December 12, 2000 EX PARTE – Via Electronic Filing Ms. Magalie Roman Salas Secretary Federal Communications Commission The Portals 445 12th Street, S.W. Washington, DC 20554 Re: VoiceStream Wireless Corporation, Powertel, Inc., and Deutsche Telekom AG Seek FCC Consent to Transfer Control of Licenses and Authorizations and Request Declaratory Ruling Allowing Indirect Foreign Ownership, IB Docket No. 00-187 Dear Ms. Salas: Attached hereto is a copy of a letter that we sent to Chairman Kennard, and Commissioners Ness, Furchtgott-Roth, Tristani, and Powell regarding the Commission’s consideration of the VoiceStream/Deutsche Telekom merger. In accordance with FCC rules, we are filing a copy of this letter in the above-captioned docket. Sincerely, Gary C. Hufbauer Edward M. Graham Reginald Jones Senior Fellow Senior Fellow Institute for International Economics Institute for International Economics C. Fred Bergsten, Director BOARD OF DIRECTORS * Peter G. Peterson, Chairman * Anthony M. Solomon Chairman, Executive Committee Leszek Balcerowicz Conrad Black W. Michael Blumenthal Chen Yuan Jon S. Corzine George David Miguel de la Madrid * Jessica Einhorn George M. C. Fisher Maurice R. Greenberg * Carla A. Hills Nobuyuki Idei W. M. Keck II Nigel Lawson Lee Kuan Yew Donald F. McHenry Minoru Murofushi Suliman S. Olayan Paul H. O’Neill I.G. Patel Karl Otto Pöhl * Joseph E. Robert, Jr. David Rockefeller Renato Ruggiero Stephan Schmidheiny Jean-Claude Trichet Laura D’Andrea Tyson Paul A. Volcker * Dennis Weatherstone Edward E. Whitacre, Jr. Marina v.N. Whitman Lynn R. Williams Peter K.C. Woo Ex officio * C. Fred Bergsten Richard N. Cooper Honorary Directors Alan Greenspan Reginald H. Jones Frank E. Loy George P. Shultz * Member of the Executive Committee ADVISORY COMMITTEE Richard N. Cooper, Chairman Robert Baldwin Barry P. Bosworth Susan M. Collins Wendy Dobson Juergen B. Donges Rudiger Dornbusch Gerhard Fels Isaiah Frank Jeffrey Frankel Jacob A. Frenkel Stephan Haggard David A. Hale Dale E. Hathaway Nurul Islam John Jackson Peter B. Kenen Lawrence B. Krause Anne O. Krueger Paul R. Krugman Roger M. Kubarych Jessica T. Mathews Rachel McCulloch Isamu Miyazaki Michael Mussa Sylvia Ostry Tommaso Padoa-Schioppa Jacques J. Polak Dani Rodrik Jeffrey D. Sachs Joseph E. Stiglitz Alan Wm. Wolff Robert B. Zoellick 11 Dupont Circle, NW, Washington, DC 20036-1207 Phone: (202) 328-9000 Fax: (202) 328-5432 http://www.iie.com INSTITUTE FOR INTERNATIONAL ECONOMICS
Transcript
December 12, 2000
EX PARTE – Via Electronic Filing
Ms. Magalie Roman SalasSecretaryFederal Communications CommissionThe Portals445 12th Street, S.W.Washington, DC 20554
Re: VoiceStream Wireless Corporation, Powertel, Inc., andDeutsche Telekom AG Seek FCC Consent to Transfer Control ofLicenses and Authorizations and Request Declaratory RulingAllowing Indirect Foreign Ownership, IB Docket No. 00-187
Dear Ms. Salas:
Attached hereto is a copy of a letter that we sent to ChairmanKennard, and Commissioners Ness, Furchtgott-Roth, Tristani, and Powellregarding the Commission’s consideration of the VoiceStream/DeutscheTelekom merger.
