NBSIR 87-3641

Barriers Encountered By U.S.

Exporters of Telecommunications

Equipment

Terrance N. Troy

U.S. DEPARTMENT OF COMMERCE

National Bureau of Standards

Office of the Associate Director for Industry and Standards

Office of Standards Code and Information

Gaithersburg, MD 20899

October 1987

U.S. DEPARTMENT OF COMMERCE

'NAL BUREAU OF STANDARDS

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100

U56

87-3641

1987

C . 2

NBSIR 87-3641

BARRIERS ENCOUNTERED BY U.S.

EXPORTERS OF TELECOMMUNICATIONS

EQUIPMENT

Research. Information Center

iNaiionai i.uteau of Standards

Gaithersburg, Maryland 20899

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ua

t lo » ~ ^1^(4 ! mi

M,

Terrance N. Troy

U.S. DEPARTMENT OF COMMERCE

National Bureau of Standards

Office of the Associate Director for Industry and Standards

Office of Standards Code and Information

Gaithersburg, MD 20899

October 1987

U.S. DEPARTMENT OF COMMERCE, Clarence J. Brown, Acting Secretary

NATIONAL BUREAU OF STANDARDS, Ernest Ambler, Director
Vo • ' . * U li- ' ,v ; * . i * • > • 1 SA
Table of Contents

Page

Abstract 4

1. Introduction 4

1.1 Background 4

1.2 Objective and Approach 9

2. General Findings 9

2.1 Results From Contacts 9

2.2 Overall Thrust of Contacts 14

3. Comments or Responses by Companies for Five Products -- 16

3.1 Modems 18

3.2 Multiplexers 21

3.3 Switches and PBXs 22

3.4 Local Area Networks 25

3.5 Fiber Optic Systems 27

4. Overview of Country Systems 29

4.1 French Telecom System 29

4.1.1 French Organizations 29

4.1.2 French Requirements: Regulations

and Standards 30

4.1.3 French Practices: Testing and Certification 31

4.1.4 Comparison of French and U.S. Systems 32

4.2 West German Telecom System 34

4.2.1 West German Organizations 35

4.2.2 West German Requirements: Regulations

and Standards 36

4.2.3 West German Practices: Testing

and Certification 37

4.2.4 Comparison of West German and U.S. Systems - 38

4.3 Italian Telecom System 40

4.3.1 Italian Organizations 40

4.3.2 Italian Requirements: Regulations

and Standards 41

4.3.3 Italian Practices: Testing and Certification 42

4.3.4 Comparison of Italian and U.S. Systems 42

4.4 British Telecom System 43

4.4.1 British Organizations 43

4.4.2 British Requirements: Regulations

and Standards 44

4.4.3 British Practices: Testing and Certification 45

4.4.4 Comparison of British and U.S. Systems 46

2
Page

5. Discussion 48

6. International Standards 50

6.1 U.S. Participation in International Standards

Activities 50

6.2 Comparison of ITU and Foreign Requirements

and Practices 52

7. Selected Options for Consideration 54

7.1 Standards 54

7.2 Testing 55

7.3 Certification 56

7.4 Accreditation 56

Acronyms and Abbreviations 57

Appendix A

Primary European Markets and Efforts to Address Problems - 58

1. France 58

1.1 Current French Market 58

1.2 Efforts to Address Problems 59

2. Federal Republic of Germany 59

2.1 Current West German Market 59

2.2 Efforts to Address Problems 60

3. Italy 60

3.1 Current Italian Market 60

3.2 Efforts to Address Problems 61

4. United Kingdom 62

4.1 Current British Market 62

4.2 Efforts to Address Problems 62

Figures ~ and Tables TM Page

Figure 1. U.S. Telephone and Telegraph Equipment Trade — 5

Table 1. Exports of Twelve Leading Countries 7 Table 2. Selected Problems 10

Table 3. Typical Comments from Telecom Companies 17

Table 4. U.S. Government Involvement in International

Standards Activities 51

3
BARRIERS ENCOUNTERED BY

U.S. EXPORTERS OF

TELECOMMUNICATIONS EQUIPMENT

Abstract

This report addresses the perceived institution of unreasonable

technical trade barriers by major European trading partners to

the export of telecom products and systems by U.S. companies.

The DOC GATT technical office, which has responsibilities to

assist U.S. exporters to take advantage of trade opportunities,

informally contacted over a period of six months, telecom

companies and agencies to assess the extent of unreasonableness

in foreign national standards, regulations, testing and

certification requi rements , and accreditation procedures. In

each country, examples of requirements and practices were

identified that allegedly blocked U.S. exports and other nondomestic products. Promises from our trading partners to revise

their systems have yielded little, and each country continues to

support unique requirements and practices that constitute trade

barriers. Many trade barriers instituted by EC countries would

be eliminated if EC regional and international telecom standards

were harmonized, their adoption made mandatory for all EC

countries, and results of testing for conformity from one

government accredited laboratory were required to be accepted

throughout the Community. Consequently, the United States should

consider as an option supporting the development and

implementation of European regional requirements and practices

that promote uniformity.

1. Introduction

1.1 Background

The U.S. trade deficit is large and growing in many product

areas, including telecom equipment, even though U.S. companies

still have state-of-the-art technological advantages for many

telecom products. The U.S. telecom trade deficit ($1.7 billion

for all telecom companies for 1986) is increasing, especially at

the expense of medium-sized U.S. telecom companies. With most

major trading partners, expected new sales and increases in

business to existing customers have been disappointing. Figure 1 shows changes in U.S. imports and exports between 1980 and 1985.

4
Figure 1: U.S. Telephone and Telegraph Equipment Trade

1980 1985

$2,028 million European

Community

1980

$557 million U.S. Exports

European

Community Mid East 18.0% 12.5%

1985

$832 million Fdr East 28.3%

Other

Ear East ‘16:6%

Latin America

10. 8%

Mid East 8. 6 %

Source: Bureau of the Census and International Trade Administration

5
U.S. exporters are excluded from European markets by Post,

Telegraph and Telephone (PTT) Administrations that control

foreign government purchasing practices and institute technical

barriers to trade related to standards and certification. (PTTs

are usually centralized government monopolies, but in this report

PTT refers to any government owned, government controlled, or

recently-privatized telecommunications-related agency.)

U.S. trade officials have been promised "open markets" by our

trading partners for many years, but the actual sales to our

trading partners has fallen short of expectations. Moreover,

foreign firms have made inroads into the open telecom market in

the United States, which is committed to "fair trade" and the

implementation of international agreements. The U.S. open system

is seen by many U.S. fair trade interests as a one-way influx of

products that has resulted in many undesirable consequences, such

as lost jobs for U.S. workers.

Table 1 compares total exports of telecom equipment to all other

countries by the 12 leading exporting nations in 1980 and 1985

and indicates the annual growth rate between 1980 and 1985 for

each country. The U.S. position is the next to the lowest in

growth for the five-year period.

The General Agreement on Tariffs and Trade (GATT), an

international agreement to promote trade, does not currently

cover government procurement of telecom equipment, including

purchase! 5y or through a PTT. The existing Procurement Code

does not include telecommunications, but PTTs can voluntarily

comply with the spirit of GATT.

The Agreement on Technical Barriers to Trade (also known as the

Standards Code) was developed under the auspices of the GATT to

eliminate or reduce technical barriers imposed by signatories and

to provide mechanisms for remedies. Hence, GATT does cover

requirements and practices that might be used as barriers to

trade in sales of telecom equipment to private customers, but

PTTs maintain control over technical requirements and practices.

U.S. telecom companies do not have a specific Federal agency to

contact for assistance, nor is one agency coordinating their

trade problems. Some of the prominent U.S. government agencies

that assist telecom exporters are: the U.S. State Department, the

Federal Communications Commission (FCC), the Office of the U.S.

Trade Representative (USTR), and the International Trade

Administration (ITA) and the National Telecommunications and

Information Administration (NTIA) of the Department of Commerce

(DOC). The DOC has a GATT technical office to provide assistance

as feasible on technically-based standar ds-re 1 ated issues to U.S.

6
Table 1; Exports of Twelve Leading Countries

Country 1980 ($ millions) 1985 ($ millions) Annual Growth Rate

Japan 602 2148 29.0

Sweden 445 946 16.3

Federal Republic of Germany 635 876 6.6

United States 557 832 8.4

Canada 211 600 23.2

France 179 486 1 28.42

Be 1 g i um/Luxembour

g

222 461 15.7

United Kingdom 140 348 20.0

Taiwan 323 297 45.

4

Hong Kong 14 206 71.2

South Korea 25 196 51.0

Italy 72 187 21.0

*Source: "U.S. Industrial Outlook 1987," — Telephone Equipment

^-Figure for 1984

2 Rate for 1980-84

^Figure for 1979

4Rate for 1979-85

7
exporters of n o n - a g r i c u 1 1 u r e products. Technical office

activities can be focused to assist exporters and to make

recommendations to other agencies.

The technical office has received indications of the existence of

barriers from a variety of sources, but telecom exporters have

not notified the U.S. government of technically-based export

problems. In particular, documented problems have not been

reported to the technical office (located at the National Bureau

of Standards (NBS) within the Office of Standards Code and

Information). Consequently, U.S. government trade officials have

limited information on the extent to which U.S. telecom exporters

face unreasonable requirements and practices instituted by our

trading partners, whether foreign practices are unreasonable, and

why there is a reluctance to provide documented evidence.

Few telecom exporters have sought government assistance* in

removing alleged technical barriers that impede trade. Exporters

that do call the technical office often request only basic

information, such as the names and addresses of agencies that can

provide information on foreign technical requirements and

practices. Primary foreign trading partners have promised

cooperation and have agreed to assist individual U.S. exporters,

but their performance to date has been disappointing to telecom

industry officials.

The DOC GATT technical office is authorized under Section

412.2 (k) (i) of the Statement of Administrative Actions for

the Trade Agreements Act of 1979 to assist U.S. exporters to

take full advantage of the opportunities provided by the

Standards Code and to disseminate information on the benefits

and opportunities of the Standards Code for the United

States, including, new possibilities for U.S. Government

agencies to pursue comp laints about foreign standards -related

act i v i t i es

.

In the belief that exporters and would-be exporters may be faced

with problems unreported and that expanding export opportunities

would be worthwhile, this study was initiated to identify options

for effective solutions that could be generally applied. To

learn about the situation, U.S. telecom companies currently

offering new products at trade shows were arbitrarily selected

for generalized telephone discussions without any statistical

* For more information, exporters should contact the Office of

Standards Code and Information, A629 Administration Building,

National Bureau of Standards, Gaithersburg, MD 20899, or phone

301-975-4039.

8
sampling techniques applied. Medium-sized companies (that

indicated a probable range of $20 million to $200 million in

sales) were selected for most interviews because trade officials

often suggest that they might represent the most significant

problem sector. Several companies known to the GATT technical

office were added to the list.

The following goals were established for this initial study:

Seek data and information concerning unreasonable

requirements and practices imposed by our trading partners;

Determine what has been done by the government and private

sector to help U.S. exporters;

Suggest options to address problems as identified.

1.2 Objective and Approach

The objective of this study was to determine the extent of

evidence of unreasonableness for requirements (such as technical

regulations and purchasing specifications) and for practices

(such as testing and approval procedures) that are imposed by

foreign trading partners on the importation of U.S. telecom

equ i pment

The objective of this study was discussed with 25 government and

private sector organizations in an effort to identify relevant

experiences with telecom exporters. The author then contacted 50

telecom companies to discuss their exporting activities and to

identify homologation (all of the steps necessary to get a product into a country, tested, approved and available for sale)

difficulties for a variety of products and countries. On the

basis of these discussions, six products were identified for

further investigation. Concomitantly, four Western European

countries and eight problems were selected for this study.

The eight export problems for U.S. companies, as they are

associated with the six telecom products, are listed in Table 2

for four European trading partners. Selected requirements and

practices for those Western European countries were then compared

with those in the United States.

2. General Findings

2.1 Results from Contacts

Government agencies and private sector organizations cited

several examples of attitudes and concerns of U.S. telecom

companies with trade difficulties related to foreign requirements

9
Table 2: Selected Problems

X^COUNTRIES

PRODUCTS \

France Federal

Republic

of

Germany

Italy United

Kingdom

1. Modems

Incompatible

Standards

Approval

Practices

2. Multiplexers

Homologation

Procedures

Private

3. Branch

Exchanges

Approval

Practices

4. Switches

Closed

Market

Local

5. Area

Networks

Testing

Procedures

Interconnection

Standards

6. Fiber Optics

Closed

Procurement

10
and practices. The following four examples are illustrative of

specific concerns:

One company was satisfied with the slow progress being made.

A second company was determined to develop a program with its

own resources to obtain access to every important foreign

market.

A third did not want anything in print, especially the name

of the company.

A fourth, a small company, had an exporting problem with a product with allegedly superior technology and lower cost. A

foreign official indicated that the company would not be able

to sell that product at that time in that country, but

provided no specific reasons.

Lists of telecom companies with successful or innovative

manufactured products were developed for further contacts. It

was not difficult to identify telecom companies that export,

would like to export, or which had taken steps to export without

success. Getting them to examine their problems in any detail

(by informal phone discussions), however, required patient

probing. After technical office staff gained an understanding of

those problems, many exporters voluntarily identified barriers

they had encountered. Discussions were non -d i r ec ted , for the

most part, although exporters were encouraged to discuss foreign

requirements and practices that might provide some evidence of

unreasonableness

Most exporters expect that progress in getting into new markets

or removing technical barriers will be slow because the telecom

industry has been a closed state monopoly in almost all countries

and PTTs are not eager to change.

Individual U.S. exporters often indicated that a concerted effort

by U.S. agencies (as listed on page 6) was needed to get each

country into a market-opening, deregulatory mood through official

discussions and negotiations. Moreover, U.S. exporters indicated

that, even where high level foreign officials stated a willingness to provide access to U.S. telecom companies, their

PTTs still maintained political and administrative bottlenecks to

restrict the importation of telecom equipment, including

equipment purchased by or for private sector use.

