SPEAKERS CONTENTS INSERTS
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INTERNATIONAL STANDARDS, PART I: TECHNICAL BARRIERS TO FREE TRADE
TUESDAY, APRIL 28, 1998
House of Representatives,
Committee on Science,
Subcommittee on Technology,
Washington, DC.
The Subcommittee met, pursuant to notice, at 10 a.m., in room 2318, Rayburn House Office Building, Hon. Constance A. Morella, Chairwoman of the Subcommittee, presiding.
Mrs. MORELLA. Good morning. I'm going to convene the Committee on Science's Subcommittee on Technology for this hearing on international standards: technical barriers to free trade. I want to welcome everybody here today for what promises to be an interesting and important hearing on international standards setting and its impact on America's competitiveness.
Standards play a vital role in international trade. The standards setting process, when carried out in an open and fair manner, can serve to promote free trade. According to the Department of Commerce, standards play an integral role in $150 billion worth of exports from the United States.
Increasingly, however, concerns are being raised that our trading partners are using the international standards setting process as a barrier to U.S. exports. According to the Department of Commerce, standards serve as a barrier to the export of between $20 billion and $40 billion worth of goods and services from the United States.
Much of the current concern over the process of setting international standards stems from the 1994 agreement on technical barriers to trade—TBT—which was adopted in conjunction with the establishment of the World Trade Organization at the conclusion of the Uruguay Round of the General Agreement on Tariffs and Trade known as GATT. TBT requires countries to put forward there best effort to use international standards. This TBT stipulation has served to significantly increase the importance of the Geneva-based International Standards Organization. With TBT, ISO standards have become a critical factor in resolving trade disputes.
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ISO, by its location, rules, and heritage is often seen by U.S. manufacturers as more friendly to the interests of European Union members than those of the European Union's trading partners.
So this morning, we're going to hear from the Director of the National Institute of Standards and Technology, which is the agency charged with playing the lead coordinating role for the development of standards in the United States. And, we're going to hear from four industry representative who have direct experience trying to navigate the ISO process.
As we will hear from our distinguished panelists, the United States needs to do a lot more to ensure that American companies do not get lost in a sea of technical barriers to trade.
What I am going to do, gentlemen, is give the oath of truthfulness. It is the policy of the Science Committee to swear you all in. So, I would ask the members of the panel if they would kindly stand and raise their right hand.
Do you solemnly swear that the testimony you are about to give is the truth, the whole truth, and nothing but the truth?
Mr. KAMMER. I do.
Mr. TYSON. I do.
Mr. TURNBOW. I do.
Mr. FORD. I do.
Mr. BROVITZ. I do.
Mrs. MORELLA. The report will indicate that everybody responded affirmatively.
And so now, as you are seated too, in terms of the testimony, we'll start off. Our lead will be Ray Kammer, the Director of the National Institute of Standards and Technology, Gaithersburg, Maryland. Welcome. Followed by Mr. Samuel Tyson, who is an independent consultant from Sinking Spring, Pennsylvania. That's a very odd name, isn't it, Sinking Spring, Pennsylvania? To be then followed by Mr. Michael Turnbow, who's the former Chairman of the American Society of Nondestructive Testing in Soddydaisy, Tennessee—another unusual name. Mr. Charles Ford is the Vice President of Quality, Babcock and Wilcox Power Generation Group in Baberton, Ohio. And finally, Mr. Stacy Brovitz, Chief Executive Officer of the Dormont Manufacturing Company in Export, Pennsylvania.
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Gentlemen, your entire testimony will be in the record and it will be available for all members of the Subcommittee and the Full Committee, and if you would like to make comments of up to about 5 minutes, and then they'll be followed by questions.
So we'll start off with you Mr. Kammer.
TESTIMONY OF RAYMOND G. KAMMER, DIRECTOR, NATIONAL INSTITUTE OF STANDARDS AND TECHNOLOGY
Mr. KAMMER. Thank you, Madam Chairwoman.
I'm pleased to testify before you today on a subject that I don't think has received enough attention. Standards and methods used to assess conformity to standards are absolutely critical to U.S. industry and our economy at large. Secretary Daley and I are committed to doing everything we can to increase the visibility of this issue and encourage the United States to formulate a strategy.
The time between new generations of products is getting compressed and people are rushing to the marketplace because that confers a competitive advantage on them. This put extreme pressure on standards to keep up with the cycle times of products that incorporate new technologies.
Unfortunately, we're beginning to hear more and more about instances in which U.S. firms are finding that they're at a competitive disadvantage because of the structure of the Western European standards setting system, not only with the standards, but also demonstrating conformity. So it isn't just the content of the standards; it's the way in which people have to demonstrate conformity.
There has been a lot of talk about the new economy. I think we also need to start talking about the new standards economy. The United States needs an effective national standards strategy if it's going to compete effectively in the global market. Europe does have such a strategy and its running full throttle. It's clear that the Europeans believe that they are achieving a competitive advantage in world markets because of the way they are acting. And we have—NIST has—standards experts stationed in South America and those experts are beginning to report that in Latin America, those countries are tending to adopt European standards rather than U.S. standards. And over time, that will have the effect of creating a preference for European products rather than U.S. products.
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The U.S. standards-setting system has grown up over the last 100 years, and it has served the domestic market very well. It has developed four very important principles: consensus, transparency, openness, and due process, which are central to the system and I think are important to preserve. Yet, this same competitive and open system for developing standards is creating some issues for us in the global market. We have over 600 U.S. standards developers in the United States. Coordination is nearly impossible. Recently an NRC panel did an assessment of the system and indicated that it wasn't serving us well in terms of competing in the global marketplace.
Congresswoman Morella, you alluded to the World Trade Organization Agreement on Technical Barriers to Trade. One of the parts of the Agreement is the commitment that all countries that are signatories, including the United States, will use international standards. However, the phrase international standards is not defined. Many Western European countries and other countries in the world are coming to believe that international standards is synonymous only with ISO, IEC, and ITU standards. This is a disadvantage to the United States, and it's a challenge for us.
Our U.S.-developed standards represent technologies; they represent products; they ultimately represent jobs and income in the United States. We have to work to get our standards adopted in the international marketplace.
In my view, the U.S. standards community needs to work together more effectively to resolve our differences. Our current domestic standards system isn't working well enough at the international level. And while I think the U.S. standards community has made huge progress in the last 5 years, I think we have to do a lot more.
So, where does NIST fit into this picture? I've settled on five challenges for NIST, and one of these is to support the full and unfettered American participation in global markets; in other words, standards development. And we're now working and intend to work a lot more with ANSI, ASM, ASTM, and FPA, NEMI and other standards developers. In September, we plan to host a summit on international standards wherein we hope to discuss the elements of a national strategy among the standards development organizations.
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In an effort to identify standards barriers more effectively, we have recently announced a 1–888 number—all the 800s are used up. But we're asking people that encounter standards problems or encounter conformity problems to phone us and tell us about them. And the number is: 1–888–591–TEST. And we also, of course, have an e-mail address which is: oiaa@nist.gov. And, we are very eager to gather information on standards conformity issues and problems that U.S. vendors are having in overseas markets.
This Subcommittee authored the National Technology Transfer and Advancement Act of 1995, which assigned NIST the responsibility for coordination among the government—state and local governments, the Federal Government, and the private sector standards development organizations. As part of that responsibility we've recently concluded an annual review of federal progress in using voluntary standards. And in 1997, we see that 180 agency-specific standards were withdrawn in favor of voluntary standards. And that brings the total number of voluntary standards in use by the fed to 8,300 approximately. I regret that that same review also showed a significant drop in federal participation in voluntary standards activities. And I think this is something that we have to address and NIST will attempt to through an interagency committee.
NIST, itself, is active in about 170 international standards committees including ISO, IEC, and ITU. The plan that we developed under the National Technology Transfer Act and submitted to Congress indicated that we would build and implement an agreed-upon U.S. system for standards and procedures for voluntary standards, product certification, accreditation, registration of quality and environmental management systems, and formal recognition procedures. To that end, we recently held a meeting on something called the National Cooperation on Laboratory Accreditation. And on April 16, we agreed with the private sector folks that we're working with that we will convene this group to recognize product testing entities in the United States, and we expect this to be operational by the end of this year.
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So we are in the new standards economy, and NIST is committed to joining with other federal agencies and the private sector to help formulate a strategy to allow us to more aggressively represent ourselves in global markets.
Thank you very much.
[The prepared statement and attachments of Mr. Kammer follow:]
"The Official Committee record contains additional material here."
Mrs. MORELLA. Thank you, Mr. Kammer. And I note that you spelled out in greater detail in your written testimony the nice synopsis you gave us.
Mr. Tyson, we'd love to hear from you sir.
TESTIMONY OF SAMUEL E. TYSO
N, INDEPENDENT CONSULTANT
Mr. TYSON. Good morning, Madam Chairwoman, members of the House Subcommittee on Technology.
I am pleased to have the opportunity to relate some of my experiences with the ISO standardization process in connection with steel and nickel alloy industrial products such as plate, sheet, bar, wire, etc.
Some ISO standards are compatible with American needs, others are incompatible and would not be useable in America without overturning current practices. Of those that are compatible, virtually none are identical with American standards such as those published by ASTM. And I mean, with respect to content, not just format. In Japan where our fellow workers in the standards field tend to be far more thorough than we are, in response to a government mandate to adopt ISO standards, the Japan Iron and Steel Federation made a very thorough study a few years ago. They compared all their standards for steel products with the ISO standards and found that very few steel standards would be useable by Japanese industry. The same would happen if we made as thorough a study with American standards.
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ISO standards which could be easily used in America are those ISO standards which have been prepared by ISO technical committee 17 subcommittee secretariats held by USA, Japan, and perhaps Norway, and China. Such secretariats have been willing to include both European and American choices in ISO standards. The testing standards are generally compatible and can be adopted by American test labs without serious problems. Lastly, those grades of steel which have been developed recently generally become introduced identically and simultaneously into all national standards and, therefore, wind up in ISO standards acceptable to all, even when the European nations hold subcommittee secretariats.
On the other hand, ISO standards for the more mature, well-entrenched grades of steel, accounting for most of the total consumption, pose problems because when standardized in Europe and America more than 50 years ago slightly different chemical composition limits were established. Both European and Americans are not willing to accept the others' limits because of the widespread use of the national standards and the national fabrication practices based upon the specific compositions. Americans and those with similar standards would be willing to accept broader limits for chemical composition for the sake of being able to say they can meet the ISO standards, but Europeans are not willing to do so, preferring to be exclusionary.
When European nations hold secretariats, as they do for subcommittees four involving stainless steel and subcommittees three involving plate, the secretariats—who have control of the agenda—have shown very little cooperation and willingness to accommodate compromise or including choices that would meet the needs of both Europe and America. Therefore, to this day, even after many attempts to standardize the popular grades of stainless steel compositions we still don't have an acceptable ISO standard.
In other technologies such as information, safety, environment, and especially quality systems, ISO standards have been used by all nations including the United States with great success. Indeed, I'm a registered lead auditor for examining quality systems to ISO standards so I know that they are very workable. But the same cannot be said for steel product standards with which I have also had considerable experience.
