Crossed wires on telecoms

THE GREAT telecom munications race is on, but the US government regulators keep ordering the players back to the starting gate.

The latest example of the Cold War tactics confronting the new technology involves American Telephone & Telegraph Company and its Chinese trade. AT&T claims it will have lost dollars 113m ( pounds 77m) in sales by the end of this year as a result of antiquated US export control restrictions, which forced it to cancel bids for an 800km fibre- optic cable link between Nanjing and Wuhan. Filling the void, according to a 500- page brief that AT&T filed with the US Commerce Department, was ECI Telecom, an Israeli company that recently sold six sophisticated transmission terminals to China.

The stumbling block for AT&T, as in other potential deals involving sales to the former Soviet Union and other restricted access countries, was CoCom (The Coordinating Committee on Multilateral Export Controls). This Cold War relic, which the US manages in concert with its allies - including Britain and Germany - is intended to restrict techology with potential military applications to countries deemed to be a national security threat. However, the CoCom list of restricted materials is hopelessly outdated.

US computer manufacturers appealed to the Clinton Administration to lift restrictions that prevented them from selling to China, Russia and other controlled destinations with a huge appetitite for their hi-tech goods. The American Electronics Association filed a petition urging the Administration to decontrol exports of machines operating at speeds of more than 100 million theoretical operations per second (MTOPS).

US companies will begin producing machines this autumn based on Intel's Pentium microchip that run at speeds of more than 67 MTOPS, but industry officials contend that foreign companies can easily assemble much faster machines using two or more of the sophisticated chips. US manufacturers are already losing big market share to foreign competitors who develop and sell computers that the US restricts for export.

Another complication is that computers with a capacity of more than 23 MTOPS require approval by all CoCom members for export to target countries.

Germany has indicated it will block measures to decontrol computers as long as the US insists on tight controls on telecommunications equipment.

Meanwhile, telecommunications has become subject to global mega-deals. Rupert Murdoch gambled on Asia's huge growth potential by agreeing to pay more than dollars 500m for Star TV, an unproven satellite television company in Hong Kong. BT acquired a 20 per cent interest in MCI Communication in a dollars 4.3bn mega-deal. US West Inc, one of the aggressive 'baby Bell' companies spawned by the break-up of AT&T, paid dollars 2.5bn for a 25.5 per cent stake in Time Warner Entertainment, a subsidary of Time-Warner Inc.

But the US Congress, the courts and US regulators continue to drag their feet on telecommunications. The old rules are continually broken, but nothing new is replacing them. While telephone companies are joining up with former rivals in newspaper and cable industries, US regulators are still administering restrictions on cross-ownerships and applying anti-trust rules set down in the 1930s and 1940s. There is agreement that the public interest and consumers need protecting as these communications behemoths move into one new field after another. But inaction is not the way to do it.

This is becoming a big problem for the Clinton Administration, which promised to create a new national 'information super-highway' as one of its campaign pledges. However, little has been done. Congress, buffeted by industry lobbies, is unsure how to proceed. Meanwhile, US telecommunications policy continues to be set by the courts, primarily through the application of anti-trust laws by US District Courts.

Eventually, Congress and the Administration will have to step in. But for now, in the words of former FCC Commissioner Ervin S Duggan: 'Everything is up for grabs.'