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HOLLINGS ENTERS 3G FRAY

WASHINGTON-In perhaps the strongest signal to date of congressional concern about U.S. global competitiveness in the future third-generation mobile phone market, Sen. Ernest Hollings (D-S.C.) pressed the Clinton administration to outline the steps it is taking to ensure American technology is not snubbed by Europe.

“I understand that the European Union is in the process of adopting legislation that mandates the use of a technical standard developed by its standards-setting body, the European Telecommunications Standards Institute. Under this ETSI standard, which has been proposed by a number of large European manufacturers and wireless operators, competing technologies developed in the United States could be locked out the European market,” said Hollings in an Aug. 13 letter to U.S. Trade Representative Charlene Barshefsky.

Hollings said the EU’s 3G legislation, which could be passed later this year or in early 1999, runs counter to the World Trade Organization’s basic telecom agreement that kicked in this year.

L.M. Ericsson of Sweden and Nokia Corp. of Finland, major members of ETSI, dominate the sale of wireless phones based on Global System for Mobile communications technology.

For the century ahead, the EU is pushing a wideband Code Division Multiple Access standard driven by GSM technology. Some GSM mobile phone operators in the United States and abroad embrace W-CDMA because they believe it provides a migratory path to next-generation wireless and is best able to support voice communications, high-speed data and multimedia applications that interact with the Internet.

But Qualcomm Inc., a San Diego developer of cdmaOne technology used by major wireless carriers in the United States and overseas, Lucent Technologies Inc., and to a lesser extent, Motorola Inc., claim the W-CDMA standard that would be used throughout Europe is not backward compatible with CDMA systems in the United States and elsewhere.

As such, Qualcomm, which backs cdma2000 but is negotiating for a converged CDMA standard, is aggressively lobbying Congress and the Clinton administration to pressure the EU not to legislate a pan-European, W-CDMA solution.

But GSM manufacturers and system operators here and abroad argue such harmonization of technologies will degrade the resulting CDMA standard.

The International Telecommunication Union, having received more than a dozen 3G technology recommendations from around the world, is most likely to approve a family of technologies as opposed to a single technology next March.

If the EU succeeds in keeping U.S. 3G wireless technology out of its market, there is speculation here that Ericsson and Nokia could then leverage a dominant position in the huge, fast-growing Asian wireless market.

In another letter to Barshefsky last week, Rep. Robert Matsui (D-Calif.) accused the EU of pursuing an industrial policy that “left unchecked, may undermine the goals and objectives of the TEP [Transatlantic Economic Partnership] and possibly have broader ramifications for our trading relationship with the EU.”

Barshefsky was on vacation last week and therefore has not responded yet to Hollings or Matsui. But another USTR official, speaking on background, left little doubt about the priority the administration is now giving 3G.

“It is very serious and we’re taking it seriously,” the official said. “We’re examining issues and WTO obligations. We are taking the European Commission at its word that it will not short circuit the ITU standard examination process nor will it mandate one standard in order to advantage European equipment suppliers.”

In recent talks in Brussels, European Union officials assured U.S. representatives the European market will be open to multiple 3G wireless technologies.

Since then, key U.S. officials briefed in Brussels-Federal Communications Commission Chairman Bill Kennard, State Department international telecom head Vonya McCann and Commerce Department international trade undersecretary David Aaron-have voiced skepticism about the EU’s promise to open its wireless equipment market to the U.S. suppliers.

CDMA is shut out of the EU today.

Moreover, policy makers here are concerned that because the U.S. standards-setting process is more open than ETSI’s, American firms are competitively disadvantaged.

But ETSI Director General Karl Heinz Rosenbrock, in an Aug. 18 letter to Rep. Philip Crane (R-Ill.), chairman of the House Ways and Means subcommittee on trade, defended the organization’s standards-setting process and complained ETSI was not invited to testify at a July 28 hearing on U.S.-E.U. trade.

“ETSI is open to influence from all its members,” said Rosenbrock, adding that “votes can and do take place within a fair and democratic process.”

Qualcomm replies Ericsson and Nokia have the lion’s share of influence on 3G because ETSI’s voting system is skewed in their favor.

GSM proponents have accused Qualcomm of trying to extort exorbitant licensings fees from European and other manufacturers and of being lax in participating in following ETSI protocol.

Qualcomm, for its part, has reserved the right to sue European wireless manufacturers that move forward with a W-CDMA standard the San Diego company claims encompasses its essential intellectual property rights.

Up to now, congressional interest in 3G has been limited to a handful of lawmakers like Reps. Matsui, Crane, Connie Morella (R-Md.), and Rob Portman (R-Ohio) who, while influential in their own right, lack the clout and stature of Hollings.

Hollings is the ranking Democratic member of the Senate Commerce Committee and one of the most powerful members of Congress.

Hollings, hostile to global trade generally and protective of his home state’s textile industry specifically, is up for re-election this fall.

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