGBT's "Model Schedule", and explains the kinds of content appropriate to the various parts of the blank format). The three columns in the table deal with:

• Limitations on market access: What are the barriers (such as monopoly rights of an incumbent telecommunication operator, restrictive licensing [14], or foreign-ownership restrictions) to participation by foreign companies in the national market [15]? In what ways, if any, is the member in question offering to reduce these barriers? The general provisions of the GATS require that the level of market access indicated in the offer must be made available to service suppliers of all members on an MFN basis unless the offering member has been exempted from the MFN obligation. Some members were so exempted at the time GATS came into force; in addition, the WTO may exceptionally waive MFN obligations either by consensus of the members or, failing that, by agreement of three-fourths of the members [16].

• National treatment: In a broadly similar way, commitments on "national treatment" concern how and to what extent national law and regulations and other "governmental measures" will ensure that foreign service suppliers are treated in the same way as domestic service suppliers. Here again, MFN applies unless a specific "exemption" is granted.
• Additional commitments: These concern regulatory policies (for example, as regards interconnection of competitive entrants' networks to the PSTN) and regulatory processes needed to make competitive "market access" and non-discriminatory "national treatment" a reality in practice.

As of late November 1995, 28 of the 31 full participants in the NGBT (including the European Commission, representing 15 countries) have made offers, covering a total of 42 countries, almost all of which are major markets for telecommunications services. A further 28 countries are participating as observers. Observer countries are being encouraged, by the most active participants and by the WTO Secretariat, to become full participants; and full participants who have not yet made offers are being encouraged to do so.

Exhibit ES.1

STANDARD FORMAT USED IN THE SCHEDULES FOR NATIONAL COMMITMENTS

COUNTRY X

* PHB note: Illustrative examples from the full list of categories used.

Exhibit ES. 2

NGBT DRAFT MODEL SCHEDULE OF COMMITMENTS ON BASIC TELECOMMUNICATIONS

COUNTRY X

As participants in the NGBT negotiate about the contents of the "offers" that will become "schedules" of binding commitments if and when the NGBT reaches agreement, the most important substantive issues they are haggling over are:

• Authorisation of service suppliers from one member to operate in another. Will AT&T, for instance, be entitled to operate in Spain in its own right, and not necessarily through an alliance, unless it freely chooses that approach to market entry? Will NTT of Japan be entitled to build and operate a long-distance telephone network in Canada?
• Foreign ownership restrictions. Does a member limit the extent to which foreigners may own shares in any telecommunications company operating within its territory?
• Regulatory policies. An agreement that in principle allows carriers from Country B to operate in Country A, but gives them no rights to interconnect to the PSTN at reasonable prices [17] (or at all), will be of limited value in opening up the marketplace to competition. Thus a degree of agreement on regulatory policies on interconnection and a number of other critical issues discussed in this report is an essential component of an overall NGBT agreement.
• Regulatory processes. An agreement that in principle grants to companies from Country A rights to operate (for example) a cellular service in Country B, subject to availability of frequencies, will be of little value in opening up the marketplace to competition if the process of assigning the limited available frequencies is so discretionary and obscure (lacking in "transparency") that a company from Country A can in practice be denied access to frequencies (or delayed for years) "behind closed doors", and thus effectively excluded from Country B's market. Consequently, characteristics of national regulatory processes inevitably form part of the agenda of issues that the NGBT must negotiate.

Members that already have fairly "transparent" regulatory decision-making processes [18] (Australia, Canada and the US, for example) may or may not be willing to accept a far-reaching agreement for the opening of national markets without significant changes in the national regulatory policies and/or processes of other countries. The indications so far are that they will insist on such changes: both Canada and the US have submitted documents spelling out the kinds of changes they are seeking.

Exhibit ES.3 characterises the kinds of issues addressed in national offers submitted during the NGBT process. It is intentionally a "common sense" classification chosen because the authors believe its categories will be meaningful to readers in the telecommunications community; its categories do not correspond exactly to those of the "Model Schedule".

