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European Telecom Bailouts Anger U.S. Firms
by William New
As U.S. telecommunications and Internet service providers struggle to break even on their own, they take it as a slap in the face to see the governments of major European markets lending a financial hand to their incumbent carriers.
Europe for several years has trumpeted the opening of its telecom markets to allow more competition, and U.S. firms say they have tried to respond to the opportunity. But industry sources said this week that France and Germany's help for large domestic companies, including the former state-owned firms France Telecom and Deutsche Telekom, is unfair and inconsistent with government claims of promoting greater competition.
"It's disturbing to see that the French and German governments have been so quick to jump back into the business affairs of formerly state-owned companies," a U.S. industry source said. "If Europe is interested in attracting more investment in the telecom sector, this is counterproductive in the long run."
The German government recently announced an almost $400 million bailout of the near-bankrupt German company MobilCom. On Tuesday, the European Commission asked the German government to provide more information about the bailout. A commission official said there is concern that the bailout gives a material advantage to the firm and is not a normal banking operation, as the government claims. Competitors also can file complaints to the commission.
Axel Spies, a German attorney at Swidler, Berlin, Sherett and Friedman in Washington, said the bailouts in France and Germany are especially unfair because the companies are among those that earlier spent heavily in a frenzied auction for spectrum licenses. "It's another case where government is interfering with private business," Spies said. "They are going to face lawsuits from everyone who pulled out of the auction."
"A few years ago, when times were good, governments said they were all for privatization and competition. But now that there are problems, they can't resist the urge to get back into things," the U.S. industry source said. "On one hand the governments profess to be committed to competition. But when things get tough, the incumbents go back to the governments." U.S. companies are examining their options, the source said.
In a related development, the European Telecommunications Network Operators Association (ETNO) on Tuesday urged the European Commission to help the advanced mobile telephony industry "rise above its financial weakness" by taking several policy steps. Instead, ETNO Director Michael Bartholomew told a one-day public workshop at the commission in Brussels, Belgium, that the EU regulatory body is looking to regulation to address the industry's woes.
Bartholomew recommended that policymakers establish consultations on spectrum management, allow for industry consolidation, target regulations toward the costs of market entry and exit, and take short-term measures such as "spectrum trading" and flexible licensing conditions.
Study Finds New European Broadband Philosophy
A new study of government investment in high-speed Internet communications in France, Ireland and Sweden identifies a new philosophy in telecom policy.
The three countries invested differently in their markets, according to the report by the consulting group Cullen International, yet all favored a third-party provider for broadband infrastructure to be leased to a few operators based on cost. They limited the infrastructure provider to basic elements, thereby allowing for competition in other areas, and they sought to limit public-sector involvement in telecom projects.
In late July, the French government launched a consultation on amending national law to comply with a new EU legislative package, the report said. Ireland continues to lag among other European countries in getting broadband to rural areas, and Sweden has several initiatives underway, the study added.
Proposal Concerns European Privacy Officials
The data-protection commissioners of the 15 members of the European Union last week raised concern about a proposal before the member states to mandate the retention of traffic data for one year or more.
The breadth of the plan could violate fundamental human rights under the European Convention of Human Rights and other agreements, they said in a statement at the conclusion of a meeting in Wales. The commissioners said data should be kept only in specific cases, for a limited time and under strict conditions.
In other European news, Information Society Commissioner Erkki Liikanen on Monday invited industry to join the commission in establishing a permanent "eSafety Forum" to accelerate the development and deployment of intelligent integrated safety systems. The forum, which Liikanen hopes to announce in mid-November, could "promote development of open platforms, open system architecture and standard software, communications, service and human-machine interfaces," he said in a statement.
Andeans Get Trade Benefits Despite Piracy
The four Andean nations that receive preferential access to the U.S. market for their goods -- Bolivia, Colombia, Ecuador and Peru -- are significant violators of U.S. intellectual property rights, according to the International Intellectual Property Alliance (IIPA).
In Sept. 16 comments to an Office of the U.S. Trade Representative committee, IIPA Vice President and general counsel Maria Strong argued that trade benefits should not be given to any of the countries without conditions.
"The U.S. should obtain commitments from each country on how that country is addressing its copyright law and enforcement obligations before designation is officially conferred," she said. "It is untenable for the U.S. government to be giving additional trade benefits to countries in which U.S. copyright owners are suffering the ravages of piracy."
Under the Andean Trade Promotion and Drug Eradication Act, the criteria for countries to receive trade benefits have been enhanced. The program aims to encourage the development of alternative economic sectors to narcotics in Andean nations.
The criteria require the president to examine the countries' qualifications before granting trade benefits, including whether they are committed to intellectual property rights obligations under the World Trade Organization. The commitments include adherence to two copyright treaties at the World Intellectual Property Organization, which Bolivia has not signed.
IIPA is a private-sector coalition of six trade associations, each representing a segment of the U.S. copyright community. They cover computer software, including business applications and entertainment, plus audiovisual works, music and books. Losses in the sectors in the four Andean countries were estimated at $274 million in 2001.
With the rise of the Internet, the problems will worsen, IIPA said. "The Internet transforms copyright piracy from a mostly local phenomenon to a global plague," Strong said.
Separately, new WTO Director-General Supachai Panitchpakdi said Monday that a report by the United Kingdom Commission on Intellectual Property makes an important contribution to the debate on how developing countries can best use the WTO Agreement on Trade-Related Aspects of Intellectual Property (TRIPs) for development.
Trade Panel Probes Impact Of Deals
The International Trade Commission is seeking input for a new investigation into the probable economic effect of separate free-trade agreements with Central America and Morocco. Both deals are stated priorities of the Bush administration.
The FTC also has launched an investigation into the impact on the U.S. economy of five trade agreements enacted during the past 25 years. The focus of the probe is bilateral agreements with Canada and Israel, the Tokyo and Uruguay rounds of negotiations at the present-day WTO, and the North American Free Trade Agreement.
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