Some company officials would, or could, only discuss their

problems with unreasonable requirements and practices in a general sense. Faced with a difficult situation, U.S. exporters

were reluctant to disclose details of their problems because

publicizing them might cause the loss of the current and possibly

future trade opportunities. All were reluctant to "put their

11
company's name on the line" in a confrontation with prospective

customers. What appears to them to make sense is to keep

"pounding away" with marketing and technical staff until sales

are consummated.

Where a company knew of a violation of the Standards Code, it

made no sense to them to seek bilateral negotiations that might

eventually benefit their competitors. Bilateral negotiations or

consultations for settling disputes or resolving conflicts are

set forth in GATT Articles XXII and XXIII. Article 14 of the

Standards Code states that:

(If) any party considers that any benefit accruing to it. ..is

being nullified or impaired ... (the other) party shall give

sympathetic consideration to the representations or proposals

made to it, with a view to reaching a satisfactory resolution

of the matter.

Generally, where sales were consummated, the difficulties

encountered were resolved with assistance from foreign agencies,

such as d i s tr i butors , who indicated which models could be sold

and what modifications (to meet unique national specifications)

were necessary. The details of the requirements and practices

are well known to foreign agents, but not to most U.S. exporters

even though they research those markets. U.S. telecom company

officials generally depended on such foreign contacts, rather

than on the U.S. government, to solve or "to get around" their

problems. As difficulties were resolved, U.S. exporters were

reluctant to share, industry-wide, knowledge gained in getting

their equipment homologated for fear that explanations of such

experiences might benefit their competitors, both U.S. and

foreign.

During the seven years that the Standards Code has been in

effect, foreign countries have learned how to avoid conspicuous

violations. Foreign governments simply do not permit government

use of, or private importation of, certain products. PTTs block

government telecom purchases; or they slow down homologation to

block private purchases until their domestic companies achieve

compet i t i veness

.

For the most part, the U.S. telecom industry's perceptions of

unreasonableness for the requirements of the four countries

studied are derived from the contrast between the open, liberal

U.S. system and the views of foreign officials that their

requirements are justified in the name of public safety, consumer

protection, and equipment quality. In the United States, those

concerns are generally left to voluntary standards and the market

p 1 ace

.

12
In the United States, design standards and performance

requirements for quality (a major source of problems for U.S.

exporters in France, the Federal Republic of Germany (FRG), Italy

and the United Kingdom (U.K.)) are usually made a part of

contractual agreements between suppliers and users who purchase

the equipment.

Perceptions of unreasonable practices formed by telecom company

officials focused primarily on foreign organizations that keep

markets closed by controlling telecom purchases through

government monopolies and on bureaucratic "red tape" that slows

down or blocks the process for granting approvals. U.S.

government agencies and private sector organizations have been

working to open markets and some progress is being made, albeit

slowly.

Even if international standards and International

Telecommunications Union (ITU) recommendations are followed,

foreign countries have been able to establish interpretations or

implement options that act as trade barriers. Testing and

certification practices in the United States, unlike those of our

major trading partners, are well defined, relatively inexpensive

and generally conducted expeditiously. In some cases where their

products were blocked, U.S. company officials could not learn the

technical details of the problems. None of the U.S. exporters

who were interviewed seemed able to suggest what medium-sized

companies, acting alone, could do to resolve these problems.

Most U.S. -based large multinational telecom companies continue to

maintain their share of the market. Hence, the consequences of

lost trade opportunities are being shouldered by medium-sized

companies, particularly those whose facilities are located only

in the United States. They see their technological advantages

and potential foreign market opportunities decreasing as U.S.

government agencies and private sector organizations continue to

go their separate ways in attempting to remove technical trade

barriers to the export of U.S. telecom equipment. They

conjecture that the lack of centralized coordination, which often

contributes to poor U.S. competitiveness, may be a characteristic

fault of the U.S. system.

U.S. telecom exporters were aware that they were competing

against the collaborative technological efforts of foreign

companies in other countries. Medium-sized companies, acting

alone, can do little to resolve such problems other than to turn

their products and technology over to foreign agents in exchange

for short-term sales. Promises from our trading partners to

revise their systems have yielded little, and each country

continues to support unique requirements and practices that

constitute most trade barriers.

13
2.2 Overall Thrust of Contacts

The data provided some information and evidence that the

requirements and practices of our primary European trading

partners impede the sale of, and often exclude, U.S. telecom

equipment. PTTs appear to be the focus of trade barriers.

Most U.S. telecom manufacturing companies do not feel that the

GATT offers any protection or that they could successfully

challenge a foreign standard or regulation as "unreasonable."

There are unfair government procurement practices for telecom

products that adversely affect U.S. exports, but such

procurements are specifically excluded from the present codes.

The aggregate of foreign requirements and practices are

tantamount to a system that does not seem fair to U.S. telecom

companies. Medium-sized companies, which usually act

independently, have little chance of getting through such

barriers or of holding on to markets they have developed. Free

trade in telecom products, as exists in the United States, does

not exist in European Community (EC) countries.

"Free trade" is a theoretical concept that assumes

international trade unhampered by governmental measures, such

as technical barriers, that control markets. The objective

of trade liberalization with U.S. trading partners is to

achieve "freer trade," it being generally recognized that

some restrictions on trade, particularly in the telecom area,

are likely to remain in effect for the foreseeable future.

Many U.S. telecom companies complain about the length of time

(often years) it takes to break into a new foreign market. U.S.

trading partners keep markets closed as long as possible to

protect their own manufacturers. Some countries keep entire

market segments closed because of purported "system differences."

U.S. exporters with innovative products often are delayed from

entering markets because foreign governments, as they are legally

entitled to do, refuse to let products in until they complete the

development of appropriate national standards or regulations.

In some cases, U.S. manufacturers followed one set of options

permitted by international standards; whereas foreign countries

required other options (also permitted by those international

standards) that acted as trade barriers. The U.S. exporters who

were interviewed seemed unsure of what they could do to resolve

these problems.

Foreign distributors (within trading partner countries) are

frequently in control of telecom markets because they are

experienced at getting equipment approved. They are in position

to take over the business if a mass market develops. U.S. firms

often express fear that they will lose markets when domestic

14
firms are able to duplicate well-established U.S. technology. In

some EC countries, U.S. exporters sell through wholly-owned

subsidiaries and are therefore better able to retain their

customers

Multinational firms often help medium-sized companies to sell

products by acting as their "distributor." For example, where

system elements are unnecessarily tied to outdated technology in

some countries, PTTs can create an excuse to block U.S. sales.

Multinational companies with knowledge of the foreign system

often know how to get compatible products approved.

Where U.S. products meet current needs, foreign agencies, in

control of the customer base, are positioned to replace U.S.

products with domestic ones. Consequently, there is an erosion

of U.S. telecom equipment advantages. Not only are few new

markets expected, but exporters believe that marginal markets for

many products will disappear in a few years. Foreign government

agencies and distributors (who appear to be affiliated closely

with each other) control access to the approval procedures that

must be complied with in order to market telecom products in

their countries. Hence, U.S. telecom companies must contend with

complex arrangements to make sales. Moreover, these foreign

agents assist in transferring U.S. technology to domestic

products, which are expected to become competitive with approved

U.S. products.

Problems of individual exporters may be the "tip of the iceberg."

U.S. exporters think that the market for small private branch

exchanges (PBXs) in Europe, and in the United States as well,

will be taken over by Japan; some believe that the world fiber

optic market will be lost to EC countries and Japan. Many U.S.

companies are not optimistic that telecom trade deficits can be

reduced under current conditions. Consequently, some

non-governmental telecom agencies and exporters suggest that the

only solution is to ban foreign imports of telecom equipment from

selected countries. Most agree that manipulation of U.S.

requirements and practices holds no promise. Where U.S. industry

has invested in improving technology, the U.S. government could

seek to maintain the market position of U.S. firms.

Unnecessary procedural steps in the certification process for

modems, multiplexers, PBXs and other customer premises equi pment

should not be imposed as a means for creating delays by any

trading partners. If a trading partner does institute

unreasonable delays, consideration of FCC retaliation against the

problem country, or other U.S. government import controls on

similar products, may be evaluated as an option for restoring

export trade.

Retaliation is an action taken by a country to restrain its

imports from a country that has increased a tariff or imposed

15
other measures that adversely affect its exports in a manner

inconsistent with GATT. The GATT, in certain circumstances,

permits such reprisals, although this has very rarely been

considered. The value of trade affected by such retaliatory

measures should, in theory, approximately equal the value

affected by the initial import restriction.

The U.S. government and private sector organizations are making

an effort to develop a strategy to get U.S. telecom products into

foreign countries. Several companies suggest that information,

collected on a country-by-cou n try , product-by-produc t basis,

should be distributed to all telecom companies and testing

laboratories. (Some of the needed information is currently

available within the DOC GATT technical office.) In the opinion

of some companies, unreasonable foreign trade barriers should be

met by swift U.S. government retaliatory trade action. Others

suggest that every possible opportunity for cooperation with our

trading partners should be explored first.

Table 3 summarizes typical exporter comments on major problems

that relate to requirements and practices. Many of the problems

were similar for most products and countries: organizations that

kept markets closed, requirements with a unique twist, practices

or procedures that were usually costly and time consuming.

3. Comments or Responses by Companies for Five Products

Discussions held with 50 telecom companies concerned problems

associated with the export of approximately 20 different telecom

products. Salient problems, such as unique standards and the

lack of transparency in standards development activities, applied

to several products in more than one country.

Transparency, under the GATT Standards Code, is the

visibility and clarity of regulations and standards and the

associated development activities. The lack of transparency

is, itself, a technical barrier that impedes trade.

All contacted U.S. exporters had marketing experiences where they

had clear technological advantages for some blocked products.

Additionally, many products required costly modifications to meet

foreign national specifications, e.g., "quality" features had to

be added that were not desired by the customer and not needed for

the network, in order to comply with the mandatory requirements

of the importing countries.

Companies acting independently in foreign markets often seemed

unsure of what was required by each country. Some believed that

they must have domestic legal representation and/or a local

technical presence to assure 24 hour service. One exporter

thought that if foreign regulations were violated by a U.S.

16
Table 3: Typical Comments From Telecom Companies

Requirements Practices

Blocked

Market

Buy-national policy

PTT monopoly on products

Government controlled system

No national standards

No tests for conformance

No competitive product

Protected

Manufacturers

Local manufacturing required

Limit number of suppliers

PTT prefers domestic products

Block attachment to network

Competitors issue approvals

Information

Unavailable

Contact agency is unknown

Development not transparent

Modifications not documented

Approvals by trial & error

Unique

Elements

Restrict regional standard

Unique purchasing specs

Int'l standards options

Test to extreme limits

Excessive

Time

Approvals take many months

Wait on standards development Retesting for all elements

Excessive

Cost

24 hour technical service

Equipment modifications

No reciprocal type approval

Additional tests

Installation/maintenance fees

Foreign

Control

Domestic legal representative

Distributors control customers

Distributors get approvals

17
(investigated) by foreign approval authorities for years. It is

not clear if those fears are justified. However, U.S. exporters

might well fear harassment or reprisals if they were to charge

that the GATT Code had been violated by a signatory nation. This

may explain why companies are reluctant to complain about their

export problems.

The products listed in Table 2 (because of relevant differences

noted below, switches and PBXs are sometimes treated separately)

that were causing U.S. exporters problems with more than one

primary trading partner were selected for in-depth study. In

Sections 3.1 through 3.5, problems associated with exporting

modems, multiplexers, switching equipment (large switches and

PBXs, which are small switches, are treated together), local area

networks, and fiber optic systems are described.

3.1

Modems

3.1.1 Def i nition

Modems are devices that enable computers, data

terminal s and word processors to "talk" through telephone lines,

converting digital signals at one end to analog tones for

transmission across the phone line and back to digital signals at

the other end. To permit data transmission, the modems at both

ends of a line must use the same modulation/demodulation

technique and must operate at the same speed. Dial-up modems

allow users to access a variety of resources using public

telephone lines.

3.1.2 Closed Market: Some foreign countries (e.g., France and the

F R G ) have kept markets closed to protect their own modem

manufacturers. One company complained that France, behind

technologically, has maintained protectionism (the deliberate use

or encouragement of restrictions on imports to enable relatively

inefficient domestic producers to compete successfully with

foreign producers) for French modem manufacturers "to the bitter

end." A useful strategy suggested by one U.S. export trading

company is to judiciously avoid trying to sell those models that

compete with domestic products in countries that are protecting

their domestic companies. (Typically, each company circumvents

the trade barrier if possible; but taken together, U.S. exporters

are acquiescing to protectionism.)

Countries can use the absence of, or incompleteness of, national

standards or regulations, which innovative U.S. products would

have to comply with, to keep markets closed. Hence, U.S.

exporters cannot enter those markets because all products must

conform to some standards. Often there are no test methods to

check products for conformance. U.S. exporters must hold back

their products until standards writers in those countries

complete development of new standards and test methods.

18
Regional standards offer hope for opening markets, but U.S.

exporters predict that full reciprocity (which will presumably

also benefit non-EC countries) through European regional

standards, under development within the European Conference for

Posts and Telecommunications (CEPT), is four to five years away.

Present European regional telecom standards allow individual

countries to make further restrictions.

3.1.3 Technical requirements: Design requirements and the lack of

un i f ormi ty among European standards for minor specifications

generally create the need for a different product for each

European country. Even seemingly trivial requirements can act as

trade barriers. Two adjacent European countries, France and the

FRG, have different modem requirements for different phone

shapes.

France is adopting the requirements recommended by the

International Telecommunications Union for modems (CCITT V.22,

V. 23, etc). (CCITT is the International Telegraph and Telephone

Consultative Committee of the International Telecommunications

Union, a specialized United Nations agency.) These requirements

are not compatible with U.S. standards. The French PTT adds

modem specifications for automatic dialback, power levels, and

frequencies that differ from U.S. industry standards (a

characteristic dilemma between most countries).