Exhibit ES. 3

CLASSIFICATION OF SUBSTANTIVE ISSUES ADDRESSED BY OFFERS MADE THROUGH THE NGBT PROCESS

Each national offer carries a qualifying statement similar to the following:

This offer is conditional. Country A reserves the right to modify, extend or reduce this offer at any time prior to the conclusion of the negotiations on basic telecommunications, depending, inter alia, on the number of offers by other parties; on the degree to which these offers are equivalent and mutually acceptable; and on the extent and significance of any exemptions from the MFN obligation sought by other parties.

The process of negotiation is a subtle one, including not only interaction between Participants in the NGBT but also between each Participant's delegation and the various arms of government that determine telecommunications policy in its home country. As Exhibit ES4 illustrates, the periodic deadlines for presentations of versions of the national "offers" alternate with formal meetings of the NGBT, informal NGBT meetings at the level of senior officials, and periods set aside for bilateral negotiations about the contents of the offers. As this process goes on, offers are slowly and incrementally "improved". Broadly, the process works like this:

• Initially, the offers made by most Participants represent little or no change of position relative to the current situation concerning access to their national markets.
• A small number of Participants make offers which do represent substantial changes from today's situation, either by changing existing ground-rules for foreign entry to the national market, and/or by changing existing ground-rules that do allow such participation but only as they apply to companies in some other countries (as in the UK and the US today), so as to make the same opportunities available to companies from all WTO members on an MFN basis. (Offers currently on the table from the EU and the US, if converted into binding commitments, would bring about changes of both kinds.)
• Bargaining then takes place between these delegations (the authors of this Briefing Report call them the "leading bidders") and the others, in which the leading bidders seek to persuade the others to improve their offers. This bargaining takes place to a limited extent through statements at formal NGBT meetings but mainly through bilateral consultations. The leading bidders' principal bargaining cards are:
• the threat that their offers might be withdrawn, partially or wholly, if the others do not improve their offers;
• the prospect that the leading bidders' offers might be further "improved" (i.e. modified to take them still further in the direction of open markets) if the others improve their offers;
• the argument that, quite apart from the bargaining process, the benefits which have accrued to countries that already have competitive telecommunications markets, strongly point to a self-interest on the part of the other countries in moving towards competitive market structures.
• At the next stage (which has now begun), if all goes well the others improve their offers, and additional full participants make offers for the first time, so that the process gradually moves towards a successful outcome:
• the leading bidders keep their offers on the table and may even improve them;
• the others gradually improve their offers; some even become leading bidders themselves and apply pressure on the remaining laggards.
• Alternatively, if the process goes badly, the others fail to improve their offers sufficiently to maintain the momentum of the process, and few additional countries among the full participants make offers. The negotiating process then winds down: the leading bidders narrow their offers or begin to withdraw them. As a result no agreement is reached at all in NGBT, or (more likely) a form of nominal agreement is reached which involves little substantive commitment by members to open their national markets.

So far, the NGBT negotiations are at the stage where delegations are being urged to improve their offers. Some delegations have in fact indicated that they will consider doing so: the European Commission, for example, has indicated that it might be possible to negotiate away all or some of its remaining restrictions on foreign ownership.

Exhibit ES.4
Work Schedule of the negotiating group on basic telecommunications (NGBT)

1994													1995												1996
.	J	F	M	A	M	J	J	A	S	O	N	D	J	F	M	A	M	J	J	A	S	O	N	D	J	F	M	A	M	J	J	A	S	O	N	D
Major WTO Events	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	..	.	.	.	.	.	.	.	.	.	.
Quest- ionnaire Process	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	..
NGBT Meet- ings	.	.	.	.	6 May	.	11 July	.	.	24- 26 Oct	.	12- 13 Dec	.	27- 28 Feb	.	26 Apr	.	.	12- 13 Jul	.	20 Sep	6 Oct	17 Nov	15 Dec					.	.	.	.	.	.	.	.
Periods set aside for bilater- al nego- tiations	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	18- 22 Sep	.	13- 17 Nov	11- 15 Dec	.	.	.	.	.	.	.	.	.	.	.	.
Offer process/ final- isation of schedules	.	.	.	.	.	.	.	Jan- Apr Original deadline for draft offers		.	.	.	.	.	.	.	.	.	.	.	.	.	.	Dec- Jan Dead- ine for revised offers	Feb- Mar Dead- line for draft schedules	Mar Dead- line for final schedules	.	.	.	.	.	.	.	.	.
NGBT goals	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	Dec Comp- lete work of outstand- ing regu- latory issues	.	.	.	Apr- May Target date for NGBT Agree- ment and report to Council for Trade in Services		.	.	.	.	.	.	.