In accordance with FCC rules, we are filing a copy of this letter in theabove-captioned docket.
Sincerely,
Gary C. Hufbauer Edward M. GrahamReginald Jones Senior Fellow Senior FellowInstitute for International Economics Institute for International Economics
C. Fred Bergsten, Director
BOARD OF DIRECTORS* Peter G. Peterson, Chairman* Anthony M. Solomon
Chairman, Executive Committee
Leszek BalcerowiczConrad BlackW. Michael BlumenthalChen YuanJon S. CorzineGeorge DavidMiguel de la Madrid
* Jessica EinhornGeorge M. C. FisherMaurice R. Greenberg
* Carla A. HillsNobuyuki IdeiW. M. Keck IINigel LawsonLee Kuan YewDonald F. McHenryMinoru MurofushiSuliman S. OlayanPaul H. O’NeillI.G. PatelKarl Otto Pöhl
* Joseph E. Robert, Jr.David RockefellerRenato RuggieroStephan SchmidheinyJean-Claude TrichetLaura D’Andrea TysonPaul A. Volcker
* Dennis WeatherstoneEdward E. Whitacre, Jr.Marina v.N. WhitmanLynn R. WilliamsPeter K.C. Woo
Ex officio* C. Fred Bergsten
Richard N. Cooper
Honorary DirectorsAlan GreenspanReginald H. JonesFrank E. LoyGeorge P. Shultz
* Member of the Executive Committee
ADVISORY COMMITTEERichard N. Cooper, ChairmanRobert BaldwinBarry P. BosworthSusan M. CollinsWendy DobsonJuergen B. DongesRudiger DornbuschGerhard FelsIsaiah FrankJeffrey FrankelJacob A. FrenkelStephan HaggardDavid A. HaleDale E. HathawayNurul IslamJohn JacksonPeter B. KenenLawrence B. KrauseAnne O. KruegerPaul R. KrugmanRoger M. KubarychJessica T. MathewsRachel McCullochIsamu MiyazakiMichael MussaSylvia OstryTommaso Padoa-SchioppaJacques J. PolakDani RodrikJeffrey D. SachsJoseph E. StiglitzAlan Wm. WolffRobert B. Zoellick
BOARD OF DIRECTORS* Peter G. Peterson, Chairman* Anthony M. Solomon
Chairman, Executive Committee
Leszek BalcerowiczConrad BlackW. Michael BlumenthalChen YuanJon S. CorzineGeorge DavidMiguel de la Madrid
* Jessica EinhornGeorge M. C. FisherMaurice R. Greenberg
* Carla A. HillsNobuyuki IdeiW. M. Keck IINigel LawsonLee Kuan YewDonald F. McHenryMinoru MurofushiSuliman S. OlayanPaul H. O’NeillI.G. PatelKarl Otto Pöhl
* Joseph E. Robert, Jr.David RockefellerRenato RuggieroStephan SchmidheinyJean-Claude TrichetLaura D’Andrea TysonPaul A. Volcker
* Dennis WeatherstoneEdward E. Whitacre, Jr.Marina v.N. WhitmanLynn R. WilliamsPeter K.C. Woo
Ex officio* C. Fred Bergsten
Richard N. Cooper
Honorary DirectorsAlan GreenspanReginald H. JonesFrank E. LoyGeorge P. Shultz
* Member of the Executive Committee
ADVISORY COMMITTEERichard N. Cooper, ChairmanRobert BaldwinBarry P. BosworthSusan M. CollinsWendy DobsonJuergen B. DongesRudiger DornbuschGerhard FelsIsaiah FrankJeffrey FrankelJacob A. FrenkelStephan HaggardDavid A. HaleDale E. HathawayNurul IslamJohn JacksonPeter B. KenenLawrence B. KrauseAnne O. KruegerPaul R. KrugmanRoger M. KubarychJessica T. MathewsRachel McCullochIsamu MiyazakiMichael MussaSylvia OstryTommaso Padoa-SchioppaJacques J. PolakDani RodrikJeffrey D. SachsJoseph E. StiglitzAlan Wm. WolffRobert B. Zoellick
Chairman William E. Kennard Commissioner Susan NessFederal Communications Commission Federal Communications CommissionRoom 8-A302C Room 8-B201H445 12th Street, S.W. 445 12th Street, S.W.Washington, DC 20554 Washington, DC 20554
Commissioner Harold W. Furchtgott-Roth Commissioner Gloria TristaniFederal Communications Commission Federal Communications CommissionRoom 8-B115H Room 8-C302C445 12th Street, S.W. 445 12th Street, S.W.Washington, DC 20554 Washington, DC 20554
Commissioner Michael K. PowellFederal Communications CommissionRoom 8-A204C445 12th Street, S.W.Washington, DC 20554
