A fundamental misunderstanding: FCC implementation of U.S. WTO commitments.

Audio-visual services are also broken down into subsectors, of which only one is relevant--radio and television transmission services. "Radio and television transmission services" refer to the network services necessary for the transmission of radio and television signals. (32)

Each WTO member's Schedule lists the sectors for which the member is willing to undertake market access obligations, i.e., whether a foreign service may enter the market or whether a foreign service supplier may supply a particular service. (33) If a WTO member wishes to limit the number of suppliers, the participation of foreign capital, or the form of investment, it must include those limitations in its Schedule. The Schedule also lists national treatment commitments by sector. Any limitations on national treatment, such as foreign ownership limits, must be "scheduled" to be effective. (34)

The U.S. Schedule of Specific Commitments includes market access and national treatment commitments in audio-visual services (35) and basic telecommunications services. (36) Under the subsector, "radio and television transmission services," the United States inscribed the following limitation on market access and national treatment:

Not only do the U.S. audio-visual commitments not change U.S. law, they give the United States the ability to bar foreign ownership in broadcast licenses. While [section] 310(b)(4) gives the FCC discretion to permit foreign investment above twenty-five percent in a broadcast licensee's direct or indirect controlling U.S. parent, the U.S. commitments categorically limit foreign ownership of the parent to no more than twenty-five percent. In addition, the U.S. Schedule also states that "US citizenship is required to obtain radio and television licenses." (38)

The United States took a very different approach in the negotiations on basic telecommunications services. Negotiators aimed to achieve maximum commitments from WTO members on market access and national treatment, so as to promote the provision of telecommunications services on a competitive basis. (39) In order to obtain market-opening commitments from its trading partners, the United States had to make an equally market-opening commitment. (40) The major demand from its trading partners was the elimination of the foreign ownership restrictions on common carrier radio licenses.

Working with the FCC, the U.S. negotiating team crafted commitments that took advantage of the discretion granted to the FCC in [section] 310(b)(4). As a result, the U.S. Schedule of Specific Commitments (41) prohibits direct ownership of a common carrier radio license by:

(a) foreign government or the representative thereof

(b) non-U.S, citizen or the representative of any non-U.S, citizen

(c) any corporation not organized under the laws of the United States or

(d) U.S. corporation of which more than 20% of the capital stock is owned or voted by a foreign government or its representative, non-U.S. citizens or their representatives or a corporation not organized under the laws of the United States. (42)

At the same time, the Schedule states that there are no market access or national treatment limits on indirect ownership (through holding companies) of a common carrier radio license. The United States preserves the right to discriminate in licensing satellite transmissions of direct-to-home and direct-broadcast television services and digital audio radio services in order to require reciprocity from trading partners with respect to those services. (43)

VII. FCC IMPLEMENTATION OF U.S. COMMITMENTS

Ms. Cho is correct that there was a fundamental policy shift at the FCC in the mid-1990s in applying [section] 310, (44) but this shift only related to telecommunications licenses and did not affect broadcast licenses. The shift was not to downplay national security and put more emphasis on "public interest," as Ms. Cho states. (45) Rather, it was to expand the reach of the public interest test to address competition concerns about foreign entry into the U.S. telecommunications market in addition to national security concerns and uneasiness about competition in the U.S. market.

Starting with the Foreign Carrier Entry Order, the FCC looked to "advance the public interest by promoting effective competition in the U.S. telecommunications services market, particularly the market for international services." (46) The FCC concerns were focused primarily on the ability of foreign carriers with market power on the foreign end to unfairly leverage their market power on the U.S. end. (47) To do so, the FCC announced it would apply an "effective competitive opportunities" test to "all planned investment in U.S. carriers by foreign carriers above a 25 percent equity threshold, or a controlling interest at any level." (48) This included applications for international [section] 214 authorizations, as well as petitions for a declaratory ruling under [section] 310(b)(4).

