Carriers fear Foreign Government Ownership Act

The collapsing World Trade Center apparently kicked up old dust from a fight in Congress.

U.S. Sen. Ernest "Fritz" Hollings (D-S.C.), chairman of the Senate telecommunications subcommittee, last month introduced a bill aimed at preventing foreign governments from owning or controlling U.S. telecom service providers. The bill could radically affect some carriers in the U.S.

"This would be a disaster for us if it became law," says Nils Paellmann, a Deutche Telekom investor relations executive. The German government owns 43% of DT. The law would require DT to either divest itself of U.S. wireless operator VoiceStream or for the German government to make a stock offering of about $13 billion in DT shares.

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The Foreign Government Ownership Act of 2001 would prohibit a corporation from receiving Federal Communications Commission licenses if a foreign government owns or controls 25% of the company, or if a foreign government exercises any management control.

The bill has gone undetected by many industry watchers because it was introduced the same day the FCC announced it would phase out spectrum cap rules for wireless service providers.

The Foreign Government Ownership Act looks to prevent a continuing flurry of transnational telecom mergers and could affect the operations of some domestic carriers. Mobile phone service provider VoiceStream Wireless was acquired by DT this year, as was satellite service provider GE American Communications by SES Global of Luxembourg.

Hollings specifically mentioned both companies in his comments introducing the bill. ISP and Web site manager Verio was purchased last year by NTT Communications, a subsidiary of Japan's Nippon Telegraph and Telephone.

Hollings started pushing for this law when some of the merger proposals began to emerge. The FCC approved the mergers with waivers justifying the deals in the greater public interest. Hollings' proposal closes the door on FCC waivers for foreign government ownership.

For once, the South Carolina senator sees eye-to-eye with his opposite number in the House, Rep. Billy Tauzin (R-La.), chairman of the House telecommunications subcommittee. Where Hollings has expressed concern about foreign government interests controlling U.S. telecommunication assets, Tauzin has attacked opening U.S. telecom services markets while other countries violate World Trade Organization rules by failing to reciprocate.

The low-profile legislation is operating in a different political climate since the Sept. 11 attacks, says a Hollings spokesman. Although the competitive issues remain paramount in the mind of the senator, the proposal stands a better chance of passing now, presented in the light of national security, he says.

Tauzin-Dingell bill may reach vote

There are signs that the Tauzin-Dingell Bill to open long-distance data transport to the big local telecommunication service providers may reach a vote in the House this month.

SBC Communications named William Daley as its new president in November (see related story, page 46). Job One for the former Department of Commerce secretary will be to push for passage of Tauzin-Dingell Bill. SBC spokesman Selim Bingol expressed optimism that the bill would be voted on in December and that Daley's appointment would help its passage.

Spokesmen from three other carriers also say on background that they expect the bill to reach the floor this month. Congressional aides say there has been a greater push to bring the bill to a vote next month, but that its fate ultimately rests with House Speaker Dennis Hastert (R-Ill.).

Legislation also emerged in November to establish a new research and development program for computer and network security through the National Institute of Standards and Technology.

U.S. Rep. Brian Baird, (D-Wash.) proposed the Computer Security Enhancement and Research Act of 2001 along with other members of the House science committee. The bill aims to recruit new computer-security researchers in graduate schools in the next 10 years through a $300 million fellowship program.

U.S. Sen. Jim Jeffords (I-Vt.), also introduced legislation asking the FCC to issue a report to Congress outlining the resources needed for development of an effective nationwide communications system for emergency response personnel. Earlier in November, the FCC established an intra-agency council to craft contingency plans addressing a possible attack against the nation's telecommunications infrastructure and to plan for maintaining essential emergency communications.

Chidi is a correspondent with IDG News Services' Boston bureau.

Read why Verizon Communications' president and co-CEO, Ivan Seidenberg defends the Tauzin-Dingell Bill.