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Now finally, there may be an impression that the European nations are eagerly adopting ISO standards while we are holding back. Let me tell you that I know of no ISO steel product standard that has been adopted by CEN without first modifying the standard to European preferences. So, one of the important things we'd like to see is: what's the policy of all the countries around the world with respect to adopting ISO standards.
That concludes my oral testimony. Thank you for this opportunity to inform the Congress.
[The prepared statement and attachments of Mr. Tyson follow:]
"The Official Committee record contains additional material here."
Mrs. MORELLA. Thank you for relating your experience and your very provocative comments, too. Look forward to questioning you, Mr. Tyson, and thank you.
Mr. Turnbow, let's hear from you.
Let me mention we've been joined by Mr. Gutnecht and Ms. Rivers.
TESTIMONY OF MICHAEL L. TURNBOW, FORMER CHAIRMAN, AMERICAN SOCIETY FOR NONDESTRUCTIVE TESTING
Mr. TURNBOW. Madam Chairwoman, members of the Committee, I'm Michael L. Turnbow, immediate past Chairman of the American Society for Nondestructive Testing.
I appreciate the opportunity to be here today to share with you my thoughts regarding the trend I see in the expansion of international standards and the role we must play in the development.
All that I have learned and will relate to you and the Committee today regarding international standards has been as a participant of ASNT business. So I will dwell there is the reason where I have got my experience.
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I recognize as never before the growing impact of standards on global commerce and the potential for standards to either facilitate or impede international trade. I've also come to realize that unless standards development activities are conducted in a manner that results in mutual benefit to all concerned, trade will suffer. The true test of international standards is the degree to which each is developed and used. Another equally important test is the fair and open access to standards development process. If, as I have found, the process for developing international standards allows certain nations to participate in standards development activities and others not, then I fear we are headed towards conflict.
ASNT is a 57-year-old professional society made up of those persons who are engaged in the practice of nondestructive testing. ASNT's membership exceeds 10,000 in the United States, and in over 107 other countries. Its standards and personnel qualification and certification of NDT personnel professionals are implemented by industries in over 60 countries. Our counterparts in Europe, working through the European Committee on Standardization—or commonly known as CEN—are developing and issuing NDT personnel qualifications that are not based on consensus.
While each nation develops standards for their own use, European standards developments have taken a decidedly new twist whereby the European Committee on Standardization—or CEN—are being developed for all members of the European Community, and through a special agreement between CEN and ISO may become an international standard. Their special agreement with ISO—the Vienna Agreement—allows CEN to develop standards within its own councils, and upon completion, to present such standards to ISP for up or down vote. Because participation in CEN is limited only to Europeans and excludes all others, the process threatens and upsets the principles of international consensus standards building. The mechanics of the Vienna Agreement allow CEN to place fully developed standards before the international body for approval that only their members were privileged to work upon, thereby defeating the entire process of developing truly international standards. The CEN process is contrary to our tradition of developing full and open standards for any professional from any nation may participate.
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How does this affect international trade? By way of example: ASNT's personnel qualification standard—SNT–TC–1A—has become a reference for product standards that govern boilers, pressure vessels, pipelines, other conveyances, and services such as the examination of commercial aircraft jet engines, electric utility turbines, et cetera, I could go on and on.
I'll be leaving tomorrow for the People's Republic of China to join with my colleagues from ASNT in meeting with officials from the Chinese government and several industrial organizations to inaugurate ASNT standards for personnel qualification certification. China, arguably one of the largest markets for U.S. goods and services and a tremendous trading power in its own right, recognizes that unless it can adhere to stringent requirements for personnel qualifications established by ASNT and developed by another 60 countries, its industrial products will be considered suspect and will not be judged to meet acceptable standards.
So as you can see, our personnel qualifications standards actually govern whether or not products and services are adequate to meet international commerce requirements. When efforts are mounted to alter or establish new international standards in this arena, we take notice. And when such efforts are taken in a manner as to attempt to exclude non-European participation, we are very concerned. Therefore, unless our national leaders become aware of the potential for manipulation in the manner to exclude U.S. firms from certain standards development activities, we will, over time, lose economic ground and access to certain markets.
Therefore, I ask you to consider expanding the role of the U.S. Government in this arena. I ask the government officials from various agencies be encouraged and supported in their participation in international standards activities. I also ask that the Congress direct the Departments of State and Commerce to begin to monitor and report on abuses as I have reported to you today, and working with European governments to voice U.S. objections to efforts by their national standards organizations to usurp legitimate international standards activities.
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Madam Chairwoman, on behalf of my colleagues at ASNT and elsewhere, I call on you and this Committee to lead this effort toward ensure equity and access in the international standards arena. Without the participation of U.S. Government agencies, and relying solely on our American National Standards Institute's limited yet dedicated staff, tight resources, and members to monitor these developments and intercede where they can, will result in our being overwhelmed by our trading partners. This should not be allowed to happen. Every effort should be made to keep the markets free and open and that will require more than monitoring government-to-government agreements and it will require monitoring standards which are becoming real mechanism by which nations are controlling access to their markets.
Thank you very much.
[The prepared statement and attachments of Mr. Turnbow follow:]
"The Official Committee record contains additional material here."
Mrs. MORELLA. Thank you very much. Certainly you have given us a call to action with specific recommendations which we value.
Look forward to hearing from Mr. Ford.
TESTIMONY OF CHARLES E. FORD, VICE PRESIDENT AND DIRECTOR, QUALITY ASSURANCE, BABCOCK AND WILCOX POWER GENERATION GROUP
Mr. FORD. Madam Chairwoman, I'd like to thank you for the privilege of testifying before this Committee. Babcock and Wilcox—not only for Babcock and Wilcox, but also for the American Society of Mechanical Engineers. I hope my testimony will convey a picture of the international playing field in the sales and manufacturing of boilers.
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My company was started in 1867 by two innovative leaders—George Babcock and Stephen Wilcox. We have recently been recognized by induction into the Inventors Hall of Fame. While I am sure they couldn't have visualized the global market as it is today, they set about globalizing the company in the early years in establishing the name Babcock and Wilcox throughout the world. Our leaders have carried on that tradition of globalization. B and W now has joint ventures in China, India, Indonesia, Turkey, Egypt, and Mexico.
During the electrification of our country following World War II, the leaders of my company again showed great innovation by recognizing what our customers needed and adding capacity to meet those needs. The United States electric power industry includes 800,000 megawatts of installed electric generating plants of all kinds. Over 600 large Babcock and Wilcox boilers rated at a total of 170,000 megawatts provide more than 20 percent of the total U.S. generating capacity. Our company also provides environmental protection equipment, including scrubbers and precipitators, for many of these plants.
Enabling American manufacturers to compete is important because most new power plants today are being built in emerging economies of Asia, and Middle East, and Latin America. Our country can compete successfully in this industry.
American boiler manufacturers ABB, Foster Wheeler, and Babcock and Wilcox provided 22 percent of the large utility boilers around the world in 1997, according to the McCoy's Power Report. Most of this business came from foreign countries because the United States is not building many new power plants today.
Additionally, there is roughly 3 times the global capacity to manufacture boilers and boiler pressure parts compared to the global demand. Under these circumstances, every step in the process of selling, designing, manufacturing, shipping, erecting, and commissioning boilers continue to undergo microscopic scrutiny for cost reduction opportunities. Labor rates and politics have driven a lot of boiler manufacturing offshore. Pricing is so low that no company can afford duplicate designs or duplicate inspections. I need a safety code that protects my customer without giving any other supplier a cost advantage over my product.
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The boiler and pressure vessel code of the American Society of Mechanical Engineers originated in 1914 as a manufacturer's response to major public safety issues of death and injury due to boiler explosions. Today, a comparatively few accidents occur because boilers and pressure vessels are designed to strict safety codes and inspected for their compliance.
America is unique in originating a system of voluntary, consensus standards codes to protect public safety. In part, the cost of participating in developing and maintaining these standards is directly absorbed by the private sector which is not the case in foreign code development. In many other countries, these standards are government functions.
Our leadership at Babcock and Wilcox are facing these challenges head on within the sphere of our control. We are attempting to level the playing field. We are opening joint ventures strategically around the world to service markets and provide some immunity to the barriers we face if we are trying to supply the world from the United States. The barriers we see are local content requirements on foreign contracts as well as enforcement of nontechnical coder requirements, certification, and accreditation.
We are providing our people with tools to improve productivity so that to some extent we can overcome the low labor rates of foreign suppliers. But efforts of productivity improvements, right-sizing, innovative designs are still not enough when you consider the actions by our government to subtly apply pressure to the ASME international, the national board, and State regulators to ease the requirements of foreign imports without real reciprocity. What is clear is that the American boilers manufacturers will continue for some time to be at a disadvantage unless their leadership had the foresight to establish foreign manufacturing facilities.
At this point, I think it is fair to identify some areas where actions have been taken to place American boiler manufacturers in less than a desirable parity with foreign counterparts.
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The ASME international established a methodology of having foreign material approved for use in ASME products. This makes it more practical for foreign manufacturers to fabricate a boiler overseas and import it into the United States. And it is consistent with the spirit of free trade. But foreign codes are not as liberal in allowing materials from other countries to qualify under their codes.
The national board has revised its charter to permit registration of foreign manufactured boilers, and note, this is very important in trying to meet state law where the majority of the States require that the boilers be registered.
State regulators are under pressure to accept foreign boilers under their state special allowances, especially for foreign manufacturers who are electing to install facilities in that particular State.
Nearly every other country attempts to advantage its own manufactures except the United States. The United States has been open to other codes through state specials in variance to ASME code. And even today, although under no requirement to do so, States such as Minnesota, and Iowa are formalizing this openness under World Trade Organization rules. Moreover, the National Board of Pressure Vessel Inspectors now will accept boilers manufactured to British standards. When Babcock and Wilcox imports a boiler to China, Austria, or Pakistan, the foreign sourced components must be reinspected and designs must be modified or certified to meet local codes.
As you can see, there is no parity. While some parity does exist in Asia, Japan is not an open market. The Eastern Bloc countries are significantly influenced by the European Common Market directly and indirectly. For example, the German code has funded a few engineers to directly work with the Ukraine in developing their codes and standards for boilers.
The cost of a Chinese safety and quality license—a Chinese government requirement for importation of boiler components into China, includes a preliminary assessment, a final assessment, 2 shop inspections every 3 years, and each inspection or assessment includes 3 people for 3 days at a cost of about $25,000, not including the company employee's time or expenses. The inspection focuses on manufacturing and quality systems with an emphasis on the system's paper trail. The language in the inspection contract is very onerous as it yields supervisory power to the inspection team.
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Another example, in a European union countries vote en bloc, they may dominate the world standards. This will cause domestic U.S. manufacturers to re-engineer, retool their process in order to compete internationally. These higher costs represent more non-tariff barriers for our business.
I hope this provides a clear picture of our difficulties a U.S. boiler manufacturer faces today in a global market. And I thank the Committee for your time and attention.
