Estudios de América del Norte
Revista Electrónica Semestral de la Maestría en Estudios de Estados Unidos y Canadá
Facultad de Historia de la Universidad Autónoma de Sinaloa
Volumen I, Número 2, Abril del 2000. Culiacán, Sin. México
http://www.uasnet.mx/historia/US.CAN/rev/Dos/

Alongside the development of a sectoral agreement in the North American Free Trade Agreement (NAFTA) to liberalize trade and investment in telecommunications services, Canada (in 1993), Mexico (in 1995), and the United States (in 1996) all introduced new national telecommunications legislation.

The efforts of these three governments to change national telecommunications legislation are matched by those of a governments in the 1990s through-out the world to rework national communications regulations and policies. Communications policy makers in many parts of the world undertook policy and institutional redesigns in the 1990s, many of which have been described as liberalization. Although the processes of building new regulatory institutions are driven in part by national needs and national changes, they are also part of global changes in the telecommunications industry, in service and equipment markets, and in international organizations.

Hence, changes in legislation and regulatory agencies have been undertaken alongside the formation of more open trade and investment agreements in North America and in international organizations. Regional agreements include the Canada-U.S Free Trade Agreement, and the

North American Free Trade Agreement. Despite a high level of economic, technical, and cultural

interaction, the formal institutions of regional governance in North America, such as the Organization of American States' telecommunications body CITEL, have received less attention than those of the European Union.

International organizations and agreements have prompted national legislative change, and set constraints on domestic policy directions. The most significant programs in the 1980s and 1990s include the World Trade Organization's negotiations on telecommunication services and information technology, and the International Telecommunication Union's numerous working groups.

The legislation in these three countries shares a number of goals, including efforts to enhance competition in telecommunications services, to reduce the costs of communications services in order to increase the countries’ global economic competitiveness in all sectors, to increase the rate of investment in telecommunications and new communications technologies, and to expand universal access to telecommunications services.

In June of 1993 the Telecommunications Act was passed, replacing the Railway Act of 1906 which had been to that point the legal framework governing telecommunications. The new law aimed: (a) to facilitate the orderly development throughout Canada of a telecommunications system that serves to safeguard, enrich and strengthen the social and economic fabric of Canada and its regions; (b) to render reliable and affordable telecommunications services of high quality accessible to Canadians in both urban and rural areas in all regions of Canada; (c) to enhance the efficiency and competitiveness, at the national and international levels, of Canadian telecommunications; (d) to promote the ownership and control of Canadian carriers by Canadians; (e) to promote the use of Canadian transmission facilities for telecommunications within Canada and between Canada and points outside Canada; (f) to foster increased reliance on market forces for the provision of telecommunications services and to ensure that regulation, where required, is efficient and effective; (g) to stimulate research and development in Canada in the field of telecommunications and to encourage innovation in the provision of telecommunications services; (h) to respond to the economic and social requirements of users of telecommunications services; and (i) to contribute to the protection of the privacy of persons (Canada, 1993).

Despite the regulatory review and the series of decisions restructuring telecommunications in the 1990s, the Canadian market has become more a duopoly between Bell Canada and Rogers than a competitive market. Official discourse seems less concerned with competition at the national level than with building strong nationally-based communications firms that could hold a dominant place in the Canadian market and hopefully be competitive at the continental and international levels.

In Canada, the focus of investment policy has been to continue to upgrade the Canadian network and prevent by-bass of traffic to U.S. carriers. Investment in 1995 was $2.096 billion US, or $70.60 US per inhabitant. Network investment has also been connected with industrial policy concerns, that is, the promotion of the prospects of Canadian network equipment companies. Since the Canadian market is too small to support the massive expenditures in research and development necessary for firms' global competitiveness in telecommunications, building and maintaining a strong Canadian equipment and services industry means allowing and encouraging the development of international alliances, investments, and markets. AT&T has become an equity partner, to the maximum allowed, in wireless service provision. With the purchase in 1999 of 20% of Bell Canada by Ameritech (which is in turn being purchased by SBC), the major Canadian service company has become more integrated into the U.S. market. Given this external orientation, however, these firms may face more attractive investment opportunities outside of Canada, especially given the relatively open access to the U.S. market.

In December of 1990, the most important measure for restructuring the sector occurred with the privatization of the newly formed state company, Telmex. It maintained a monopoly of local and long distance telephone services for six years. As a private company, minority ownership participation of foreign partners was allowed, and SouthWestern Bell (SBC) and France Telecom bought shares.

The passage of the Federal Telecommunications Law in June of 1995 (Mexico, 1995) had several fundamental objectives: to promote the efficient development of telecommunications; to foment competition between different providers of telecommunications services so that users would

benefit from better prices, diverse services, and higher quality services, and; to promote a suitable social distribution of services (Article 7).

One of the explicit objectives in deregulating and restructuring the sector was to allow competition in local and long distance services. When privatizing Telmex in 1990, competition in local telephony was allowed (Mexico, 1990). However, this was not immediately initiated. The company was granted the exclusive right to provide long distance services for a period of six years. It was only in 1997 that long distance competitors with Telmex began to operate. In 1998, Telmex still had 96.3% of local lines, 81.2% of long distance minutes nationally, and 68.4% of outgoing international minutes (OECD, 1998, p. 2).

The proposed goal in the National Program of Development 1995-2000 was to reach a telephone density of 20 telephone lines by each 100 inhabitants by 2000, as was recommended by the ITU. In 1995 with 10 million installed telephone lines, the density remained at 9.58 lines per 100 inhabitants.

