THE CHANGING ROLE OF GOVERNMENT
IN AN ERA OF TELECOM DEREGULATION

TRADE AGREEMENTS
ON TELECOMMUNICATIONS: REGULATORY IMPLICATIONS

Report of the Fifth Regulatory Colloquium
held at the ITU Headquarters

6 -8 December 1995


TABLE OF CONTENTS

PART I - INTRODUCTION AND SUMMARY

PART II - WTO'S PRACTICAL IMPACT ON REGULATORS

  1. Overview
    1. GATS' General Obligations and Disciplines
    2. Additional commitments
  2. WTO's Impact on specific regulatory areas
    1. Market Access
    2. Licensing
    3. Interconnection (Domestic)
    4. Interconnection (International) and Accounting Rates
    5. Competition Policy
    6. Frequency Spectrum Regulation

PART III - IMPLICATIONS FOR DEVELOPING COUNTRIES

PART IV - RELATIONSHIP OF THE ITU AND THE WTO

PART V - CONCLUSIONS AND RECOMMENDATIONS

List of participants

Summary Description of WTO regime

Colloquium discussion outline

EXECUTIVE SUMMARY OF BRIEFING REPORT



PREFACE BY THE SECRETARY - GENERAL OF THE ITU

I am extremely pleased to introduce the Report of the Fifth Colloquium on the Changing Role of Government in an Era of Telecom Deregulation, which was held at ITU Headquarters in Geneva from 6-8 December 1995.

The Fifth Colloquium considered a subject which is likely to become increasingly central to the realm of telecommunications: namely the impact which the emerging free trade regime of the Word Trade Organization (WTO) will have on national telecommunication regulation and regulators, as well as on the telecom industry generally. The Colloquium took the highly innovative step of inviting as participants key officials and policy makers involved in current WTO negotiations, along with the normal complement of telecom regulators and policymakers. I also had the pleasure of welcoming Mr. Warren Lavorel, Deputy Director General of the WTO, as well as the expert WTO staff officials on telecommunications, Mr. Neil McMillan of the UK, Chairman of the WTO Negotiating Group on Basic Telecommunications (NGBT), the group established by the WTO to make further progress on extending the regime to basic telecommunications; and a number of government officials active in the NGBT.

The meeting's purpose was educational and analytic: to explain to the telecom community how their activities will be effected by the new WTO regime, and at the same time to convey back to the trade community of policy makers and negotiators some of the special complexities and considerations posed by the telecommunications industry that need to be taken into account in extending a multilateral free trade regime to telecommunications.

The unstinting cooperation of our colleagues from the trade community was critical to the success of the meeting, and for this I am most appreciative of the support of the WTO community, beginning with its Director General, Renato Ruggiero.

The meeting was once again made possible by the generous funding of the Friedrich Ebert Foundation of Germany (FES), and for this critical help I am most appreciative to the FES and to the director of its Geneva office, Dr. Erich Vogt.

As I noted in my Introduction to the Report of the First Colloquium, the concept of the Colloquia originated with David Leive when he was Chairman of the ITU's Telecom '91 Regulatory Symposium in Geneva in October 1991. An extensive round of informal consultations with experts from many countries led Mr. Leive, Ambassador Gerald Helman, who provided critical assistance, and me to conclude that the Colloquium would meet a significant need and be of great practical value to many countries. This forecast has been more than borne out by the success of the five Colloquia and the widespread use of its Reports.

In view of his outstanding leadership of the Colloquia, I asked David Leive after the Second Colloquium to continue as permanent Chairman. As we have come to expect, he was done his usual admirable job in organizing and conducting the Fifth meeting.

The results of the Fifth Colloquium are reflected in the following Chairman's Report by Mr. Leive. Together with several of my senior colleagues, I participated throughout the three day session, just as I had at the first four Colloquia.

The Report describes the consensus of the participants on the principal issues discussed, but does not represent individual participants' views.

This publication also includes the executive summary of the Briefing Report prepared by a distinguished independent expert, Michael Tyler, which was presented to the Colloquium in draft form to serve as a basis of the discussions. The full Briefing Report will be translated and distributed to all administrations this winter. Both the executive summary and the Briefing Report reflect Mr. Tyler's own research and views, and are not products of the Colloquium discussions themselves.

Planning is now underway for subsequent meetings. The Sixth Colloquium, scheduled for September 1996, will consider the impact upon the national telecom regulator of the growing convergence of conduit and content. The Seventh Colloquium is scheduled for April 1997, on a topic to be selected.

The Colloquium represents an important continuing initiative to consider, in an informal, expert and practical way, some of the fundamental issues of telecommunications regulation that arise from today's fast-changing telecommunications environment. The Colloquium is non-governmental in nature, privately financed, and brings together, in their individual capacities, high level telecom officials and experts from a diverse range of countries. The participants meet in Geneva for three days to formulate practical advice designed to be of immediate benefit to policy makers, regulators and business communities in developed and developing countries alike.

Participants in the Fifth Colloquium noted the increasing efforts that are now being made by the ITU itself, and by the World Bank, to more widely disseminate the results of the five Colloquia, recognizing that the underlying purpose of the activity is that the global community of telecom policy makers, regulators, and private sector participants should benefit from the focussed work of these Colloquia.

I firmly believe that the Fifth Colloquium constituted an historic occasion marking the practical cooperation between the WTO and ITU, reflecting the shared goals of both organizations to foster telecom regulatory reform so that countries may fully benefit from modern technologies and competitive forces to develop their national economies. I look forward to working in close partnership with Director General Ruggiero, Deputy Director General Lavorel and their able staff to achieve these shared goals for the benefit of our members.

Pekka TARJANNE
Secretary-General
Geneva, January 1996


PREFACE BY THE DIRECTOR - GENERAL OF THE WTO

Access to modern telecommunications services is an essential condition for success in the development of national economies and in international trade. Telecommunications is both a vital underlying means of transport for all forms of economic activity and a traded service in its own right; one in which private operators and competition are assuming an ever more prominent role.

These realities have been recognized by the community of nations in the Marrakesh Agreement which, under the auspices of the General Agreement on Trade in Services, made telecommunications subject to the rules of the multilateral trading system. Progressive liberalization of basic and value-added telecommunications networks and services through the introduction of competition will greatly reduce the cost of doing business and could make a real difference to economic growth rates. But much remains to be done to ensure that business and consumers reap the full benefits of the phenomenal improvements in technical efficiency which are now being made.

The first priority is to reach a successful conclusion of the extended WTO negotiations on basic telecommunications in April 1996. A key ingredient in this processs, and in all future negotiations to introduce market forces in telecommunications, is to broaden the dialogue between the trade and telecommunications communities so as to foster mutual understanding of the trade disciplines and of the unique characteristics of the sector. For example, the application of the trade principles of most-favoured-nation treatment, national treatment and market access will have important implications for both traditional and newly evolving regulatory practices, technical requirements and public policy objectives.