[The prepared statement and attachments of Mr. Ford follow:]
"The Official Committee record contains additional material here."
Mrs. MORELLA. Thank you, Mr. Ford. You shed light on some of the comments that have been made before—very valuable.
Mr. Brovitz.
TESTIMONY OF STACY BROVITZ, CHIEF EXECUTIVE OFFICER, DORMONT MANUFACTURING COMPANY
Mr. BROVITZ. Good morning. My name is Stacy Brovitz. I am Chief Executive Officer of Dormont Manufacturing Company located in Export, Pennsylvania, about 30 miles east of Pittsburgh.
Thank you very much for the opportunity to briefly outline Dormont's experience with technical barriers to free trade, particularly in Europe.
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We've been fighting these barriers in the form of design restrictive product standards for over 10 years with little success. These standards focus on the construction requirements of our product, rather than the desired performance and safety characteristics. We have invested and lost over $1 million not to mention a great deal of time. We have lost millions of dollars in annual sales.
Although Dormont is a relatively small company with $30 million in sales, we are the world's leader and largest manufacturer of stainless steel corrugated connectors that are used to connect gas-fired appliances to the main gas supply in residential and commercial food service applications. Each and every one of us comes across this product several times every day. Chances are, the restaurant where you eat lunch or dinner today will use our products—whether it's McDonalds or the finest restaurant in Washington. If you have a gas-log fireplace, a gas range, a gas water heater or dryer at home, these appliances will be connected to the gas supply using our products.
Dormont invented the stainless steel gas appliance connector in the early 1970's, and since that time has sold over 45 million connectors. We are the choice of every major fast-food chain and gas cooking and appliance manufacturer. Dormont has more experience with the stainless steel gas connector than any other company in the world.
Throughout the 1980's, as American fast food companies started to expand throughout Europe and the rest of the world, Dormont's products were always part of the equipment instillation. Starting in 1988, almost every European country adopted standards for gas connectors that contain design criteria that served to exclude Dormont products from the market, favoring local manufacturers. In fact, local manufacturers dominate all the national standards setting committees. Consumers, installers, foreign manufacturers and other interested parties are either completely shut out of the process or have limited minority roles. Despite our pleas, we have been shut out of the standards setting process, being told that we have no standing to suggest any changes or technical information based on our experience.
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It is design criteria alone that has excluded our products from Europe. In each and every case, we were able to pass all performance and safety requirements. Often the local standard allowed an overall inferior or less safe product but restricted the product design preventing the sale of the Dormont product. The cost for Dormont of designing a manufacturing and certifying different connectors for each national market are prohibitive. The product construction approved in many of the standards may result in a lower-quality product than we are comfortable selling.
After unsuccessful attempts to change the national standards, we decided to pursue a CE mark that, in theory, would give us the unrestricted ability to sell throughout Europe. In 1993, we passed all the performance and safety requirements of the British standards and we were issued a CE mark. However, in January of 1994, local manufacturers threatened with our presence, pressured the member states into revoking our mark. This action resulted in the cancellation of all our open orders and the breakdown of our distribution network. We eventually closed our European operation at a substantial loss.
In fact, our U.S. sales have also suffered because the multinational chains in equipment manufacturers are no longer buying our products for export with their own equipment.
The irony of this situation is that local customers and installers fully supported the approval of our products, but they too are locked out of the standards setting process.
Mostly through our own initiatives and enlisting the help of the State Department, the Department of Commerce, and the USTR, as well as our own legal council in Europe, we have recently made a small amount of progress. But these success just scratch the surface of the business opportunity available to us.
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In the last year, the British standard for commercial connectors has been revised despite strong opposition from British manufacturers. In a very short period of time, we've become the No. 1 brand in Britain. It is no surprise that they have tried to lock us out. The residential standard has not been changed and represents a much larger opportunity.
We've also received approvals from Denmark and Belgium, but again, these represent very small opportunities. We have not made any progress in the rest of Europe.
The design-restrictive standards in Europe have prevented Dormont Manufacturing Company from making significant progress in penetrating the European market. The size of the market opportunity in Europe is very similar to that of the United States. Consequently, these standards are limiting our ability to create jobs and increase the size of our business. Despite all our efforts and a significant investment, we have been blocked at each and every attempt to move forward. Other than lending a sympathetic ear and urging the E.C. to help us, the U.S. Government has not made a concerted effort to intervene and has been unable to handle the stall tactics used by the E.C. and member States.
We realize that Dormont Manufacturing Company is a small fish. However, we are a rapidly growing business that in the last 5 years has created over 150 jobs in our community and significantly more for our suppliers around the country. We have talked to countless other small- to mid-sized manufacturers who have experienced very similar problems to those I described today. A concerted effort by the U.S. Government to help resolve these problems would have a significant impact on a large number of companies.
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Thank you very much for the opportunity to present our case before the Subcommittee today. We are prepared to help the government's efforts in any way possible.
[The prepared statement and attachments of Mr. Brovitz follow:]
"The Official Committee record contains additional material here."
Mrs. MORELLA. Great, and that's the purpose of this hearing, too, is to try to understand more why we have these barriers and what we can do about it.
Thank you all for your testimony.
I'll start off with Mr. Kammer who talked about how the creeping into Latin America toward these European, the CEN standards. And I think you, in your testimony, you point out that in part, it's because they don't have free access to libraries of up-to-date standards from our U.S. standards-setting bodies. And how critical is this lack of U.S. standard reference libraries?
Mr. KAMMER. It's very influential. Both the British standards organization and the German product standards organization as a matter of government policy make, on an annual basis, a full set of their standards available to countries that they are targeting, particularly, but almost any country that asked for it would get them.
A similar set of U.S. standards that was as comprehensive as the British Standards Institute standards would probably cost a country $80,000 or $90,000. In terms of national countries, that doesn't seem like a lot, but, of course, each office, you know, has its own budget, and I've got two choices on running the office: I can have the German and the British for free or I can, with great effort, go into a number of different standards organizations in the United States, spend upwards of $100,000 in order to get them. So usually what you find in these libraries is parts of U.S. standards that they needed very badly that might be very old, and very current European standards. And countries are then writing their own product standards for their own national acquisitions; they tend to use the European standards. And we're seeing that manifest itself in the marketplace.
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Mrs. MORELLA. Has that been brought to the attention of our U.S. standard setting bodies?
Mr. KAMMER. Certainly they're all aware of it, but most of the standards developers in the United States finance their operations through the sale of their standards. This is contrary to Europe where typically there is a government relationship and there is either a government subsidy or, indeed, it is the government and they pay for the standards.
If the U.S. standards developers were to start giving their standards away in a general way, they wouldn't be able to develop standards. Their income would go way down.
It's an interesting problem and it's one of the principal issue that I hope to address over this summer with the standards developers.
Mrs. MORELLA. Okay. Because it may be that the U.S. Government should take a larger role in this.
Any of the other panelists want to comment on that concept in any way? I mean, you don't have to because I've got some other questions I'll ask you. Mr. Tyson?
Mr. TYSON. I personally, I think it would be a great idea for the U.S. Government to assist the distribution of our standards. I never realized that what you just reported was true. And it would certainly have a big influence against us if our standards aren't available.
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Mrs. MORELLA. Yes, Mr. Turnbow?
Mr. TURNBOW. The interesting point that's happening is that other governments are realizing if they supply countries with their standards, than the companies within those countries are obviously going to benefit. We have enjoyed in this country through our volunteers and our societies that are generating these standards, they have perpetuated themselves around the world because of lack of standards in other nations, and many countries are using our standards today and are slowly replacing them because they are being provided by other nations free of charge.
Mrs. MORELLA. Very important point, and I'm glad that NIST is going to be bringing it up during the summer.
Just going to like the bottom line, so to speak, it just seems to me that one of the reasons that we're being phased out is that we're not clever enough, we're not imaginative enough, to be able to beat them at their own game where they have created the rules, so to speak, in terms of our being involved with the treaty. So I guess, I'd like to ask you:
what can we do to transcend the problems with regard to how we work with ISO. Do we need people that are more trained, who are more adept at it? What is the bottom line in terms of what we should be doing? Is it to be more aggressive? Is it to be better trained? Is it to be more innovative? Is it none of the above? I'd like to ask all of you. I'll start off with you, Mr. Kammer.
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Mr. KAMMER. I think that part of the strategy has to be that we have to come together—standards developers have to come together. We're having a sort of a monolithic attack and it's not surprising that, you know, when there is one coherent strategy on one side and there's many strategies on the other side, that the one strategy tends to succeed.
Secondly, I think your point about having more people that are sophisticated about how ISO, IEC, ITU work is an important one. It is a very complex procedural structure. And there is no particular reason why the folks that understand it have a high motivation to explain to say a U.S. industrial representative. Well, you have some procedural options here. If you objected, in fact, we couldn't proceed. But if the guy doesn't know that if he objects.
Mrs. MORELLA. Right.
Mr. KAMMER. And it is a very complex system. Right now, ANSI, who is our representative to the ISO, is financially very strained. They are actually letting people go right now. They are having a lot of trouble making ends meet. And yet, the need for representation is expanding. I think that that's another issue that needs to be focused on.
Mrs. MORELLA. Is our trade representative, Ms. Boshevsky, involved enough in this?
Mr. KAMMER. The USTR's role in this is typically at sort of the two extreme ends. One is developing policies, negotiating with framework. And the WTO trade agreement was indeed led by the USTR, as I know you know.
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And then at the other end, if there's an extreme abuse, there is sort of our representatives to go back to the World Trade Organization and argue our case or advance a new policy that would deal with the problem.
That still leaves the everyday issues, which typically the USTR doesn't take responsibility for; it isn't their role in life. And to date, that role has been fulfilled on a voluntary basis by the private sector organization, ANSI. I think there is a market imperfection now in that we have a need for more representation and it's not being financed by the approach we are using now. I think we have to find another way.
Mrs. MORELLA. I'd like to hear from our private sector witnesses in terms of the question of do U.S. small businesses have the capacity to participate in the international standard setting process.
And then I want to go further in terms of what you see that the Federal Government can do to assist small and medium-sized businesses in, I guess, negotiating in the international standard setting arena. I say that recognizing that within your testimony that I have been hearing recommendations.
So we will start either way. Great, we will start with you, Mr. Brovitz.
Mr. BROVITZ. As a small company, particularly in Europe, where we've been allowed, which is basically in Britain for one portion of our product line, we have been very effective in participating in the standard setting process. Other than that, we are told constantly that we have absolutely no standing, and that although each of my competitors in Europe either has a U.S. operation here or owns a portion of a U.S. company that competes with me and is allowed to sit on our standard setting committees, we are not allowed to do that.
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From a government perspective, we have spent a great deal of time talking to people at USTR, talking to people at the State Department, talking to people at the Department of Commerce. The situation that occurs is they are more than happy to take our case to the EC or the proper authorities, and it just stops there.
And from a small company standpoint, I think a couple of things need to be done. Number one is we need to get a catalog somehow of what these issues are for companies, not only my size, but also larger, so that we can present a very coordinated, very clear case of, across the board, here's what's happening in a variety of industries across a variety of products, number one.