Moreover, the French PTT is adding other requirements that are

not contained in the international standards, such as

specifications purportedly for personal safety. (The GATT

Standards Code, Article 2.1, states that "Parties shall ensure

that technical regulations and standards are not prepared,

adopted or applied with a view to creating obstacles to

international trade...." However, Article 2.2 states that

"...Parties shall use (international standards )... as the basis

for the technical regulations or standards except where. ..such

international standards or relevant parts are inappropriate

for. ..such reasons a s . . . p r o t e c t i o n for human health or

safety. . .

. "

)

One exporter complained that the FRG prohibits sales of U.S.

equipment to the U.S. Air Force facilities in Europe by not

permitting attachment of high-speed modems to the public network,

even though the equipment meets the requirements of international

standards. The Air Force allegedly does not want to use

political leverage to force the issue.

3.1.4 Practices and Procedures: EC countries, unlike some trading

partners, do not have a program to accept test results on modems

from U.S. testing and inspection bodies designated to conduct

testing for specified products made in the United States. Using

19
the data from U.S. testing laboratories, an exporter can apply

for type approval in some non-European countries without the need

for on-site inspections, as are often required by the FRG, thus

sharply reducing the cost of such approvals in other countries.

Type approvals are required for each country in the EC. U.S.

exporters indicate that the FRG is apparently not living up to

the EC agreement to make approvals in a reasonable time (the U.S.

government has complained to the EC and the FRG, but is waiting

for improvement). The FRG will not allow registration until a standard is developed. New standards can take two years for

completion. Other EC countries also have imposed requirements

resulting in excessive costs and delays in providing type

approvals, thus effectively excluding products from the market

for extended periods.

One U.S. exporter said that to get certification for U.S. telecom

products (or to get around the requirements) in certain

countries, foreign original equipment manufacturers must act as agents. In some EC countries, U.S. exporters sell through

wholly-owned subsidiaries; otherwise separate foreign technical

and legal representatives are required to obtain approvals.

The National Bureau of Standards' National Voluntary Laboratory

Accreditation Program ( NVLAP ) has one program specifically for

telecommunications and emissions regulations. In time, this

program could be helpful for the export of telecom products. The

U.S. has agreements with the U.K. for reciprocal recognition of

testing services provided by specifically accredited

laboratories, such as Underwriters Laboratories, which has a telecom accreditation program. However, at the time of this

report, no exporter had submitted test results from a NVLAP

accredited laboratory to U.K. approval officials.

One exporter complained of Italian installation practices which

unnecessarily raised product costs. For example, installation of

privately supplied modems is under control of a PTT agency which

charges maintenance fees even though no maintenance may be

necessary. Several exporters complained that in the FRG, until

recently, only the PTT could install modems.

3.1.5 Other Trade Problems; When the French government permitted

modem sales to be made directly to customers of the French PTT,

PTT officials complained that the business, which went to U.S.

firms, should have gone to a domestic firm. France, as a party

to the GATT Standards Code, is required to ensure that other

central government bodies, local government bodies, and

non-government bodies comply with the letter and the spirit of

the Code. They brought about a successful resolution by not

condoning the PTT's attempts to dictate to liberated customers.

20
U.S. exporters were barred from selling high-speed modems in

foreign countries except where they were at least partly made by

a domestic company. U.S. exporters, faced with difficult FRG

requirements and practices based on outdated, protected FRG

product technology, are forced to ship modems through friendly

open-market countries which do not have the same barriers to

trade with the FRG. These modems are attached to the public

network and used extensively, but apparently result in no

technical difficulties. Outdated designs and systems can be used

as an excuse, whether valid or not, to block U.S. sales.

Another exporter cited the use by the FRG of design standards

that set forth details of a telecom interface that have nothing

to do with performance or safety. (Interface standards can be as

effective as equipment standards if used as technical trade

b a r r i e r s .

)

3.2

Multiplexers

3.2.1 Definition: Multiplexers are devices that allow a single

communications line to do the work of many lines simultaneously.

Digital multiplexing is the process of taking information signals

from different sources and transmitting them simultaneously, in

digital form, at high speeds over a single line. Some

multiplexers have internal microprocessors that enable them to

perform error detection, collect statistics on the amount of data

passing on each line, and provide diagnostics to speed repairs.

Statistical multiplexers can increase the efficiency of linesharing by allowing only active channels to use the line, and

they can accommodate overbooking (i.e., incoming data exceeds

capacity for temporary periods) by temporarily storing incoming

channel data before sending it over the line.

3.2.2 Closed Market: One exporter of U.S. multiplexers (and

several others for other products) complained that local content

(domestic manufacturing contribution) evaluation methods are

often used to protect foreign manuf ac turer s . These laws make

cost bids of U.S. products manufactured totally in the U.S. much

higher and tend to keep markets closed.

3.2.3 Technical Requirements: Each EC country has a different set

o? multi pi exer standards , a~condition that reduces U.S. chances

to manufacture a single product for all of Europe. Apparently

there is no common multiplexer standard on the horizon.

(Intra-European trade is diminished to a lesser extent.) The

standards are varied just enough to constitute a European-wide

trade barrier. Each country can give its specifications a unique

twist. In the U.K., for example, specifications cover noise and

inside coatings that are not required by other European countries

21
or required by the FCC or even included in voluntary standards

issued by Underwriters Laboratory. FR6 standards call for an

apparently unnecessary and unique two to one compression ratio.

3.2.4 Practices and Procedures: Getting a U.S. multiplexer

approved in an EC country may take three months or more. In the

FRG, procedures regularly take six months. In the U.K.,

approvals must be obtained from the PTT; this is true even though

the telecom business has been privatized. In other EC countries,

exporters must sell multiplexers to or through the PTT. This

practice was required even though the product was to be installed

within the customer's local area network. The exporter, who had

to sell the multiplexer to the PTT, said he was "permitted" to

lease it back and install it himself.

2.2.5 Other Trade Problems : In the U.K., sales can be made

directly to private companies, but most requests for sales

generally come from distributors. U.S. exporters often express

the fear that they will lose markets when foreign domestic firms

are able to duplicate the technology. One multiplexer

manufacturer complained that intellectual property rights

(software copyrights) of U.S. companies need better protection

because products of a foreign manufacturer openly violate his

U . S . -copyr i ghted software for his computerized telecom equipment.

Efforts are being made by the U.S. government to explore use of

the GATT as a mechanism for protecting intellectual property

rights owned by private firms.

3.3 Switches and PBXs

3.3.1 Definition: The basic function of a circuit switching

system is to interconnect two or more users on demand.

Traditional switching systems consist of three basic functional

building blocks: user services, a switching network, and the

control system. A private branch exchange (PBX) provides local

switching services for customer premises equipment. The first

generation of automatic PBXs (or PABXs) was based on early

electro-mechanical switching technology used in telephone central

offices. The advent of analog electronic switching with

intelligent internal control produced second generation

equipment. The digital technology that has evolved in central

office switching has also found its way into PBXs.

Switches and PBXs are similar in function, but they are regulated

(and purchased) on different bases. Switches are part of the

public network, coming under heavy government regulation, and

usually purchased by PTTs under government monopolies. PBXs are

customer premises equipment. PBXs can usually be sold directly

to private customers, consequently they should move more freely

in foreign commerce.

22
3.3.2 Closed Market: Exporters complain of the length of time it

takes to break into a new foreign market. U.S. Department of

Commerce officials said that Japan took 10 years before

permitting the sale of switches made in the United States to its

PTT. One exporter, for over two years, was consistently told by

Italian and other European PTT officials that "the market for his

products was not favorable" so that he would not attempt to make

any sales.

One exporter made contacts in the U.K., requesting information on

standards and regulations applicable to central office switching,

but never received a reply. Another exporter was told by a U.K.

official that the market would remain closed to his sales efforts

even though his product was designed to enhance and extend the

life of existing systems. In Italy, U.S. companies have to prove

to. government officials that they have a product that is superior

in performance, or else comparable but much lower in cost, before

their products can enter the protected market.

3.3.3 Technical Requirements: Each European country develops

unique purchasing specifications for switching equipment.

Exporters complain that, unlike those of the United States,

foreign standards for switches and PBXs are generally neither

clear nor specific. This gives foreign companies that have

experience with PTT requirements a clear advantage when selling

at home and an equal chance when selling in the United States.

Moreover, amendments are made over time with no consolidation of

changes. U.S. exporters think that some requirements are totally

unnecessary, such as providing a digital access point to

determine attenuation in order to comply with FR6 standards.

Efforts by U.S. government officials, who have verified this

scenario, to use legal and persuasive mechanisms to resolve this

difficulty have not been successful.

U.S. exporters are unable to comply with some international

standards because of the cost of implementing all the options

that foreign officials capriciously select. The international

signaling standard (CCITT Fascicle VI. 7 Specifications, for

signalling system no. 7, Recommendation Q.701 through Q.714)

differs from corresponding U.S. signaling standards. (CCITT X.l

Recommendation, for signaling speeds, is consistent with American

National Standards Institute (ANSI) X3.1-76 standards.) ANSI

X 3 . 1-76: Synchronous Signaling Rates for Data Transmission

provides a group of signaling rates for synchronous binary data

transmission. Equipment must be compatible with the

international CCITT standard to be sold in Europe. Compliance

with both standards can be achieved with the same equipment, but

only at a higher cost. (Harmonized standards would reduce

barriers on both sides of the Atlantic, and could reduce costs

for all manufacturers and probably for consumers as well.)

23
3.3.4 Practices and Procedures: Italy has two sets of

certification procedures for PBXs: conformance to the network

requirements and conformance to the electrical safety codes,

especially as to the power supply. The Italian PTT approvals

cover safety shielding, protection against surges, and

accessibility. With a European power supply pre-approved in

another EC country, self-certification is usually permitted for

that element.

To maintain control of the marketplace, PTTs in the EC do not

accept U.S. developed test data for switches or PBXs; a product

must be submitted to European testing laboratories for all tests

(including retesting although U.S. results provide sufficient

means of proving conformity to regional or international telecom

standards). Most U.S. firms object to retesting because it is

costly and causes unnecessary delays and uncertainties.

Most EC countries take three to nine months to approve U.S.

PBXs. Recently, the FRG took two years to certify a PBX. One

exporter complained that there is little information about the

Italian organizational structure (e.g., which agency provides,

and where one should go to apply for, certification). These

delays hurt U.S. exporters.

3.3.5 Other Trade Problems: "National security" (under the

Standards Code a permiss i ble trade barrier) is often cited as a reason for not relying on a U.S. supplier as a source for central

office switches. Sometimes European countries require U.S.

products to be modified to meet competition from other, morefavored foreign suppliers rather than to comply with established

national standards.

Selling switches in Italy must be done through an Italian

subsidiary with Italian directors and, in some cases, through

Italian distributors. But even this may not help exporters to

sell switches in Italy. Italy already has more than what they

consider to be the optimum number of suppliers to sell switches

to the PTT. All U.S. exporters recognize that the developed

countries have entrenched systems to protect their own suppliers;

other countries usually do not manufacture switching equipment.

U.S. exporters cannot sell large switches to lesser developed

countries if those countries' funds cannot be used for imported

products. There is no right of exchange. Nevertheless, some EC

countries have financial programs that make it possible for their

exporters to sell to those countries without difficulty. (The

U.S. Export-Import Bank has recently completed negotiations with

Indonesia for a $100 million line of credit for high technology

products .

)

U.S. exporters believe that U.S. PBX manufacturers are going to

lose the entire world market for small PBXs to "highly

24
competitive foreign manufactured products," hence there may be no

need to attempt to eliminate trade barriers or to stay

competitive. Additionally, they believe, the world market for

large switches will soon be left to a few multinational

compan i es

3.4 Local Area Networks

3.4.1 Def i n i t ion

A local area network (LAN) is a communications

system used to interconnect computers, terminals and other

peripheral devices within a building or campus. LANs permit work

stations to be used for multiple purposes. A LAN may extend for

as little as ten feet or, rarely, as far as tens of miles.

Early local area networks were provided by mainframe computer

vendors. Data switches and multiplexers were later introduced by

communications components suppliers. Ethernet, a de facto U.S.

industry standard, is probably the best known LAN standard. When

many vendors develop LAN products that are compatible with a major vendor's LAN standard, that standard becomes (in fact) an

industry standard despite not being issued by a recognized

standards organization.

3.4.2 Closed Market

European market access appears to be a difficult problem for U.S. firms that specialize in local area

networks. One telecom company official said that the FRG will

not let his agents approach a dealer to determine if his LAN

products are marketable. FRG regulations do not permit his LAN

devices to be offered for sale; hence, his products are not

allowed inside the border. (In most cases, however, such

products may be exhibited at trade shows.) Another telecom

company said that an FRG PTT official indicated that the market

was closed to innovative U.S. products if the particular LAN

product was not also available from an FRG manufacturer.

3.4.3

Technical Requirements: U.S. exporters complain that

European national regulations affecting LANs are a major trade

barrier because it is difficult to determine which requirements

apply. Even when requirements can be determined, those exporters

sometimes encounter problems with undocumented modifications.

Medium-sized exporters, in particular, cannot keep pace with the

intricacies of the system.

International requirements may offer no refuge. European

standards-wr iters influence international telecom standards,

which extend even to the color of the light-emitting diodes.

Another exporter added that signal "beeps" must be of the

"correct" EC frequency.

25
One exporter complained that the U.K. standard is excessively

restrictive for any LAN product that could affect the power

supply of customer premises equipment. The FRG has more

restrictive severity levels for radiated electromagnetic energy

than the International Electrotechnical Commission (IEC) standard

(IEC 801-3 Electromagnetic Compatibility for Industrial -Process

Measurement and Control Equipment Part 3: Radiated

Electromagnetic Field Requirements First Edition).

FRG standards create major difficulties for U.S. Ethernet LAN

equipment and the FRG requirements may be adopted by the EC as a regional standard for all of Europe. The FRG apparently is the

only country in Europe that requires extensive LAN tests for

safety and emissions. The FRG PTT has strict limitations on

cable length (how far LANS can extend), and the PTT has its own

LANs for sale.