Dear Chairman Kennard, and Commissioners Ness, Furchtgott-Roth, Tristani,and Powell:
In September 2000, the Institute for International Economics publishedthe attached policy brief, entitled “’No’ to Foreign Telecoms Equals ‘No’ tothe New Economy!” Because many of the points we made in that policy briefwith respect to legislation proposed by Sen. Hollings are equally applicableto the Federal Communications Commission’s deliberations regarding theVoiceStream/Deutsche Telekom merger, we are submitting that policy brieffor your consideration.
In our policy brief, we reviewed the facts of the VoiceStream/DeutscheTelekom merger and concluded that it exemplifies the sort of horizontalexpansion that adds to competition in the U.S. market. Unless VoiceStreamcombines with a carrier like Deutsche Telekom that is not already in the U.S.market, a merger is likely to subtract competition. We also concluded thatDeutsche Telekom does not derive special benefits from the Germangovernment’s ownership as competitors have alleged. For example, indepen-dent credit ratings show no discernable difference between DeutscheTelekom’s credit rating, and the ratings of other large telecommunicationscompanies.
We believe that what is at stake as the Commission considers thismerger is no less than the United States’ credibility as a trading partner. If the
FCC uses its statutory powers to block Deutsche Telekom’s acquisition of VoiceStream based onDeutsche Telekom’s degree of government ownership, protectionist forces around the world willlearn by bad example and find new reasons to block U.S. telecom expansion abroad. This is espe-cially true now that the merger has cleared U.S. antitrust authorities without an objection. U.S.telecom firms and consumers would be significant losers.
If the FCC denies or conditions the VoiceStream/Deutsche Telekom merger based on theGerman government’s ownership interest in Deutsche Telekom, the Commission will shout a triple“No!”: “No” to foreign competition, “No” to American consumers, and “No” to U.S. telecom firms.To shout this triple “No” is tantamount to shouting “No” to the new economy and the prosperity it isbringing.
Sincerely,
Gary C. Hufbauer Edward M. GrahamReginald Jones Senior Fellow Senior FellowInstitute for International Economics Institute for International Economics
tition between privately-owned US telecomfirms and publicly-owned foreign firms. Toput the debate in a sound bite, “How can aprivate firm compete with a governmentwallet?”
But even at the sound bite level, it’swrong to characterize Deutsche Telecom asan extension of the German government’swallet. Deutsche Telecom is now 42 percentprivately owned (US investors own approxi-mately 20 percent of all privately heldDeutsche Telecom shares). Acquisition ofVoiceStream by Deutsche Telecom,through a share exchange, will increasethe private ownership of Deutsche Telecomto 55 percent. The German Federal Govern-ment is already a largely passive investor,holding no “golden share” in DeutscheTelecom and only one of 20 board seats; infact, the German government plans to selloff the rest of Deutsche Telecom as fast asmarket conditions permit. DeutscheTelecom enjoys no special tax breaks. Nor
can it borrow from the German FinanceMinistry. Indicative of the arm’s length re-lation between Deutsche Telecom and theGerman government is that the Standard& Poor’s credit rating for Deutsche Telecomis AA- (the same as AT&T, SBC, andBellSouth), while the German sovereignrating is AAA.