Number two is it appears to us that the USTR and the Department of Commerce does not have the ammunition or the tools to attack this and to really, once they are stonewalled at the EC level, to do anything about it.
So I think a more aggressive approach in enforcing the treaties, and GATT in particular, that we have in place, and that we have to draw a line in the sand and put our foot down and say we are not going to take no for an answer. You have to start moving in this direction or we will take whatever actions are necessary.
But I think in our case, some of it tends to be one off and nobody is going to go that far down the road for a company our size for a couple million dollars in sales.
Mrs. MORELLA. You almost need a—what is it—the National Independent Small Business Association, or something like that, a consortium.
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Mr. BROVITZ. I mean, absolutely. If you go to any of our trade shows and you talk to 10 or 15 manufacturers up to several hundred million dollars in sales, they will relate the exact same experiences to the extent that they need a separate product for Germany, for France, for the U.K.
Mrs. MORELLA. And yet you all don't have an opportunity to coordinate and to share.
Mr. BROVITZ. No.
Mrs. MORELLA. And then to strategize.
Mr. BROVITZ. Right. And it also becomes a resource problem. I mean, being a small company, you have to figure out where you are going to pick your battles. And we have been extremely stubborn, particularly in Britain. I mean, it took us 10 years to get the standard changed. And within several months, we are the leading brand in the U.K., and it has been for nothing than our own——
Mrs. MORELLA. Perseverance.
Mr. BROVITZ [continuing]. Persistence and beating our head against the wall and threatening legal action. Like I said, we spent up to $1 million to get this far, and you know, I will be very old and very broke if I do it country by country in Europe.
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Mrs. MORELLA. Mr. Ford, do you want to comment on that?
Mr. FORD. I'd like to say one of the things I think is really important is that the government needs to make sure that the people that are negotiating with foreign standard developers really understand the developers in this country.
I think that there is, in my opinion, certainly a lack of
that understanding at the government level. I think that is one of the things that is really important.
I'd also like to say that I think that having this matrix of what countries accept our products and what countries we accept their products is a very good tool and a good measurement.
For instance, if I was going to build a new boiler plant today, given everything that I know, I would build it in Europe. And the reason is because I can have those products shipped into the United States with no encumbrances, but the other way around, I can't do that. So I think that having that kind of a matrix would really help everyone.
Mrs. MORELLA. Shouldn't that be USTR's responsibility? Do you see it falling into that category to give you that matrix that you mentioned, so you know what's accepted? I mean, just common sense.
Mr. FORD. Yes, I think the Commerce Department needs to do that.
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Mrs. MORELLA. And it would be helpful to you, obviously. All right, Mr. Turnbow.
Mr. TURNBOW. A number of interesting things are happening here to us. American standards, as I indicated earlier, are implemented around the world in many places. As an example, ours is in 60 countries. As the world understands the ISO movement, it seems that the only interpretation that's occurring in many different countries, including our customers, is that you must have an ISO standard.
Our standards, and many other organizations in this room, are by de facto already international standards. So we have a problem with that. And then when we go to the table to argue or participate in the international standards development, then those issues about being blocked out or block voting and all the other things you've heard, always kicks in.
There is another piece that I didn't bring up earlier that we have now been faced with. An international standard has been developed that is inferior to American standards. And so the rest of the world is racing to implement this standard and if it were to be implemented in this country, we would immediately say we would be putting American health and safety at risk, American health and safety at risk.
So I think it's a major point, because of not allowing open access to these standards, the international arena is missing up on the ability of taking advantage of the knowledge and experience that people around the world and ourselves of being involved in that.
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So that's an issue not so much associated with dollars and cents and competition, but we're talking literally the health and safety of people.
I think that basically explains that. I think what the government can do to help us in this is the fact that I believe we have been so open in developing our standards for so many years, we got caught up into the fact that we thought everybody else would approach it in the same noble kind of manner. And what we have woken up to realize today is that's not the case.
Anybody can come to our lowest committees in our standards development organizations from any country, anyplace in the world and participate. And to me, that is the underlying basic fundamental problem that I think we're going to have to have government help, because we, as societies, are supported by our industries.
We have developed all the standards we have by volunteers such as myself, who don't get paid. We go to these societies and we work on these standards. Our companies pay the bill because in the end, they see the benefit of participating and how the process works collectively through consensus. We have a tremendous consensus process. Even one negative vote has to be resolved to great details, which is not the case in ISO.
So I see the government in multiple layers of participating. I'm not saying we need the involvement to come in and take over and dictate everything, but we certainly need your assistance in helping overcome some of these obstacles and making it a level playing field.
Mrs. MORELLA. It almost sounds like we are too much of the perfectionist. Never too much, never too much. But I see what you are saying also. Mr. Tyson.
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Mr. TYSON. Almost everything that's been said by others at this table applies to the steel manufacturers. One of the frustrations of dealing with ISO standards, however, is that the steel companies, for the most part, which are rather sophisticated and have funding available for standardization activities, they can meet the DIN standards, the German standards. They can meet the BSI standards, the AFNOR standards, the Japanese standards.
It would be interesting to ask some information as to how true that is the other way around. That is, some fact gathering to show the acceptance of American standards in other countries versus the fact that we will accept almost any other producer's standard in this country. If somebody wants to buy it, they—in fact, if European nations want to ship to the United States, they just work to as ASTM standard, no holds barred. It's very easy for people to export to us, but I would be interested to see some facts gathered on how it works the other way around.
Mrs. MORELLA. You've been in the business for a long time, Mr. Tyson. Are we getting any better in terms of our standard-setting organizations in understanding and dealing with the process, or is it deteriorating, or is it about the same? Do you see any changes?
Mr. TYSON. Well, it's a difficult question to answer. Actually, ASTM standards are accepted the world around. We haven't found a need to use ISO standards yet. They aren't used in the steel business.
Mrs. MORELLA. In your testimony, you indicate that despite the fact that CEN has a disproportionate influence on the ISO process, that those member nations tend not to adopt the ISO standards.
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Mr. TYSON. Excuse me, would you repeat what you just said?
Mrs. MORELLA. Right, okay. It seemed to me that you indicated that despite the fact that CEN has a disproportionate influence on the ISO process, those member nations of CEN tend not to adopt ISO standards, but rather use the CEN standards. Now, how does this comply with the TBT agreement, that Technical Barriers to Trade agreement?
Mr. TYSON. I would like to know the answer to that one myself. Now, CEN usually, if not always, will, if there is an ISO standard available or a draft in process, they will start with the ISO standard as their draft standard, but then modify it. And so one wonders how fair it is. That is, what kind of a game are they playing?
Mrs. MORELLA. Does that suggest that we should simply divorce ourselves from the ISO process, if the European Union is adopting the CEN standards, and adopt the U.S. standards? Does anyone want to comment on that?
Mr. BROVITZ. Can I just make one more comment about the CEN process, because one of our product lines is currently under review with—there's actually a CEN committee writing a standard of—again, we are not allowed to have any input into that. In fact, the CEN process is not necessarily the answer, at least for us, because even if our product meets a CEN standard, that still means we have to pay for approvals in each and every country in Europe, and for them to actually test our products.
We've also been told that even if an ISO standard is developed, CEN can use it or not use it. So they do not feel that they are bound by any requirements to use an ISO standard if one comes to pass with our products. So our issue is more than the ISO level. It goes all the way from the national level to the CEN level and then to the ISO level.
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But I don't think we can divorce ourselves from those processes. I think we need to, and it's easier said than done, to figure out a way to interject ourselves into those processes. And I think that's really what the key is.
I think somebody made the comment earlier that I'm not looking for favors. We're just looking for a level playing field, and we're willing to meet anybody in the marketplace under performance standards from our standpoint and we'd be happy to deal with it that way.
Mrs. MORELLA. Mr. Turnbow, you cite in your testimony the Vienna Agreement. I just wondered if you might comment on how it works. I think your allusion to it was that it could be a means for CEN to usurp the international standard setting agreement.
Mr. TURNBOW. Yes, ma'am. The Vienna Agreement, in summary, basically states that if CEN approaches ISO and takes the lead for the development of a standard, and the standard is developed by CEN, ISO will relinquish that responsibility to CEN.
CEN then develops the standard. The CEN rules then apply, which means that nobody can participate in the development of that standard except Europeans. And at the end of the day, the standard then goes back to ISO at the final highest tier offering, where there is a vote. And at that point, it's so late in the game, we've tried to intercede and interject our thoughts, and you can only get minor corrections in. The standard is approved and you had no control in it.
Mrs. MORELLA. Yes, Mr. Tyson.
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Mr. TYSON. I would like to augment that by saying that in TC 17 on steel, there was a subcommittee 19 on tubular products, the Secretariat held by Italy, they decided to cease meeting as ISO. They also have the Secretariat in the comparable CEN committee and they are conducting their business in the CEN committee, and the ISO committee is no longer meeting.
Some indication that they need to spend their time concentrating on the CEN standards and don't have the time to give to ISO. But at any rate, that ISO subcommittee no longer meets.
Mrs. MORELLA. Wow, because that gets to the whole question of can the U.S. representatives to ISO countermand what you point out as the unfair advantage that CEN possesses through the Vienna Agreement. Mr. Kammer would like to comment on that, I think.
Mr. KAMMER. There are some procedural options that are available if, in the case of a subcommittee going out of existence, it's possible to object at a policy level above the technical committees in ISO, and insist that we have a right to representation.
No, ISO cannot refer anything to CEN unless there is a vote at the committee level. And if there are objections while ultimately the vote is a majority-minority kind of a vote, quite a bit of discussion needs to precede the vote procedurally if you insist on your rights.
You also have the opportunity to marshall your forces, if you will, get other countries with like interests to attend a future meeting, and people have been successful at this. One group that I am very impressed with—I think they've provided national leadership—is ASME. Their pressure and boiler code is used internationally; it's clearly an international standard. And they continue to argue that point.
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But simultaneously, they took over the Secretariat for Technical Committee number 11, which is pressure and boiler code, and under their leadership they convened a meeting, they proposed a performance-based standard that didn't confer a competitive disadvantage on anybody, nor did it confer a competitive advantage. It allowed anybody that was able to meet the basic code to comply.
They recently had a vote and prevailed. So they sort of presented us with both elements that I think are important in a national strategy. Argue our own technologies, advance our own case; but at the same time, be aggressive and active in ISO.
Mrs. MORELLA. I just wonder, have we adequately covered any concrete steps that you think that the Federal Government should take to protect U.S. interests during the ISO process? Do we need to streamline more in that regard? Do any of you have any suggestions? Mr. Turnbow.
Mr. TURNBOW. Yes. We understand the process, but the process has the opportunities in it for us to be disadvantaged. So as those are clearly understood, I think that is where we need to go back to ISO and revisit the rules and clean that up, so that our position in the world market is equal.
I think we've all pretty well demonstrated that very clearly today that we believe that that is the problem here. It is not a level playing field. We see clear advantages of the ISO in the CEN agreement, through the Vienna Agreement, of causing that not to be the case. And I think that's where we need your help, is for the concrete items through NIST and ANSI, and with our partners and our other societies, to work on that issue.