For this reason, I was pleased to accept the invitation of Secretary-General Tarjanne for the WTO to participate in the Fifth ITU Regulatory Colloquium and welcomed the opportunity for WTO and ITU staff to join with trade and telecommunications experts from some of our Member nations in this beneficial exchange of information and ideas. The results of this constructive exchange are contained in the Report by the Colloquium's chairman, David Leive, and I earnestly commend it to your attention. The Chairman has offered a number of practical conclusions and recommendations which reflect some of the insights gained by each of our communities about issues and problems faced on both sides.

I wholeheartedly endorse Pekka Tarjanne's call for closer co-operation between the WTO and the ITU, and - still more important - between the trade and telecommunications administrations within each country. We, at the WTO, look forward to promoting close collaboration in a variety of formal and informal ways to achieve our common goals. This valuable Colloquium served as one such vehicle.

Renato RUGGIERO
Director-General

Geneva, January 1996



CHAIRMAN'S REPORT

PART I  -  INTRODUCTION AND SUMMARY

It has become commonplace to observe that telecommunications has entered a period of explosive, global growth. This telecommunications revolution has been marked by the unleashing of technological change, competitive forces and the privatization of state monopolies, the creation of consortia of service providers which are global in scope, and of wholly new services embodying advanced capabilities often targeted to the specific needs of businesses or individual consumers.

Less noticed, but of great potential significance to the future growth and stability of the industry, has been the beginning of a multilateral governmental response to this telecommunications revolution. In the trade field, it was expressed when the Marrakesh Agreements, signed in 1994, for the first time squarely placed the provision of telecommunications services within the pre-existing framework of global trade negotiations.

Why Did This Happen and What Does It Mean?

Technological and market forces are changing the telecommunications industry from a state industry with special status (and often under state ownership) to one in the mainstream of trade. The globalization of national economies, the trend towards "information economies" and open access, the greater interest of the state in telecommunications as a key factor in national development, the significant decreases in costs in the sector which have facilitated entry, the fact that telecommunications is an essential infrastructure to facilitate trade in goods and services now being covered within the trade framework, such as financial services, and the creation of global telecommunications companies and consortia, all have contributed to bringing about this change. Telecommunications is now seen as the modern trade route.

The efforts to place telecommunications in a trade setting, if they continue to be successfully pursued, will certainly add to the momentum of the telecommunications revolution, with major benefits for all countries. Whether there is an orderly transition from today's partly monopolistic and nationally regulated bilateral trading system in telecommunications to one in which trade barriers are largely discarded and such established free trade principles as Most Favored Nation (MFN) treatment within a multilateral framework are applied will depend in part on establishing a strong dialogue between trade experts and those in the field of telecommunications.

Such a dialogue is especially important in the case of national telecommunications regulators and policy-makers, who will have the task of adapting, in the face of the practical operational realities of managing a national telephone system, to a future new global free-trade regime. The aim of contributing to the process of orderly transition, which is in part one of mutual education, led the Regulatory Colloquium to convene a representative group from the fields of telecommunications and international trade to discuss the impact of the emerging free trade regime on the regulation of telecommunications. (For a list of participants, see Attachment 1.) It is a contribution to a process which certainly will have to continue in order to enable all countries, and particularly developing and newly-industrializing countries, to deal with the economic and technological realities of the 21st century.

* * *

The Marrakesh Agreement culminated the latest multilateral "round" of trade negotiations under the auspices of the General Agreement on Tariffs and Trade (GATT). It established a new international organization, the World Trade Organization (WTO), replacing the GATT, with new powers and procedures. Part of the Marrakesh Agreement is a General Agreement on Trade in Services (GATS). The GATS is the first global trade agreement which contains treaty provisions applicable to telecommunications; one of GATS' Annexes is a Telecommunication Annex, which clarifies and extends some of the GATS provisions as they apply specifically to telecommunications. In addition, schedules to GATS contain commitments by which fifty-seven WTO members open their national markets to international competition in varying degrees. For the time being, these commitments apply chiefly to value added services. Lastly, at Marrakesh, countries were unable to reach agreement on major market-opening measures for basic telecommunications, so a new mechanism, the Negotiating Group on Basic Telecommunications (NGBT), was established to deal with this fundamental issue.

The NGBT is meeting on a frequent schedule with the objective of reaching an agreement by April 1996 on market-opening measures concerning trade in basic telecommunications services.

There is a growing convergence of goals of the ITU and WTO to increase the value and utility of telecommunications to society as a whole, and to foster telecommunications regulatory reform so that countries may fully benefit from modern technologies and develop their national economies. However, not all ITU members are members of the WTO, and even for the 100 or so countries which are members of both, there is a surprising lack of information and understanding among the telecommunications community about what the WTO is, what it does, and what impact it is likely to have on their telecommunication industries and their telecommunications regulatory regimes. Perhaps even more importantly in that context, are the potential impacts on each nation state's broader public interest goals - general economic growth and job creation, the opportunity to fully participate in the growing global trading system, and social benefits of opportunities such as distance learning and telemedicine.

A purpose of this report, then, is to describe to that telecommunications community what it should know about the new trade regime, and what can be inferred about its likely impact on their regulatory practices.

The report is addressed to the trade community as well. Just as the telecommunications community needs to become fully cognizant of the potentially radical changes that may come about as a result of bringing telecommunications within a trade framework, so the community concerned with international trade policy needs, in order to do its job better, to appreciate the particular complexities of the telecommunications industry and regulatory structures.

For these reasons, the Colloquium concluded that it was essential that this Report be distributed as widely as possible.

At the same time, while this report assesses the impact of the WTO regime on telecommunications regulation and regulators, and indeed on nation states' policies, it is too soon to be prescriptive about the precise impact. Many questions are still unresolved, although the general direction is clear.

Why Does It Matter?

The Fifth Regulatory Colloquium was mainly concerned with:

1) Understanding the evolving world of negotiations and agreements concerning trade in telecommunications services, including its impact on developing countries and how developing countries might associate themselves with the process to their best advantage;

2) Assessing the implications for national telecommunications regulation of the existing GATS Agreement;

3) Considering the substantive options available to the NGBT negotiators, particularly their merits and disadvantages from the point of view of national telecommunications regulation, and the eventual implications of the NGBT for both national and international regulatory issues.

The existing agreements affecting telecommunications (GATS, its Telecommunications Annex and the Schedules), that form part of the overall Marrakesh Agreement of 1994, despite considerable limitations and ambiguities built into them, do substantially modify the environment for national telecommunications regulation. They do this by seeking to open national markets, by creating general "obligations and disciplines" that are binding on World Trade Organization (WTO) member governments, and (in the case of the National Schedules) committing WTO member governments. For that reason, the Marrakesh Agreement foresees a far-reaching change in international trade in telecommunications services, with direct impact on national regulatory regimes. For example, by requiring publication of regulatory rules in the interests of "transparency", and requiring national regulation to be carried on in a manner which does not impede trade, the Marrakesh Agreement will require many telecommunications regulators to adapt their rules and practices. (See Attachment 2 to this Report for a tabular description of selected obligations of the GATS and their scope of application.) They also modify the environment for national regulation, insofar as the "specific commitments" that were made (initially and primarily for value added services) in Schedules to the General Agreement open new markets to the oversight of binding multilateral trade rules.

