With Friends Like These

Posted: 02/1998


With Friends Like These

By Ernie Kelly, President,
Telecommunications Resellers Association

Imagine you are an entrepreneur involved in efforts to open up
telecom markets. Your plan is to introduce advanced technological
developments and innovative marketing techniques that have been
effective in the United States into countries whose markets have
never really been open to competition. Against great odds you
keep at it, buoyed by the knowledge that your government supports
and encourages what you are trying to do. Indeed, the federal
regulatory agency which oversees your industry has clearly stated
that what you are doing is not only in the public interest, but
it has issued rules and regulations stipulating that the services
you are providing are consistent with, and supportive of, U.S.
policy and law.

After a while, the incumbent foreign competitor, citing laws
from its country which are contrary to those of the United
States, fights back. With incredible audacity, it files a
"cease and desist" enforcement action with the same
U.S. government agency that articulated the policy you are
working to support, claiming you are in violation of the
country’s laws. In a stunning turnabout, your country’s federal
agency now rules in favor of your foreign competitor and orders
your company to quit offering the service. To add insult to
injury, this same agency allows the foreign entity to
subsequently file a claim for "damages" against you for
harm you have done them as a competitor

Welcome to the world of international callback, 1998. This
isn’t a dream–this is actually happening. American callback
providers, who probably have done more than anyone over the past
five years to promote competition in hitherto closed,
monopolistic, foreign telecommunications markets, are today the
object of proceedings initiated by The Telephone Company of the
Philippines (perhaps it’s just me, but that name just doesn’t
have that competitive-sounding ring to it) to keep U.S. callback
providers out of its country. Incredibly, the U.S. government,
through the Federal Communications Commission (FCC), is
unwittingly aiding and abetting them in their efforts.

The reason you probably haven’t heard about this is that it is
locked away as a "restricted proceeding," thus making
it more difficult to find out exactly what’s going on. In a
nutshell, what we have here is a case of a foreign private
company utilizing U.S. regulatory processes in support of
anti-competitive foreign laws to frustrate, impede and damage
U.S. competitors. To this observer, it seems to be against
family, apple pie and motherhood. Come to think of it, maybe I
should fax this article to Rush Limbaugh–it sounds like one of
his issues.

Here are the particulars: In the original International
Callback Order issued in 1995, the FCC went to great pains to
explain that it did not want to get into the business of
enforcing the laws of foreign governments. It established a
process that foreign governments had to go through to bring
complaints to the attention of the United States. To date, the
Philippine government has not begun this process or lodged any
formal complaints with the U.S. government. Instead, crafty
American lawyers came up with the idea of having the incumbent
telecommunications provider in that country take its government’s
place and file a formal complaint as an "individual
party" against the callback providers under Section 208 of
the Telecommunications Act of 1996, making the same arguments
allowed for in the callback order for foreign governments. The
lawyers ran that one up the flagpole to see who would salute and,
incredibly, the FCC was willing to oblige.

Many observers feel that the FCC, through this case, has
landed on a slippery slope that could open the floodgates to
regulatory and legal action by scores of foreign entities who
today continue their never-ending battle to keep their
telecommunications markets closed to competition. With the fresh
smell of blood (a.k.a. "damages") now in the water, the
lawyers representing these foreign telecommunications companies
are circling the FCC, praying it will open up this second
treasure chest for them.

If the FCC is actually trying to help them, it is an
incredible turn of events. How ironic that our federal regulatory
agency, which traditionally has been slow to act on complaints
from resellers and competitors against entrenched incumbents in
our own country through the years, is now stepping smartly into
this battle on behalf of foreign monopolists! Score one for the
opponents of competition. Add this to the recent FCC ruling
opening U.S. domestic markets to foreign competitors, regardless
of how open their markets are to U.S. companies, and you have a
second foul shot clanging home. Incidentally, the Philippines, at
last count, was among the 30-odd holdout nations that had not
ratified the landmark, competitive World Trade Organization
agreement, thus putting its implementation in jeopardy.

You can’t really blame the foreign carriers. For them, it’s
self preservation. And, after all, our government essentially
showed them that the barn door was open. You can’t really blame
the lawyers advising them, either. They’re just doing their job.
Who knows? With damages looming on the horizon, if they win big
they could end up on the beach at Maui in a chaise longue,
sipping a piqa colada and wearing those Scrooge McDuck
sunglasses (you know, the ones with the dollar bill signs on

Yes, I’ve heard all the arguments about the sovereign rights
of foreign nations and their government-sanctioned carriers. I’d
like the U.S.-based lawyers representing them to come to one of
the Telecommunications Resellers Association’s shows and
reiterate the carefully contrived legal arguments they make on
behalf of these foreign monopolists to a group of entrepreneurial
American international competitors. I’ll be happy to turn on the
applause-o-meter and report the reading.

The ones who really need to stand up and account for
themselves are the members of the FCC and their staff. They got
us into this mess and now they need to get us out. They can start
by making this an unrestricted proceeding so we can have a public
airing of this issue. Then maybe we can see who will stand up for
the rights of American competitors. After all, one would think,
U.S. law and U.S. policy promoting competition ought to prevail
over foreign laws restricting competition, at least in a U.S.
regulatory setting. We shall see.

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