NCPA - National Center for Policy Analysis

Telecom Policy Exports Harmful Regulations

February 7, 2003

In the name of free trade, the United States is pushing other countries to adopt telecommunications policies modeled on U.S. regulations. However, U.S. telecom markets are over-regulated and the rules stifle innovation, warn Cato Institute analysts.

  • The federal Telecommunications Act of 1996 forced large domestic telephone companies to share their lines with new competitors at a significant discount.
  • This has retarded network investment and innovation and has ignored the emerging wireless and Internet-based telephony technologies that will replace the older, "wireline" telephone networks in the near future.

Despite the shortcomings of the 1996 Act, in World Trade Organization negotiations the Office of the U.S. Trade Representative (USTR) is pushing other nations, specifically Japan, to adopt similar regulations in their domestic markets.

USTR is also pushing other countries to reduce international connection fees to U.S. consumers. Analysts say these policies will have the same effect as in the United States: harming foreign telecoms and discouraging the transition to newer technologies.

Instead, critics say the USTR should focus on reforming or eliminating the most serious barriers to foreign direct investment both here and abroad.

Source: Motohiro Tsuchiya and Adam Thierer, "Is America Exporting Misguided Telecommunications Policy? The U.S.-Japan Telecom Trade Negotiations and Beyond," Cato Institute, Briefing Paper No. 79 January 7, 2003.

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