Moreover, the negotiations currently taking place under the auspices of the NGBT may well result in Most­Favored Nation (MFN) treatment and new specific commitments which extend the open-market principles of market access, transparency of laws and regulations, and national treatment to a range of telecommunications services that in the past has mostly been supplied by monopoly or exclusive service suppliers. Of equal importance, the NGBT negotiations may well refine and extend the pre-existing general obligations of the GATS concerning regulatory practices through what are called additional commitments, also inscribed in schedules.

The inclusion of telecommunications in the Marrakesh Agreement reflects fundamental economic and technological changes in telecommunications, which can only be very briefly summarized here:

1) The emergence of new kinds of telecommunications networks, services and modes of commercial operation (in both developed and developing countries) which facilitate competition. For example, the private sector is engaged in the development of global satellite based wireless systems whose capabilities and costs assume the availability of a global marketplace and the open trade access that it implies.

2) The transition of many advanced industrial economies towards a high degree of specialization in services and in information and communication-related economic activities.

3) The convergence of telephone and computer networks (e.g. voice on the Internet).

4) Economic pressures for further efficiency.

5) As a consequence, the growing importance of telecommunications as the modern trade route, that is, the mode of delivery of other services and goods.

6) As a further consequence, an increasing national need to treat telecommunications as a "normal industry", and not to regard it as a "special" industry or "natural monopoly" requiring governmental ownership or other treatment different from that generally afforded other sectors.

7) The recognition that a modernized telecommunications system is central to the economic development of all countries and that privatization and economic liberalization of telecoms is a critical condition for attracting the capital needed to achieve telecommunications modernization.

Thus, pressures for the extension of the multilateral trading system to include telecommunications (and other information-related matters such as intellectual property rights) are a natural outcome of fundamental economic and technological trends. At the same time, governments in many countries, developed and developing, are debating the balance between the economic benefits of competition, and other policy concerns such as extending service to underserved population groups, maintaining universal service obligations, and maintaining some continuing governmental role in the telecommunications sector and the stream of revenue it provides.

Trade issues in telecommunications arise for at least four distinct, but related reasons:

1) Because telecommunications networks are an important infrastructure for the exchange of all goods and services, such as financial services, tourism, professional services and other information-based services.

2) Because the transition to competition in telecommunications makes the issue of market access, always a critical part of trade negotiations (the ability to sell a service into a foreign market, for example), of central importance.

3) Because successful trade negotiations about telecommunications require reforms to the national telecommunications regulatory regime so as to permit genuine competitive opportunities to the domestic and foreign entities which have been afforded market access.

4) Because issues concerning telecommunications relationships between countries or between telecommunications operators in different countries that have traditionally been handled within the ITU framework, such as issues concerning accounting rates and correspondent relations between international telecommunications operators, also arise in the context of international trade negotiations.

Within this context, the Colloquium first sought to define the agenda of issues facing national policy makers and regulators. It then considered the impact of the new WTO regime upon the domestic telecommunications regulator, and the factors which telecommunications regulators and policy makers felt the NGBT negotiators should bear in mind. Issues emphasized in the discussion included:

1) Telecommunications institutions at the national and international levels need to adapt to a new agenda and approach derived from the world of competitive markets under binding international trade rules; and conversely those working in trade/policy institutions and negotiations need to become more familiar with the operational realities of the telecommunications industry and make effective use of the expertise and capabilities of telecommunications institutions at both national and international levels.

2) The telecommunications legislation of WTO member countries must enable government policy-makers and regulators to fulfill the obligations they have under the GATS and the Telecommunications Annex. In particular, regulators in certain cases may need additional powers or a revised legislative mandate, in order to fulfill their new obligations.

3) The "general obligations and disciplines" of the GATS, and the specific commitments in Schedules to the GATS, in conjunction with the Dispute Settlement Understanding (DSU), will have a major impact on the work of national telecommunications regulators. For example, WTO dispute panels may review practices of national regulators. The possibility of such review is likely to lead over time to some changes in national regulatory practices. This has not happened yet under the existing GATS regime, but it seems likely to be only a matter of time before it does. It could become an important practical reality if the NGBT negotiations conclude successfully; the commitments made on market access and national treatment and the disciplines under GATS which those commitments imply, all will impact upon regulatory institutions, processes and policies. Such commitments would also be subject to the DSU process. A need for resorting to the DSU would be reduced if the commitments, including the "additional commitments" on regulatory frameworks which ensure real market access, were clear and sufficient to avoid the "nullification and impairment" of market access commitments which is the focus of DSU decisions.

4) The WTO regime will encourage foreign direct investment in the expansion and upgrading of national telecommunications infrastructures, by reducing regulatory uncertainties and hence perceived investor and operator risk. Potential investors or service suppliers who want to enter the market in a particular country normally confront uncertainties and subsequent negotiations concerning that country's regulatory practices or "rules of the game". Both would be significantly aided if governments commit in the NGBT process to a regulatory regime that promotes investment and competition and that is subject to an independent and open review on the national level and perhaps also, on occasion, through the international dispute settlement process.

5) A successful outcome of the NGBT negotiations is likely to facilitate increased economic efficiencies and structural changes in the global telecommunications industry in such areas as new strategic alliances, international correspondent relationships between national carriers, and the legitimization of non-traditional suppliers of services (for example, international resellers) which are now benefitting from arbitrage among the traditional suppliers of international services, operating within the traditional correspondent framework.

6) Developing countries may need to devise an approach to the new business environment arising from world trade negotiations in telecommunications in order to:

The Colloquium's conclusions and recommendations can be found in Part V.

PART II  -  WTO'S PRACTICAL IMPACT ON REGULATORS

A. Overview

To summarize the close link between trade issues and national telecommunications regulation:

1) GATS imposes some general obligations concerning national regulation, including those relating to transparency. However, it does not require any particular form of national regulation.

2) Each WTO member must determine whether its national regulator has sufficient powers to fulfill its GATS obligations.

3) WTO members who enter the NGBT process must decide what additional changes, if any, in their domestic arrangements, may be required in order to reach agreement within the NGBT.

4) More specifically, the national regulator, together with the country's trade negotiator, must carefully consider the degree and extent to which it wishes to reserve its regulatory discretion in a wide variety of different circumstances. Such "reservations" may include:

5) In framing its position, the national regulator must take into account the fact that any questions which may arise later concerning its conformity with the general obligations of GATS, and with its own country's Scheduled commitments, will be subject to the dispute settlement (DSU) process.