A critical question concerns whether major developing countries will make offers that open their markets to a significant degree. If an NGBT agreement has the effect of opening major growth markets in these countries to competition, this may be viewed very favourably by the developed industrial countries. If it does not do so, an NGBT agreement would still have some attractions for the advanced countries, but it is questionable whether they will be willing to let its requirements for MFN and national treatment prevent them from using rights to participate in the national markets (as they do today) as a bargaining counter in bilateral negotiations over issues such as reducing excessively high accounting rates or obtaining reciprocal market access.

From the point of view of the developing countries themselves, the critical question is whether there is enough benefit to them from joining the group of countries that have made substantial offers to open their markets to competition. One point of view argues that the resulting flow of investment, technology and management skills into their national telecommunications markets is highly desirable, and may even represent a critical precondition for their other industries to achieve or retain international competitiveness. Another view emphasises the "infant industry" argument: that national carriers in developing countries need time to adapt to "best practice" before being exposed to the full blast of international competition. Still other commentators argue that competitive entry is incompatible with maintaining the universal service obligations of the established ("incumbent") PTO, or at least that developing countries need an extended transition period in order to put effective arrangements in place to safeguard universal service provisions [19].

One possibility for a compromise might perhaps be found along the following lines. If governments of some developing countries feel that their national carriers are not ready for international competition, they have the option of making a market-opening offer in NGBT that retains, for a fixed number of years, a limitation on the maximum allowable degree of foreign ownership but otherwise allows entry of new carriers that are partly foreign-owned. This would stimulate a flow of capital and know-how into the country concerned while, through joint ventures, strengthening the locally-based carrier or carriers rather than challenging them head-on. Concerns about universal service can be met by imposing on all carriers either obligations to provide service to rural or disadvantaged areas, or to contribute to the costs of doing so.

There is little to indicate that telecommunications policy in any country has yet changed in any major way since the Marrakesh Agreement was signed in April 1994. Nevertheless, it is likely that such changes will take place:

• As a result of general obligations arising from the GATS

or

• As a result of a future agreement arrived at through NGBT, or possibly subsequent negotiations held in fulfilment of the general GATS commitment to "progressive liberalisation".

We consider both of these aspects in turn.

Implications of existing GATS provisions

It would appear that the GATS and the Telecommunications Annex do already have significant, though limited, implications for three types of interested parties, specifically:

• National governments and regulators, though not yet subject to the kind of detailed WTO treaty obligations concerning independence of the regulator, transparency of regulatory decision-making and equal treatment of local and foreign companies that may emerge from the NGBT negotiations [20], do already have general transparency obligations under the provisions of the GATS. These general obligations imply limits on the extent to which national regulators can act in an arbitrary manner, or take decisions based on undisclosed criteria, in matters such as licensing or assignment of radio frequencies, in a manner that disadvantages foreign providers of telecommunications services.
• Telecommunications operators, while not directly subject to any obligations arising from the Marrakesh Agreement, may find themselves subject to decisions made by their national governments as they fulfil their own obligations under the Agreement. If, for example, their government has made commitments to unrestricted market access and national treatment for electronic-mail services in its Schedule (as 37 members did) they are likely in due course to find that (if national regulatory rules do not require this already) their national regulator will require them to interconnect foreign-owned electronic-mail networks to their PTTNS on the same terms that they provide to operators of locally-based electronic mail services.