In the case of [section] 214 applications, the FCC also looked at other public interest factors, including the national security implications of the foreign entry. (49) With respect to foreign ownership under [section] 310(b)(4), the FCC stated that it would look at "other public interest factors that weigh in favor of, or against, foreign investment[]." (50) These additional factors include "any national security, law enforcement, foreign policy and trade concerns raised by the Executive Branch." (51)

Following the conclusion of the WTO negotiations on basic telecommunications, the FCC reevaluated its competitive concerns about foreign entry into the U.S. market for telecommunications services. It concluded that these concerns had been alleviated by the market-opening commitments of WTO members. (52) The Foreign Participation Order clearly states that the new open entry policy for service suppliers from WTO members applies to applications for international [section] 214 authorizations, cable landing licenses, and authorization to exceed the [section] 310(b)(4) foreign ownership benchmark. (53) In parallel, the FCC extended the new open entry policy to satellite services provided by foreign-owned satellite operators--except for Direct-to-Home (DTH), Direct Broadcast Satellite (DBS) services, and digital audio radio services--which remain subject to the effective competitive opportunities test in light of the U.S. exclusion of these services from its WTO commitments. (54)

The new open market entry policy was not a "critical blow to the national security concern," as Ms. Cho states. (55) Both the Foreign Participation Order and the Amendment to the Commission's Regulatory Policies regarding domestic and international satellite services (DISCO II) emphasize that the FCC will continue to look at all other facets of the public interest test, including any national security, law enforcement, foreign policy, and trade concerns raised by the Executive Branch. (56) In practice, where foreign ownership is present, the FCC sends all applications for [section] 214 authorizations, cable landing licenses, and all petitions for a declaratory ruling under [section] 310(b)(4) to the Executive Branch for review and does not act on the application or petition until the Executive Branch responds. The Executive Branch often requests that the FCC include, as a condition to a license or authorization, a requirement that the licensee abide by any agreement reached with the Executive Branch to assuage national security and law enforcement concerns, a request which the FCC routinely grants. (57)

As demonstrated above, the FCC's policy toward foreign ownership of broadcast licenses did not change in the Foreign Carrier Entry Order or Foreign Participation Order. In the Foreign Cartier Entry Order, the FCC specifically addressed the issue of whether an effective market access test should apply in the broadcast context. The FCC stated that "[f]oreign ownership of broadcast licenses presents different questions than for other types of radio spectrum licenses." (58) Citing support from the Executive Branch and Congress, the FCC concluded that, "the time has [not] yet come to ease restrictions on alien ownership of broadcast licenses to the extent that would result from the implementation of an effective competitive opportunities test in the broadcast context." (59)

Other FCC actions confirm that it has not changed its broadcast policy. As evidenced by the title alone, the Foreign Ownership Guidelines for FCC Common Carrier and Aeronautical Radio Licenses, (60) which Ms. Cho cites as evidence that the FCC has an open entry policy for broadcast licenses, (61) refers only to common carrier and aeronautical radio licenses. Moreover, the text of the Foreign Ownership Guidelines states: "These Guidelines are intended to apply to two categories of radio licenses: (1) common carrier and (2) aeronautical en route or aeronautical fixed (hereinafter, 'aeronautical') licenses." (62)

The other evidence that Ms. Cho cites to support her conclusion that the FCC has changed its policy on broadcast licenses is not an FCC action at all. (63) It is a recommendation by a subcommittee of the FCC Advisory Committee on Diversity. (64) In fact, the FCC rejected the recommendation, stating that: "[w]e are not convinced, on the basis of the record before us, that taking the extraordinary step of relaxing our foreign ownership rules would advance our interest in promoting diversification among broadcast licensees, including women and minorities." (65)

VIII. CONCLUSION

The United States did not undertake any obligations to open the U.S. market for radio or television broadcasting to foreign entry in either NAFTA or the WTO. In fact, in both negotiations, the United States preserved its ability to discriminate against foreign investors in the broadcasting market. In contrast, the United States made significant market-opening commitments for telecommunications services in the WTO. This dichotomy between a closed market for broadcast services and an open market for telecommunications services has been reflected in FCC policies and orders since the WTO negotiations on basic telecommunications concluded in 1997.

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