6) Should the national regulator wish to preserve its ability to exercise regulatory discretion regarding competitive supply of basic telecommunications services in ways that are inconsistent with those existing obligations of the GATS that apply to "specific commitments" (but not otherwise), (e.g. provisions requiring objective, transparent and non-discriminatory rulemaking in Article VI), then it should not schedule GATS commitments on the basic telecommunications services concerned. If no commitments are scheduled for a particular telecommunications service, then MFN treatment would be the principal obligation incurred (unless an MFN exemption is taken).

7) A government must also determine if it needs to take an exemption from MFN treatment, whether or not it schedules commitments. Typically, an MFN exemption would permit a regulator to use reciprocity (for example, an assessment of the degree of market access in the country of origin of the applicant) as a basis for decisions whether or not to permit a firm to supply a particular telecommunications service. If regulators were to desire to apply such "reciprocity tests", an MFN exemption would be necessary, but it is important to bear in mind that MFN exemptions by major players would certainly cause the NGBT negotiations to unravel, thereby subjecting global telecommunications liberalization to a series of costly, non-uniform, and unpredictable bilateral deals which would lack consistency and the framework for an orderly transition which addresses changes in the industry.

Part II A considers the "baseline" obligations which are undertaken by all WTO member states through their participation in the Marrakesh Agreement, such as those requiring "transparency" of the domestic telecommunications regulatory regime. Part II B then considers the impact of the WTO regime upon specific, functional responsibilities of the telecommunications regulator, such as licensing and interconnection.

1. GATS' General Obligations and Disciplines

The Marrakesh Agreement and subsequent international trade negotiations within the WTO framework can have an impact upon the work of national telecommunications regulators in several different ways:

1) As a result of the "general obligations and disciplines" arising from the GATS and the Telecommunications Annex relating to regulatory practices.

2) As a result of the general obligation of MFN treatment - not to discriminate among suppliers on the basis of national origin, unless an exemption has been taken by the government concerned.

3) As a result of specific market access and national treatment commitments pertaining to certain sectors and sub-sectors

4) As a result of "additional commitments" concerning national telecommunications regulation (substantive regulatory policies and/or regulatory process and institutions) that some WTO members may undertake in the course of the NGBT negotiations.

These general obligations and disciplines (See Attachment 2 for their substance) concern:

The impact of these "general obligations and disciplines" will vary according to the structure of each country's market, along a continuum from monopolistic to highly competitive. A few examples will illustrate the impact of the GATS provisions.

1) Monopolistic Settings - Even in a country where a single telecommunications operator has been granted a comprehensive monopoly, and the government has made no commitment in its Schedule to the GATS to change this, the combined effect of the "general obligations and disciplines" with scheduled specific commitments made concerning services other than telecommunications (e.g., broadcasting, tourism, professional services, financial services) may have an impact upon the regulation of telecommunications. This happens because Article VIII of the GATS requires that each Member of the WTO "shall ensure that any monopoly supplier of a service in its territory does not ... act in a manner inconsistent with that Member's obligations under ... specific commitments" and because the Annex on Telecommunications requires reasonable and non-discriminatory access by other service suppliers to such telecommunications networks for the supply of scheduled (competitive) services, e.g., financial services.

2) Limited Competitive Entry - A different situation exists where there is competitive entry and the relevant WTO member government has committed itself (via its national Schedule) to maintain market access for foreign operators, but the former monopoly retains substantial market power. There are several aspects:

a) Consider, for example, the case where competitive entrants need interconnection rights to the pre-existing network because the monopoly operator retains a monopoly of the local loop; although competition may exist for long distance and/or value-added services. Here a different provision of Article VIII of the GATS is particularly important: "Where a Member's monopoly supplier competes in the supply of a service outside the scope of its monopoly rights and which is subject to that Member's specific commitments, the Member shall ensure that such a supplier does not abuse its monopoly position to act in a manner inconsistent with such commitments". This presumably means that a telecommunications operator in this situation would not be permitted to abuse its monopoly of the local network in order to compete unfairly with a foreign entrant in the (competitive) value-added long distance or international business, for example, by denying its competitor local interconnection or leased lines, overcharging for these services, or providing them at low levels of quality.

b) Of equal importance, Article VI imposes various duties on the regulator where the Member has made specific commitments in its GATS schedules. For example: "the Member shall not apply licensing and qualification requirements that nullify or impair such specific commitments ". If the government or regulator does so, the DSU may be applicable.

c) Even where no market access commitments have been scheduled, the regulators of a WTO member government must apply MFN treatment. As a result, where some degree of liberalization of certain telecommunications services already exists in practice, or if it is newly introduced, regulators may not discriminate in favor of foreign suppliers from any country or against suppliers from any WTO Member. Unless an exemption from the general MFN obligations of the GATS is filed with the WTO (which, if not filed by the close of the NGBT negotiations by end April 1996, is only possible through approval of a waiver by other WTO members) the regulator cannot favor, for example, Japanese suppliers over French suppliers on the basis of their nationality in granting licenses to supply any liberalized services, whether or not a Schedule commitment was taken for the service concerned. As a result of not scheduling, the criteria used for granting any such licenses cannot relate to the nationality of the foreign supplier.

3) Competitive Markets - In highly competitive markets, the provisions of Article IX of the GATS, concerning Business Practices, continue to be important to ensure that national telecommunications operators do not act in a manner calculated to unfairly disadvantage foreign participants in the national market, although Article IX mainly imposes an obligation to consent.

Another issue concerning the baseline obligations relates to "transparency" requirements. Article III of the GATS and Article 4 of the Telecommunication Annex impose a requirement on national regulators to publish tariffs and other conditions applicable to end users. These transparency requirements could in some instances conflict with local requirements for commercial confidentiality, although Article III bis provides that "Nothing in this Agreement shall require any Member to provide confidential information, the disclosure of which ... would prejudice legitimate commercial interests of particular enterprises, public or private". More significantly, if the national regulatory practices can be shown not to be consistent with these transparency requirements imposed by the GATS, the country concerned may be subject to the DSU process.

The Colloquium concluded, however, that these transparency provisions are as yet untested, and it is not possible to be too definitive about their scope or likely practical impact.

2. Additional commitments

In international trade negotiations about basic telecommunications, achieving an agreement to remove barriers to international competition (such as that being sought in the NGBT) may involve the negotiation of "additional commitments" in Members' schedules concerning regulatory institutions, processes and policies from a "critical mass" of countries. This need arises because, in the absence of such provisions, governments that are willing in principle to make commitments about market access and national treatment in telecommunications and to adhere to WTO principles may not be willing or able to fulfill the commitments in practice. Many negotiators believe that granting market access alone may not be sufficient without ensuring, through an effective regulatory regime, fair opportunities to compete. Governments whose negotiators take this position may be unwilling to proceed unless other governments not only make significant commitments to market access and national treatment, but also agree to accompany such commitments with "additional commitments" about regulatory matters.

Thus, market access and national treatment commitments are the chief objectives of the NGBT, but such commitments may not of themselves be sufficient to assure market access in practice. To help achieve that actual market access, additional commitments are sought. A successful outcome to the NGBT process is likely to involve regulatory elements, such as provisions concerning:

1) regulatory institutions: for example, whether the regulator is independent of the incumbent telecommunications operator and national industrial interests.