3.4.4 Practices and Procedures: Some exporters indicate that U.S.

LAN devices that are based on new technology not found in

products of European countries will not be approved until there

are applicable standards to comply with.

U.S. companies find certification of LANs to be a problem in

virtually every Western European country. Each analog component

can require a type approval with separate approval for each LAN

system. Homologation costs for LAN systems installed in the U.K.

can run as high as $10,000, with long delays and uncertain

results. (The U.S. FCC does not regulate LANS.)

One exporter complained that the time before obsolescence of some

LAN products is often shorter than the time consumed in getting

approvals. Another exporter indicated that if the country has

good standards -- one can eventually get necessary approvals even

though there are delays. But not many countries have standards

where proof of conformity can be easily shown. As a result, U.S.

exporters indicate that foreign distributors are in control

because they are successful at getting equipment approved. They

are, therefore, in position to substitute domestically made

products to take over the business, which they would especially

like to do if a mass market develops.

3.4.5 Other Trade Problems: Exporters presume that the U.K.

privatized PTT can continue to block sales by requiring LAN

devices to be installed in the "telephone room." Exporters are

not sure who controls these facilities after the liberalization

of the U.K. system and the end to the monopoly of the PTT.

In Italy, an installer of a LAN is required to sell most of the

LAN equipment to the PTT then lease it back. In several EC

countries, LANs designed by U.S. companies must be competitive

with heavily subsidized domestic companies.

26
One exporter who had worked extensively with potential customers

said he gave up his prospective customers because he had too much

business in the United States and because of disadvantages

created by the strength of the U.S. dollar against other

currencies at that time. (The strong U.S. dollar at that time

was often cited as a major trade barrier. The value of a national currency in terms of the currencies of other nations can

affect the domestic demand for imports and foreign demand for

exports. Lowering the value of the U.S. dollar is expected to

reduce domestic demand for higher-priced imports and to raise

foreign demand for U.S. exports because their prices are lower in

terms of foreign currencies.)

Government telecom officials maintain that short-term business

considerations by U.S. exporters often lead to bad trade

decisions for the United States for the long term, because

obsolescence of U.S. telecom products can be delayed if such

products can penetrate world markets.

3.5 Fiber Optic Systems

3.5.1 DefinitionThe transmission of information by fiber optics

has been made possible through the development of ultra-highpurity glass fiber light guides, diode lasers, light-emitting

diodes, and photodiodes. Glass fiber cables are strong,

flexible, lightweight, immune to electromagnetic disturbances and

secure. They also provide electrical isolation from transmitter

to receiver, require no surge protectors and allow spans between

repeaters much longer than those obtainable with metallic paired

or coaxial cable.

3.5.2 Closed MarketsForeign countries can keep their entire

market closed because of maintained system differences. One U.S.

company indicated that France claims to have a system that is not

compatible with U.S. technology. French officials do not look at

fibers the way U.S. industry does. Cable design and splicing are

different; consequently, U.S. fiber optic technology is not

compatible with French networks.

In France, the fiber-optic cable networks will be considered the

province of the PTT. The networks for broad-band transmission

will not be built separately from the existing public telephone

network. These networks have room available for fiber-optics in

the telecom channels and the PTT has personnel experienced in

laying the cables; hence France does not see any advantages in

eliminating this monopoly.

3.5.3 Technical Requirements: The variety of options available

under international standards are sometimes used as barriers for

fiber optic products. Selections can be in opposition to U.S.

27
voluntary or industry standards. The PTTs can impose

requirements for specific options that customers do not want or

need, making the U.S. product too costly.

One exporter hopes to sell the optical fiber portion for LANs

that meet a U.S. industry LAN standard of the Institute of

Electrical and Electronics Engineers (IEEE) to integrate voice

and data (IEEE Std 802.5-1985, Token Ring Access Method and

Physical Layer Specifications). This company is concerned that

an International Organization for Standardization (ISO) draft

standard, an incomplete international version, (ISO/DP 8802/5) is

being used as a trade barrier in EC countries.

3.5.4 Practices and Procedures: In order to verify the integrity

of a fiber optics system, French officials say they must test all

equipment and components. Pre-approvals, prior to testing, are

also required. France also prohibits the installation of fiber

optic cable that extends beyond a building or campus and crosses

public lines. French officials consider this to be an

infringement on the PTT's monopoly.

3.5.5 Other Trade Problems: One potential exporter complained

that the recently privatized U.K. PTT still uses government

administrative restrictions to delay entry to its markets.

However, a second company has operating agreements with two U.K.

firms, the only firms other than the privatized PTT licensed to

install fiber optic systems. But this means that the second

company must sell through a potential competitor which will

eventually supply its own fiber optic products.

Distribution is yet another problem for U.S. firms. To market

fiber optic products in Italy, as with other products, an Italian

subsidiary with Italian directors or domestic distributors are

usually required. One exporter complained about the discounts in

the prices of the U.S. products which are required in order to

compete with domestic vendors in Italy. A multinational U.S.

company which markets fiber optic systems in all countries of the

free world feels compe 1 1 ed to develop joint ventures in foreign

countries in order to avoid trade barriers.

Some telecom companies think that U.S. exports will suffer

significantly when fiber optic patents owned by U.S. industry run

out. France and Japan already have technological advantages that

reduce U.S. export opportunities. One U.S. exporter predicted

that all installations in the United States will eventually be

controlled by foreign companies. When queried as to how this

could happen, he said the same way that it happened for TVs and

VCRs -- foreign competitors, heavily subsidized by nationalistic

governments, have targeted selected markets for takeover.

28
4. Overview of Country Systems

Organizations, requirements and practices for the four selected

countries are defined in this part of the report. The elements

for those countries include the specific organizations that

affect the telecom industry, their regulations and standards, and

their testing and certification practices. For the problems

described in this initial assessment, limited to two examples in

each country as listed in Table 2, comparisons will be made with

the U.S. system.

4.1 French Telecom System

This section focuses on problems that impede the sale or

installation under the French approval procedures for U.S. f i ber

optic systems and on French standards and certification

procedures for modems . In Sections 4.1.1 through 4.1.3 the key

organizations, information on fiber optic and modem standards,

and practices for procurement and certification are discussed.

Section 4.1.4 will compare these French requirements and

practices with those of the United States.

4.1,1 French Organizations

MPT, the Ministry of Posts and Telecommunications, is the French

PTT. All telecom services are provided or regulated by the MPT.

DGT, the Direction Generale des Telecommunications, is the

telecom branch of the French PTT. Primary responsibility for

French telecom needs, matters and policies rests with DGT.

D A 1 1 , DGT's Department of Industrial and International Affairs,

establishes policies with regard to equipment attachment,

industrial strategies, and international service agreements.

CNET, Centre National d'Etudes de Telecommunications, is

responsible for technical standards, testing and type approval of

equipment. CNET is the French equivalent of Bell Labs (Bellcore)

and provides technical services for DGT.

CNCL, Comission National de la Communication et des Libertes, is

coming into existence and will have functions similar to the U.S.

Federal Communications Commission.

AFNOR, the Association Francaise de Normalisation, is the

official French standards organization. AFNOR is the only

organization with the authority to publish national standards.

AFNOR represents France in non-treaty, non-governmental

international and regional standards organizations.

29
NOREX, a subsidiary of AFNOR for trade, provides technical

assistance to French exporters. They have 35 employees and have

6,000 case files. NOREX has an office in Washington, DC with

nearly 4,000 French standards in English, but no telecom

standards

.

The major suppliers to the telephone network are CIT-Alcatel and

Thomson-CSF, government controlled French companies.

4.1.2 French Requirements: Regulations and Standards

French modem regulations, which are issued by the D6T, are

contained in:

No. 500-85 General Telecommunications Directorate, Telematics

and Commercial Affairs Directorate.

General instructions on telecom services are set forth in:

TC-2 Subscriber's Installations other than Telephone Systems

Created and Maintained by Private Industry and Connected to a Switched Telephone Network.

Other key standards include:

NF Z 66-200: Connecteurs pour les Circuits d'Echange Entre

Equipment Terminal de Donnees et Equipement de Tranmission de

Donnees - Affectations des Broches. Provides specifications

of the 25-pin connector and pin number assignments for the

interface between data terminal equipment and data

c i rcu i t-termi nat i ng equipment or automatic calling equipment

for voice-band modems and public data networks.

NF Z 70-001: Systems de Traitement de 1

' Informat ion - Modele

de Reference de Base pour 1

' I nterconnexi on de Systemes

Ouverts. Defines a reference model for coordination of

standards development for open systems interconnection.

Establishes the architecture for interfaces and protocols.

Modem suppliers must comply with CCITT recommendations and CNET

specifications. For ex amp le, the interface standards are subject

to international standardization (CCITT Recommendation V.24,

V.25, etc). Utilization of acoustic couplers for data

transmission is subject to CCITT Recommendation V15. Modems

limited to 300 bit/s are subject to CCITT Recommendation V.21 and

modems limited to 1200 bit/s are subject to V. 22 (full duplex)

and to V.23.

30
Understanding the CCITT recommendations is not difficult.

Experience has shown, however, that the CNET specifications

cannot be understood and applied by U.S. exporters without

several passes through the approval process.

France has been active in the development of European regional

standards (CEPT). U.S. officials are seeking to have CEPT

standards development forums opened to U.S. participants.

Transparent standards development, required by the GATT Standards

Code, would apply to the EC, a signatory, but not to CEPT, which

does not come within GATT rules. The EC acts as a " go vernment"

in some senses of the GATT.

French fiber optic standards are not yet available; however, it

should be noted that the French transmission data rates are

different from those in the United States (64 kbit/s v. 56

kbit/s). The optical fiber portion of LANs may have to conform

to an incomplete international LAN standard (ISO/DIS 8802/5),

constituting an unreasonable requirement in France.

Compliance with French regulations and standards does not assure

the right to market a product (nor does it assure approval);

regulations and standards are minimum requirements. The PTT

administration has the exclusive right to grant or deny

authorization without being required to justify its position.

4.1.3 French Practices: Testing and Certification

Approval procedures conducted by the French PTT are mandatory and

time-consuming; but, according to some U.S. exporters, getting

products through is worth the effort. All equipment must be

tested by French government telecom laboratories and approved by

CNET before being marketed and utilized. CNET takes six to 12

months to approve large telecom products such as PBXs; small

products such as modems may take two to six months.

Additionally, the connection to the public network has to be

approved by the PTT in order to assure that the technical

requirements of the connection are fulfilled.

Current procurement practices are contained in the Code des

Marches Publique. The procurement process in France is as

follows:

A tender offer for telecom products issued by the PTT is

announced in the official journals of the EC and France (the

offer is open two to three months).

Bids are evaluated against technical specifications (the

evaluation takes one to six months).

31
A company is chosen and the award is published in the

journals.

An ad hoc commission is created to evaluate the award

including the proper use of government funds.

Certification of telecom equipment, in France, is a five-step

process

1) Importer submittal of required product and company

information to the procurement Secretariat;

2) Secretariat review and forwarding to an acquisition review

commission, which meets monthly, for evaluation or

acceptance for testing;

3) CNET testing of the equipment for conformance to technical

standards

;

4) CNET preparation of a test report summarizing their

decision and rationale for commission approval;

5) Commission issuance of a certification number.

A U.S. manufacturer wishing to have his telecom equipment

approved must inform the DGT of any French company assigned to

represent him in France. If terminal equipment can be approved

without testing, paperwork still takes up to six months. None of

the U.S. manufacturers were aware of any laboratory accreditation

programs in France.

4.1.4 Comparison of French and U.S. Systems

U.S. telecom regulations and standards include technical elements

which can be grouped into four categories:

Safety standards

Emission regulations

Telecom regulations

Interconnection standards

They are represented respectively by: Underwriters Laboratory

(UL) listings; FCC regulations Title 47 Code of Federal

Regulations (CFR) "Telecommunication," Part 15 "Radio frequency

devices;" FCC regulations 47 CFR Part 68 "Connection of terminal

equipment to the telephone network;" and open systems

interconnection (OSI) standards and the integrated services

digital network (ISDN) standards of international organizations

ISO and ITU.

32
FCC Terminal Equipment Compatibility Regulations (for type

approvals for telecom products) include the following methods

from 47 CFR Part 68 Subpart D:

68.304 Leakage current limitations;

68.306 Hazardous voltage limitations;

68.308 Signal power limitations;

68.310 Longitudinal balance limitations; and

68.312 On-hook impedance limitations.

Modems are char acter i zed by the speed of the data stream they are

capable of handling. Speeds up to 1800 bit/s are generally

processed asynchronous ly . With data rates of 2400 to 9600 bit/s,

modems are clocked by a timing provision synchronized to other

elements in the data communications network. At lower data

transmission rates, modulation can be accomplished through a frequency shift keying technique. At higher data rates, the

technique is augmented by phase-shifting. To communicate, modems

must employ the same speeds and modulation methods. In the

United States, modem characteristics conform to the standards

originally established by the Bell System and to protective

guidelines, such as voltage surges, established by UL. Some

CCITT standards have also been adopted by the U.S. government

such as FED-STD-1005 Telecommunications - Coding and Modulation

Requirements for Nondiversity 2400 bit/s Modems and FED-STD-1006

Telecommunications - Coding and Modulation Requirements for 4800

bit/s Modems. French modem standards follow CCITT

Recommendations V.21 (300 bit/s), V.22 (1200 bit/s, full duplex)

and V.23 (1200 bit/s).

In the United States, the 300 bit/s modem follows the Bell

103/113 specifications with center frequencies of 1170 and 2125

Hz and a one bit (or mark or high) sent as the higher frequency.

The French use center frequencies of 1080 and 1750 Hz while a one

bit is the lower frequency. This means that in France (where

European-dominated ITU standards are being adopted), the data is

encoded upside down relative to U.S. practices. Consequently,

the Bell 103/113 modem and modems designed to CCITT V.21. are

incompatible. (Dual-system modems and harmonized standards are

useful for resolving these kinds of problems.)

