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FCC Considers Limits on Foreign Phone Equipment

November 13, 1986|Associated Press

WASHINGTON — The chairman of the Federal Communications Commission said Wednesday that the agency is investigating the possibility of implementing regulations that could block American telephone companies from buying foreign switching equipment.

Mark S. Fowler said a proposed rule could be ready for public comment by the end of the year. The move is the newest phase of an intense multibillion-dollar trade battle with West Germany.

Fowler is upset that foreign companies can do business in the United States while foreign governments, such as West Germany, seek to block American companies from selling such equipment abroad.

The proposed rule, he said, would let the FCC take into account questions of national security as well as fair and free trade in deciding whether it is in the public interest to allow a piece of foreign equipment to be used in the American telephone network.

In an interview, Fowler said it might not be wise to allow foreign manufacturers to know how and where sophisticated switching equipment is installed and how well it is protected.

Siemens AG, the West German company at the center of the fight, has gained a toehold in the American telephone market since 1984, when American Telephone & Telegraph lost its monopoly to make equipment for all of the Bell telephone companies it owned.

AT&T still gets most orders, but Siemens, with U.S. headquarters in Boca Raton, Fla., and Canadian-owned Northern Telecom Ltd. have signed some contracts. Northern Telecom's U.S. subsidiary is based in Nashville, Tenn.

Fowler has said he is outraged by West German efforts to keep AT&T from closing a lucrative contract to obtain 16% of the digital switching equipment business of the state-owned French telephone system.

West German officials said the French should keep the business in Europe and deal with Siemens, not AT&T.

The FCC chairman threatened U.S. government sanctions against Japanese companies in January, 1985, by inquiring publicly into whether he could slow down approval for Japanese products in retaliation for delayed approval of American equipment offered to Japan. After a seven-month study, the commission decided that it lacked authority to act.

Under a 1981 trade agreement that expires Dec. 31, Japan and the United States are supposed to have access to each other's markets. However, American sales to Japan have been generally disappointing.

American-made products are less expensive in Japan, however, since the value of the dollar has declined in relationship to the yen.

Action by the FCC under Fowler a few years ago kept the Japanese from contracting to build a fiber-optic cable link along the East Coast, a job that went to an American company, even though a Japanese company had submitted a lower bid.

Three weeks ago, Fowler polled the regional Bell companies and GTE, another major purchaser, on plans for purchases from Siemens.

Bell Atlantic Corp., which operates telephone companies in six states and the District of Columbia, has spent more than $1.2 billion on central office equipment in the last three years.

Its chairman, Thomas E. Bolger, said $91 million of that went to Siemens and $115 million to Northern. He said that an additional $21 million is earmarked for Siemens in 1987.

Nynex Corp., which provides service in New York and most of New England, projected spending $7 million with Siemens in 1987-88, following $13 million spent in 1985 and 1986.

Both companies said the great majority of the Siemens equipment they buy is made in U.S. plants.

The other companies have either not replied to Fowler or refused to release figures to the public.

Ameritech, the Chicago company that serves five Midwestern states, has entered into an agreement to allow Siemens to bid on $450 million in switching equipment contracts to be awarded over three years.

"We have been developing a growing relationship with Siemens," said Ameritech spokesman Bill Hensley. "If the FCC told us we had to buy equipment from a domestic manufacturer, that would put us in a box. If we want to have a competitive choice, and we do, then we simply must go beyond the shores of our own country."

Bell Atlantic's Bolger recommended a different solution to the trade problem: allow the Bell companies to make their own equipment.

The Bell System breakup gave manufacturing responsibilities to AT&T, and the divestiture agreement signed to end an antitrust case against AT&T forbade the regional companies to manufacture equipment.

U.S. District Judge Harold Greene so far has refused to waive the provisions of the breakup decree to allow the Bell companies to manufacture equipment for use in the United States. He has granted limited permission for joint ventures between Bell companies and overseas manufacturers to make equipment overseas for use overseas, however.

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