The general nature of the language of the GATS and the Telecommunications Annex makes it difficult to be certain exactly what the practical implications of their obligations will be in the day-to-day decision-making of national telecommunications regulators and ultimately the operations of telecommunications operators. To some extent, this will depend on what interpretations of these provisions are generally accepted: the questions involved are discussed in detail in Chapters 3 and 4. It is also possible that the "General Obligations" will be clarified by the settlement of disputes, rather as case law clarifies the meaning of national legislation drafted in broad and even ambiguous terms. For example, it is possible that at some stage a government, acting on behalf of a potential telecommunication competitor frustrated in attempting to enter the telecommunications market in another member country, may initiate a complaint under the Dispute Settlement Understanding, and that the outcome may set a clarifying precedent.

Implications of the possible outcomes of negotiations in the NGBT

The outcome of the NGBT negotiations still lies in the future (April 1996 at the earliest). It is still possible that the NGBT will produce no agreement, or an agreement that represents no large advance relative to today. In the authors' view, however, there is a reasonably high probability that such a stalemate will not occur.

If the NGBT produces agreement including a substantial degree of opening of markets in at least a major sub-category of member states (i.e. all or most of the "full participants" in the NGBT), it is likely to have some or all of the following implications for national governments and telecommunications regulators, and for telecommunications carriers, in these member states.

Possible implications for national governments and telecommunications regulators

The government and regulator of a given NGBT Participant (Country A say) may, depending on the NGBT outcome, become committed to:

• Permitting service suppliers from other WTO members to provide services to and from Country A, reselling existing infrastructure capacity such as leased lines and marketing their services in Country B [21], without limiting this freedom of action to suppliers based in other countries that have a similarly open market (i.e., the right to operate in this way would be made available on an MFN rather than a strictly reciprocal basis)[22].
• Permitting telecommunications operators based in other WTO members to build network infrastructure in Country A and compete in the national market using that infrastructure, again on an MFN basis.
• Abolishing or greatly reducing limitations on foreign ownership of telecommunication operators building and operating network infrastructure in Country A.
• Ensuring that "governmental measures" in Country A concerning network interconnection give telecommunications operators from other countries (or which are wholly or partly foreign-owned) rights to interconnect with the existing public network in Country A, which rights:
• do not exist only on paper but are sufficient to ensure practical value,
• are equivalent to those made available to domestic telecommunications operators.
• Ensuring that where rights to use scarce resources such as radio frequencies (or privileges such as powers to carry out construction work using public rights-of-way) are granted by government, they are granted in such a way as not to discriminate against foreign operators or against domestic operators which are wholly or partly foreign-owned.
• Adjusting regulatory institutions or processes to meet agreed standards of transparency: for example, such standards might concern publication of the process for making decisions about licensing or the criteria for the decisions; publication of filings by the interested parties; or rights of appeal [23].

Possible implications for telecommunications service suppliers

If all or some of the provisions listed above do emerge in an eventual NGBT agreement, the implications for telecommunications operators would include all or some of the following in all or some of the NGBT full-participant countries, depending on the content of their Schedules of commitments:

• The automatic right to provide cross-border services such as calling-card "country direct" or resale carrier services (often referred to generically as "light carrier" services) in NGBT countries other than their home country.
• The right to establish new network infrastructure and to become a facilities-based carrier in certain member countries.
• The right to interconnect either light-carrier service or (if Schedules permit) new facilities-based services to the PTTNS on terms that are reasonable and equal to those available to domestic telecommunications operators.
• The corresponding necessity of facing competition in their home country, if their home country has made major market-opening commitments in its NGBT Schedule, from entrants from any WTO member country, since these entrants will, under the MFN principle, enjoy the rights listed in the previous paragraphs.

Of course, all this is speculative. It may not happen. Nevertheless, the possibilities listed above all have a substantial foundation in offers already made in the course of the NGBT negotiation, although these offers may still be withdrawn or scaled down if the Participants making the offers consider that substantial progress towards open markets has not emerged.