Telecom Giants Unite to Lobby For Opening of Markets in Asia

By REBECCA BUCKMAN

Staff Reporter of THE WALL STREET JOURNAL

September 14, 2004

HONG KONG -- Several global telecommunications companies, upset about regulatory hurdles they say are impeding competition in fast-growing Asian telecom markets, are forming a new industry group to push for more liberalization of the region's telecom sector, according to people involved in the plan.

The companies include AT&T Corp. and MCI Inc. of the U.S., BT Group PLC and Cable & Wireless PLC of Britain, T-Systems, a unit of Germany's Deutsche Telekom AG, and several others. The same companies successfully lobbied regulators in Singapore last year for a significant reduction in the so-called last-mile fees charged by state-linked Singapore Telecommunications Ltd., the country's former phone monopoly.

Those fees -- applied to domestic and foreign companies that lease the local circuits needed to connect businesses with global networks of voice and data traffic -- are higher in Asia than in the U.S. and most countries in Europe, the group says. Reducing such fees will be a key goal of the group's efforts, because many of its members are focused on selling services like data networks to businesses. The companies also say more competitive markets will bring benefits for consumers and help Asian economies.

Formation of the lobby group, to be called the Asia Pacific Carriers Coalition, is expected to be announced today. The group is modeling itself on the European Competitive Telecommunications Association, a similar industry grouping that lobbies European regulators for open markets. The new coalition is expected to target developed markets such as Singapore and Japan as well as less-developed ones, including China, India and Vietnam, members say.

Members of the coalition contend that big Asian telecom operators "typically remain dominant in their markets," even in countries where new operators, including foreign companies, have been allowed to challenge them, says Joe Welch, an MCI regional director for regulatory affairs who will be the APCC's president.

Many of the dominant Asian telecom companies continue to wield market power through excessive fees, the APCC believes, including those charged for last-mile data connections and completing calls to mobile phones. In much of Asia, unlike in the U.S., an individual subscriber's phone company must pay a fee every time he or she places a call to a mobile phone, even if the call is local.

"Whilst we have liberalized markets, we're still a long way off from effective competition," says Matt Healy, the national regulatory manager for Macquarie Corporate Telecommunications Holdings Ltd., a telecom company now competing against Australia's former telecom monopoly, Telstra Corp. Macquarie will also be a member of the APCC, along with Pacific Internet Ltd. and StarHub Pte. Ltd., both of Singapore.

While big telecom concerns such as MCI and AT&T operate their own international networks, in most countries a local provider owns most of the last-mile connections to individual buildings. In Singapore, for example, SingTel -- as Singapore Telecommunications is known -- owns those connections.

SingTel has called the Singapore government's decision in December ordering it to cut its last-mile fees by 30% to 50% inconsistent "with the stated regulatory approach of placing primary reliance on market forces." SingTel notes that it recently signed a three-year contract with Singapore mobile-phone company MobileOne Ltd. to provide local leased circuits. The deal "clearly shows that win-win, market-driven outcomes can be arrived at without the need for regulatory intervention," a SingTel spokeswoman says.

The APCC is also expected to express concern about restrictions on foreign investment in less-developed telecom markets, such as China. There, foreign investors can't invest in telecom companies offering basic services, such as fixed or wireless networks -- though that will change soon because of China's membership in the World Trade Organization.

In India, meanwhile, the group says high license costs keep many foreign companies from entering the market. Foreign telecom companies trying to do business in the U.S. don't often face the same type of restrictions, it says.

Write to Rebecca Buckman at rebecca.buckman@wsj.com