Mexico's low level of availability of telecommunications services in rural regions posed the greatest challenge for expanding access and services. The focus of universal service elements of telecommunications policy has been in providing rural telephony through satellites, rural cellular telephony, and rural telephony through trunking (OECD, 1998, p. 10). However, this category of services benefited less from efforts to introduce competition than the expansion of services in urban areas. Strict limitations on investment in the telecommunications sector have been lifted in order to encourage growth. Foreign direct investment is limited to 49% of telecommunications firms. From 1991 to 1995, investors supported infrastructure construction, including building a fiber optic cable to connect the 54 largest cities. Other areas of new investment in the early 1990s included the addition of 3.3 million phone lines by 1995 (with another 1.5 million projected in 1997 to bring the total to 10 million) (Arizona, 1995, p. 7). Investment in 1995 was $1.106 billion US, averaging $12.10 per inhabitant (ITU, 1997), but projections of the value of total network and equipment investment for the last half of the 1990s have ranged as high as $2 billion US per year (Arizona, 1995).

Constructing and expanding basic infrastructure were the priorities for Mexico's telecommunications planning. At the same time, new technologies allowed for the use of a variety of wireless technologies in addition to traditional wired networks. Wireless telephone service has seen the most rapid growth in subscribership through the 1990s (to 660,000 by 1996) and a high rate of investment. Attempts to move the geographic location of investment from beyond urban areas or regions bordering on the U.S. also are important to universal service objectives.

In the United States, the 1996 Act augmented and modified the Communications Act of 1934, which had similar objectives: "to promote competition, to reduce regulation, to assure low prices and the highest quality services and to drive the fast installation of new telecommunications technologies". The Act presumes that the telecommunications market was converging, or at least that cross-market competition in some services would be possible. For instance, many proposed that local basic telephone service, long distance, and international services, cable television, personal communications, cellular phones and even, with some restrictions, audiovisual services, theoretically could be rendered by the same company. There would be a number of companies competing to offer all or part of these packages.

However, the implementation of the Act was criticized in 1998 in a round of Congressional hearings, and from a number of perspectives. The main issue of concern was that competition in local telephone service had not materialized. The U.S. had already introduced competition in premises equipment, network equipment, and long distance service prior to the 1996 Act. The focus promotion of competition in local services had met, after two years, with little success. The growing use of wireless telephone and paging services, although still priced higher than basic wired access, allowed for some alternatives for local customers.

What did materialize was a trend, which intensified through 1999, of mergers and acquisitions among telecommunications, cable, and other media firms. Among the most notable: Bell Atlantic acquired Nynex in August of 1997, and is also purchasing GTE; Pacific Telesis was bought by SouthWestern Bell (SBC), which has also acquired Ameritech; AT&T has entered the video and local market with the purchase of TCI and MediaOne; Worldcom completed the merger with MCI

in 1998 and the purchase of Sprint was undertaken in 1999; while in 1999 US West was acquired by Qwest.

How should these corporate movements be interpreted in the light of the attempt to promote competition in the Telecommunications Act of 1996? Is this merely a concentration of the RBOCs in order to face the imminent entry of the long distance companies, AT&T and Worldcom into local markets? The local companies argued that the FCC's strict interpretation of Section 271 of the Act, which required local companies to meet certain requirements before offering long distance services in their regions, was slowing the growth of competition. Or is the strategy to position companies in a number of communication sectors and geographic regions, prior to presenting consumers with a range of service options.

The new legislation in each country sought to promote the competitive supply of services, to advance universal access to services, and to accelerate investment in new technologies and services. Given the differing conditions in each country, the specific character of the approaches varied. While Canada focused on positioning the telecommunications sector for continental and global competitiveness, and Mexico identified investment in the expansion of the network as primary goals, the United States emphasized local competition and investment in new technology as the main purposes of the legislation.

What this suggests is that despite the growth of regional agreements like NAFTA, and multilateral trade agreements like the GATS services agreement and annexes to liberalize trade and investment in telecommunications services, and despite the similarities in the goals of national legislation, it is necessary to recognize national differences in the character of deregulation, and in the implementation of national legislation and trade and investment agreements.

What does this say about the importance of NAFTA as a regional trade agreement or as a mechanism for harmonizing policies in the telecommunications sector? The differences in national strategies despite shared legislative objectives shows that integration of national policies has been minimal in the NAFTA experience. National objectives and trading advantages are pursued over common strategies. Furthermore, negotiations in the World Trade Organization have become a major focus of policy attention focusing on further liberalization.

Arizona Office of Trade, Tourism and Investment (1995), The Mexican Telecommunications Market[www.natlaw.com/mexico/topical/communications/communic.htm].

Canada (1993), An Act Respecting Telecommunications (Chapter 38, Elizabeth II, 40-41-42) 23 June.

International Telecommunication Union (1997), World Telecommunication Development Report (Geneva: ITU).

McDowell, Stephen D, Ana Luz Ruelas, and Martin Dowding (1999), "Telecommunications Services: NAFTA and National Legislation," Paper for World Services Congress, November 1-3, 1999, Atlanta, Georgia, United States.

Mexico (1995), Ley Federal de Telecomunicaciones, DOF, June 7.

Mexico (1990), Modificacion al Titulo de Concesion de Telefonos de Mexico, S.A. de C.V., Diario Oficial de la Federacion, December 10.

United States (1996), Telecommunication Act of 1996 (Public Law 104-104).

Estudios de América del Norte
Revista Electrónica Semestral de la Maestría en Estudios de Estados Unidos y Canadá
Facultad de Historia de la Universidad Autónoma de Sinaloa
Volumen I, Número 2, Abril del 2000. Culiacán, Sin. México
http://www.uasnet.mx/historia/US.CAN/rev/Dos/
 
 

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