If Hollings prevails in his campaign toblock Deutsche Telecom, two groups of
Within a few weeks, the United Stateswill make a pivotal decision—whether toprohibit foreign telecommunications firmsthat are partly owned by foreign govern-ments from competing in the US market.The decisive case is Deutsche Telecom’sbid to acquire the US mobile telephone op-erator VoiceStream (and VoiceStream’sown new acquisition, PowerTel).
Senator Ernest Hollings (D-SC) is doingeverything he can to stop the Germantelecom giant. Along with 29 Senate co-sponsors, Hollings has introduced a bill (S.2793) that would block Deutsche Telecom,or any other telecom owned more than 25percent by a foreign government, from ac-quiring a US telecom firm. S. 2793 may notpass, but to reinforce their objections,Senator Hollings and the 29 other senatorswrote a stern letter to William Kennard,Chairman of the Federal CommunicationsCommission (FCC), urging the FCC to blockthe acquisition. Hollings worries about whathe sees as the unfair character of compe-
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Gary C. Hufbauer and Edward M. GrahamInstitute for International Economics
Americans will be certain losers—all US consumersand most US telecom companies. Potential corporatewinners may be lurking in the background, but sofar they have kept out of sight.
To understand why the Hollings initiative can in-flict so much damage, and finds so little support amongUS telecom firms, let alone US consumers, it’s usefulto start with a short background on telecom econom-ics.
Telecom EconomicsThe telecommunications industry—once a staid
investment for widows and orphans—is simulta-neously going through two revolutions. These are al-most the industrial equivalent of the American andFrench Revolutions happening simultaneously. Onthe one hand, the industry is being rocked by an ex-plosion of new technology and applications of thistechnology—digital, mobile/PCS, broadband trans-mission, internet, e-commerce and more. On theother hand, there’s the dramatic introduction of com-petition into what was once a near-monopoly indus-try, not only in the United States but everywhere elseas well. Working together, technology and competi-tion have made telecommunications the main en-gine driving the information technology revolution.Once telecommunications was largely about callingmother on Sunday night. But now telecommunica-tion networks have become the muscles that drivethe “new economy”. When these muscles work well,we see the economic equivalent of an Olympicmarathoner; when they work poorly, we see the once-a-month jogger.
Network EconomicsBut there’s another dimension to the story—net-
work economics. A telecom network becomes expo-nentially more valuable when more companies,people, and services are connected to that network.Thus, a network with 50 million customers is twicethe size but many more times the value of a net-work with 25 million customers.
The value of a network to a telecom firm in-creases faster than its size because the marginalcost of adding additional subscribers and services isa fraction of the fixed cost of building the backboneof the network. This is why Deutsche Telecom canbid roughly $51 billion for VoiceStream, more than$15,000 per customer. Voice Stream (in combina-tion with PowerTel) is only the sixth largest telecomnationwide, with around 3 million existing custom-ers. Potentially, however, it could serve nearly 250million Americans. As it expands in the rapidly grow-ing US wireless market, with finance and technol-ogy from Deutsche Telecom, the cost of serving addi-tional customers will fall dramatically.
Importantly, the value of the service provided bythe network to the customer also increases expo-
nentially with the size of the network. Thus, for ex-ample, both modern e-mail and traditional voice te-lephony are of great value to the user because bothcan be used to reach millions of other users. If thenumber of persons connected to the network weresmall, the value of being connected would also besmall. (For this reason, telecom firms interconnecttheir networks, so a customer of one network canreach customers on other networks.)
