[Congressional Record Volume 140, Number 140 (Friday, September 30, 1994)]
[Senate]
[Page S]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: September 30, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
                        U.S. COMMUNICATIONS LAWS

  Mr. PRESSLER. Mr. President, I was disappointed by Commerce Committee 
Chairman Hollings' announcement Friday that S. 1822 would not be 
considered by the Senate prior to sine die adjournment. I will not say 
that S. 1822 was a perfect bill. Commerce Committee members worked 
diligently to fashion a bill that would be acceptable to the Senate. As 
a member of the farm team, a group of original cosponsors of the bill 
who represent small city and rural areas, I want to commend Chairman 
Hollings, ranking minority member Danforth, and their staffs for their 
willingness to consider provisions to ensure that all Americans have 
the opportunity to benefit from advanced communication services, 
whether they live in New York City or Humboldt, SD.
  We need to revise our Nation's communications laws. The current 
statute is 60 years old, and does not address the realities of today. 
The Modified Final Judgment [MFJ] entered into by AT&T and the Federal 
court in 1982 is still in force. The Bell Operating Companies created 
by the MFJ to this day must seek relief from the judge charged with 
overseeing the 1982 agreement. These companies are proscribed from 
entering into the long distance service market and from manufacturing 
telecommunications equipment. These companies have been pursuing 
opportunities to expand their services through the U.S. court system. 
This is precisely why Congress must act. It is poor public policy for 
the U.S. judicial system to bear the burden of administering and 
adjudicating a significant segment of the Nation's telecommunication 
industry. Providing appropriate laws for this important industry sector 
is a legislative branch responsibility. I know many of my colleagues 
believe as I do that it is important for us to address this issue early 
in the next Congress.
  Failure to act on legislation to set appropriate guidelines for such 
an important industry would hurt us internationally as well as 
domestically. The U.S. telecommunications services and equipment 
industries are the most competitive in the world. Our 
telecommunications companies are in the international market and are 
doing well, frequently against great odds that are stacked against them 
in many countries.
  United States telecommunications executives in Europe privately have 
complained to me that the majority of the European Union [EU] member 
countries resist opening their markets. The Europeans will quickly 
point to United States restrictions on foreign ownership of radio 
licenses to make a weak argument that the United States market is not 
open. This is a red herring. The U.S. telecommunications equipment 
market is wide open. Ericsson, Philips, British Telecom, Siemens, and 
other European firms know this well and provide jobs to thousands of 
Americans in their plants in the United States.
  The United States has used quiet diplomacy to encourage the European 
Union countries to open their markets. The goal adopted by the EU was 
liberalization of all telecommunications markets by 1998. Earlier this 
year, I had an article printed in The Wall Street Journal outlining why 
the United States could not wait until 1998 for liberalization. I ask 
unanimous consent that this article appear at this point in the Record. 
Shortly after this article appeared, the European Parliament adopted a 
resolution to delay liberalization past the 1998 target. That is 
unacceptable.
  There being no objection, the article was ordered to be printed in 
the Record, as follows:

          [From the Wall Street Journal Europe, July 7, 1994]

                U.S. Callers Pay For Europe's Monopolies

                          (By Larry Pressler)

       U.S. communications companies are working hard to do 
     business in Europe. Their task is not easy. Despite Europe's 
     professed commitment to open its telecom markets, government-
     owned phone monopolies are still preventing U.S. firms from 
     competing on their turf.
       The failure of Europeans to open their markets affects not 
     only U.S. communications equipment and service suppliers. It 
     also affects everyone in America who uses a telephone, since 
     U.S. long distance carriers and their ratepayers must 
     subsidize European telephone companies. European nations 
     received approximately $554 million from U.S. carriers in 
     1993. Approximately $411 million were subsidies imposed on 
     U.S. carriers for the right to have customers' calls 
     connected in Europe.
       These subsidies are a direct charge to U.S. consumers: It 
     is estimated that the average U.S. international caller pays 
     $100 each year due to the above-cost accounting subsidies to 
     foreign telephone companies.
