REGULATORY REVIEW: Spectrum Trade Wars

by Gerry Oberst

Could disputes over how countries make satellite spectrum allocation decisions ripen into trade disputes? Ever since the agreement on basic telecommunications was reached through the World Trade Organization (WTO) in early 1997, there has been an ambiguous relationship between the WTO and the International Telecommunication Union (ITU).

The two organizations have agreed to fairly basic cooperation mechanisms, including document sharing between them and observer status of certain official events. However, these organizations still have different agendas and methods of operation.

These differences could become highlighted in the satellite arena. Spectrum controversies, especially in the satellite area, could lead to tensions in the future, as decisions through ITU or national mechanisms increasingly have important WTO trade implications.

This question was raised initially during the negotiations for the WTO basic telecommunications agreement. At the same time countries were submitting their commitments for market opening measures, some among them were defining those commitments as “subject to availability of spectrum/frequency.”

The chairman of the negotiations maintained these caveats were unnecessary. In a “chairman’s note,” he said the international trade rules acknowledge that every WTO member has the right to exercise spectrum and frequency management, which could affect the ability of both foreign and domestic companies to enter into the relevant markets.

In any event, the 1997 WTO agreement included a set of principles for telecoms regulation –the so-called “reference paper”–that also set forth general rules for allocating spectrum. Article 6 of the reference paper provides that any procedures for allocating the use of scarce resources, including frequencies, must be carried out in an “objective, timely, transparent and non-discriminatory manner.” Going back even further in time, WTO rules under the 1994 Agreement on Technical Barriers to Trade also sets limits under international trade rules that could be invoked if spectrum rules are arbitrary or discriminatory.

Now that the dust has settled from the WTO agreement on telecoms, it is increasingly apparent that spectrum allocations could have important trade implications. In its 16th annual report on trade barriers with the United States, the European Commission in July this year claimed European satellite carriers have encountered a number of problems when trying to serve the U.S. market. The European Commission argued the “proceedings by the FCC on [satellite] spectrum allocation and licensing are not always carried out in an objective, transparent, timely and non-discriminatory manner.”

The FCC chairman was moved to make a high profile response to these allegations in the European press. After listing the number of non-U.S. satellites that the FCC had licensed to serve the U.S. market, in a late August opinion article he concluded, “As our actions show, the U.S. market for commercial satellite services is indeed open. And, with all due respect, we believe our actions speak louder than the European Commission’s words.”

Now there are rumblings that actions on the European side of the Atlantic might lead to examination under the magnifying glass of trade rules. Actions by the pan-European Conference of Post and Telecoms Administrations (CEPT) increasingly are being examined by the satellite industry. Because they have no appeal rights, limited transparency, and highly variable implementation of measures, it would be interesting to see how CEPT activities measure up to the international trade rules.

Another contentious issue was identified by a high-ranking FCC official at a recent satellite event in Europe. He noted the FCC has the complicated task of negotiating on behalf of U.S. companies in the ITU satellite coordination process; at the same time it has the responsibility for granting licenses for non-U.S. companies to enter the U.S. market. Often the non-U.S. companies are the same entities who are fighting over rights to orbital slots and frequencies with their U.S. competitors.

This conflict will arise every time that spectrum controversies arise. Countries can and do fight for national interests at ITU radio conferences and study group proceedings. These national interests often involve differing industrial and spectrum policies, as well as different national policies on the use of satellite infrastructure.

It is not unusual, indeed it is even expected, that national positions at the ITU radio conferences aim explicitly at creating advantages for national operators, often at the expense of foreign competition. Yet those same countries, and often the same officials who charge through the ITU proceedings, are expected to make neutral decisions on allocating spectrum and licensing satellite services once the ITU conferences are finished.

Some observers think these neutral decisions are not always possible. So far, however, no one has tested spectrum allocation proceedings based on WTO principles. Despite the rhetoric of the 16th trade report on U.S. trade practices, no one expects this to be another opportunity for a WTO case–the facts are too murky.

It is only a matter of time until spectrum decisions get dragged into the international trade arena. And if the satellite industry thought the ITU procedures are arcane and difficult, just wait until it gets a closer look at trade disputes on the international level.

Gerry Oberst is a partner in the Brussels office of the Hogan and Hartson law firm. His email address is [email protected].