Restrictions Reduced: Foreign Investment Could Increase

WASHINGTON--The FCC last week paved the way for greater foreign investment in U.S. wireless operators.

The foreign investment order may bring a level of relief to personal communications services licensees complaining of difficulty acquiring capital. The order responds to an agreement to liberalize domestic telecommunications markets that was signed by 69 nations of the World Trade Organization, including the United States. So far, 27 signatories have revised some of their laws to comply, but only the United States has fully enacted its WTO commitment, the FCC said.

Increasingly, wireless carriers are seeking foreign capital. Western Wireless Corp., for example, wants the FCC's permission for an investment by Hong Kong's Hutchison finance group, and Teligent LLC has received a $100 million investment from Japan's Nippon Telephone and Telegraph.

The FCC's primary change is that investors whose home nations signed the WTO pact will no longer have to pass the "effective competitive opportunities" test. The ECO test, which still applies to non-WTO countries such as China, requires an investor's home-nation market be as competitive as that of the United States.

The FCC still will require a waiver for each indirect foreign investment that creates a U.S. company that's more than 25 percent foreign owned. However, the waiver process will now presume those waivers should be granted, as long as they are in the public interest--meaning that they don't harm national security or law enforcement. The FCC promised action on each request within 35 days. Federal law allows the FCC to grant waivers allowing up to 100 percent indirect foreign investment but still bans direct foreign investment above the 20 percent level.

The commission's new chairman, William Kennard, said the move will "introduce new sources of competition in the telecom and satellite markets in the United States and attract much needed investment capital."

The two new Republican members of the commission, Harold Furchtgott-Roth and Michael Powell, both saw the market-opening move as an example for the world to follow.