       Here's how it works. International carriers negotiate a 
     rate for calls placed between two countries. This negotiated 
     rate does not reflect the real economic cost of connecting 
     the call, nor does it reflect the rates charged in the 
     calling country. For example, Germany's Deutsche Bundespost 
     Telekom, a government-owned monopoly, could insist in its 
     negotiations with any of the 183 U.S. carriers offering 
     service from the U.S. that it will cost $1.18 per minute for 
     calls between the U.S. and Germany. This figure may be far 
     above the real cost.
       Deutsche Telekom has been able to price international calls 
     above the actual cost because there has been no other carrier 
     in Germany. The German collection rate for an international 
     call exceeds the actual economic cost of the call by as much 
     as 75%. In 1993, U.S. carriers paid Deutsche Telekom almost 
     $196 million as settlement for calls placed from Germany to 
     the United States. Approximately $146 million of this figure 
     represents a pure subsidy. Calling rates between European 
     countries are generally lower, though European consumers also 
     pay for the lack of competition in telecommunications by 
     higher rates than are found within, say, the U.S.
       The result is an irrational and anti-market system of 
     international communications whereby American international 
     long distance carriers and consumers are subsidizing phone 
     rates in Europe. The cost of sending a letter between points 
     in Europe and the United States is the same. But a telephone 
     call from Frankfurt, Germany, to Sioux Falls, South Dakota, 
     will cost significantly more if placed from Germany than from 
     the United States. This defies logic.
       The EU is scheduled to implement internal liberalization of 
     the telecoms market by January 1998. To be sure, some 
     progress is being made. European companies are exploiting 
     loopholes in EU law and lobbying politicians to open their 
     markets to competition. The electric utility holding company 
     Viag AG, for instance, will be offering telephone service to 
     big German companies in late next year, presenting for the 
     first time an alternative to Deutsche Telekom. The EU 
     Commission has supported this in principle, but the 
     bureaucratic hegemons of state telecom monopolies, flanked by 
     the unions, are not anxious to comply. Moreover, this spirit 
     of liberalization has not translated to open markets for 
     foreign competitors.
       By opening their basic telephone services market to 
     competition, the cost of calling would be reduced, 
     encouraging more Europeans to make phone calls to the United 
     States. Without market liberalization, the U.S. carriers--and 
     U.S. ratepayers--will continue to pay higher settlement costs 
     to European companies each year.
       The U.S. Congress should consider requiring the adoption of 
     a telecommunications trade-in-service agreement as a 
     condition for the implementation of the new GATT agreement. 
     No proposal is on the negotiating table currently and U.S. 
     negotiators report that, despite the rhetoric, real progress 
     on getting Europe to open its markets is slow.
       If the EU is unwilling to negotiate, the United States must 
     seek bilateral agreements with nations, such as the U.K., 
     that have made a real effort to liberalize their markets. If 
     the U.S. is to approve the proposed purchase of 20% of U.S.-
     owned Sprint by European telephone monopolies Deutsche 
     Telekom and France Telecom, then it is only fair that U.S. 
     companies be able to provide basic telephone services in 
     Germany and France.
       The U.S. market may be criticized for not being completely 
     open in all sectors, but it is still the most open market in 
     the world. If Europeans want to compete in our backyard, they 
     should be ready for the U.S. to compete in theirs. We cannot 
     wait until 1998.

  Mr. PRESSLER. The U.S. international telecommunications carriers pay 
settlement rates to European nations of approximately $554 million each 
year. Of this figure, $411 million is a pure subsidy. Worldwide, our 
carriers are paying $4 billion a year in settlement rates, of which an 
estimated $2.3 billion is a subsidy. This is not a small amount of 
money; it is a major outpayment of U.S. hard currency that is 
equivalent to approximately 30 percent of our total foreign assistance 
budget.