Thus, the larger a network, the more valuable itbecomes to its business and household users, be-cause they enjoy a seamless reach to more firms,people and places. And this value is increasing asthe result of new technology: For example, technol-ogy has enabled households to add broadband com-puter connections at low cost to their basic telecom-munications service. With this connection, they canaccess foreign Web sites and even order merchan-dise from abroad. Business firms can link their re-mote offices and factories using customized voice,video, sound and data facilities.
The Urge to MergeNetwork economics are a supercharged variant
of economies of scale. Every student who passes Eco-nomics 101 can predict the outcome in an industrythat is characterized by powerful economies of scale.Firms will merge in order to reduce costs. If carriedtoo far, of course, these combinations could lead toone firm that monopolizes the industry. But that out-come seems remote in telecommunications. Rather,firms are entering what once used to be anotherfirm’s exclusive market simply to remain competi-tive. This is happening on a world scale. US firmsare the most aggressive players in this global game:Five of the world’s top ten telecom firms are basedin the United States—and they are growing likekudzu in every corner of the globe. Four foreign firms,with substantial government ownership, are also inthe top ten—NTT (Japan), Deutsche Telecom, FranceTelecom, and Telecom Italia. Telefonica (Spain) isclose behind.
The Deutsche Telecom acquisition ofVoiceStream (and Powertel) exemplifies the sort ofhorizontal expansion that adds to competition in theU.S. market. Deutsche Telecom, like most other for-eign carriers (Mannesmann/Vodaphone is an ex-ception), has no significant presence in the US mar-ket. If Deutsche Telecom makes an entry, it willadd to competition. VoiceStream can potentially
serve nearly all American households. ButVoiceStream is now the sixth largest player in theUS market. Unless it combines with another player,it won’t have the capital and technology to expandand compete. And with Verizon, SBC, BellSouth,AT&T and Sprint already nationwide carriers, un-less VoiceStream combines with a carrier not alreadyin the US market, a VoiceStream merger is likely tosubtract competition.
Pro-competitive RegulationWhile the Deutsche Telecom acquisition poten-
tially adds to competition in the US market, that isn’tnecessarily true of all telecom mergers and acquisi-tions. Indeed, there’s an obvious tension between thenetwork cost reduction enabled by consolidation andexpansion and the price benefits of wide-open com-petition. All telecom companies would go broke if com-petition drove prices down to the level of marginalcosts for their services. If prices were to equal mar-ginal costs, the firms would never recover the hugefixed costs of investment that go into setting up fiberoptic connections, wireless relay stations, and thedevelopment of new technology. On the other hand,consumers would be short-changed if there was notenough competition to drive prices down to the level
of average costs. When prices do equal average costs,firms can recoup the fixed costs of creating networks,including those of developing innovative technologies,while customers receive maximum value from us-ing the network.
There are two ways of reconciling the age-old co-nundrum between industrial consolidation and en-suring that prices approach average cost. The old-fashioned way is detailed price and entry regulation,service-by-service, customer-by-customer, region-by-region. The problem with price and entry regulationis that it usually gets captured by lawyers in the payof telecom firms. They do their best to establish mo-nopoly practices under the cloak of public oversight.Once captured, price and entry regulation can be usedto create undesirable barriers to innovation and newplayers.
The newer reconciliation, now practiced world-wide, is to welcome the widest number of firms intothe market, and regulate the industry in a pro-com-
petitive manner to ensure that incumbents don’tblock innovation and new entrants. The free-for-allof the market then drives down prices. That wasJudge Harold Greene’s strategy when he broke upAT&T in 1982, and it has since become the guidingstar of FCC policy. The pro-competitive strategy hasin fact delivered a more abundant economic cornu-copia than anyone twenty years ago could have ex-pected.
The newer reconciliation has delivered powerfulbenefits to US consumers. A great example is mo-bile telephony—VoiceStream’s business. Until 1995,every regional market had only two mobile telephoneoperators—the regional bell operating company andthe winner of the FCC’s cellular license lottery. Newcompetitors began to enter the market in 1995. Now,nearly 70 percent of American households are servedby at least five mobile operators. The result: between1994 and 2000, average mobile telephone rates wereslashed from 57 cents a minute to 24 cents a minute.As this example illustrates, it takes at least five play-ers in the market to ensure that competition willdrive prices down towards average cost.