At 1200 bit/s there are two key types: frequency shift keying and

phase shift keying. The frequency shift keying modems in the

United States and in France are similar enough to operate

together some of the time, and phase shift keying modems are

compatible at 1200 bit/s. But CCITT options and alternative

configurations can create problems. U.S. exporters will often

make variable modems (which can be set to different

character i st i cs such as speed) to overcome incompatibilities

based on options. At higher data transmission rates, 4800 and

9600, the Bell 208 and 209 cannot communicate with the CCITT V. 27

and V . 2 9 modems.

33
The U.S. certification process, conducted by the FCC under Part

68, is designed to protect the network; French regulations and

testing also seek to protect the users of the system against

hazards. (CCITT recommendations are silent on the subject of

personal protection.) U.S. regulations reflect the belief that

competition has a strong se 1 f -reg u 1 a t i n g effect, and that the

benefits of open market access outweigh the possible benefits of

mandatory testing.

Compet i tive value added networks, which could use fiber optics,

are not permitted by French regulations. Such services are not

regulated in the United States. France is pushing its own

network (for terminals operating in the packet mode), Transpac,

which has 86,000 terminals worldwide. In the United States,

there are no restrictions on who can use fiber optics, and

competitive value added networks are encouraged.

In the United States, getting approvals is not very difficult.

Preventing harm to the network is the only concern of the FCC

regulations. FCC defines "harm" in Title 47 CFR 68.3 (g) as

electrical hazards to telephone company personnel, damage to

telephone equipment, malfunctioning of telephone billing

equipment, and degradation of service to persons other than the

user of the subject terminal equipment, his calling or called

party. Two months is the average time to complete approvals and

FCC does not usually do any testing.

Important international standards include:

IEC 693: Dimensions of Optical Fibers

IEC 793: Optical Fibers

IEC 794: Optical Fiber Cables

The desirability for fiber optic installation standards in the

United States has been recognized by the National Utility

Contractors Association. (See the ANSI Reporter , a biweekly

publication of ANSI, Vol 21, No 19, of January 30, 1987 , page 1.)

The ANSI Fiber Optics Coordinating Committee is currently

encouraging the development of a U.S. voluntary standard for

underground installation of fiber optic cables in public

rights-of-way. There is some concern that some companies are

installing fiber optic cables without appropriate protection or

adequate marking.

4.2 West German Telecom System

Two telecom problems, the approval of modems and the procedures

that keep local area networks from being tested, are reviewed in

the contex”t 57 the FRG tiTecom system. In Section 4.2.1, the

West German organizations are listed and described; in 4.2.2 the

34
important West German standards are identified; in 4.2.3 the

practices are reviewed; and in 4.2.4 a comparison is made of the

West German system with the U.S. system.

4.2.1 West German Organizations

DBP, Deutsche Bundespost, is the West German PTT. DBP is a quas i -governmental agency loosely controlled by the Minister of

Posts and Telecommunications. DBP is responsible for the

standards development process. Its procedures, exempt from the

GATT, are not transparent as would be required by the GATT

Standards Code.

FTZ, Fernmeldetechnisches Zentralamt, the telecom technical

office and engineering center, is a division of DBP. Some of its

functions are similar to the U.S. FCC. Standards for all

terminal equipment are developed by FTZ.

ZZF, Zentralamt fuer Zulassungen im Fer nme 1 dewe sen , is the

central approval office for telecommunications equipment and is a division of DBP. ZZF approves all terminal equipment not

supplied by DBP. Applications must be submitted by a West German

agent

ZVEI is the telecom section of the West German Electrical and

Electronic Manuf acturer s Association.

DIN, the Deutsches Institut fur Normung, is by the West German

Standards Treaty the competent standards organization for the FRG

and corresponds to ANSI for the United States. DIN works closely

with West German testing laboratories.

VDE, Verband Deutsche Elektrotechniker, is the West German

Electrical Engineers Association. VDE conducts electrical safety

testing.

TUV, Technischer Ueberwachnungs e.V., is the largest organization

for technical safety, inspection, certification and quality

assurance in the FRG.

Until recently, DBP was the sole provider of modems for the FRG

public telephone network. Pressure from the EC and others

encouraged them to open the market. DBP supplied no equipment on

the customer side of the modem. DBP is the main buyer of

switches and other telecom equipment, but national railways and

cities are also purchasers. DBP can purchase terminal equipment

where there are commonly approved specifications.

35
4.2.2 West German Requirements: Regulations and Standards

Regulations are promulgated under the Telecommunications

Installation Act (1928) and the Postal Administration Law

(1953). Standards published in the German Official Federal

Gazette become legally binding.

The following translated modem standards were reviewed:

German TL 5805-3002: Data communications equipment for use in

the public telephone network: Insert modem for 1200 bit/s.

German TL 5805-3002, Appendix 2, Supplement: Description of

automatic calling with modem assembly MDB 1200-01 in accord

with new CCITT Recommendation V.25 bis (bis indicates a second variation).

The first document indicates that there are a number of

modifications for the basic modems. Standards are termed

"simplified" versions of CCITT recommendations and the modem

assemblies are required to follow CCITT recommendations "unless

otherwise specified in the performance description." The first

standard also sets fort h design re quirements. The second

standard seems to follow the CCITT recommendation without

var i at i on . U.S. telecom exporters and secondary sources report that:

DBP regulates the level of equipment performance and attempts

to ensure minimum standards of service.

DBP considers the subscriber's premises to be inseparable

from the network; consequently, standardization extends from

a terminal through the network to another terminal.

DBP imposes extensive installation and maintenance

requirements on terminal equipment attached to the network.

The DBP uses standards to assure the technical integrity of

the network. Standards are intended to prevent harm to the

network and to the user. They also cover equipment

reliability and interoperability.

DBP asserts that detailed standards are needed to avoid

litigation.

Standards specify technology and equipment char acter i s t i cs . For

example, the maximum distance that lines can extend is specified

for PBXs. Standards also stipulate the interface, system size,

performance, and implementation requirements.

36
Key DIN VDE telecom standards, not available in English, include:

E DIN VDE 0800 Part 11-13: Telecom fundamentals for safety of

facilities and apparatus

E DIN VDE 0804 Part 1-2: Telecom construction and testing of

apparatus

DIN VDE 0805 / IEC 435 & 0805A1 / IEC 435A1: Safety of data

processing equipment

E DIN VDE 0816 Part 1-3: External cables for telecom and data

processing systems

DIN VDE 0845: Protection of telecom systems against excessive

voltages

DIN VDE 0848 Part 1-3: Hazards by electromagnetic fields

(Part 2 covers protection of persons in the frequency range from

10 kHz to 3000 GHz)

DIN VDE 0871 Part 1, 100, and 102: Radio interference

DIN VDE 0875: Radio interference suppression

DIN VDE 0877: Measurement of radio interference

DIN VDE 0878: Radio interference suppression for telecom

systems

DIN VDE 0887 Part 1-3: Radio frequency cables

DIN VDE 0888 Part 1-4: Optical waveguides for telecom systems

DIN VDE 0891 Part 1-10: Use of cables and insulation wires

for telecom systems and information processing systems

4.2.3 West German Practices: Testing and Certification

Exporters must have a West German presence to assure 24-hour

service for any equipment attached to the public network. German

representat i on is always necessary to market network equipment.

(Exceptions are made to permit sales of terminal equipment

without an established West German business office; decisions are

made on a case-by-case basis.) U.S. exporters consider that

establishing an office in the FRG, which can be costly in dollars

and set-up time, is nevertheless necessary to keep from losing

market control to foreign d i str i butor s

37
All electrical testing must be conducted under VDE authority (but

not necessarily at the VDE facilities). VDE will not accept

manufacturers test data, but they will accept test reports from

specifically approved foreign laboratories under contract, such

as Underwriters Laboratories. Electrical Testing Laboratories

also has an agreement with TUV for mutual acceptance of test

data. (Both U.S. laboratories participate in the NBS laboratory

accreditation program.) Additionally, some UL evaluations of

products to West German safety standards have been accepted.

U.S. exporters consider West German testing and certification

procedures to be very complicated and burdensome. FTZ allows

self-certification for small computer equipment. ZZF tests other

terminal equipment. Tests must be done at the ZZF testing

laboratory or at an approved third-party facility within the FRG.

Every applicant to the FTZ for approval of use of equipment by

the DBP, and every applicant to the ZZF for approval of use of

equipment within the FRG, but not exclusively by DBP must have

its headquarters or subsidiary in the European Community, or have

a representat i ve in the FRG.

Anything used in connection with approved equipment, such as LAN

products, requires separate ZZF approvals in order to be used

legally within the FRG. Applications to ZZF for approvals of

terminal equipment must be submitted by a West German agent that

is either a legal entity within FRG territory or a firm with its

headquarters or subsidiary within the European Community.

One U.S. exporter stated that approvals for terminal equipment

took six months and cost $4,000 to $6,000 for each product.

Approvals for other telecom equipment can take two years;

however, one case took nine years. U.S. exporters suggest that

FRG conformance testing sometimes lacks precision and accuracy,

and results are unpredictable. In theory, DBP purchases on the

basis of Federal government regulations not its own

specifications. But, DBP regulates the level of equipment

performance and guarantees minimum standards of service.

4.2.4 Comparison of West German and U.S. Systems

The closed FRG system is considerably different from the open

U.S. system for modems and LANs, as illustrated by this example.

When FTZ lacks adequate information to develop standards, it

establishes working groups from industry to advise on the

contents of draft standards. All information discussed within

these working groups is considered confidential and may not be

discussed publicly. In contrast, discussions on standards that

relate to modems and LANs conducted in the United States are in

meetings open to all concerned.

38
The U.S. technical requirements can be grouped into four

categories: safety standards, emission regulations, telecom

regulations and interconnection standards. They are represented

by UL listings, FCC regulations in 47 CFR Part 15, FCC

regulations in Part 68, and OSI/ISDN standards of international

organ i zat i ons

Approvals are made by UL (Standard for Power Supplies UL 1012,

Third Edition is one listing) in the United States and by such

European test houses as the German VDE. Telecom manufacturers

can generally sell throughout the United States and Europe

without major difficulties with general safety standards. The

FRG is the most stringent of the Western European Countries.

(The major difficulties alluded to in this report stem from

foreign national telecom regulations for the attachment of

te 1 ecom equ i pment .

)

U.S. emission regulations cover electromagnetic compatibility as

determined by the following test methods:

Conducted emissions, power lines, 450 kHz to 30 MHz

FCC Method -- 47 CFR Part 15 Subpart J; and

Radiated emissions, 30 MHz to 1000 MHz

FCC Method -- 47 CFR Part 15 Subpart J.

Most European emission standards are centered around the German

VDE standards. For Class A limits, testing by a VDE engineer is

required. Arranging for these tests is a major logistics problem

that inhibits U.S. exports. For Class B limits, selfcertification by manufacturers is permitted, but VDE has extended

the lower end of the frequency range to 10 kHz , a major problem

for LAN products. The requirement is in West German standard:

DIN VDE 0878: Radio interference suppression for telecom

systems; Part 1, Section 5.84.

The U.S. requirement comparable to DIN VDE 0878 Part 1, Section

5.48 is under 47 CFR 15.832. It states that:

A Class B computing device that is designed to be connected

to a low voltage public utility power line. ..shall limit

radio frequency voltage conducted back into the power

lines. ..over the frequency range 450 kHz to 30 MHz....

U.S. exporters find this West German requirement to be

unreasonable; apparently the requirement would be less

unreasonable if they knew it would be an EC standard. One

product could then be made for all EC countries.

39
Anything used in connection with approved equipment, such as LAN

products, requires separate ZZF approvals in order to be used

legally within the FRG. Interconnection standards and protocols

(conventions developed to insure the transfer of data in an

orderly and organized manner) for LANs threaten to become major

barriers unless the United States and the EC can harmonize their

efforts

.

The purpose of the FCC Part 68 is to provide uniform standards

for the protection of the public network. Direct connection is

permitted for all terminal equipment, all PBX or similar

equipment, and all customer premises wiring associated with

business telephone service. If the products have all been

approved, there is no requirement for a separate approval for the

LAN.

The means of connection in the United States is, generally,

through standard plugs and standard telephone company-prov i ded

jacks or equivalent. In contrast, the DBP imposes extensive

installation (and maintenance) requirements on terminal

attachment equipment.

4.3 Italian Telecom System

This Section describes the organizations that affect the selling

of switches and the practices that control the selling of PBXs in

Italy. No translated Italian standards or regulations for

switching equipment were available. The market for switches is

closed to medium-sized companies unless they sell through an

authorized supplier. The most important difficulty for PBX

exporters is certification, discussed in Section 4.3.3.

4.3.1 Italian Organizations

MPT, the Ministry of Posts and Telecommunications, technically

the PTT for Italy, has authority for overall policy, regulation

and supervisory control of telecom activities.

STET, Societa Finanziaria Telefonica, the government controlled

group of quas i -pr i vate companies, fulfills many, if not most, of

the functions provided by PTTs in other European nations.

Currently, MPT divides responsibility for the provision of

telecom services with STET, but reorganization is underway.

IRI, the Institute for Industrial Reconstruction, owns 65 percent

of STET and is the Italian agency responsible for supervision of

government controlled activities.

40
SIP, Societa Italiana per 1'Esercizio Telefonico, is the largest

member of STET and Italy's most important telecom element. SIP

plans, installs, operates and maintains the local telephone

networks. SIP is currently one of six franchised companies that

provides enhanced telecom services, but they are gaining control

over all domestic telecom activities.

ISPT, the Instituto Superiore Poste e Telecommunicazioni , manages

standards development activities and conducts equipment testing.

ISPT officials are concerned that the multinational companies

will reduce or eliminate their management authority within the

Italian telecom system. (STET may also lose some authority as the result of organizational changes in the Italian telecom

system .