  International accounting rate settlements and foreign market 
liberalization must be given greater attention by Congress and the 
administration. I have no quarrel with the acquisition of stakes in 
U.S. carriers by foreign telecommunication companies. Indeed, such 
acquisitions may result in the accelerated liberalization of markets in 
France and Germany.
  AT&T Chairman Robert Allen addressed Comm Week's International 
Network Economy Conference in Washington Monday on this point. He 
forcefully addressed the U.S. international carriers' need for relief 
from paying excessive subsidies for the completion of telephone calls 
to foreign nations. I agree with Mr. Allen that the Federal 
Communications Commission [FCC] must give priority to the development 
of a comparable market access standard for foreign companies. I have 
written to FCC Chairman Reed Hundt about this matter, and I will have 
the opportunity to speak with him about it this week.
  Mr. President, I ask permission for AT&T Chairman Robert Allen's 
timely and frank speech to be printed in the Record at this point.
  There being no objection, the speech was ordered to be printed in the 
Record, as follows:

 Keynote Speech of Robert E. Allen, Comm Week International Networked 
                           Economy Conference

       Thank you Denis, and good morning everyone.
       It goes without saying that it's a privilege to keynote the 
     first session of this conference. And it's an honor to follow 
     Anne Bingaman.
       It's also a little ironic that the last time I was invited 
     to speak at a Comm Week conference in Washington, AT&T was in 
     the throes of acquiring NCR. Now we've just completed the 
     acquisition of McCaw Cellular.
       It's beginning to look like a major acquisition is a 
     prerequisite for getting invited; and if that's the case, we 
     can't afford to have me come back again too soon.
       When I was here in 1991, the term ``Information 
     Superhighway'' wasn't quite in mass circulation.
       Today some people object to that term on aesthetic grounds. 
     They're just plain tired of hearing it.
       But I have to confess, I like it.
       There's a good reason why the highway metaphor has become 
     so widely used. It's a form of short-hand for the collective 
     expectations people all over the world have for what 
     information technology can deliver.
       Expectations differ from country to country, from business 
     to business and household to household. But around the world, 
     there's a well-justified sense of excitement about the 
     benefits of emerging information technology. And more than a 
     little concern about how those benefits should be delivered.
       Part of the appeal of the superhighway is the image it 
     gives of high speed, high volume traffic with easy access.
       A highway system like that expedites trade in goods between 
     people in distant places. A Global Information Superhighway 
     should do the same thing for trade in information and 
     services.
       To build an information superhighway, we need a strong 
     foundation in the form of a global communications market that 
     offers the same kind of access and mobility associated with a 
     modern highway.
       We need a market where customers consistently have access 
     to competitive choices.
       We need a market that can provide multinational companies 
     with truly seamless, worldwide services.
       And we need a market where communications companies are 
     free to cross national borders to give customers the services 
     they want.
       Clearly, we don't have a market like that yet; not in most 
     parts of the world. The main reason we don't have it is the 
     lingering fear of competition, especially when it comes to 
     providing basic network services in countries outside the 
     United States.
       But anyone who went through the competitive revolution in 
     the United States over the last ten years understands the 
     benefits of competition to customers. And what's good for 
     customers is good for industries and countries.
       Conversely, any industry or country that ignores what's 
     good for customers is ignoring its own long-term interests.
       Earlier this month a group of visiting telecommunications 
     officials from developing counties in Africa met with FCC 
     Chairman Reed Hundt, who'll be speaking to us at lunch. He 
     told them it was an illusion to think that any nation can't 
     afford to have competition in its telecom market.
       Specifically, the chairman said, quote: ``Countries and 
     consumers can't afford NOT to have competition. Competition 
     helps lower prices, increase efficiency, improve and expand 
     service. It encourages the entry of the most modern 
     technologies and increases a country's competitiveness in the 
     world market.''
       We've all heard that the winds of competition are blowing 
     in communications markets around the world. And that's true. 
     The need for competition is recognized just about everywhere, 
     first and foremost by customers. But after years of 
     discussion, those winds of competition aren't much more than 
     a light breeze.