2) regulatory processes: for example, whether there are measures ensuring that the decision­making process is known, and is non-discriminatory.

3) substantive regulatory policies: for example, policies concerning interconnection between carriers (as discussed at length in the Fourth Regulatory Colloquium's Briefing Report).

Two broad conclusions emerged from the Colloquium discussion on this subject:

1) There is a need to ensure that the "additional commitments" are specific enough to:

2) Nevertheless, "additional commitments" should not be so detailed that they:

Finally, the Colloquium recognized that it is simply too soon to determine whether a "critical mass" of countries will be prepared, either through the NGBT process or otherwise, to subject their national regulatory regimes within the next several years, not only to fundamental reforms (which many countries have been undertaking anyway), but also to place such hitherto national regulatory processes for basic services squarely within the multilateral trade framework, with its special disciplines, procedures, and dispute settlement mechanisms.

B. WTO's impact on specific regulatory areas

1. Market Access

Under the heading of "market access", the Colloquium concluded that:

1) National regulators may need to revise their regulatory policies in order to implement specific market access commitments that their governments have made in the Schedules to the GATS, or may make in the future through the NGBT and other future negotiations.

2) Market access commitments are made on an MFN basis, but MFN exemptions may be taken, once the current suspension of the application of MFN during the NGBT negotiation comes to an end. The scope and number of such MFN exemptions is not yet clear. For countries which are participants in NGBT negotiations, in the event that a substantive agreement on opening the market for basic telecommunications is reached through the NGBT, MFN exemptions will be limited by the desire to reach an agreement.

3) It may (or may not) be considered acceptable, even where market access and national treatment commitments and MFN obligations apply, for national regulators to continue applying very general criteria which give the regulator wide discretion in practice and process, especially if the results or perceived results could be inconsistent with general GATS principles.

4) Restrictions on foreign ownership and investment may no longer be sustainable.

5) National regulatory policies other than licensing, considered below, may impede the achievement of market access and national treatment. "De facto" Limitations may be perceived to be the equivalent of "non-tariff" barriers.

The Colloquium's more specific conclusions in this area were:

1) Review of Legislation - National governments and national telecommunications regulators will need to closely review the adequacy and suitability of national legislation and regulation to allow for the implementation of both the "general obligations and disciplines" of the GATS, and specific commitments made in 1994 in the Schedules to the GATS (or in any subsequent Schedule commitments that arise from the NGBT and future negotiations). For example, national regulators will need sufficient powers to ensure that carriers which have monopoly rights act in compliance with Article VIII (Monopolies and Exclusive Service Providers) of the GATS.

2) MFN - Three main points emerged from the discussion of MFN:

3) Regulatory Discretion - Concerning the question of how much discretion should be left to regulators, and how differing implementation and enforcement approaches by national regulators can be reconciled with market access and national treatment commitments, the Colloquium considered that handling of this subject through additional commitments may be appropriate in the context of NGBT. It is clear that a solution that is acceptable to a sufficient number of governments must be found in order to allow an agreement to be reached in the NGBT that commits members to a major move towards more open markets in both law (de jure) and practice (de facto), and one that is clear enough to provide the basis for the DSU process.

4) Foreign Ownership - Concerning the question of foreign ownership, the discussion made it clear that, at this stage, foreign ownership or control of new entrants to the telecommunications operator business may be handled differently from foreign investment and equity participation in the incumbent carrier, but that governments should eventually reconcile the two. For example, some governments have been willing to allow majority foreign ownership for new cellular services but not for established fixed services. For those WTO members with monopoly PTT's, how much foreign ownership is to be allowed in that entity?

5) Relationship to Other National Policies - Concerning the relationships between other aspects of national regulation and market access, three important issues emerged:

2. Licensing

The Colloquium recognized that the way national regulators perform their licensing functions will change to some degree as a result of the 1994 Marrakesh Agreement, and potentially will change to a larger degree (at least in some countries) as a result of any future agreement arising from the NGBT negotiations. Such changes may affect regulators' licensing activities in three ways:

1) By changing the way they must conduct their licensing process.

2) By changing whom they do or do not license.

3) By changing the license conditions the regulator will impose.

The first of these points has already been considered in Part II A of this report. The second and third are considered below.

The conduct of licensing in accordance with the requirements of the GATS, the Telecommunications Annex and existing GATS Schedules, and in accordance with any further agreement that may be reached through NGBT, involves significant challenges. Even if the NGBT negotiating process did not place pressures on participating WTO members to make "additional commitments" concerning regulatory processes (which it does), WTO member governments, including those not participating in the NGBT, will often need to enhance their national regulatory arrangements to meet these challenges, because these are general obligations under Articles VI, VIII and IX of GATS.

For example:

1) The relationship between license conditions and general policies (for example those concerning universal service and measures to enforce competition policy), will often need to be clarified. In practice today, for example, many regulators use licensing to implement policies concerning market structure. To take another example, license conditions are often used as a protection against anti-competitive behavior in many countries, including those that introduce competition but do not have a competition law framework that applies to this regulated sector.

2) If a commitment is to be made, it is extremely important to schedule any limitations or restrictions on the number of licenses granted (whether, for example, because of radio spectrum limitations or due to a desire not to grant rights to build in public rights of way to large numbers of operators). Any regulations which have not been scheduled and that in practice have the effect of denying the market access and national treatment indicated in a Schedule can be challenged through the dispute settlement machinery set up by the DSU. It is critical, then, that if the telecommunications regulator wishes to preserve any restrictions or limitations, it ensures that they appear in the relevant national schedule, or are consistent with the requirements of Article VI (e.g., objective technical standards).

Normally, telecommunications regulators reach considered judgements on the many elements involved in issuing licenses based on a weighing of the relevant financial, technical and policy considerations. But when related commitments are made within the WTO framework, these domestic telecommunications regulatory and technical considerations must be based on objective criteria and be no more burdensome on the licensee than is necessary to attain the regulator's legitimate policy goals (GATS Article VI). It is difficult to determine in advance how these obligations will be interpreted in practice. If additional commitments in this area are negotiated, it is important to ensure that they do not unnecessarily curtail the exercise of reasonable regulatory discretion, while remaining consistent with the general GATS principles.

3. Interconnection for Domestic local and/or Long­Distance Services

For national governments' commitments to market access and national treatment to be fully effective in practice, agreement on interconnection rights is required. The terms of scheduled "additional commitments" that might embody such an agreement must be specified concretely enough to be enforceable and effective, but must not be specified in so much detail as to restrict unreasonably the flexibility of national regulation. The aspects that commitments on interconnection should address are:

1) Pricing of Interconnection: General principles are needed to assure a level competitive playing field (along the lines of developing further the concept of "cost orientation"), but these should be general principles and not detailed rules.