)

ITALTEL, the largest telecom equipment manufacturer in Italy, is

also a part of the STET group. ITALTEL controls over 50 percent

of the installed public switching and over a third of the

installed PBX equipment. Changes scheduled to be made within the

Italian telecom system by the Italian government may give ITALTEL

control over all international telecom activities.

4.3.2 Italian Requirements: Regulations and Standards

Italian regulations and standards were rarely discussed by U.S.

exporters, nor were translations of requirements for switches or

PBXs available. Exporters indicated that Italian telecom

regulations specify characteristics for voice-band and base-band

transmission and ensure functionality as well as compatibility

with their national telecom network. Any short circuits must not

be harmful to the operator in addition to not being harmful to

the network.

U.S. exporters expect that Italy will follow the European

regional telecommunication norms or standards of CEPT more

closely than the international recommendations of CCITT. (Each

country can establish its own standards, and CEPT coordinates

standards issues that may arise among EC countries.) Draft

standards are not published for comment. U.S. companies are

sometimes able to participate in the development or revision of

these standards through Italian companies, e.g., where there is a joint venture.

The CCITT issues recommendations for network signaling and

switching, and is currently developing standards for an ISDN

which will have field trials in Italy. (U.S. companies have to

know these standards to ensure development of compatible

products .

)

41
4.3.3 Italian Practices: Testing and Certification

Foreign test data is not accepted by ISPT; type approvals are

mandatory for PBXs. Manufacturers must declare that each device

complies with safety regulations, particularly regulations on the

power supply. (These declarations are subject to ISPT

verification or testing and approval and should not be viewed as self-certification .

)

Apparently, U.S. exporters must hire Italian attorneys to

represent their firms. Products must get technical approval at

the national level and by local telecom agencies. Unlike the

FRG, Italy permits products to be approved (by ISPT) if no

standards exist, but the approval is limited to a specific

product and a specific user.

Certification is a two-step process: certification of conformance

to network and safety standards and then permission to attach to

the network. The total process can take 12 to 18 months. Spare

parts must be available for a period of at least five years.

4.3.4 Comparison of Italian and U.S. Systems

In Italy the number of companies that can sell a particular

telecom product may be limited (as for switches). In the United

States, there are no legal restrictions on the total number of

suppliers.

U.S. exporters feel that it is difficult to know which Italian

government agency or organization is responsible for requirements

or approvals. (Many of the requirements and practices, after

they are known, also seem unreasonable.) However, if effective

rapport is established with the appropriate official, approval

practices for safety and network attachment for switches and PBXs

may cause no major difficulties in Italy.

In the United States, getting approvals for switches and PBXs is

not difficult. Preventing harm to the network is the only

concern. Italian organizations can be openly unconcerned and

excessively bureaucratic. Italian requirements can also regulate

against harm to the operator of the telecom equipment. Italy

requires two certifications for PBXs: conformance to the network

and electrical safety, especially as to the power supply. The

PTT approvals cover safety shielding, protection against surges,

and accessibility. UL's safety standards are not as rigid, and

do not present the difficulties associated with the small and

subtle Italian changes to international and European regional

standards

.

42
No information was available on Italian Telecom standards.

Terminal Equipment Compatibility Regulations (type approvals for

telecom products) in the United States include the methods from

47 CFR Part 68 Subpart D.

One important voluntary U.S. standard, issued by the Electronic

Industries Association (EIA) is: EIA RS-464: Private Branch

Exchanges (PBX) Switching Equipment for Voiceband Applications.

Similar to the regulation of the U.S. telecom system, where there

is often an absence of strict enforcement of FCC rules, the

Italian system gives some U.S. exporters the perception of a lack

of uniformity in the enforcement of rules, particularly in

certifications. This probably militates more strongly against

medium-sized companies that lack a strong presence in Italy and,

consequent ly , do not know the "rules of the game."

Mutual type acceptance may be available in a few years under a new EC program. Manufacturers will be able to have PBX equipment

type-appro ved by the British Standards Institution, for example,

and then have reciprocal acceptance of test data in Italy.

4.4 The British Telecom System

This Section describes two telecom equipment problems: the

introduction of multiplexers into the U.K. and some current and

anticipated dif f i c u 1 1 i e s w ith interconnection standards and

protocols for LAN products. Sections 4.4.1 through 4.4.4 cover

British organizations, requirements and practices, and a comparison of the British system with the U.S. system is made.

4.4.1 British Organizations

The British Telecommunications Act (1981) gave the Secretary of

State for Trade and Industry the authority to liberalize

regulations pertaining to equipment for connection to the public

networks and the authority to grant licenses (formerly the

exclusive privilege of the PTT monopoly).

BT, British Telecom, is the organization that had the PTT

monopoly. BT is now a private sector telecommunications operator

in competition with Mercury Communications Ltd and with the

Ki ngston-Upon-Hul 1 Corporation (and with private sector telecom

equipment manufacturers including U.S. firms). The

Telecommunications Act (1984) removed BT's exclusive privilege of

running U.K. telecom systems.

OFTEL, the Office of Telecommunications, is a new (1984)

government department which has been given independent

responsibility for supervising telecom activities in the U.K.

43
The Director General of Telecommunications ensures that holders

of telecom licenses comply with license conditions and the

Director, OFTEL, promotes effective competition in

telecommunications. OFTEL is also responsible for providing

consumer protection.

BABT, British Approval Board for Telecommunications, approves

telecom equipment for attachment to the public networks and

accredits laboratories to test British telecom standards.

DTI, Department of Trade and Industry, has regulatory authority

and can specify an interim standard or code of practice, if no

British standard exists.

NATLAS, the National Testing Laboratory Accreditation Scheme, at

the National Physical Laboratory, has a Memorandum of

Understanding (MOU) with NBS that provides for the mutual

recognition of the accredited status of testing laboratories

under systems administered by the parties to this MOU.

BSI, the British Standards Institution, is the source of British

standards and, purportedly, the first national standards body in

the world. BSI is independent, operating under a Royal Charter.

THE, Technical Help to Exporters, was established by BSI in 1966

to assist U.K. manuf ac t ur er s in marketing British products

abroad. THE identifies foreign government requirements, as well

as marketing practices, and has a product testing and

certification program.

4.4.2 British Requirements: Regulations and Standards

The U.K. has a unique set of multiplexer standards, even though

the British strive to have their standards recognized as

international standards. In July, 1986, BSI News , a monthly

journal of BSI, estimated that 24 percent of all British

Standards were identical with international standards, with

another 7 percent technically equivalent and a further 12 percent

related (some very closely). BSI NEWS concluded that 43 percent

of British Standards were connected with the international

standards system.

Important U.K. standards (DD is a draft document of a provisional

nature and not to be considered as a British Standard) for

multiplexers and other telecom terminal equipment are:

BS 6301: 1982 Safety requirements for apparatus for

connection to British telecommunications networks

44
BS 6505: 1984 Code of practice for installation of private

branch exchanges for connection to the British

telecommunications public switched telephone network

BS 6701: (Part 1: 1986 General recommendations) Code of

practice for installation of apparatus intended for

connection to certain telecommunications systems

BSI DD 138: 1985 (will supersede BS 5850: 1981 and BS 6204:

1982) Safety of information technology equipment including

electrically operated business equipment

BS 5850: 1981 Specifications for safety of electrically

energized office machines (corresponds with European

Committee for Electrotechnical Standardization (CENELEC)

Harmonization Document HD 372, which is based on IEC

publication 380)

BS 6204: 1982 Specification for safety of data processing

equipment (based on IEC publication 435)

Some examples of Local Area Network Standards include:

BSI DD 99: 1986 Logical link control for local area networks

(based on IEEE 802.2)

BSI DD 100: 1985 Token bus local area networks, Part 1:

Technical specifications (identical with ISO DP 8802/4; IEEE

802.4)

Important Open Systems Interconnection Standards include:

BS 6568: 1984 Description of basic reference model for open

systems interconnection (identical with ISO 7498-1984)

BSI DD 102: 1985 Open systems interconnection:

connection-oriented presentation protocol presentation

(identical with ISO DP 8823.2)

BSI DD 105: 1985 Open systems interconnection: job transfer

and manipulation concepts and services (identical with ISO DP

8831)

If British protocols and file transfer standards are harmonized

with U.S. OSI versions during the developmental stages, trade

between the U.K. and the United States should be enhanced.

4.4.3 British Practices: Testing and Certification

Medium-sized exporters cannot keep pace with changes in the U.K.

system. Each analog component requires individual approval.

45
Homologation costs in the U.K. can run as high as $10,000 per LAN

system, with uncertain time requirements and uncertain results.

OFTEL certification officials claim they do not have sufficient

resources to complete all approvals expeditiously.

Licenses to provide network services are granted through OFTEL.

The requirement for an independent third-party for certification

is not as important in the U.K. as it is in the rest of Europe.

U.K. industry is traditionally wedded to self-certification.

Even though U.S. exporters complain about the approval backlogs,

one exporter said his British distributor gets LANs approved in

one week.

A U.K. consortium was established in 1986 to develop test methods

for OSI standards to ensure that LAN products can communicate

with each other. A test center located in the U.K., but

established under EC jurisdiction, will produce test data for

telecom and information equipment that will be accepted by all

Western European countries.

NATLAS was not known to any of the U.S. telecom companies because

the MOU with NBS just became operational within the past year.

U.S. laboratories accredited by the NBS NVLAP program may now be

able to perform some telecom tests that should not have to be

repeated in the U.K.

4.4.4 Comparison of British and U.S. Systems

The U.K. has a unique set of multiplexer standards; no harmonized

CCITT or CEPT multiplexer standard is on the horizon. The U.K.

standards are sufficiently different from U.S. standards to

create problems for U.S. exporters. In the U.K., specifications

cover noise and inside coatings that are not required by either

UL or FCC. These specifications do not relate to environmental

safety nor to harm to the network, as U.S. requirements do.

U.S. multiplexer standards and regulations can be grouped into

two categories: safety standards and telecom regulations. They

are represented by UL standards and FCC regulations in Part 68 of

the CFR

.

Safety testing is a private sector activity; in the United States

provided by UL, and in the U.K. by such organizations as BSI.

Telecom manufacturers can generally sell throughout the United

States and Europe without major difficulties with safety

standards. In time, U.S. products can consistently get European

safety approvals. However, most exporters find major

difficulties with U.K. telecom standards because of the "unique

twists" such as specifications for multiplexer noise.

46
Terminal Equipment Compatibility Regulations for type approvals

for multiplexers are also included in the methods from 47 CFR

Part 68 Subpart D.

Examples of voluntary U.S. LAN standards include:

ANSI X3.140: Information Processing Systems - Open Systems

Interconnection - Connection Oriented Transport Layer

Protocol Specification

ANSI X3.148: Fiber Distributed Data Interface Physical Layer

Protocol (designed for token ring arch i tecture

)

Certification of LANs in the U.K. can be a major problem. No

certification of LANs is required in the United States and

currently there is no ITU recommendation. The United States is

fearful that the U.K. and other EC countries will use different

protocols to exclude U.S. products. Customers in all countries

are beginning to ask about interconnectability and

interoperability. Some companies talk of "certifying" the

interconnectability and interoperability of network

installations, but this may be just "sales talk."

Open Systems Interconnection (OSI) standards, which will enable

different telecom systems to be interconnected through networks,

are still, for the most part, on the drawing board. They will

probably be voluntary in the United States, but there is always

the possibility that mandatory requirements will emerge in other

countries. Moreover, conformance to interconnection standards is

not the only con s i der at i on : two products may conform to the

required interconnection standards but not be interoperable.

Legitimate retesting for each set of elements by each country may

be insisted on. However, tests for interoperability could give

foreign governments "open season" to exclude U.S. products.

In the United States, the Corporation for Open Systems (COS) is

developing test methods for interconnectability and

i n teroper ab i 1 i ty of LAN products. (See Corporation for Open

Systems , Prospectus, dated April 1986 ; 8 6 1 9 Westwood Drive;

Vienna, VA 22180.) COS plans to provide the testing facilities

that will serve as the mechanism for the acceleration of the

introduction of multi-vendor telecom products. COS hopes to be

able to assure widespread customer acceptance of an open network

architecture in international telecom markets.

In the U.K., a consortium, established in 1986 to develop

comparable test methods for OSI standards, could develop tests

which are different from those developed in the United States.

The U.K. test center, the Standards Planning and Applications

Group (SPAG), established under the auspices of the EC, expects

to produce test data for telecom equipment that will be accepted

across all European borders.

47
COS is just getting started and SPAG is even further behind the

needs of the marketplace. COS is having discussions with SPAG

which could lead to an agreement on the reciprocal acceptance of

test results.

5. Discussion

Full reciprocity in telecom trade with our major European trading

partners probably will not be achievable in the near term,

although the possibility of moderate success with the U.K.

exists. Reciprocity is the practice by which governments extend

similar concessions to each other, as when one government

eliminates technical barriers impeding its imports in exchange

for equivalent concessions from a trading partner on barriers

affecting its exports (a "balance of concessions"). However, the

United States has already opened its telecom market,

uni 1 ateral ly , to all trading partners. Consequently, the United

States is not in a favorable negotiating position to demand a "quid pro quo" or mutual benefits.

Our trading partners rarely impose telecom equipment requirements

or approval procedures that are conspicuous violations of the

GATT Standards Code because they would then be required to submit

to formal dispute settlement procedures. Additionally, where a bilateral dispute settlement cannot be reached, USTR can use the

Standards Code Committee as a mechanism for resolving

violations.

Each major European country has a unique telecom system and

individualized standards. Unlike U.S. standards, foreign

standards are generally not clear nor specific. Amendments are

made "piecemeal" over time, with no consolidation of changes.

This gives telecom companies in those countries a clear advantage

when selling at home and, because the United States has a welldefined system and requirements, equal prospects when selling in

the United States.

The variety of options contained in international standards is

sometimes used in different but reasonable ways by each European

country, but proving that any one requirement is unreasonable is

very difficult. The implementation of all these technical

options, which customers rarely want or need, can make U.S.

products too costly to be competitive.