       In the industrialized countries of Western Europe, the 
     European Union has consistently called for liberalized market 
     access and competition. That's a sincere effort. But even the 
     most optimistic view of the EU's plans doesn't include 
     concrete market results for voice infrastructure competition 
     until 1998, at the very earliest.
       But one thing IS certain; the same trade barriers that are 
     impeding competition in the market for communications 
     services are also impeding construction of the Global 
     Information Superhighway.
       Consider the five principles of Global Information 
     Infrastructure issued by Vice President Gore at the World 
     Telecommunications Development Conference last March in 
     Buenos Aires.
       Number one, encourage private investment.
       Number two, promote competition.
       Number three, create a flexible regulatory frame work that 
     can keep pace with rapid technological and market changes.
       Number four, provide open access to the network for all 
     information providers.
       And number five, ensure universal service.
       I think those five principles make excellent construction 
     guidelines for the Global Information Superhighway. And they 
     remind us that technology alone won't get us where we want to 
     go.
       The most efficient rule for traveling on the Information 
     Superhighway is a high-octane blend of technology and 
     competition, with a light touch of public policy.
       The ideal mix differs from country to country. But too many 
     countries have trouble applying the competition element of 
     this formula--especially when it come to basis network 
     services in their own markets.
       On the other hand, the interest in technology has set off a 
     boom in infrastructure investment worldwide.
       You can pick up the Wall Street Journal or the Financial 
     Times almost any day and see headlines about high tech 
     alliances and budding multimedia services. But keep in mind 
     that two-thirds of the world's households don't even have 
     telephones.
       One half the world's population, about three billion 
     people, are still waiting to make their first phone call. 
     Never mind accessing a multimedia data base.
       So it's no wonder that visions of the Global Information 
     Superhighway look different in different parts of the world.
       But there's universal recognition of the link between 
     information technology and economic growth. Many countries 
     are playing catch-up, and playing it well, especially in East 
     Asia, Latin America, Eastern Europe and the former Soviet 
     Union.
       In fact, the UN just reported a record of $80 billion in 
     private foreign investment in developing countries last year. 
     And the majority of that investment went to countries with 
     ambitious infrastructure programs. Twenty-six billion went to 
     China alone.
       The growth of China's infrastructure is even more 
     breathtaking than the double-digit growth of its economy.
       China is expanding its national network at the rate of 12 
     million lines a year. Six years from now it plans to be 
     expanding at almost that rate--20 million lines a year. In 
     terms of capacity that's the equivalent of creating a new 
     Bell Atlantic or Nynex every year.
       China seems intent on realizing its potential of being an 
     economic superpower in the 21st Century. And its leaders 
     recognize that they need a world class information 
     infrastructure to make that happen.
       AT&T has memorandum of understanding with China that covers 
     a long-term partnership to provide services, equipment and 
     technology throughout the system. And I can assure you that 
     the Chinese not only have a voracious appetite for more 
     capacity, they also have gourmet tastes in technology.
       The Chinese government is determined that their information 
     infrastructure will be in the fast lane of the Global 
     Information Superhighway, and they are by no means alone in 
     that desire.
       I was in Saudi Arabia this summer for the launching of the 
     biggest single network expansion project ever outside the 
     United States. The Saudis are doubling their national 
     network, from 1.5 million to 3 million lines, all digital.
       The Kingdom of Saudi Arabia is looking for economic 
     diversification. And they, too, want an infrastructure that 
     can take full advantage of anything coming down the global 
     information superhighway.
       We've seen the same kind of determination at work in South 
     Korea, Mexico, Argentina and many other countries.
       But the newest chapter in the world infrastructure story is 
     being written right here in the United States.
       Until just the last few years, the market for transmission 
     and switching systems in the U.S. was huge, but barely 
     growing. That's changed dramatically.