So where can a new competitor like VoiceStreamgo to seek a large partner with the financial re-sources to expand its wireless business? And wherecan the United States find new players for otherniches in the burgeoning telecom market? TheUnited States has reached a point where it actuallyneeds entry by big foreign players—companies likeNTT, Deutsche Telecom and France Telecom—toprovide the financial clout to ensure that the com-petitive benefits of cheap telecommunications reachAmerican consumers in each and every niche of themarket.
Aha! But can competition really be fair when aforeign government owns one of the players? That’sthe nub of Senator Hollings’ campaign againstDeutsche Telecom and other government-ownedtelecoms, like NTT and France Telecom, that wantto buy into the US market.
What About Government Ownership?Twenty years ago, virtually all telecom compa-
nies were either regulated private monopolies (likeAT&T), or government corporations, like DeutscheTelecom. They kept each other at arm’s length,charged stiff interconnection rates for transmittingvoice or data to local customers from foreign carri-ers, and blocked the entry by newcomers who wantedto offer cheaper long distance, wireless service, oruser hardware like office switchboards. The maincomplaint against government ownership was thatit served to block entry into the telecommunicationssector and keep prices far higher than necessary.
But all this has changed. Through privatizationand pro-competitive regulation, telecom companiesin Europe are being forced to shed their monopoly
vestiges in favor of slugging it out in the market-place. The pro-competitive regulatory approach hasmany elements, pioneered in concept by JudgeGreene and the FCC in the United States during the1980s, expanded by Congress in the 1996 Telecom-munications Act, and adopted internationally by theWorld Trade Organization in the 1997 Basic TelecomAgreement.
Thus, other countries are restructuring theirtelecom industries, and not just to accommodateUS wishes. Instead, a stark realization is drivingthe shakeup of ancient telecom monopolies: Nocountry has a prayer of prospering in the neweconomy without innovative and competitivetelecom service providers that provide the latestand best technologies to customers at the lowestpossible cost.
Of the two ingredients of the new telecom indus-try outside the United States, privatization and pro-competitive regulation, the latter is in fact the most
important. Some countries—Mexico and Singaporebeing just two examples—privatized their publictelecom carriers without implementing pro-competi-tive regulation. In particular, the telecom firms wereprotected from foreign competition. The result? A highvalue for shares when the public telecoms were sold,but also high rates and low innovation for customersin the years thereafter. In fact, Mexico and Singapore,under these policies, did not fully participate in thebenefits of the new economy.
By contrast, most European countries have em-braced pro-competitive regulation, while graduallyprivatizing their telecom sectors. Britain led the waywhen it privatized British Telecom and followed upwith pro-competitive regulation that opened the wayfor entry of new carriers. Germany is on the samepath. More importantly, Germany has implementedall the elements of pro-competitive regulation con-tained in the WTO Basic Telecom Agreement. Entryby new service providers in Germany now is allowedand, indeed, one result has been that long distanceand international rates have dropped by more than70 percent. Nearly 150 carriers now offer local ser-vice. Four competitors are fighting for the mobilemarket. Deutsche Telecom in fact is only the sec-ond largest mobile operator in Germany. Leading UScompanies hold stakes in the German market: AT&T,WorldCom, Qwest, Global Crossing and many others.German Internet density is fast approaching US lev-
els, with 20 million subscribers by the end of 2000.America Online is the second largest Internet ser-vice provider in Germany.
Why American Consumers Lose under HollingsAmerican consumer interest is plain and simple.
The larger the number of telecom giants operating inthe US market, the keener the competition, the lowerthe prices, the faster the innovation—all propelling thenew economy. If the Congress passes the Hollings bill,or if the FCC uses its existing statutory powers to blockDeutsche Telecom’s acquisition of VoiceStream, thatwill send a powerful message: Foreigners keep out untilyou are 75 percent privatized!