Current regional European standards allow individual countries to

impose additional product restrictions, including certification

requirements. With CEPT, approval in one EC country, through the

development and acceptance of new European telecom norms, should

mean automatic entry to all countries. However, full reciprocity

may be four to five years away.

48
European systems can create major barriers for exporters

confronted with the difficulty of establishing which regulations

are applicable. Additionally, each country can give its

specifications a unique twist, making them incompatible with

other European countries even though those countries have similar

specifications. In particular, medium-sized exporters cannot

keep pace with the systems and are totally at the mercy of their

foreign distributors.

Compliance with foreign national regulations and standards does

not assure the right to market a product; regulations and

standards are often minimum requ i rements . The PTT administration

has the exclusive right to grant or deny authorization to a U.S.

exporter to market a given product without being required to

justify its position.

In EC countries, exporters usually must sell to or through the

PTT. PTTs in developed countries generally protect their

domestic suppliers. Moreover, sales must often be made in direct

competition with heavily subsidized domestic companies.

Most medium-sized exporters must operate through foreign

distributors who know how to get around the barriers that

permeate the homologation process. Nevertheless, these

distributors seem to be addressing the need to get some telecom

products into a market -- for the short term. Multinational

companies, which are not overly cooperative in sharing their

expertise in meeting requirements and practices, will act as

distributors when it is in their interest.

Unlike companies in other countries, U.S. telecom companies

compete individually to address export problems. Company

representatives "just have to keep pounding on the door until it

opens." One U.S. company, which has a large percentage of the

standard U.S. modem market (1200 bit/s), hopes to make modems to

meet standards in 33 countries with a set of products developed

by cross-checking with its own resources the translated

regulations of each country. (NBS got the documents and had them

translated for this company. Some governments do this

routinely.

)

U.S. government officials receive technical support for

discussions and negotiations from trade organizations such as the

American Electronics Association (AEA), Association of Data

Processing Services Organization (ADAPSO), Computer and Business

Equipment Manufacturers Association (CBEMA), Electronic

Industries Association (EIA), and the Exchange Carriers Standards

Association (ECSA). Groups of manufacturers, with assistance of

trade associations such as the EIA, join together to develop

international positions. One "working party" on modems acts

through the State Department to represent U.S. interests in the

workings of the CCITT.

49
In an effort to obtain greater access to European telecom

markets, the Department of Commerce initiated in August 1985 a series of market access fact-finding (MAFF) discussions with

several European countries. These discussions give U.S.

officials the opportunity to express concerns to European

officials. Moreover, officials of U.S. government agencies (DOC

(ITA and NTIA), FCC, STATE, and USTR) and officials from telecom

associations and large U.S. telecom companies have been working

together in an attempt to open European markets. Few

interviewees have seen significant benefits for the medium -sized

companies, but it is probably too soon to make a judgement.

6. International Standards

6.1 U.S. Participation in International Standards Activities

Some U.S. telecom companies participate in official U.S.

delegations to meetings of treaty organizations such as the

International Telecommunications Union (ITU) and its

International Telegraph and Telephone Consultative Committee

(CCITT) as well as in ANSI delegations to meetings of non-treaty

organizations such as the International Organization for

Standardization (ISO) and the International Electrotechnical

Commission (IEC).

The reader who is interested in obtaining more information

(including recommendations) is referred to a report entitled

Benefits Perceived by U.S. Industry From Participating in

International Standards Activities , (National Bureau of

Standards, Office of Products Standards Policy; September

1984, NBSIR 84-2886). The report found, inter alia, that

companies expressed interest in international product

standards and test methods as doubly beneficial to U.S.

industry sectors, both for permitting export on a worldwide

basis and for establishment of profitable operations abroad.

One conclusion of the report was that there is considerable

concern that international standards written without U.S.

participation may adversely affect the exports of U.S. goods

and services.

Six of the medium-sized companies that are active in exporting

indicated some participation in international standards

activities. Multinational and other large telecom companies

actively participate through memberships in virtually all

important international committees.

In one case, a multinational company official said he knew of six

or seven CCITT study groups where scientists and engineers

employed by his company participated. Because of particular

50
Table 4: U.S. Government Involvement in International Standards Activities

International Committee Support Agency

ITU/PC World Administrative Telegraph and Telephone Conference NTIA

CCITT SC. 07 Data Communication Networks NTIA

WG.05 Message Handling Facilities NBS

WG.35 Directory Systems NBS

CCITT SC. 08 Terminal Equipment for Telematic Services NTIA

CCITT/ 1 EC Optical Fibers — NBS

IEC TC046 Cables, Wires, and Waveguides for Telecommunications Equipment*

SC.46D Connectors for RF Cables NBS

WG.05 Determination of Upper-Frequency Limits of Coaxial Connectors NBS

ISO TC097 Information Processing Systems**

SC. 02 Character Sets and Information Coding NBS

SC. 06 Telecommunications and Information Exchange Between Systems** NBS

WG.01 Data Communications Control Procedures NTIA

WG.02 Network Layer* NBS

SC. 07 Software Development and System Documentation NBS

SC. 11 Flexible Magnetic Media for Digital Data Interchange** NBS

SC. 13 Interconnection of Equipment NBS

SC. 18 Text and Office Systems

WG.03 Text Structures and Interchange NBS

SC. 21 Information Retrieval, Transfer and Management for OSI* NBS

WG.01 Architecture NBS

WG.03 Database NBS

WG.04 OSI Management* NBS

WG.06 Session, Presentation and Common Application Services* NBS

SC. 22 Programming Languages

WG.04 International Cobol* NBS

SC. 23 Optical Digital Data Disk** — NBS

*U.S. (non-ANSI) holds the secretariat.

**ANSI holds the secretariat.

51
interest in ISDN, his company had several participants. He was,

himself, a chairman of an ITU study group.

Five companies participated in various CCITT standards

activities. Two were interested in ISDN standards. Other

standards of interest include: V. 22, etc., series for modems,

X.25 packet switching, and X.400 electronic mail.

Important international committees that impact telecommunications

and have U.S. government technical support are shown in Table 4.

6.2 Comparison of ITU and Foreign Requirements and Practices

International telecom standards, generally, do not match those in

the United States, and are more compatible with standards of

those European countries that actively support their

development. ITU standards primarily follow European standards

which extend to the color of the light-emitting diodes and to the

"beeps" which must be of the correct frequency. Consequently,

the United States must have more impact on ITU recommendations

before they push for universal adoption of international

standards

.

The variety of options contained in international standards are

sometimes used as barriers to U.S. imports by European countries.

The implementation of options, which customers usually do not

want or need, can make the U.S. product too costly to be

competitive. Additionally, CCITT alternative configurations can

create problems. Each European country can select a different

set. (U.S. exporters will often make a set of variable modems to

overcome incompatibilities based on nationally selected

alternatives . ) Suppliers of telecom equipment to European countries, such as

modems to France, attempt to follow CCITT recommendations. For

example, the interface standards are subject to international

standardization (CCITT Recommendation V.24, V. 25, etc).

Utilization of acoustic couplers for data transmission is under

CCITT Recommendation V.15. Modems limited to 300 bit/s are under

CCITT Recommendation V.21 and modems limited to 1200 bit/s are

under V . 2 2 (full duplex) and V.23. But, the French issue

additional specifications (beyond the CCITT) requirements which

have to be followed.

Finding the specifications that are at variance with the ITU

standards, as in France and the FRG, is a monumental task.

Special features and options may be described in up to 100 pages

of text, usually only in French or German. On the other hand,

some national standards, particularly those from the U.K., are in

accord with the available international standards.

52
The technical office learned from the FRG modem standard, TL

5805-3002, that there are a number of German modifications to the

basic international CCITT modem standards. Standards are termed

"simplified" versions of CCITT recommendations and the modem

assemblies follow CCITT recommendations "unless otherwise

specified in the performance description." The TL 5805-3002

standard also set forth design requ i rement s

CCITT recommendations do not cover protection of audio and power

supplies and are silent on the subject of personnel protection.

Each country appears to have different rules and practices for

items such as the insulation breakdown voltage in transformers,

the transformer isolation method specified, and surge and shock

protection.

Another common practice is to make the national severity levels

more restrictive than the i nternat ional standards. One example

(although not ITU) is the FRG standard for radiated

electromagnetic energy, which has more restrictive requirements

than those contained in the international standard (IEC 801-3).

Foreign national standards are sometimes harmonized first with

European regional standards, such as CEPT or CENELEC and

sometimes harmonized directly in line with international

standards. In the U.K., for example, the requirements in BS

6204: 1982 "Specification for safety of data processing

equipment" are taken directly from IEC publication 435. However,

BS 5850: 1981 "Specifications for safety of electrically

energized office machines" corresponds with CENELEC Harmonization

Document HD 372, which is a modified version of IEC publication

380. This means that the U.K. safety standards are

IEC-equivalent for data processing equi pment but not for other

business equipment.

The testing and approval procedures conducted by the four

countries set forth the engineering rules for direct connection

of equipment to the telephone network. In all countries, the

process is considered necessary to protect the network. The

Europeans, however, also seek to protect the customer. CCITT

recommendations are silent on the subject of protection for users

of telecom equipment. Additionally, these countries apparently

do not want to deprive their testing laboratories of the economic

benefits of mandatory testing nor their manufacturers of the

non-tariff barriers such testing provides.

Certification of LANs and LAN products in the four European

countries can be a major problem. Using a variety of complex

practices, these countries are able to force U.S. telecom

companies to turn their LAN technology over to domestic

distributors to get approvals. There are no ITU recommendations

or practices for certification of LANs to provide comparable

guidance.

53
New rules are being proposed by ITU that would ensure that

enhanced or value-added telecom services would follow European

requirements and remain firmly fixed under the regulatory

jurisdiction of European PTTs. Many U.S. telecom companies

oppose this proposal since it would further close telecom

markets

.

7. Selected Options for Consideration

The U.S. government may wish to consider and evaluate instituting

retaliatory import controls (that would not have negative

domestic consequences) in response to the kinds of situations

uncovered in this report in European countries that deny trade

benefits to U.S. exporters under the GATT. Special attention

should be given where U.S. telecom companies have made major

investments in improving telecom technologies.

This action authorized under Chapter 1 of Title III of the

Trade Act of 1974, Public Law 93-618, approved January 3,

1975 , 19 U.S.C 2411, as amended (commonly referred to as

Section 301) is a more direct way to hold on to U.S. markets

than would be actions to manipulate U.S. requirements and

practices, which hold little promise. Section 301 was

further amended under Title IX of the Trade Agreements of

1979 in two principal respects to constitute the basic

statute: (1) to include specifically enforcement of U.S.

rights and responses to actions by foreign countries

inconsistent with or otherwise denying U.S. benefits under

trade agreements; and (2) to place specific time limits. ..for

investigating and taking action on petitions.

The following specific options address the problems described in

this report, with possible actions by U.S. government agencies,

as well as private sector organizations, relating to standards,

testing, certification, and accreditation (including bilateral

and/or multilateral agreements).

7.1 Standards

If the Department of Commerce develops and promotes a cooperative

arrangement with telecom companies to document and report (on a confidential basis) any standards, regulations or approval

practices that those companies believe (including suspected

untranslated documents) are being used as technical barriers to

trade, it will be possible to create a database of hard

evidence. Government officials could obtain and translate (paid

by contributions from interested telecom companies) into English

copies of those foreign national and regional requirements or

practices that are identified by U.S. exporters as barriers that

impact the sale of U.S. telecom products in Western Europe.

54
Under government contract or agreement, knowledgeable U.S. or

foreign organizations could then compare each requirement and

practice with those in effect in the United States. The

resulting documentation could be made available (through DOC GATT

technical office/industry workshops and through trade

associations and other telecom organizations) to all interested

U.S. telecom companies. The technical office has some experience

in this activity and would be able to suggest when to take

action.

With assistance from industry, government officials serving on

international treaty-organ i zat i on standards committees could

attempt to effectively factor U.S. telecom technology into

requirements to be incorporated into international standards.

Efforts might be made to increase membership or representation

from medium-sized companies on U.S. delegations to international

and regional standards development organizations. More

participation by U.S. government officials actively involved in

such committees is needed, particularly in non-treaty standards

organizations such as ISO and IEC, to provide strength to U.S.

positions in voluntary international standards development

activities. Options and alternatives in the requirements

contained in international standards should be eliminated from

final drafts, where possible, because they can be used as

barriers and prevent the development of products that can be sold

internationally.

7.2 Testing

The U.S. government may wish to obtain and translate all European

requirements that are recognized by the EC for conformance

testing for telecom products (and the concomitant test methods)

regardless of their potential as trade barriers. These documents

could be distributed to U.S. exporters to use to determine which

products are good candidates for exporting. U.S. telecom testing

laboratories should also be given all the information collected.

Foreign testing laboratories should be a good information source

and may be helpful, through reciprocal agreements, in getting

U.S. counterparts accredited in their countries.

The United States may wish to consider supporting EC directives

for harmonized telecom requirements and mutual recognition of

telecom equipment standards. Testing for all EC countries will

become less burdensome if regional CEPT standards and

international CCITT recommendations (telecom standards) can be

harmonized under an EC directive in the same way that the EC Low

Voltage Directive harmonized the CENELEC and IEC electronic

safety standards. The United States may also consider support

for the development and impl ementat i on of a joint effort with the

EC for a reciprocal testing agreement so that a U.S. product

tested and accepted for use in one country will be acceptable in

55
all other EC countries without further testing. U.S. exporters

could then notify the technical office if their products are

subjected to duplicate type approval testing in a second EC

country after obtaining approval in one member state.

7.3 Certification

Within an adequate framework for all levels of certification, the

U.S. telecom industry may wish to continue to support the

acceptance of self-certification when there is little doubt that

a product conforms to the necessary standards. The acceptance of

manufacturers test data, in whole or in part, can also be

considered as a means of expediting third-party certification,

technically or legally required for conformance to some foreign

national and international standards. Section 5.2 of the GATT

Standards Code states that Parties shall ensure, whenever

possible, that their central government bodies accept test

results, certificates or marks of conformity issued by. ..other

Parties; or rely upon self-certification by producers in the

territories of the other Parties. Self-certification should be

encouraged especially in situations where risk to the network (or

the public) is minimal.