2) Quality and functionality provided: the right of interconnecting carriers to receive interconnection services of sufficient functionality and quality, on a timely and non-discriminatory basis, is also important. For example, dialing parity (known in some countries as equal access) is an important aspect of interconnection functionality, enabling telecommunications users to choose a new carrier without having to dial a large number of extra digits. An important related aspect is the numbering plan. This, though less dramatic than the frequency spectrum issue, is an important factor in rendering competition viable in practice. Managing the numbering plan is a regulatory function, even though the regulator can delegate all or part of it to the industry and retain only some regulatory oversight.

Once more, the challenge is to define general principles that, while general, are concrete enough to achieve effective commitment to make market access and national treatment a reality, and to provide a sufficient basis for resort to the DSU should that prove necessary.

3) Network Architecture: The ability of carriers to interconnect to the public network in a manner appropriate to carrier operations (e.g., co-location or "trunk side interconnection"), as distinct from interconnecting like an end­user ("line side interconnection") is important to making market access effective. Another important aspect concerns the physical locations of "points of interconnection" where interconnection is provided. Here again, the challenge is to establish the best balance between general principles and detail.

4. Interconnection for International Services, and Accounting Rates or Network Access Termination Charges

The future evolution of the traditional correspondent relationship between national operators, involving accounting rates and settlements for international telecommunications traffic, should be seen as part of the problem of achieving, in practice, market access, MFN and national treatment for cross­border supply of services. Alternatives to today's accounting rate system (for example, an MFN based "termination charge" or cost-oriented access charge to interconnect international traffic) have been proposed in the NGBT, OECD, and ITU. Proposed alternatives generally represent proposals for putting payment for delivery of international traffic from one national carrier to a correspondent in another country on a basis similar to the pricing of domestic interconnection. In the long run, convergence between these two types of payment for interconnection for international telecommunications traffic has merit, and is, in any case, likely to develop where specific market access and national treatment commitments for basic telecommunications have been made, as a result of competitive market forces, technology or the breakdown of the correspondent system.

There are two practical possibilities: either the international service continues to be provided by an international operator in one country to a subscriber in another country on a cross-border supply basis ("Mode 1" in GATS terminology) or the international operator establishes itself in the corresponding country, delivers the international traffic to itself in that country and then, often via domestic interconnection arrangements, delivers the traffic to the subscriber (Mode 3). In the first case there would be some international access charge applied at the border of the corresponding country. This would replace the accounting rate. However, a means would still need to be found to compensate the corresponding carrier for the use of its international facilities. In the second case there would be no accounting rate necessary because the originating operator would deliver the traffic to itself in the corresponding country. In the first case the correspondent country would not necessarily have to commit to allowing entry to foreign operators in its international telecommunications market, though it may nevertheless make certain commitments with respect to the access charge applied to the international traffic delivered to its borders. In the second case, the government of the correspondent country would make market access and national treatment commitments with respect to the entry of foreign suppliers of international traffic. There might also be additional commitments pertaining to interconnection.

The issue of a fundamental restructuring of the existing correspondent system of accounting rates is not being addressed in the NGBT for the following reasons:

1) No universally accepted alternative has been proposed.

2) The manner in which MFN would be applied to the current system of accounting rates is uncertain.

3) The net hard-currency revenue from international calls is an important source of foreign exchange in some developing countries, and thus the inclusion of provisions concerning accounting rates in an agreement arising from the NGBT may make it difficult to secure agreement among a large number of countries in relation to issues being negotiated in the NGBT. Even if there is no agreement in the NGBT on the matter, however, developing countries may be increasingly faced with a situation in which the large international carriers will no longer be willing to pay such countries as much as they are today for terminating their traffic.

4) Practical problems of moving from today's network of bilateral relationships to a multilateral MFN or cost-oriented framework may lead to changes in the accounting rate regime being phased-in on a bilateral and regional basis first.

5) While issues involving changes to existing levels of accounting rates are being discussed in the NGBT, there is a considerable disagreement about whether accounting rates are the result of "governmental measures" or the outcome of "commercial negotiations" (or both), and to what extent an intergovernmental agreement can impose changes to commercial agreements.

The Colloquium concluded that, quite apart from the impact of the WTO, the present accounting rate system itself is unlikely to survive very long because of the strong pressure on tariffs caused by competitive entry by foreign operators, and the possibility which that competition brings of "through carriers" or global alliances in the future seeking to deliver their own traffic to the destination country and interconnecting at domestic tariff rates.

5. Competition Policy

Safeguards against anti-competitive behavior by market participants are necessary parts of national regulatory regimes for telecommunications. The task of implementing such safeguards may be entirely entrusted to an industry-specific telecommunications regulator applying competition and telecommunications law; entirely entrusted to a general competition-policy body working in conjunction with the courts; or entrusted to a combination of the two. It needs also to be kept in mind that many developing countries do not have a competition policy, or competition policy institutions.

The existing "general obligations and disciplines" of the GATS already address some of the responsibilities of the agency or agencies charged with devising and applying competition policy as it applies to telecommunications.

It is possible that "additional commitments" made in the course of the NGBT negotiations will further amplify and clarify their responsibilities, at least for those countries whose governments make such commitments. Here, too, a balance must be struck: on the one hand, there is a series of requirements that must be incorporated into a country's competition policy; on the other, too great a specificity may unduly limit the flexibility of the national regulators to implement the country's own competitive policies. For example, how specific should a country's proposed additional commitment on competition policy be on such matters as cross­subsidies within the operations of dominant suppliers, accounting safeguards or structural separation, and misuse of customer related information? It is not clear how far countries should go, in the NGBT process, to lay down conditions on national competition policy.

6. Frequency Spectrum Regulation

Decisions on frequency spectrum issues constitute one of the key responsibilities of national regulators. These decisions are often expressed in terms of granting licenses by deciding on the applicable technical criteria and then, for suppliers of radio communications services, selecting the "winner" or winners from among contending applicants, who may include both domestic and foreign entities. Given that spectrum is a limited resource, a variety of situations may arise:

1) A country adopts a certain radio standard or spectrum sharing scheme, and then rejects the license application of entities proposing the use of a different standard or scheme. Can it be challenged in the WTO regime on the grounds that it limits the number of potential operators?

2) The national regulatory authority rejects the application of both foreign and domestic carriers for a given portion of the spectrum because it has reserved the use of the spectrum requested for other purposes which are also consistent with its obligations under the ITU Radio Regulations.

3) The use of the radio spectrum is commonly associated with state security issues, such as police and national defense. It should be noted that Article 48 of the ITU Constitution provides Member States with full freedom concerning their military radio installations. In addition, Article XIV of the GATS contains a "public order" exception. For these reasons, it is not at all clear that the transparency requirements under GATS would require publication of information related to the state security use of the radio frequency spectrum.

4) A national regulator has decided to license, say, six domestically owned cellular operators with frequency spectrum apportioned among the six operators. Does it have the right to reject a seventh applicant, whether foreign or domestic? Can its decision be reviewed on the grounds that the regulator could have established eight licenses and thus admitted additional foreign competitors?