       The regional Bell companies, GTE and some of their 
     competitors in the cable television business, are investing 
     in the technology to deliver multimedia consumer services--
     the kind of services people in this country associate with 
     the idea of an information Superhighway. We're working as a 
     technology supplier to both industries.
       The advanced state of technology is due in no small measure 
     to the advanced state of competition in the U.S. market. For 
     a variety of reasons, the fuel of choice on our National 
     Information Superhighway is blended in about equal parts of 
     technology and competition. And so far, public policy has 
     walked the fine line of supporting the expansion of 
     information technology while leaving the actual work to 
     competitors in the marketplace.
       There's still some work to do in getting the FCC and some 
     state regulators out of the business of regulating prices in 
     long distance. And we still have some work to do in 
     introducing competition into the local exchange market.
       That's the newest frontier in America's continuing 
     competitive revolution. And the action is centered right here 
     in Washington.
       Congress has been debating the first major communications 
     legislation in this country in 60 years.
       Unfortunately, events compelled withdrawal of the Hollings 
     bill in the Senate on Friday. So apparently there won't be 
     telecommunications reform this year.
       We've supported the Hollings bill because it provides a 
     logical approach to the expansion of competition.
       It anticipated the local exchange companies' eventual 
     freedom to enter the already competitive long distance 
     market. But not until the introduction of real competition, 
     in the local exchange market, where the local exchange 
     companies still have a monopoly.
       That arrangement strikes me as fair. And hopefully, these 
     principles will be part of any legislation proposed in 
     congress next year.
       Meanwhile, the size and relative openness of the U.S. 
     market have attracted competition from all over the 
     industrialized world. Unfortunately the open door policy of 
     the U.S. market has not generated comparable progress in 
     other countries. They want the freedom to compete for 
     customers in the United States, but they haven't taken 
     significant steps to dismantle their monopoly control at 
     home.
       I don't mean any disrespect to my fellow panelists or to 
     their companies. And I certainly don't want to suggest that 
     anyone in America should be telling another country how to 
     run its telecommunications system.
       France Telecom and the Deutsche Bundespost have created 
     some of the best technical infrastructure in the world. 
     They've been serving their own populations for most of this 
     century without any policy advice from the United States, 
     thank you very much.
       But the problems created by closed markets transcend the 
     borders of any one nation.
       The proposal of France Telecom and Deutsche Bundespost 
     Telekom to enter the U.S. network services market through 
     their investment in Sprint goes well beyond the internal 
     policies of any of the countries involved. It underscores the 
     question of whether America can afford to open the door to 
     competitors from countries which offer very little in the way 
     of comparable market access.
       If I may be permitted to answer my own question: The time 
     for this lop-sided arrangement is long past.
       Not just because it strikes many people as unfair, but more 
     important, it deprives U.S. customers of competitive choices 
     in the global market, and it poses the risk of reducing the 
     competition that's already the strength of the U.S. market.
       Meanwhile, business and residential customers are looking 
     for the best possible combination of price and service here 
     and abroad. They want the option of buying exactly the 
     services they want from the carrier of their choice. And they 
     want that carrier to meet their needs inside and across the 
     borders of other countries.
       Even putting aside the new information services that will 
     be coming down the superhighway, competitive access is 
     crucial for delivering the full benefits of the voice and 
     data services that make up most of the global market right 
     now.
       The big multinational customers whose buying power drives 
     that market are growing impatient. They've been teased long 
     enough with the promise of competitive choices for seamless 
     global connections through the world's public switched 
     networks.
       That's impossible right now. Not because technology is 
     lacking, but because competition is lacking. And competition 
     will remain lacking as long as carriers from other countries 
     are allowed to compete in the U.S. at the same time they 
     sharply restrict access to their home markets.
       This just doesn't make sense for customers. They are being 
     denied the economic benefits of facilities-based competition 
     among carriers outside the United States.
       Permitting any country to operate this kind of a closed 
     market while its own affiliate competes on an equal footing 
     in the United States is not in the best interests of full and 
     fair competition.
