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Volume 51; 1998-1999 • Issue 1

Editor’s Note


Liberalized Telecommunications Trade in the WTO: Implications for Universal Service Policy
By Taunya L. McLarty

The basic telecommunications commitments associated with the General Agreement on Trade in Services significantly affect market liberalization. Ultimately, a domestic legal framework that incorporates, as a part, some cost sharing for the furtherance of socially beneficial domestic policy would increase universal access benefits for some. Any detriment to those who are bearing the costs of it would be offset by the benefits that are obtained from GATS commitments on telecommunications that reduced trade barriers on services. Thus, this domestic/international arrangement could increase access to basic and enhanced services for some without decreasing universal service to any.

“Wildly Enthusiastic” About the First Multilateral Agreement on Trade in Telecommunications Services
By Laura B. Sherman

In 1998, the World Trade Organization’s (WTO) “Basic Telecom Agreement” dramatically opened to foreign competition basic telecommunications services of the sixty-nine WTO Members committing to the Agreement. The process and results of the WTO negotiations are important to telecommunications consumers because there will be increased market competition, thereby decreasing the price of such services and increasing consumer choice. The negotiations that led to the WTO Agreement resolved many difficult issues including: scheduling, regulator’s independence, competitive safeguards, and interconnection of telecommunications suppliers. The resolution of these issues will allow market access and foreign ownership in over 90 percent of major markets. These negotiations were only the beginning of the process and implementation of the Agreement will provide new challenges.

From International Competitive Carrier to the WTO: A Survey of the FCC’s International Telecommunications Policy Initiatives 1985-1998
By Lawrence J. Spiwak

With the creation and implementation of the February 1996 World Trade Organization Agreement on Basic Telecommunications Services, the international telecommunications community has (at least on paper) promised ostensibly to move away from markets characterized by monopolies and toward a world of competition and deregulation. The big question, however, is whether these efforts will actually lead to better economic performance in the market for international telecommunications products and services. This Article examines one particular, yet extremely significant, portion of this inquiry—how much have U.S. international telecommunications policies specifically helped or hindered this process. This Article, after surveying Federal Communications Commission (FCC or Commission) precedent from the FCC’s first major international policy decision (International Competitive Carrier) through the FCC’s implementation of the WTO Agreement (January 1, 1998), concludes that despite a few laudable achievements, the FCC’s efforts have been marred by both the demonstrable rise of neo-mercantilism at the expense of consumer welfare, as well as substantial legal and economic analytical inconsistencies and outright errors resulting from their embarrassing attempts to implement and defend this neo-mercantilist policy. By adopting such legally and economically flawed policies, the United States has achieved neither trade policy’s basic goals of promoting U.S. investment abroad nor the maximization of consumer welfare under the FCC’s public interest mandate. Tragically, the only tangible achievement apparently has been the delay of effective WTO implementation and the rise of international ill-will against the United States and, a fortiori, U.S. firms.

A Birthday Party: The Terrible or Terrific Two’s? 1996 Federal Telecommunications Act
By Kathleen Wallman

As we celebrate the second anniversary of the Telecommunications Act of 1996, we can see that the predictions of instant cross-industry competition that were made at its birth were rather euphoric. Despite the unexpected twists and turns of the first two years, there have been a number of significant market developments suggesting that the lowering of barriers that the Act effected have put things on the right course. However, the success of the Act will be rather fragile during the next few years, as it is subject to reversal by market as well as judicial forces. We should therefore continue doing what we have been doing and, rather than evaluating the Act’s success today, do so at its tenth birthday.


State Sales & Use Tax on Internet Transactions
By Sandi Owen

The explosive growth of electronic commerce raises serious questions about the viability of the current state sales and use tax system. Sales via the Internet and other electronic means are changing both the form and substance of consumer transactions, and such sales often do not satisfy the traditional nexus requirement for state taxation because on-line vendors frequently lack physical presence in the purchaser’s home state. The inability to collect taxes on this growing segment of the retail sales market will impair states’ efforts to raise revenues and cause economically similar transactions to be treated differently. Consequently, Congress must act pursuant to its Commerce Clause authority to allow state taxation of interstate transactions by means of either federal legislation or uniform state laws. This will result in a system that taxes similar transactions in the same manner, regardless of the context of the transaction or the identity of the seller or service provider.

Commercial Speech in the Law of the European Union: Lessons for the United States?
By J. Steven Rich

Both the United States and the countries that comprise the European Union have previously imposed limits on tobacco advertising. These restrictions prevent tobacco companies from advertising on broadcast television. Recently, the European Union adopted a new proposal that would expand restrictions by phasing out press and billboard advertisements, and prohibiting tobacco company sponsorship of sporting events. It seems certain that advertising interests in Europe will challenge the new proposal as a violation of freedom of expression. An analysis of the European Convention on Human Rights reveals that these challenges should ultimately succeed since the restriction on commercial speech is more restrictive than necessary and should be narrowed to allow truthful cigarette advertising targeted at adults. The situation should prove informative for the United States since the courts of the European Union and the United States have reached similar conclusions regarding limitations on commercial speech.