Several conclusions can be drawn about these cases:

1) It is necessary for governments to determine the extent of the commitments they will make concerning national treatment and market access (e.g., what limitations they will indicate) concerning telecommunications services that use the radio-frequency spectrum. This decision will dictate whether the same treatment must be given equally to foreign and domestic entities, how many licenses must be granted, if any, and the limitations that can be applied to foreign equity participation in (or control of) licensees. The key point is that a commitment will mean that the rejection of a foreign applicant for a spectrum license, or the imposition of conditions, must be consistent with the scheduled commitment, with MFN treatment (except where exemptions apply), and with the disciplines of the GATS, for example, Article VI.

2) Once commitments are made, the possibility needs to be recognized that a losing applicant may persuade its government to initiate a dispute-settlement proceeding under the DSU, on the grounds that the GATS market access commitment has been breached by denial of the license or the imposition of restrictive conditions, even though the national regulator may have reasonably believed it was entitled and justified to act as it did.

3) Governments will need to decide whether, and to what extent, to take an MFN exemption, if they intend to discriminate in favor of suppliers from a particular country, in radio-based services for which they will take commitments, or even if they do not make specific commitments for such services.

4) Judgments about how to manage particular radio-spectrum allocations at the national level, (e.g. whether to divide a particular allocation into two blocks or four blocks for assignment purposes), can have a significant impact upon the licensing processes. These judgments involve complex technical, market and policy matters, as well as technical coordination with other governments to minimize interference in the use of the spectrum. Nevertheless, there is a possibility that differences of opinion about the reasonableness of these judgments may lead to dispute-settlement proceedings under the DSU.

PART III  -  IMPLICATIONS FOR DEVELOPING COUNTRIES

The Colloquium extensively considered the implications of the Marrakesh Agreement and the NGBT negotiations for developing countries.

As of 30 November 1995, of the 184 ITU members, 114 were WTO members, while an additional 39 were observers, many of which are in the process of accession to the WTO. 45 countries were participating in the NGBT (15 are represented by the European Union), 27 countries were observers, and the NGBT had before it 28 offers from 14 countries (offers from the 15 countries of the European Union being presented as one). Of the 45 participants in the NGBT, eight were major developing countries. Of the 14  countries which had made offers, three were developing countries.

In particular, the Colloquium concluded that:

1) Impact - Even if current national policies remain unchanged and NGBT reaches no agreement, the impact of the Marrakesh Agreement on the evolution and functioning of the market for telecommunications services will be felt in developing countries as well as in advanced industrial countries through increased volumes of telecommunications traffic and easier access to sources of information.

2) Participants - There are significant potential benefits to developing countries from a fuller participation in market-opening measures negotiated through WTO, especially in terms of:

On the other hand, there is a probability of some reductions (or at least reduced growth) in hard-currency revenues, resulting from a drop in international accounting rates. This potential loss will have to be balanced against long term gains from competition and better telecommunications services.

It was also recognized that in some developing countries, an agreement on telecommunications services may be part of a "package deal" involving other traded goods or services (for example, oranges, telecommunications and tomatoes may be put in the same basket).

3) Whether and How to Participate - As a consequence of each country's evaluation of its interests, different developing countries may adopt different positions regarding participation in NGBT; for example:

Developing countries' offers might be designed to accelerate access to new technology and experienced management via international alliances and need not involve commitments or concessions as far-reaching (at least in the early years of their application) as those offered by advanced industrial countries.

The Colloquium reached some additional conclusions:

The governments of many developing countries are not fully aware of the significance of the negotiations underway. For this reason, it is important to disseminate information to developing countries to increase the level of awareness of the WTO regime and implications, so as to encourage the governments of these countries to join in the NGBT efforts towards market liberalization. It is also important to ensure that a country's trade negotiators are in close contact with their telecommunications colleagues and thus become fully aware of the implications for the telecommunications sector. For a series of practical recommendations addressed to a group of African countries with respect to WTO issues, see coordinated African Programming of assistance on Services (CAPAS) and Telecommunications Development Bureau (BDT) of the ITU, Report on Policy Study of Five African Countries and Negotiations and Concessions under General Agreement on Trade (GATS), Sanou and Moshiro, October 1995.

This information should clearly indicate the opportunities and benefits of joining the process, as well as the consequences of joining or not joining. For example:

1) A country cannot join the NGBT process until it becomes a WTO signatory.

2) A country that is a WTO signatory but does not commit to NGBT before it concludes its work in April 1996 can at any time submit commitments to open up its market, without having to wait until the next round of negotiations (which will begin in the year 2000 at the latest). However, a country loses the advantage of participating in the NGBT process and thus influencing the negotiation.

3) Likewise, a government that is a WTO signatory that signs on to an agreement arising from the NGBT, but with significant limitations built into its Schedule, may increase its commitments and reduce the limitations at any time. However, it again loses the advantages that might have been gained by using these concessions to gain bargaining leverage during the NGBT process itself.

4) If a WTO signatory schedules no commitments in the context of the NGBT, it will nevertheless benefit, to the extent actually possible given the capabilities of its telecommunications operators (and given MFN exemptions that may be taken by NGBT participants), from the commitments made in the NGBT by other governments. This will only be true, however, if other governments are willing to accept the outcome of the negotiations as substantial enough to enable them to keep their offers on the table, and forego (or minimize) their MFN exemptions.

5) If a WTO member government has not made any commitments in telecoms (either in the Schedules to the 1994 Marrakesh Agreement, or in the context of NGBT) and takes no such action by 30 April 1996, it has no obligations to liberalize basic telecommunications service. It retains the benefit of the MFN approach, but would also need to apply MFN to any subsequent liberalization measures it decides to take. If it wished to retain flexibility not to apply MFN, then such an MFN exemption would need to be registered by 30 April 1996.

Developments in international telecommunications (regardless of NGBT), with global alliances whose existence puts accounting rates in question in the long term, the introduction of competition in developed countries and an increasing number of developing countries, with consequent pressure on the present very high margins on international tariffs against steadily falling technology-based costs, all lead to the conclusion that the present revenues enjoyed by developing countries through the accounting rate system are under threat. Developing countries are likely to benefit from embracing the WTO principles of market opening and allowing foreign investment as a way of keeping up investment needed to bring their networks to a level allowing them to compete internationally and attract investment in other economic activities to speed their development.

PART IV  -  RELATIONSHIP OF THE ITU AND THE WTO

The Colloquium recognized the complementary roles of the WTO and ITU as regards trade agreements on telecommunications, and made the following suggestions. These suggestions fall into two categories: basic issues concerning the nature of the ITU's responsibilities, and operational issues concerning cooperation between the two organizations:

Basic Issues

In addition to its impact on national telecommunications regulators and policy makers described above, the WTO regime will have a substantive impact on ITU activities with regard to such matters as accounting rates and the trade related aspects of frequency spectrum policy. Ways need to be found for the two organizations to study such potential impacts together.

