July 27, 2000

  KEEP U.S. TELECOM COMPETITIVE AND SECURE:
SAY NO TO FOREIGN GOVERNMENT MONOPOLY TAKEOVERS

Dear Colleague:

Recently we introduced H.R. 4903, a bill that sets common-sense ground rules regarding the takeover of United States telecommunications firms by companies that are owned by foreign governments. It is a companion measure to legislation introduced by Senator Hollings with substantial bipartisan support in the Senate.

It is flatly unfair to the competitive American telecommunications industry -- as well as to American workers and consumers -- to allow foreign governments to compete as marketplace participants in the new economy. Foreign government ownership of telecommunications entities in the United States puts other American companies at a clear disadvantage overseas where that government-owned entity would be both competitor and regulator simultaneously. Moreover, this bill is necessary to maintain vigorous domestic competition and to make sure that U.S. telecommunications systems remain secure.

For the past several decades, the U.S. has worked diligently, notably through the 1984 breakup of AT&T and the 1996 Telecommunications Act, to open its telecommunications markets to competition. But in promoting competition here at home, we made it easier for foreign government-controlled telecommunications monopolies to enter our market and acquire key U.S. assets. In fact, companies such as Deutsche Telekom and France Telecom -- both majority foreign government owned -- are aggressively pursuing acquisitions of American telecommunications companies. No U.S. company would have a similar ability to invest or purchase such companies in France or Germany.

As a result, foreign government ownership of these U.S. assets would produce substantial marketplace distortion within our borders. These foreign companies have superior access to investment capital. Conversely, private companies without any government ownership (such as every American high tech company) competing with a foreign government-owned firm may experience an increase in their cost of capital. These anti-competitive effects can be relieved merely by the elimination or significant reduction of government-owned stakes.

Foreign government ownership of U.S. telecommunications systems raises important national security concerns as well. Should law enforcement and national security agencies be required to give notice to foreign governments, through their controlled telecommunications company in the U.S., when conducting domestic security investigations? If we worry about FBI intrusions on privacy on the Internet, ought we not be concerned when foreign governments own our telecommunications systems?

H.R. 4903 would require that any company that seeks to acquire a U.S. telecommunications firm be less than 25% owned by a foreign government. This is a common-sense measure, and represents a policy that is shared by many other countries around the world. For example, Italy and Spain recently prevented foreign government-owned telecommunications providers from purchasing assets in their home countries for the same reasons outlined above.

We urge you to join in promoting fair competition in the U.S. telecommunications market by co-sponsoring H.R. 4903. If you have any questions, or would like to co-sponsor, please call Andy Levin at ext. 6-3400 (Commerce Democratic staff) or Colin Crowell at ext. 5-2836 (Rep. Markey).

Sincerely,