Telecommunications Services and the WTO
Global telecommunications services generate $1.5 trillion per year representing an economic force to be reckoned with; and the World Trade Organization (WTO) is at the center of it. The various principles and agreements made under the WTO have contributed to the liberalization and privatization of telecom markets around the world. The lowering of trade barriers among WTO members has greatly benefited the satellite industry. It was perhaps the WTO agreements of the mid-1990s that set things in motion for the eventual privatizations of Intelsat, Inmarsat and Eutelsat at the turn of the millennium.
The WTO and GATS
The WTO was established in 1995 and now has 153 member nations. All WTO members are signatories to the General Agreement on Trade in Services (GATS), a treaty created to extend multilateral trading to the services sector. The GATS is essentially a framework of free trade principles and rules specifically applicable to services. Previous to GATS, only merchandise was subject to trade agreements. The objective of GATS is the progressive liberalization of the international markets in traded services. The idea that telecommunications services are tradable is what made their inclusion in the WTO arena possible.
The Reference Paper
Commitments have been made by 82 WTO members regarding certain telecommunications regulatory principles or best practices. These principles, which provide a guide on domestic regulation, are commonly referred as the “Reference Paper.” Under the Reference Paper, members are committed to: 1) preventing domestic telecom providers from engaging in anti-competitive practices; 2) ensuring interconnection; 3) promoting universal service policies; 4) making licensing criteria publicly available; 5) creating an independent regulator; and 6) making fair and non-discriminatory use of electromagnetic resources. These commitments are credited with the great strides members have made in the liberalization and privatization of their telecom markets.
The Basic Telecom Agreement
The Basic Telecom Agreement (BTA) is an Annex incorporated to GATS in 1997, under which certain members agreed to open their markets for telecommunications equipment suppliers, vendors and service providers. The specific commitments made under the BTA vary by country, but ultimately the objective is a universally open market. In addition, by becoming party to the BTA, each country commits to the principles set out in the Reference Paper. The Basic Telecom Agreement is responsible for satellite landing rights whereby non-U.S. satellites from WTO countries can access the U.S. market. There should also be reciprocity, but it has not always worked as such in practice.
Most Favored Nation
The GATS specifies Most Favored Nation (MFN) treatment for member countries. The idea behind MFN treatment is not that any one country (or group of countries) is given special treatment, but rather that a government lowering its barriers will give the same benefit to all WTO member nations as they do to any single nation. In other words, a WTO member cannot treat telecommunications service suppliers from other members less favorably than it treats its local suppliers; treatment in taxation and regulation must be identical.
GATS provides for a dispute resolution and enforcement mechanism. This singular provision is what sets apart the WTO from other inter-governmental bodies like the International Telecommunications Union that are often viewed as toothless. A complaining member can request the appointment of a dispute resolution panel. The panel will hear arguments from both sides and subsequently issue a report. The ruled-against member may choose to appeal the ruling of the panel to a WTO appellate body, which has the power to uphold, modify or reverse the panel’s legal findings. Members not abiding by the appellate body’s decision may have certain trade concessions suspended and may be subject to economic sanctions.
Satellite operators and service providers wishing to expand their global footprint should keep the WTO in mind. The first step in the analysis is determining whether a target country is a WTO member. This will dictate whether there is required reciprocity in market access. For instance, a U.S. company should expect and demand equal treatment with the domestic operator in the target market if the target country is also a WTO member.
Raul Magallanes runs a Houston-based law firm focusing on telecommunications law. He may be reached at +1 (281) 317-1397 or by email at raul@ rmtelecomlaw.com.