The discussion in the Colloquium made it clear that the issues being addressed in trade negotiations are inseparable from many complex and technical issues which have been pursued in great depth, and over many years, through the ITU. They include:

In supporting trade negotiations in telecommunications (and administering the resulting agreements), it is important for those negotiators to bear in mind that the ITU represents a network of treaty commitments and administrative practices which have contributed to the huge growth of telecommunications in recent dates. It will clearly make sense for the WTO Secretariat (and national delegations to the WTO) to make extensive use of the deep expertise on those and other relevant matters that exists within the ITU. Equally, ITU members and the ITU Secretariat will need to monitor closely the trade impacts of work carried out in ITU Study Groups, given that in such a dynamic industry with a clear global dimension, only in exceptional cases will there be issues which are solely technical.

Operational Issues

The following suggestions for cooperative approaches can best be undertaken on an informal and practical basis.

1) As trade and telecommunications officials at the national level need to cooperate more closely with each other, information should be exchanged between the two organizations and the secretariats so as to assist each in better discharging their respective responsibilities. For example, officials from the ITU member states and from the ITU Secretariat may consider providing: a) specific information concerning such matters as national and international (respectively) spectrum management policies and processes; b) specific information on accounting rates; c) expert advice requested by WTO panels in connection with DSU proceedings, to the extent such advice could be provided consistent with the time limits of the DSU. For its part, the WTO may consider providing to the telecommunications community comparable information about its procedures and processes.

2) The two organizations should consider collaborating in organizing regional workshops to educate those in both the public and private sectors on pending GATS/NGBT issues.

3) The ITU's practice of extensive private sector participation in its work, particularly in its working groups, might usefully be extended to selected joint WTO/ITU activities.

4) In order to implement these suggestions, and others that undoubtedly will arise, and reflecting the commitment to cooperation in the Prefaces to this Report by Director General Ruggiero and Secretary General Tarjanne, it is suggested that the two secretariats consider establishing a high level, informal working committee to explore these matters.

PART V  -  CONCLUSIONS AND RECOMMENDATIONS

This Part summarizes some of the Colloquium's principal conclusions and recommendations. More detailed sets of specific conclusions are found throughout the report.

1) Telecommunications have irrevocably been drawn into the trade regime, specifically GATS, and must increasingly conform in practice at the international and national level with accepted trade practices within a multi-lateral framework:

On the multilateral level, each country should give priority to reviewing its interest and assessing whether and how to associate with the WTO/GATS process.

2) Not all ITU members are members of the WTO. Those not participating in the WTO must keep themselves informed about the impact of the Marrakesh Agreement. The large body of countries already covered by GATS and the Telecommunications Annex, and especially the significant number who may make future commitments through the NGBT, will undoubtedly lead the legal and regulatory environment for the telecommunications industry into a new phase of development.

3) A transition thus is underway. The end point will be:

i) more open market access and greater competition; and

ii) far-reaching changes in current international telecommunications arrangements, such as accounting rates and correspondent relations. The question is, how to most effectively manage that transition?

4) Much will depend on the results of the NGBT negotiations, and an evaluation of the impact of the WTO on telecommunications must await that event. A successful NGBT conclusion will bring impetus for additional change to the rapid moves towards liberalization and open market entry already apparent worldwide.

5) For example, the concept of market reciprocity, reflecting the current bilateral basis for international telecommunication, is fundamentally inconsistent with a multilateral regime based on the Most Favored Nation principle. Moreover, affirmative action by a WTO member government is needed by 30 April 1996 if it wishes to exempt itself from the MFN principle for basic telecommunications. This is so even if the government is undertaking no market access or national treatment commitments, or undertaking no additional commitments in the NGBT about its internal regulatory processes.

6) Central to the NGBT is the negotiation of market access and national treatment commitments, hopefully with a minimal number of limitations on such commitments. Market access is the key, but once committed, it is also important to assure that such market access in fact is available by appropriate safeguards in the national telecom regulatory regime. Such safeguards are conveyed by additional commitments by each WTO member concerning its regulatory regime. Market access without such regulatory safeguards may be ineffective in practice.

7) National trade and telecommunications officials will be faced, in the context of NGBT, with difficult choices in deciding whether and what types of additional commitments to make concerning their internal regulatory regimes for telecommunications so as to convince other countries that their market access commitments will in fact permit foreign entities to compete successfully. In making such commitments, national officials, in consultation with telecommunications regulators, must carefully balance the need for enough specificity in those commitments to make sure market access will work, and their business decision makers reassured, with the need to preserve national discretion and flexibility in dealing with such complex public policy matters as universal service, licensing, competition policy, frequency spectrum management, and interconnection policy.

8) National government and telecommunications regulators will also need to review the suitability of national legislation to allow for implementation of GATS commitments concerning issues such as competition policy, market access, fairness of regulatory procedures and "transparency" spectrum management and technical standards.

9) The exercise of regulatory judgement by national officials may be subject to review in the new dispute settlement procedures established in the WTO regime. While the WTO is not a world regulator, and is most unlikely to become one, if governments voluntarily schedule market access or additional regulatory commitments, the DSU may address whether the member governments' actual regulatory practices are consistent with their scheduled commitments.

10) Developing countries should be aware that the impact of the Marrakesh Agreement on telecommunications will be felt in all countries. For a developing country, fuller participation may well bring about:

11) Foreign investment in telecommunications infrastructures will be significantly promoted if investors and suppliers know that a country's regulatory practices are anchored in a multilateral setting and subject to an international dispute settlement process.

12) Developing countries should carefully weigh the advantages to them of participating in the NGBT process, and the potential costs (i.e. more limited access to private capital of not participating). Even if they decide not to participate, they need to clearly understand the processes of the WTO regime so that they are in a position to take timely decisions. They need to look at the next round under WTO likely to start before the year 2000, at the implications for those who sign up to the NGBT outcome or who will be bound by the existing GATS and Telecommunications Annex.

13) Recognizing that the goals and activities of the WTO and ITU are converging, there should be a close and continuing contact at the national and international levels between trade and telecommunications officials.

14) The WTO and the ITU secretariats should explore ways of informally cooperating, in view of the need for trade and telecommunications officials to keep closely in touch. They should consider organizing regional information workshops once the NGBT is concluded, and give wide and prompt circulation to this report.

* * *

The Colloquium Chairman wishes to thank the Friedrich Ebert Stiftung and the Director of its Geneva office, Dr. Erich Vogt, for the funding which made this Colloquium possible, the participants in the Fifth Colloquium for their generous commitment of time and effort, Ambassador Gerald Helman for his good counsel and judgment throughout the process, the ITU Secretary-General, Dr. Pekka Tarjanne, for his support, encouragement and advice, and other ITU officials who participated, and the WTO Director General, Mr. Renato Ruggiero, Deputy Director General, Mr. Warren Lavorel and staff who provided invaluable expert advice and assistance, both prior to and during the Colloquium itself.