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Mrs. MORELLA. Okay. I'm going to recognize Mr. Gutknect for any question he may have. Mr. Gutknect, it seems like what they've been saying is that it just isn't a level playing field out there.
Mr. GUTKNECHT. Well, thank you, Madam Chairwoman. I appreciate your holding this hearing. I get excited when I do plant tours around my District and I see these signs hanging up either on the outside or the inside of the building that say ISO 9000 or whatever the correct number behind the ISO is.
The reason I get excited about that is that it says to me that this company—and we have some in my District that are relatively small—but when they have that sign up somewhere in their plant, it says to me that they are very interested in competing in a world marketplace.
I have been amazed at how many small companies in my District are exporting. In fact, there is one relatively small company that told me that 40 percent of what they manufacture in Owatanna, Minnesota, is shipped overseas now, and they expect within the next 3 or 4 years that number will be over 50 percent.
But the whole issue of setting standards and the relative importance of that and how the United States is able to compete. And I apologize if these questions have been asked, but I do want to ask, for example, the European governments spend more, at least we are told, than the United States does on setting standards.
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I am wondering, does that put us at a competitive disadvantage? Do any of you want to take a stab at that?
Mr. FORD. I think we need to understand how that measurement is. The Federal Government spends very little on standard settings, the U.S. Federal Government, because all of the cost is picked up by the private sector. And in Europe, the government there picks up the cost. So I think that's the difference with the measurement.
Mr. TURNBOW. That, in itself, is becoming an issue. Our organization, our American National Standards Institute, is rather stressed right now because of a lack of funds in doing activities and representing us well internationally. This is a fact that we all are very aware of.
And so to still rely upon private industry to take on that burden of trying to approach the rest of the world while their governments are funding them is a disadvantage to us.
Mr. GUTKNECHT. It's sort of like we used to be with the Olympics. Can you tell me, am I correct in the information that I have that there are over—and I think this ties together with what we are talking about right now—there are over 600 organizations here in the United States that are in the business of attempting, at least, to set standards. And so the problem does tie together with the Europeans, particularly our European trading partners. There pretty much the government handles that.
Is the testimony then that you are saying—and for the record, our stenographer, all the heads were nodding yes, I believe, on that comment.
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Is the essence then of your testimony here today that the government needs to take a more active role in this, our Federal Government?
Mr. KAMMER. Sir, my view is that we're encountering a kind of a market imperfection. We have a coherent strategy of attack against us by the Western Europeans and we are not very coordinated. There are, indeed, just as you said, about 600 standards development organizations.
And one of the objectives that I have taken for NIST is over the course of this coming summer, I am trying to meet with each of the standards development organizations that is a major one. There are about 30 that write most of the standards.
And I hope to convene a meeting then in September where we come together and agree on a strategy. I see my role not so much as saying what the strategy is—I don't think that's the government role in this case—I think what the government can do is encourage people to have a strategy. I think our role is that assignment. And out of the standards development organizations will come the strategy.
And it may very well be that an element of that strategy is the government assuming some modest financial responsibility for what has historically been exclusively a private sector endeavor.
But I think even if we did that, that we would still want to preserve the basic nature of our current standards development system. It's open, it's very fair, and it's based on written processes so everybody can know what's appropriate. And I think that's an important part of our society.
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Mr. BROVITZ. I think the other element is not only the government support of the standard setting process, but just the standard setting process itself, particularly in Europe. I mean, every standard setting board that we would appear before or take our product to is dominated by the local manufacturers. And so it's not only that maybe the government runs it or supports it, but it's also the process, the makeup of the committee, the way it goes about setting their standards, who's allowed to participate.
For us, at least, it's a very, very, very important issue. I mean, users and consumers aren't represented. It's basically the local manufacturers who are determining what the standard is.
Mr. GUTKNECHT. Let me ask—and maybe this is even a more basic question—let's say I'm in the business of manufacturing widgets in Waseca, Minnesota. How do I know? I mean, how do I plug in to the ISO standards? What is the communication link here?
Mr. KAMMER. If you phone, e-mail, come to NIST, we maintain a standards library of all the standards in the world, to the best of our ability, at least. And certainly, that includes all the ISO standards, all the U.S. standards, and the like, as well as as many country-specific ones as we can get. And we will share the information with you. We will give you access to standards experts in that country.
Mr. GUTKNECHT. So if we get a call from that widget manufacturer, we should plug them in to you.
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Mr. KAMMER. Absolutely. Please refer them to NIST.
Mr. GUTKNECHT. Good, thank you. I have no further questions, Madam Chairwoman.
Mrs. MORELLA. Thank you. I wanted to talk a little bit about NIST and how it's been involved with what you all are doing. First of all, I want to ask Mr. Kammer about something I learned recently. I didn't realize it was when we were beginning to set this hearing up. And that is that NIST has some people in different embassies that are there to help with what's happening with regard to these negotiations. What embassies did you pick, and what do they do?
Mr. KAMMER. The locations currently are Brussels, which is a natural location; Saudi Arabia, which was the first and was really an accident of aggressive advocacy by the U.S. companies that export to Saudi Arabia. We currently have an individual in Mexico who's been very successful. We have an individual in Argentina and we have an agent in India.
Our intent originally when we set this up was to actually go for more like 20 countries, and we were focusing on the big emerging markets where we reckoned U.S. manufacturers were not likely to be sophisticated. I mean, people don't know a lot about India. Most people find it relatively easy to export to Britain because of common language and no severe cultural differences.
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In the process of setting this up, we encountered some concerns on the part of the House Appropriations Committee about us expanding the program and indeed, I currently have the opportunity to give them a report which I will be doing shortly which will be my attempt to persuade them that the success so far is such that we should proceed to go with a few more countries, and we'll have to see where that takes us.
Mrs. MORELLA. Will you share that report with us, too.
Mr. KAMMER. Absolutely.
Mrs. MORELLA. Because I'm also interested in what the cost factor is. And you know, we are in a time period where we do this kind of weighing of cost-benefit ratios, etc. I don't know. Maybe some of you panelists have some comments about that. Hey, don't they speak English in India, for the most part?
[Laughter.]
Mr. KAMMER. Among other languages.
Mrs. MORELLA. Among other languages. I'm teasing you. Anybody have any comments on it? If you don't have any comments, let me ask you, Mr. Brovitz, did this help your negotiations?
Mr. BROVITZ. No. I mean, our process for us started about 10 years ago. And to be quite honest, we have spoken with ANSI, our local trade association, the American Gas Association, departments of the U.S. Government. I mean, basically, the reason that we are selling in the U.K. today is because of what we did, to be perfectly honest with you, our perseverance at every turn and not taking no for an answer.
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We have not come across an organization, whether it's independent or part of the government, that has been willing to run with our flag. And it's nothing against any of them, because there's a lot of things to do. But basically, our success has been 99 percent through our own perseverance.
Mrs. MORELLA. Do any of you want to comment also—I'm trying to pull all these pieces together—in terms of who's doing what and who's helping. SBA help anybody? Small Business Administration, do they come to the fore in any way? Maybe you don't even look to them, or whatever.
And I'm delighted to hear about what you're going to be doing this summer. Obviously, it's what's needed, and the panelists would agree. But I also want to suggest that maybe NIST should work out some agreement with the U.S. standard setting organizations to give standards libraries to developing countries, like you mentioned Latin America. Give maybe, like we did with access to the Internet; we said affordable access to the Internet. But it seems to me that it is better to even give them, because if you don't, you are not getting any benefit anyway, so that might be a real help.
You're nodding, so it must be you're thinking of it.
Mr. KAMMER. I'm very attracted to the idea. The biggest barrier is the concern on the part of the standards development organizations, that they aren't just giving one copy. They are giving a copy that will find the nearest Xerox machine and that they will find themselves losing their control of their intellectual property.
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Obviously, any SDO could afford to give one set of their—or even as many countries as there are in South America, that number of sets. But then what they are concerned about is that their intellectual property won't be respected and that they'll suddenly discover they sell no standards in the country they've given the set to.
And I think that's going to be a matter of government-to-government discussion.
Mrs. MORELLA. Yes, it seems to me you should be able to work that out.
Mr. KAMMER. The place we have to get to is that it isn't just that these standards are a piece of paper—they represent technology, products, jobs, U.S. jobs. And the point is we want other people to practice them.
Mrs. MORELLA. But you're willing to sell them, except no one is buying.
Mr. KAMMER. So I think, on a government-to-government basis, maybe we need to go another way.
Mrs. MORELLA. Right, right. I could ask other questions, but they would be a little bit redundant, because I think we're understanding some of the barriers that you are facing.
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I wanted to give you all an opportunity for any final comment before I adjourn the hearing. But it seems to me what I've heard so far is what we need basically is a level playing field. We need to do something with regard to a clearinghouse, whatever you want to call it. We need to revisit the rules. There needs to be more coordination. We need to do better training of our negotiators, and we need to allow more open access, I guess, look at our standards, too, in terms of whether European Union standards are much too lax and ours aren't. And this whole concept of the standards libraries for the developing nations.
I guess I want you to add anything to that, confirm that, or any final comments you would like to make. I think I'll do it in reverse and start with you.
Mr. BROVITZ. I would agree with your summation very much. Certainly, from our perspective, there is a heck of a lot of business out there for us if we can get over some of these hurdles.
I think the idea of a level playing field is exactly and the only thing that we are asking for as far as standards, at least, for our industry and our business to be performance- and safety-based, not design-based. And I think for us the crux of the matter is for the government to use its leverage and its weight to gain us access and fair and open hearings with these standards setting committees.
From our perspective, that is the ultimate solution to our dilemma.
Mrs. MORELLA. Mr. Ford, any final comments.
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Mr. FORD. I agree with his summation, except I think that I have one other thing I would like to mention, and that is the standards that we build to become a matter of law in the United States through the state regulators.
And I think that the pressures that the Federal Government is putting on those regulators, as well as the standards developers, ought to have some restrictive barriers put in them. And those restrictive barriers ought to try to equalize that standard, where if we're going to adopt a German standard, then they also have a provision where they adopt the American standard. And there ought to be some kind——
Mrs. MORELLA. Reciprocity.
Mr. FORD. Reciprocity. And I think that there is no reciprocity today, and that's really what's hurting our business.
Mrs. MORELLA. Right. Mr. Turnbow.
Mr. TURNBOW. Again, the items you listed, I certainly support. The openness is, I think, the bottom line issue. If the European standards are open and the level playing field occurs, I think many of the problems will go away. I also would hope that we could receive support that American standards that are already international standards, that the issue that it has to be an ISO situation, that somehow we work through that problem and make it clear that international standards are standards that are used around the world, regardless of what their acronym or their name is.
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And I would hope that through government support—and I think this is my personal feeling and I think I've heard my colleagues say the same thing—private industry has supported us in the past and I think we are at the point now where the strain on that and our societies to do that is becoming financially burdensome to the point we are not being effective in this, because we need additional funds to make sure that we are represented properly in this arena.