Privatization is certainly desirable. It’s alreadyhappening in Europe, Japan and elsewhere. Hollingsworries that the pace of privatization is too slow. Butto block entry into the US market by foreign telecomfirms until they are 75 percent privatized is impa-tience with a vengeance! In another five to ten years,nearly all these foreign firms will indeed be priva-tized to Hollings’ 75 percent threshold. But in themeantime, American consumers will lose the ben-efit of stronger competition. And with the US telecommarket more mature and expanding less rapidly fiveor ten years hence, it will be much harder for a new-comer to build a big enough customer base to coverthe fixed costs of entry. Under the Hollings bill, USconsumers will long be denied the benefits of addi-tional competition from firms like Deutsche Telecom,France Telecom, NTT and others.
Why US Telecoms Lose under HollingsOutside the United States and a few other na-
tions, in practically every country, battles are con-stantly being fought between those who advocatetelecom competition and innovation, and incumbenttelecom operators who would rather do things theirway at their time. In these battles, US telecom firmsare agents of change. They are bursting into mar-kets everywhere, foremost in Europe. From thestandpoint of Europe’s own self interest in its tran-sition to the new economy, it should welcome AT&T,MCI Worldcom, SBC, Verizon, and all the rest of theAmerican pack—whatever the outcome of SenatorHollings’ efforts.
But let’s be realistic. If Deutsche Telecom isblocked, the status quo forces in Europe and else-where will learn by bad example: They will find newreasons to block US telecom expansion. US telecomfirms would then be big time losers. But so will USconsumers. Households and firms that are seekinglow cost, seamless, high-quality connections to Eu-rope could, in many instances, be disappointed.
What if Hollings is Right?Despite everything in the WTO Basic Telecom
Agreement and German actions, Hollings could still
The views expressed in this publication are those of the authors. This publication is part of the overall program of theInstitute, as endorsed by its Board of Directors, but does not necessarily reflect the views of individual members ofthe Board or the Advisory Committee.
be right to worry about a government-controlled playerin the US telecom market. After all, DeutscheTelecom, like AT&T, enjoys the advantages that gowith 100 years as the incumbent carrier. In opaqueways, Deutsche Telecom might use these advantagesto keep prices high and innovation low in Germany,while applying the profits to enlarge its foothold inthe US market—by offering bargains to theVoiceStream customers. In a word, what if DeutscheTelecom behaves like a predator? This scenario ap-pears to have no factual basis in Deutsche Telecom’scase, but it cannot be dismissed as a mere theoreti-cal concern.
Fortunately, the United States has instrumentsbesides the blunt Hollings bill to address this con-cern. Exercising its statutory authority, the FCC cancondition approval of the VoiceStream acquisition onappropriate benchmarks of Deutsche Telecom opera-tions, not only in the United States but also in Ger-many. The U.S. president—acting under the Exon-
Florio act, administered by the Treasury-chairedCommittee on Foreign Investment in the UnitedStates, CFIUS—can block or modify the acquisitionif it poses a national security concern. Once the ac-quisition is complete, the FCC can continue to moni-tor the operations of Deutsche Telecom andVoiceStream in the US market. And, importantly,the Department of Justice can take remedial ac-tion if Deutsche Telecom, through VoiceStream,behaves as a predator and attempts to establish amonopoly by doing harm to its domestically-ownedcompetitors. In short, the United States already hasin place an array of means by which it can deal withDeutsche Telecom—if it actually behaves as Sena-tor Hollings fears.
To enact the Hollings bill is to shout a triple “No!”:“No” to foreign competition, “No” to American con-sumers, and “No” to US telecom firms. To shout thistriple “No” is tantamount to shouting “No” to the neweconomy and the prosperity it is bringing.