7.4 Accreditation

NBS, in cooperation with the private sector, could expand the

Telecom Laboratory Accreditation Program, which now covers only

FCC emissions and telecom attachment regulations, to include

international open systems interconnection (OSI) standards. OSI

standards will make it possible (and feasible) for telecom

products and services from many different vendors to operate

together within the same network. NBS could continue to support

the development of conformance test methods for (OSI) standards

for telecom equipment and begin to support a program for the

accreditation of laboratories that conduct those conformance test

methods

.

56
ACRONYMS AND ABBREVIATIONS

AEA American Electronics Association

ADAPSO Association of Data Processing Services Organization

ANSI American National Standards Institute

BT British Telecom (privatized PTT in the U.K.)

CBEMA. . Computer and Business Equipment Manufacturers Association

CCITT Int'l Telegraph and Telephone Consultative Committee

CENELEC .. European Committee for Electrotechnical Standardization

CEPT European Conference for Posts and Telecommunications

COS Corporation for Open Systems (U.S.)

DBP Deutsche Bundespost (West German PTT)

DOC Department of Commerce

EC European Community

ECSA Exchange Carriers Standards Association

EIA Electronic Industries Association

FCC Federal Communications Commission

FRG Federal Republic of Germany

GATT General Agreement on Tariffs and Trade

IEEE Institute of Electrical and Electronics Engineers

IEC International Electrotechnical Commission

ISDN Integrated Services Digital Network

ISO International Organization for Standardization

ITA International Trade Administration (DOC)

ITU International Telecommunications Union

LAN Local Area Network

MAFF. .Market Access Fact Finding (discussions with EC countries)

MPT Ministry of Posts and Telecommunications (PTT in France)

NBS National Bureau of Standards

NTI A. ... National Telecommunications and Information Agency (DOC)

OSCI Office of Standards Code and Information (NBS)

OSI Open Systems Interconnection

PBX Private Branch Exchange

PTT Post, Telegraph and Telephone Administration

STET . . Soc i eta Finanziaria Telefonica (functions as PTT in Italy)

U.K United Kingdom

UL Underwriters Laboratory

USTR Office of the U.S. Trade Representative

57
Appendix A

Primary European Markets and Efforts to Address Problems

This appendix presents a summary of the current markets of our

primary Western European trading partners: France, the FRG,

Italy, and the U.K. Descriptions of current and previous U.S.

efforts to address these problems are presented.

A) 1 France

A) 1.1 Current French Market

The market in France for telecommunications equipment is largely

"closed" to U.S. exports for the short term. The French telecom

market is expected to rise from $3.7 billion in 1985 to $6.1

billion by 1989. With this expansion and the high regard for

U.S. technology, U.S. exporters should gradually gain greater

access, since France is committed to the concept of free trade

and is a vigorous supporter of the GATT. However, to foster the

development of its communications and computer industries, France

continues to subsidize domestic producers. In order to give

domestic producers time to become compet i t ive, access to major

segments of the French market continue to be denied to U.S.

companies

.

To keep potential customers from buying non-French products,

major restrictions are applied against imports. A centralized

authority or legalized monopoly provides all telecom services.

(Service industries, such as telecommunications services, have

become increasingly important and now account for about 25

percent of world trade. Traditionally GATT rules have not

applied to trade in services, but efforts are underway to include

services within the jurisdiction of the GATT.) Competitive

"value added" networks are not permitted since they are viewed as

unnecessary complications of the French system. Consequently,

two major U.S. companies that offer "value added" networks cannot

do business in France.

Some French authorities say that France is allowing competitive

networks and a competitive terminal equipment market. French

representatives have expressed doubt to U.S. government officials

that competition in basic network services will be allowed due to

constraining economies of scale, even under the new liberalized

system. Moreover, they add, consideration must be given to

maintaining current subsidies by the telecom branch of the French

PTT. Government officials of both countries have maintained a continuing dialogue to increase understanding and opportunities

for U.S. exporters.

58
A) 1.2 Efforts to Address Problems

U.S. and French telecom officials initiated MAFF talks in Paris

in July 1986. The discussions gave the United States the chance

to learn about the French system and to encourage the French to

open their markets. U.S. officials have been encouraging

liberalization of the French telecom system, and the French

officials seemingly agree. They indicate, however, that change

will be evolutionary rather than abrupt. French officials

promised to decide by January 1988 which telecom services will

remain under DGT monopoly control and which services will be

opened for competition.

With assistance in the development and analysis of issues from

the DOC GATT technical office, bilateral negotiations on modem

standards were held in April 1985 by the USTR. The USTR

complained that modems built in the United States were subject to

excessive and discriminatory approval procedures in France.

Information on conformance to French standards and on

authorizations for attachment to the public network was helpful

for U.S. modem manuf acturer s . For fiber optic systems, however,

U.S. telecom companies were not aware of any specific actions to

assist them in exporting to France.

A) 2 Federal Republic of Germany

A) 2.1 Current West German Market

The FRG does not plan to deregulate its telecommunications system

on the same scale as was done in the United States or the U.K.

Consequently, the FRG telecom markets are expected to remain

restricted. Expectations of increased telecom trade to help

reduce the overall trade deficit with the FRG, which was $12.1

billion in 1985, will not be fulfilled.

The FRG PTT, a quas i -governmental agency, has a virtual monopoly

over their telecom market. If a U.S. company seeks to penetrate

that market, they must first comply with the PTT regulation which

requires that a local r e p r e s e n t a t i v e be appointed. That

represen tat i ve can be a subsidiary that manuf acturer s telecom

equipment or just a "d i s tr i butor . " A U.S. company, through its

local representative, can then seek a permit for the type of

equipment for which bids to the PTT are to be submitted, and the

firm is eligible to receive a license after the equipment has

undergone extensive acceptance testing.

Federal telecom procurement is essentially closed to U.S.

exporters that do not maintain subsidiaries that manufacture in

the FRG. Those U.S. exporters, without such subsidiaries,

59
accounted for 0.3 percent of German PTT procurement in 1984. The

PTT received only four bids from such U.S. exporters in the three

years ending in 1984.

A) 2.2 Efforts to Address Problems

Last year, the Secretary of Commerce presented objections to the

DBP Minister on the non-acceptance of test data and the need for

a manufacturing presence. FCC has received promises that U.S.

telecom companies will have the same chance to sell to the DBP

that West German companies have to sell in the United States.

Additionally, the USTR, with technical support from the DOC GATT

technical office, held bilateral negotiations in 1985 with West

German trade and testing officials involving VDE testing

procedures

.

The FRG is a signatory to the GATT Code on Government

Procurement; however, the Code excludes telecom equipment.

Therefore, U.S. Government officials do not have legal authority

to charge the FRG with technical barriers within the government

procurement area.

MAFF discussions were held with telecom experts from the FRG in

December 1985, March 1986, and February 1987. In addition, U.S.

experts continued to hold consultations with FRG officials

regarding the development of a revised telecommunications law

that will eliminate perceived unfair requirements and practices

and provide more opportunities for U.S. exporters. The U.S.

government is continuing to hold these fact finding discussions

to develop more information on opening FRG markets.

In the private sector, some U.S. laboratory evaluations of U.S.

products manufactured to West German standards have been accepted

for application of the FRG safety mark. The U.S. government,

through the NBS National Voluntary Laboratory Accreditation

Program, also contributes to this effort which could shorten

approval times for U.S. products.

A) 3 Italy

A) 3.1 Current Italian Market

Italy is currently "studying" the issue of liberalizing and

modernizing its present government-controlled telecommunications

monopoly, and is continuing to promise a "more open" market. The

U.S. government expects fair access to the Italian market, one of

the largest in Europe. However, an open, competitive system is

not likely to evolve in the near future. Italy does not plan to

follow the U.S. and U.K. models of deregulation and

privatization.

60
Italian officials feel that Italy does not discriminate against

U.S. suppliers willing to adapt to the Italian system. They

strongly suggest that U.S. telecom companies seeking to become

exporters must: write in Italian, ask to bid, demonstrate

superior technology (or fill a void), offer lower prices, and

guarantee service. Nevertheless, Italian national practices

significantly restrict efforts of U.S. exporters to enter the

telecom market. Additionally, it is difficult to know which

Italian government agency or organization is responsible for

requirements or practices, many of which seem unreasonable.

Five manufacturers, two Italian and three multinational, account

for 100 percent of the installed public switching market, with

the largest having a market share of over 50 percent. These

companies also account for over 60 percent of the PBX and related

equipment market, the largest having a market share of over a third of the installed equipment. The largest manufacturer in

both cases is an Italian company and part of a quas i -pr i vate

group. Two of the multinational companies are subsidiaries of

U.S. based companies.

A) 3.2 Efforts to Address Problems

Market Access Fact Finding talks held in April 1986 and February

1987 have been very positive in establishing good rapport between

the telecom establishments of Italy and the United States. A key

issue -- how can U.S. firms compete within the complex telecom

organization structure? -- is being resolved consonant with plans

to eliminate the complexity by reducing the number of Italian

telecom agencies. One agency will, apparently, have all

authority for domestic telecommunications.

Multinational firms have offered to, and do, provide knowledge of

and access to Italian markets for other U.S. telecom companies.

One multinational company is a distributor for several U.S.

telecom exporters. All telecom companies agree that discussions

and pressure from U.S. officials can help to open Italian

markets. But multinational firms have indicated that they can be

hurt by U.S. retaliation threats against our trading partners.

PBX manufacturers were not aware of any specific action by the

U.S. government to assist sales in Italy. Moreover, they

indicate that there probably is no possibility of opening the

market for switches short of retaliation. (One company, however,

indicated that the threat of retaliation in Senator Danforth's

bill opened the market for switches in Japan.)

61
A) 4 United Kingdom

A) 4.1 Current British Market

The U.K. is currently undergoing deregulation and privatization

of their previously government owned and operated telecom system,

and the British are experiencing growing pains. The

Telecommunications Act of 1984 removed the PTT's monopoly and

created competition in telecom service areas. The PTT has been

privatized and now has one moder ate - s i zed competitor and one

small, local competitor. There are no longer any official

barriers to trade, but U.K. purchasers are encouraged to "think

British."

The "privatized PTT" still has administrative restrictions to

delay entry of products from U.S. telecom companies into the

market. Sometimes U.S. exporters have to go through BT, as a competitor, to get to customers. U.K. telecom agencies sometimes

do not respond to requests for help from U.S. exporters. In one

case, the exporter was told that BT would not buy from his

company even though his product could extend the life of their

existing telecom systems.

A) 4.2 Efforts to Address Problems

U.S. government officials have encouraged privatization and have

been patient as new approval procedures have been worked out.

ITA officials helped companies to find distributors who knew how

to get LANs certified in the U.K.

In the United States, the Corporation for Open Systems (COS) is

developing test methods for interconnectability and

i nteroper ab i 1 i ty of LAN products. The U.K. consortium,

established in 1986 to develop comparable test methods for OSI

standards, could develop tests different from those developed in

the United States. The U.K. test center, established under the

auspices of the EC, expects to produce test data for telecom

equipment that will be accepted across all European borders. No

immediate impact is expected because COS is just getting started

and the European counterpart to COS is even further behind. COS

and its European counterpart, SPAG, are having discussions on how

best to establish an agreement to accept each others test data.

62
FORM NBS-1 14A (REV. 1 1-84) U.S. DEPT. OF COMM.

BIBLIOGRAPHIC DATA

SHEET (See instructions)

1. PUBLICATION OR

REPORT NO.

NBSIR 87-3641

2. Performing Organ. Report No. 3. Publication Date

4. TITLE AND SUBTITLE

Barriers Encountered by U.S. Exporters of Telecommunications Equipment

5. AUTHOR(S)

Terrance N. Troy

6. PERFORMING ORGANIZATION (If joint or other than NBS, see instructions) 7. Contract/Grant No.

NATIONAL BUREAU OF STANDARDS

U.S. DEPARTMENT OF COMMERCE 8. Type of Report & Period Covered

GAITHERSBURG, MD 20899

9. SPONSORING ORGANIZATION NAME AND COMPLETE ADDRESS (Street. City. State. ZIP)

10.

SUPPLEMENTARY NOTES

H J Document describes a computer program; SF-185, FlPS Software Summary, is attached.

11. ABSTRACT (A 200-word or less factual summary of most significant information. If document includes a significant

bi bl iography or literature survey, mention it here)

This report addresses the perceived institution of unreasonable technical

trade barriers by major European trading partners to the export of telecom

products and systems by U.S. companies. The DOC GATT technical office, which

has responsibilities to assist U.S. exporters to take advantage of trade

opportunities, informally contacted over a period of six months, telecom

companies and agencies to assess the extent of unreasonableness in foreign

national standards, regulations, testing and certification requirements, and

accreditation procedures. In each country, examples of requirements and

practices were identified that allegedly blocked U.S. exports and other nondomestic products. Promises from our trading partners to revise their

systems have yielded little, and each country continues to support unique

requirements and practices that constitute trade barriers. Many trade

barriers instituted by EC countries would be eliminated if EC regional and

international telecom standards were harmonized, their adoption made

mandatory for all EC countries, and results of testing for conformity from

one government accredited laboratory were required to be accepted throughout

the Community. Consequently, the United States should consider as an option

supporting the development and implementation of European regional

requirements and practices that promote uniformity.

12. KEY WORDS (Six to twelve entries; alphabetical order; capitalize only proper names; and separate key words by semicolon s) certification; exports, GATT; international trade; trade barriers; regulations;

standards; telecommunications; telecom equipment

13. AVAILABILITY

[~^~| Uni imited For Official Distribution. Do Not Release to NTIS

rn Order From Superintendent of Documents, U.S. Government Printing Office, Washington,

‘ 20402.

] Order From National Technical Information Service (NTIS), Springfield, VA 22161

14. NO. OF

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64

DC

15. Price

13.95

USCOMM DC 85-6006