And I think that pretty much concludes my summary. Thank you.
Mrs. MORELLA. Great. Mr. Tyson.
Mr. TYSON. I'll repeat one thing I said before, and that is that I know that the Japanese government had originally adopted a policy that ISO standards would be used. And after the Japan Iron and Steel Federation investigated it thoroughly, I believe they decided to pull back from that policy, or at least, they are wondering how they can deal with it.
In the United States, our Federal Government generally doesn't tell us what to do, because of the system we have for standardization. I would be very much interested in trying to find out what the policies are of the European nations or of CEN with respect to adopting ISO standards without changing them. We really have to know what kind of a ball game we are playing in.
Mrs. MORELLA. Thank you, Mr. Tyson. That feeds and fuels Mr. Kammer's final statement.
Mr. KAMMER. I am very much in agreement with your summary. And maybe my last statement would be that as we make ourselves open to using new approaches to new strategies, I think the principles that we want to make sure we don't lose, that we preserve, are that we remain an industry-led system and that we maintain the basic character of openness, fairness, transparency, and due process that we've always had. It serves us very well and it's an important part of our society.
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Mrs. MORELLA. And I think we can feel comfortable knowing that you're at the helm at NIST, and your understanding of what we all agree, that they should be industry-driven and fair.
Excuse me, any final point you'd like to make? I want to thank all of you for being here. You presented excellent testimony. Members of the Subcommittee will feel free, I hope, to be able to submit any questions to you for any responses. And I hope you'll follow this with further suggestions and comments as we proceed.
Thank you very much. The Subcommittee meeting is now adjourned.
[Whereupon, at 11:38 a.m. the Subcommittee was adjourned, to reconvene at the call of the Chair.]
"The Official Committee record contains additional material here."
INTERNATIONAL STANDARDS, PART II: THE IMPACT OF STANDARDS ON THE DIGITAL ECONOMY
THURSDAY, JUNE 4, 1998
House of Representatives,
Committee on Science,
Subcommittee on Technology,
Washington, DC.
The Subcommittee met, pursuant to notice, at 10:05 a.m., in room 2318, Rayburn House Office Building, Hon. Constance A. Morella, Chairwoman of the Subcommittee, presiding.
Mrs. MORELLA. I'm going to call to order the Technology Subcommittee of the Science Committee. And I want to welcome all of you who are here today to the Technology Subcommittee's second hearing on international standards.
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Last month, this Subcommittee tackled the issue of the International Organization for Standardization, ISO, and the impact the ISO process is having on the ability of U.S. companies to compete in the international marketplace. And at that hearing, the Director of the National Institute of Standards and Technology announced that he would be convening a standards summit in September to discuss how the United States can better coordinate its effort in the international standards-setting arena.
Such a summit is clearly needed. While standards setting is often not considered a particularly exciting or sexy topic, it has profound economic consequences, and I'm pleased that our last hearing helped to focus attention on this vital issue.
Today's hearing will explore how the international standards system has been working with respect to U.S. users and manufacturers of electronics. It will also review in detail the specific case of the ongoing debate surrounding efforts to create a single, global wireless telecommunications standard, commonly referred to as the third generation wireless standard, 3G.
Three G is one of the more important international standards slated for development. Three G is currently being discussed before the International Telecommunications Union. The U.S. initial proposal to the ITU for radio transmission technologies, a vital component of 3G, is due on June 30th of this year.
Currently, Europe uses a single standard for wireless communication. That standard, established by the European Telecommunications Standards Institute, ETSI, is called the Global System for Mobile Communications, GSM. This certainly is an ''acronymous'' society with all of these abbreviations.
There is no single comparable standard in North America. In the United States, the Telecommunications Industry Association, TIA, is charged with developing a consensus among the competing interests of America's wireless manufacturers and service providers. Currently, GSM, the Code Division Multiple Access, CDMA, and Time Division Multiple Access, TDMA, all hold a significant share of the U.S. market.
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As we're sure to hear today, developing such a consensus will not be easy. The principles of U.S. standards setting, allowing industry to develop consensus without government interference, has often allowed U.S. standards to be technically superior to those in other countries. A multiplicity of technologies offers U.S. consumers more choices and ultimately offers the opportunity to identify the technology that most closely meets their needs.
In some instances, encouraging a diversity of technologies may make it more difficult to secure international recognition of standards supporting U.S.-developed technologies.
I'm concerned that with respect to 3G, the line from John Dickinson's ''The Liberty Song'' may hold true: ''United we stand, divided we fall.''
I look forward to hearing from our distinguished panelists today on how the United States can best ensure that international standards support the development and implementation of the best technologies. I'm convinced that as long as the international standards setting process is driven by the merits of individual technologies, U.S. manufacturers and service providers will fare extremely well. From Franklin to Edison, to Ford, America has always been on the cutting edge of technological invention. In an open marketplace, this heritage will help secure the continued vitality of our nation's digital economy. The key will be to ensure that the international standards setting process does not impede fair competition.
With that opening statement, I now would like to recognize the Ranking Member of this Technology Subcommittee, Mr. Barcia.
Mr. BARCIA. Thank you very much, Madam Chairwoman.
Good morning, and I too want to welcome everyone to this hearing.
Today's hearing is important for two reasons:
First, it highlights the importance of standards to technology development and commerce. And second, it emphasizes the increasingly international character of the standards-setting process.
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While standards are fundamental to commerce, the standards-setting process is frequently overlooked by the public and most policy makers. Today's hearing is a case in point. I doubt that most cell phone users could tell you whether their phones utilize CDMA, TDMA, or GSM technology. Yet, these standards effectively run the cellular phone system.
What consumers care about is that service is efficient, reliable, and meets their needs. Nowhere is this more important than in the field of telecommunications. Telecommunication technologies are rapidly changing, and there are several technologies that address specific consumer needs.
In addition, there is not a domestic telecommunication market for technology developers, manufacturers, and service providers. There is only a global market.
This is why international standards are so important. International standards should not be used to confer competitive advantage on a single technology or regional manufacturing base. International standards should promote the development and adoption of technologies that meet the actual needs of the marketplace. As I see it, the challenge is how we promote a level playing field in the international standards-setting process.
What I hope our distinguished witnesses can address today is: First, what are the problems they see with the international standards process? And second, how can the government best address their concerns and ensure that the process is fair, equitable, and open?
I want to again thank Chairwoman Morella for her attention to this important issue, and I look forward to the panel's comments.
Mrs. MORELLA. Thank you, Mr. Barcia.
I'd like to now recognize the Vice Chair of the Science Committee, Mr. Ehlers.
Mr. EHLERS. Thank you, Madam Chairwoman.
Just very briefly a few comments. Setting standards is not a new activity. It has taken place for many, many years. What is new in today's world, and particularly in the industry we're addressing today, is the very rapid pace of development and the need to act rapidly in adopting new standards.
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The question is whether the government needs to be involved in that or not? And I think it's fair that the preference of Congress, and my preference, is that the industry be able, on it
s own, to establish standards. However, there are three reasons that the government might be and probably should be involved. And those three reasons would be: when industry itself is not able to agree on appropriate standards. A second good reason for government involvement is when the industry is perpetuating unfair competitive practices through the setting of standards. And the third good reason is to provide for the protection of the consumers of the products being made by the industry and ensure that the best choice is being made for the benefit of consumers. That means that if the industry does not want the government to be involved, the industry has to take care of those three concerns at a minimum.
However, if the government, at some point, has to be involved, I think it's very incumbent upon us to ensure that decisions are made rapidly and that we don't follow the old pattern where it may take a decade or more to establish a standard using the appropriate international governmental agencies.
So I'm looking forward to the testimony here. I will be listening very carefully to determine whether or not the industry believes that they can set the standards themselves. And if they do so, that they will avoid the three problems that I raised; and thirdly, will be interested in hearing their comments about whether or not there's any necessity for the government to be involved—for the Federal Government to be involved—in this international standards setting process.
Thank you very much.
Mrs. MORELLA. Thank you, Mr. Ehlers. I would now like to recognize the newest member of this Subcommittee, the gentleman from North Carolina, Mr. Etheridge.
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Mr. ETHERIDGE. Thank you, Chairwoman Morella.
It's a pleasure to be here and a pleasure to be on this Committee. And I appreciate the opportunity, and I want to also join in welcoming the members to the panel today. And I think this opportunity is very special for us, and I hope for you.
But let me in particular welcome one member who has a major presence in my District, in the Research Triangle Park, is Ericsson. And I hope I pronounce this correctly is this Mr. ''Piecarszewski?''
Mr. PIEKARSKI. Piekarski.
Mr. ETHERIDGE. Piekarski. Okay, close enough.
Thank you and we welcome you here because Ericsson has a large R&D presence in the Research Triangle Park, with almost 1,200 employees and growing. And this whole area, I think, Mr. Ehlers has touched on some of the areas I wanted to touch on—this whole issue of standards and the importance of them. But one other point I would add in addition to the three he's laid out that in the absence, many times, of a standard everyone agrees with—and we allow the industry to do it—one of the real dangers we run into is this whole issue of standards being set. And it grows into such a position that it impedes competition on the part of those developing organizations. And I think that's important that we don't allow that to happen. Everyone knows what the standards are. And I encourage you and look forward to your comments. And again, thank Chairwoman Morella for pulling this important meeting together so that we can gain something as we move forward to the 21st Century.
Thank you very much.
Mrs. MORELLA. Thank you, Mr. Etheridge. Mr. Davis, from our neighboring State of Virginia, has joined us.
Mr. DAVIS. I have a statement for the record I'll put in so we can get ahead to the panelists.
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[The prepared statement of Mr. Davis follows:]
Offset Fols 155 HERE
Mrs. MORELLA. Without objection, the statements of all of the members of the Subcommittee will be entered into the record.
And I'd like to now recognize Ms. Rivers from the great State of Michigan.
Ms. RIVERS. I have no opening statement.
Mrs. MORELLA. Thank you. Ms. Stabenow—also from Michigan.
Ms. STABENOW. Good morning. Just a moment to bring a welcome to our panelists. I look forward to a very spirited discussion today about an important topic. Thank you.
Mrs. MORELLA. And Ms. Tauscher, from California.
Ms. TAUSCHER. Good morning, Madam Chairwoman.
I represent California's tenth Congressional District where the Silicon Valley sleeps, and I'm happy to have you here. I do have a few questions, but I do not have an opening statement. Thank you.
Mrs. MORELLA. Thank you, Ms. Tauscher. I hope you will all notice that we have a great number of women who are very interested in this issue who are here on this Subcommittee and have added a great deal to it.
Our panelists today are Mr. Oliver Smoot, who is the Executive Vice President for the Information Technology Industry Council. Information Technology Industry Council, or ITI is located in Washington, DC. Mr. John Major is the Executive Vice President of QUALCOMM, Incorporated. QUALCOMM is based in San Diego, California. Mr. Jesse Russell is Chairman of the Wireless Communications Division of the Telecommunications Industry Association. The Telecommunications Industry Association, known as TIA, is also located in Washington, DC. And Mr. Bo Piekarski is Vice President of Business Development and Strategic Marketing for Ericsson, Incorporated. Ericsson's North American operations are based in Richardson, Texas.
