Foreign Affairs

Bill Kennard knows the political art of the loophole.

Just weeks after packing up his general counsel's briefs and stepping into the regulatory hotseat that is the FCC chairman's domain, Kennard led his staff of commissioners in a decision that angered an entire continent.

Here is Kennard's side of the story: The FCC voted unanimously to knock down the barriers that kept foreign investors from owning more than 25% of a U.S. telecom carrier. That's good news for some C-block PCS licensees who, facing bankruptcy (not to mention an embarrassingly public payback reorganization), have exhausted investor prospects on the home front. It's even better news for the U.S. government, which now may actually realize the millions of unpaid dollars it "won" in the spectrum auctions, albeit via some sizable currency exchanges.

"The rules we approve today make sense by establishing clear and understandable standards for entry, with streamlined procedures for most applicants and safeguards to prevent foreign carriers with market power from distorting competition in the U.S. market," Kennard said.

Thus, we come to the European Union's (EU) side of the story: The FCC's "sweeping" approval of the World Trade Organization's agreement left standing some rules that allow the Commission, the U.S. Pentagon, the U.S. State Department and even the U.S. trade representative to deny foreign investment. This "public interest standard" loophole is equally sweeping in that it can deny access for trade, national security or competitive reasons.

The EU is understandably irked that the United States already has plotted its escape from future investment attempts.

"We reserve the right to take World Trade Organization action if the United States does not meet its obligations," EU spokesman Nigel Gardiner said.

If Mr. Gardiner were from Brooklyn, he'd be yelling, "Hey, buddy, this is a 2-way street!"

Is this any way to launch a 69-nation telecom romance? Kennard has brushed aside the concerns.

"There's no hidden agenda here," he said of the loophole.

And he's right. The United States always has been cautious in its acceptance of a world economy. Might this "prenuptial" addendum be inappropriate evidence of this caution, or does Kennard know something that we don't? Picture this national security concern: A deceptively naive assembly of East European investors purchases controlling interest in one struggling PCS license holder. At first, their expansion into sleepy Midwestern BTAs appears innocent, but when they turn on the switch in larger markets, the evidence adds up ... too late. The damage already has been done: A Communist insurgency has gathered crucial U.S. intelligence via eavesdropping devices planted in subscribers' supposedly secure handsets!

Or how about this trade scenario: A German industrial giant buys up a handful of cellular licenses. It then drops per-minute rates to an all-time low and signs up hundreds of thousands of new subscribers (who, distracted by the frenzy of falling prices, fail to translate the German fine print in their contracts). Imagine their surprise when they all are reassigned German-manufactured satellite phones and rolled over to the seven-deutschmarks-per-minute satellite rate!

Still not singing off of the Kennard songsheet? How about this competitive could-be: A Hong Kong conglomerate forces the agents and resellers in its newly acquired paging territory to offer wireless service as a mere enticement to the real products -- cheap plastic knockoffs of high-end Japanese electronics!

Clearly, you can never be too much of a protectionist.

If you were a monthly subscriber to WirelessWorld or Cellular Business, make sure you continue to receive Wireless Review (which publishes twice a month) by filling out the renewal card that arrived as a cover wrap on this issue. Do you have your own opinions about these Views, the merged magazine or the industry? Share them by e-mailing me today at darren_sextro@intertec.com.