       And the France Telecom/Deutsche Bundespost Telekom/Sprint 
     deal as proposed now would not fit any reasonable definition 
     of full and fair competition.
       Not as long as France and Germany maintain their tight grip 
     on competition in switched voice services and infrastructure.
       It's encouraging that France and Germany have recently made 
     significant strides in bringing international settlement 
     rates down closer to cost--a practice we'd like to see more 
     countries emulate.
       American international callers pay out $4 billion a year 
     more than the U.S. takes in from all foreign governments. An 
     estimated $2.3 billion of that is pure subsidy. It amounts to 
     a tax on Americans.
       And while they're collecting this premium to complete calls 
     from America, many countries use discriminatory rates to 
     charge carriers from other parts of the world substantially 
     less for similar access.
       High and discriminatory settlement rates are symptoms of 
     uncompetitive markets. They represent toll booths on the 
     Global Information Superhighway, and the tolls are still too 
     high.
       It's time for strong action by the U.S. government to 
     demonstrate that comparable market access is no longer an 
     abstract hope. It's a principle, a standard for 
     telecommunications trade between the U.S. and other 
     countries, and a necessity for giving customers the level of 
     services they want.
       Specifically, we are asking the Federal government to take 
     action now.
       We are requesting that the FCC act on the filing we made a 
     year ago and develop uniform rules that would make comparable 
     market access a standard for foreign carriers to enter the 
     U.S. telecom services market. And we're asking the FCC to 
     review the France Telecom/Deutsche Bundespost Telekom/Sprint 
     deal in the context of that standard.
       We're calling on the commission to use its statutory 
     authority to require foreign carriers looking to do business 
     in the U.S. to first demonstrate that their home markets are 
     open to competition in basic services, and provide the kind 
     of network interconnections that go with true competition.
       And, of course, we want the commission to insist that any 
     foreign carrier looking to compete in this market offer cost-
     based, non-discriminatory accounting rates to all U.S. 
     carriers.
       The Department of Justice is already reviewing the 
     antitrust issues raised by the France Telecom/Deutsche 
     Bundespost Telekom investment in Sprint. But I can't imagine 
     any set of conditions imposed here that would be more 
     effective than the establishment of real competition in 
     France and Germany.
       With that in mind, we're requesting that the U.S. Trade 
     representative begin negotiations to achieve comparable 
     access in France and Germany, and we're asking the U.S. 
     Congress to examine the larger issue of comparable market 
     access globally.
       This kind of attention to the market for services would be 
     entirely consistent with the support already provided by the 
     Clinton Administration for the rising trend in American 
     exports of telecommunications equipment. The freedom of 
     American carriers to provide their customers with end-to-end 
     global services should not be impeded by political 
     boundaries.
       We're not asking the U.S. government to create a draconian 
     set of market entry conditions here. The bottom line is 
     simply this: We want U.S. carriers to have the practical 
     opportunity to compete in the home markets of other carriers 
     on a comparable basis with the opportunity those carriers 
     have in the U.S.
       I have great respect for France Telecom/Deutsche Bundespost 
     Telekom and Sprint. AT&T has known them individually as 
     customers, competitors and suppliers. I don't even fault the 
     French and German companies for trying to take advantage of 
     the lop-sided market access policies in America.
       But I would find fault with American public policy if it 
     continues to allow this kind of market imbalance on a case by 
     case basis. American policy-makers should be leaders in 
     seeing that national boundaries don't stand between customers 
     and competitive choices.
       We appreciate the progressive forces at work in Europe. 
     They recognize the value and the necessity of competition in 
     delivering the benefits of the Information Superhighway.
       We applaud their efforts to open up their markets to 
     competition. And we sincerely hope that the U.S. government 
     will support those efforts by setting policies that encourage 
     full and fair competition in basic communications services.
       If our government is successful in that, America will earn 
     the gratitude of all future travelers on the Global 
     Information Superhighway, whatever their starting points, and 
     whatever their destinations.
       Thank you very much.

                          ____________________