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Gentlemen, it's the policy of the Science Committee and its Subcommittees to swear in all of our panelists, so if you would rise and raise your right hands.
Do you swear that the testimony you are about to give is the truth, the whole truth, and nothing but the truth?
Mr. SMOOT. I do.
Mr. MAJOR. I do.
Mr. RUSSELL. I do.
Mr. PIEKARSKI. I do.
Mrs. MORELLA. The record will indicate an affirmative response from all of you.
And I would like to comment, because I heard Mr. Davis, that we have some wonderful men on this Subcommittee too.
[Laughter.]
I'm going to ask each of you, since we do have your written statements, and they will be included in their entirety in the record if you'd speak 5 minutes and then we'll open it up to questions from all of the panel. And I guess we'll start off in this order. Mr. Smoot, you'd go first, please.
TESTIMONY OF OLIVER R. SMOOT, EXECUTIVE VICE PRESIDENT, INFORMATION TECHNOLOGY INDUSTRY COUNCIL
Mr. SMOOT. Thank you, Madam Chairwoman. It's a pleasure to be here although I feel a little bit like the appetizer. Not on? Now on? Okay. It was already on then. I do feel a little bit like the appetizer before the main meal, because I was asked to talk a little more about the standards system than about third generation wireless. So let me try to do that in 2 or 3 minutes, and then talk about the main meal.
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Our industry, which is the information technology industry, used to be called the computer industry, participates quite actively in national and international standardization because we feel it's critical to supporting competition in the industry and moving that industry forward. All of the other organizations that are here today and organizations in electronics that are not present also participate in standardization quite actively. This participation is decentralized, private sector led, and we think, for the most part, highly successful. I think it's successful because our common aim is effective, market-relevant voluntary consensus standards. On those standards, we can build products and provide our customers with the products and services that they want to use. To give you a little bit of scope, I added up roughly the standards participants for the ITA, for the Telecommunications Industry Association, and for Committee T1 on Telecommunications Services, and there are about 4,100 engineers involved in just this area of standardization.
We all participate actively in the American National Standards Institute, and are accredited by ANSI in doing our work. My written statement gives you some details about standardization. But members of this Subcommittee have already mentioned other important aspects of standardization about which my written statement doesn't deal, because you have to select something and focus on it.
I think that the following items are important.
First, I'd like to acknowledge the Chairwoman's statement about jargon. This sector of activity is probably the most jargon filled of any that people deal with, incomprehensible even outside our own sectors when we get into different technologies. But let me explain some terms.
To us, market relevant means that the standards respond to the needs of the market. Market means not simply the producers, but the users and the public interest. And we like to have processes that ensure that all of those factors are taken into account. Because what we're looking for, in the end, is consensus—general agreement on the technical specifications so that products and services will actually be put on the market that meet those specifications.
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Getting to consensus requires due process and transparency. You've got to have some rules so that people know what the playing field looks like and how they participate.
And finally, a lot of people use the terms voluntary, and by voluntary we don't mean that I go to meetings because I like to go to meetings. It means that use of the standard is voluntary. If it's mandatory in the United States, we like to call it a regulatory standard.
The other thing I'd like to say is that the representatives, both domestically and internationally, from a U.S. viewpoint in standardization, are those that are directly affected, namely, employees of the other witnesses. ITI, for example, as a trade association does not stand in the way of its members in advocating their views on standardization, neither does ANSI. They provide—we provide administrative support.
I think an important conclusion for the Subcommittee to go away with is that there is no general answer to the question of how best to do standardization. You have to look at the issues sector by sector or technology by technology. Perhaps this morning's subject is about as broadly as you could go, because even if you go to other standardization issues, say, in information technology, you'd come out with different strategies to achieve a result that's desirable for U.S. competitors. But it is important if you're going to be successful, especially at international standardization, which we do look at from a U.S. perspective—we develop a U.S. position—that you have a strategy; that you give the effort priority, that is, the companies give the effort priority; provide the resources necessary to participate actively; stick with it for the long term, because standardization is not a short-term get-in and get-out type activity; and you have to work at both the management and the technical levels, because what you can achieve at the technical level can be taken away at the management level.
It's not easy work, and, as was said, if we did it perfectly, standardization likely would be invisible to the users. So when it's visible, it probably means it is being imperfectly handled. But I think overall this sector, the electronics sector, has a good record, a good successful record in international standardization. And I think that failures can be traced to either bad strategy or not paying attention.
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Let me turn for 2 minutes to wireless standards. I think that everyone on this Subcommittee at least realizes that we are in the midst of many scientific and technological revolutions. To us, it's extremely exciting and important to find the emergence of a mobile society and the convergence of computing and telecommunications going on everyday. IT, including your desktop computers, laptop computers, palm top devices, personal digital assistants, etc., are increasingly reliant on wireless technologies. Therefore, a protracted debate about G3 standards does not serve the information technology industry. In particular, wireless third generation standards give us an opportunity to dramatically expand affordable bandwidth for data traffic on which we can accelerate the deployment of electronic commerce, which our industry believes is the next significant economic evolution worldwide. I don't think that we could overstress the importance to us of affordable higher bandwidth. We believe that third generation wireless must include the following considerations in order to address our needs. One, it does need backward compatibility. Second, it needs network to network interoperability. Third, it needs common service sets and protocols. And fourth, it needs multi-band and multi-standard mobile telephones.
Backward compatibility and interoperability are our keystone words in this consideration. So in this situation, we think that a mandated single standard one size fits all approach will create an artificial market environment and discourage the development of new technology that doesn't conform to that single standard. Embracing a multiple standard approach is the best way to encourage greater competition and spur innovation.
Generally, and in this particular area, we encourage government agencies to be involved in the standards process to achieve agency goals, as set out in the NTTAA that this Subcommittee—the Technology Transfer Act Amendments—that this Subcommittee originated and that have been reinforced by the revision of OMB Circular A–119 that covers participation of federal agencies in standardization. We also fully support the National Research Council report, which I hope led this Subcommittee to consideration of the NTTAA. However, we discourage governments and others from directing standards development or for mandating standards other than to achieve their statutory, regulatory objectives. Third generation wireless standards do not, we believe, constitute a special case for regulatory intervention nor have we seen market failure. We don't think it's good public policy to mandate standards generally, and we don't see any reason to believe differently in this case.
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I believe that the quote that included in my written statement about the Transatlantic Business Dialogue, conclusions from its 1997 meeting, support the view that industry in the United States and in Europe does have a common framework to move forward in third generation wireless. By embracing multiple standards, we ensure that today's IT equipment can be used on tomorrow's networks. We protect our investment in time, resources, and money. And we ensure that no technology is stranded as new technology evolves. Most importantly, we ensure that the evolution of technology is guided by the market and not by government mandate. Thank you very much.
[The prepared statement and attachments of Mr. Smoot follow:]
"The Official Committee record contains additional material here."
Mrs. MORELLA. Thank you very much. Very succinct testimony. I think we got the bottom line on that. Also, I wanted to reiterate that your extensive written testimony is before all of us, too. Thank you. Mr. Major? Love to hear from you, sir.
TESTIMONY OF JOHN MAJOR
, EXECUTIVE VICE PRESIDENT, QUALCOMM
Mr. MAJOR. Thank you, Chairwoman Morella, Congressman Barcia, and members of the Subcommittee for the opportunity to testify before you today on the subject of third generation wireless standards.
QUALCOMM develops, manufacturers, markets, and operates advanced communication systems and products based on proprietary digital wireless technologies. One of these technologies, Code Division Multiple Access, or CDMA, is now marketed around the world under the trade name CdmaOne and is the world's fastest digital wireless standard.
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QUALCOMM, along with other CDMA manufacturers, has also developed a third generation, or 3G, version of CdmaOne that will be known as wideband CdmaOne. It will allow consumers to send and receive more than two megabits per second of data and access the Internet while continuing to enjoy the best voice quality of any digital wireless technology. QUALCOMM believes in the certain principles with regard to the process of setting 3G standards.
First, we believe the world's standard bodies should move towards a converged 3G standard that respects existing second generation investments by ensuring backwards compatibility with those systems and allows for worldwide roaming. We believe the 3G standards process should respect the intellectual property rights of patent holders. We believe that markets, not governments, should guide the timing and deployment of 3G services. And we believe that standards and technology decisions should be made based on what is best for customers and operators and not what is best for manufacturers or governments. We believe in competition among technologies, not in protectionism or industrial policy.
QUALCOMM is not alone in espousing these principles. They represent the historical approach that the U.S. Government and the U.S. standards bodies have with respect to wireless telecommunications standards. Recent actions of the European Commission, ETSI, and others promoting the WCDMA standard do not meet these principles. WCDMA is a 3G standard that adopts many of the features of the CDMA air interference but has been made intentionally incompatible with CdmaOne. A small group of manufacturers and their partner governments appear to be operating in concert outside the ITU consensus process to set preemptively WCDMA for 3G service. The effect of these actions will be to place the majority of U.S. operators and manufacturers at a competitive disadvantage. QUALCOMM believes that all parties can and should work together towards a converged 3G standard that treats existing investments fairly and provides significant benefits.
I want to assure this Committee that QUALCOMM takes its obligations as a corporate citizen in this global market very seriously and is willing to devote considerable time and attention to finding a good solution for the introduction of a 3G standard.
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The obstacles to this goal are not insurmountable, but our common task will be easier if the EC and the European manufacturers reconsider the philosophy that has restricted their markets to competition and limited consumer choice.
In my written testimony, I provide the Subcommittee some background on the standards process and the different paths the United States and Europe have taken in establishing of existing digital standards. To summarize, the EC and related groups have mandated the use of a single technology, known as GSM, on that continent. Initially, this was designed to facilitate Pan European roaming. Once that goal was met, however, the EC continued to insist on a single standard to the exclusion of other technologies. This remains their approach in 3G standards process. In contrast, the United States welcomed competition between digital standards, and today American consumers benefit from the choice of CdmaOne, GSM, or TDMA.
Although the goal of Pan European roaming has been met, ETSI and the EC continue to insist for a single standard for Europe, one that is incompatible with competing standards like CdmaOne and TDMA. This closed, unilateral standards process ignores and squelches efforts to standardize non-European technologies for 3G.
Let me explain the principles I mentioned earlier.
Fairness. It's important that operators have made investments in their current generation system have an evolutionary migration path to 3G. The WCDMA approach unfortunately fails to provide such a path for CdmaOne and TDMA operators, including the majority of U.S. cellular and PCS operators and others around the world. To offer 3G services to customers, these operators would have to rip out their existing systems and purchase new equipment compatible with the new standard, coincidentally manufactured by dominant European manufacturers.
By contrast, the CdmaOne approach espoused by QUALCOMM and the vast majority of U.S. telecommunications equipment manufacturers would present CdmaOne, TDMA, and GSM operators with a clear and fair migration path to 3G service. Those who currently use CdmaOne will simply add to their systems. TDMA or GSM operators would retain their existing networks and affordably adopt a wideband CdmaOne interface to migrate into 3G.
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Intellectual property. A consistent principle of U.S. policy has been simply put: intellectual property matters and should be protected. There has been much recent debate about IPR and 3G. QUALCOMM holds more than 130 patents relative to CDMA; has approximately 400 patent applications pending around the world; and has licensed 55 companies to manufacture equipment based on this standard. CDMA is, by far, the widest—the most widely licensed standard in the world. The only major manufacturer of wireless equipment in the world who has refused to obtain a license so far is Ericsson. QUALCOMM is prepared to license our IPR on fair and reasonable terms for 3G standards that achieve compatibility with CdmaOne without sacrificing capacity and quality. We have outlined, to both ETSI and ARIB, the specific conditions that will achieve this goal.
We could hope that integrity of the intellectual process will continue to protect innovators and their inventions. We also hope that the standards organizations involved in the development of 3G will follow their own policies respecting IPR.
The broader question, of course, is why the EC is making exclusionary technology decisions today about deployments that will not occur until after the Year 2000. Governments rarely make good technology choices. A decade ago, European governments decided unilaterally to built the future of data networking on ISDN and not on the Internet. They're still playing catch up with the rest of the world as a result of that decision. The same thing happened with HDTV and personal handy phones in Japan. The message is that standards should respond to markets, not the other way around. Europe will no doubt continue to race ahead of consumers in their attempts to seal off much of the 3G market to operators and manufacturers who are not willing to deploy European technology. The result will be bad for the U.S. companies and bad for innovation.
As I mentioned earlier, we remain hopeful that all parties can agree on a converged 3G standard that treats existing investments fairly and provides significant benefits for operators and consumers. We'd ask the Congress and relevant Federal agencies to monitor carefully the evolving 3G discussion and insist the world community follows on the basic principles I've outlined here today.
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Thank you, again, for this opportunity to testify.
[The prepared statement and attachments of Mr. Major follow:]
"The Official Committee record contains additional material here."
Mrs. MORELLA. Thank you, Mr. Major. Now, I'm happy to recognize Jesse Russell.
TESTIMONY OF JESSE E. RUSSELL, CHAIRMAN, WIRELESS COMMUNICATIONS DIVISION, TELECOMMUNICATIONS INDUSTRY ASSOCIATION
Mr. RUSSELL. Thank you, Madam Chairwoman, and members of the Subcommittee.
I hope that my testimony this morning will provide you with some small input from the Telecommunications Industry Association in terms of the activities that we're doing and help you in the deliberation.
My name is Jesse Russell, and I'm here today on behalf of the Telecommunications Industry Association, or TIA. In my capacity as Chairman of TIA's Wireless Communications Division and as Chairman of that division's ad hoc committee on third generation wireless systems.
TIA is a full service national trade organization with memberships of 900 large and small companies that provide communications and information technology products, materials, systems, distribution services, professional services in the United States and around the world. The Association member companies manufacture or supply virtually all of the products used in global communications networks. TIA is a accredited by the American National Standards Institute to develop American national standards in the areas of expertise. And the TIA engineering committees develop input to the Department of State for consideration at the International Telecommunications Union, ITU.
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As an ANSI accredited standards organization, SDO, TIA generates American national standards, TIA standards, interim standards and other technical documents in support of the industry. More than 1,500 engineers and scientists, both TIA members and others, support this effort. TIA and its predecessor organizations have been generating standards for over 50 years. These standards develop activities as sponsored by product-oriented divisions of TIA, such as the User Premises Equipment Division, the Fiber Optics Division, the Network Equipment Division, the Satellite Communications Division, and the Wireless Communications Division.
In addition to its domestic network work, TIA is very active with other SDO's around the world. The Wireless Communications Division of TIA represents the TIA members with an interest of this segment of the industry. The division sponsors those TIA engineering committees, which are open to all direct materially interested parties that develop wireless standards for TIA, including engineering committees TR45 and TR46 that are developing input into the ITU process to create third generation wireless standards.
TIA and accredited standards committee TI, telecommunications TI, which is sponsored by the Alliance of Telecommunication Industry Solutions, ATIS, have advised that four radio transmission technologies or RTT's proposals for the radio interface for third generation wireless systems have been set for the U.S. evaluation group, or Task Group 8/1, for initial consideration for submission to the ITU. Task Group 8/1 will provide input to the ITU radio communications sector, that is ITUR Study Group 8, which has asked national and regional standards bodies to submit candidate technologies for consideration as the radio interface.
As mentioned, in the United States, development of candidate RTT's is being addressed by the TIA engineering committee, TR45, for mobile and personal communications systems, TR46, mobile and personal communications, and by T1 under the auspices of its technical subcommittee, T1P1. The four candidate RTT proposal inputs to the evaluation process includes CDMA2000, submitted under the auspices of TR45; UWC136—that's the universal wireless communications—submitted under the auspices of TR45; wideband CDMA North America, submitted under the auspices of T1P1; and WIMS wideband CDMA, which is Wireless Multimedia and Messaging Service, submitted under the auspices of TR46.
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TIA supports the ITU effort toward harmonization and continues to work toward achieving the global standardization of 3G wireless systems and the goals of IMT2000. From TIA's perspective, the goal of 3G IMT2000 process are network-to-network interoperability, features and service transparency, maximum harmonization within key technologies, global roaming among all networks, and as much backward compatibility with existing networks as possible. TIA and T1 have been working hand in hand to help develop what will be the final U.S. position.
Thus far, several months of meetings have been held by TR45, TR46, T1, and the TIA Wireless Communications Division 3G ad hoc committee to progress the work of 3G. Service provider representation from the Cellular Telecommunications Industry Association, CTIA, and from the Personal Communications Industry Association, PCIA, have been invited to participate in the TIA effort. The TIA board of directors and many other industry groups are urging industry participation to continue their efforts to achieve a single U.S. 3G standard to harmonize that standard with other regions of the world. We will not know whether we will achieve that goal until the process is complete. At this time, standardization efforts are proceeding down two tracks: a Code Division Multiple Access track, CDMA, and a Time Division Multiple Access track, TDMA.
While the RTT work is relative to the radio interface side of IMT2000, TIA is also active in the network side of IMT2000. TIA engineering committee, TR45, created an ANSI/TIA/EIA–41 the American national standard that is used throughout the world for cellular and personal communications networks. The ITU announced by press release on May 21, 1998, that an agreement had been reached to achieve global roaming for third generation mobile systems and collaboration on the networking aspects of such systems.
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The ITU press release is also attached to my testimony. This agreement, which includes representation from both TIA and T1, is focused on the networking side of such systems which is under Study Group 11 of the ITUT telecommunications sector, but not the radio interface, which is under the ITUR, Study Group 8.
In summary, progress is moving on IMT2000. Time will tell whether a single standard will evolve, whether there will be a few standards under the ITU family of systems concept for IMT2000. On the network side, it appears that two primary standards will be used—the TIA ANSI41 standard, and the ETSI global system for mobile GSM mobile application part. Each of these standards have been used in over 100 networks, each worldwide. The radio interface standard is currently proceeding down, as I stated earlier, a CDMA and TDMA track, and there are still many months of work to be done. Many standardization, intellectual property right issues, market timing, and trade issues still are to be resolved. TIA will continue to work with the ITU and others involved in the process to achieve a global—the goal of IMT2000.
Some parties have suggested that the U.S. Government
should mandate what standards should be used for third generation wireless. TIA believes that such action is ill-advised at this present time. Absent a market failure, TIA believes market forces should determine the appropriate technology, not governmental officials. The opinion is shared by many of the industry's senior leaders. More than 200 industry people, including TIA staff, TIA members, participate in the work of the FCC Network Reliability and Interoperability Council, which was a federal advisory committee to the FCC, convened to approve the recommendation implementation of section 256 of the Telecommunications Act of 1996, which covers, among other things, interconnection, interoperability, and the FCC's role in standardization. Some of the summary conclusions available on the FCC web site provide specific answers to this question. In this particular document, the responses to those questions are included.
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And finally, in support of the TIA position, where voluntary action is not meeting a compelling national need for interoperability in a timely fashion, only then the FCC should mandate it.
I would also like to point out that the TIA support for FCC Chairman Kennard's May 8, 1998, response to the question you posed, Chairwoman Morella, regarding third generation wireless standards. Again, with respect to 3G, the process is still ongoing. We have not yet had a market failure. In fact, the agreement to work together on global roaming issues show that the progress is working—the process is working successfully.
This Subcommittee was also very instrumental in the passage of the National Technology Transfer and Advancement Act, which urged government agencies to rely on and participate in the voluntary standards process. TIA believes that process—that that process should be allowed to work.
In closing, on behalf of the TIA and its Wireless Communications Division, I would like to thank the Chairwoman and members of the Subcommittee for this opportunity to provide testimony for its support of standardization activity in the telecommunications industry.
Thank you.
[The prepared statement and attachments of Mr. Russell follow:]
"The Official Committee record contains additional material here."
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Mrs. MORELLA. Thank you very much, Mr. Russell. I would now like to turn to Mr. Bo Piekarski, Vice President of Business Development and Strategic Marketing for Ericsson.
TESTIMONY OF BO PIEKARSKI, VICE PRESIDENT, BUSINESS DEVELOPMENT AND STRATEGIC MARKETING, ERICSSON, INC.
Mr. PIEKARSKI. Thank you, and good morning, Madam Chairwoman Morella and other distinguished members of the House Science Subcommittee on Technology.
I appreciate the opportunity you've given Ericsson, Inc., to testify before your Committee today. My testimony will address the principal issues as outlined in your letter of invitation, specifically the role of industry standards, and in particular the North American and international wireless standards process as well as the ongoing industry-led efforts to create further harmonization of various global wireless telecommunications standards.
But first, I'd like to begin with just a few words about Ericsson, Inc., if you could indulge us.
Ericsson North America, the market presence of Ericsson, Inc., the U.S. subsidiary of LM Ericsson actually dates back to 1902, when we opened our first sales office in New York City. Today, Ericsson, Inc. is the largest subsidiary of LM Ericsson, a $3 billion company, with over 8,000 employees in more than 100 locations in the United States.
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Ericsson's U.S. corporate headquarters are located in the heart of what's called ''Telecom Corridor'' in Richardson, Texas. We have major North American manufacturing locations in Morgan Hill, California, and Lynchburg, Virginia. Last year, Ericsson exported over $500 million of equipment from these locations around the world.
Our global R&D center, our research and design center for handsets is in Research Triangle Park, North Carolina.
Our view on standards echo very much the words of Ronald Grawert, the Chairman of the TIA Board, specifically that standards are vital to many industries, where equipment and systems must interconnect and interoperate. But in the telecommunications equipment area, we cannot exist without standards. As one of the world's leading suppliers of wireless equipment, Ericsson provides support to customer networks operating in more than 100 countries. The technology choice of our customers includes three digital standards that operate in several bands. And, as Chairwoman Morella has pointed out, there's a lot of messy acronyms in the telecommunications business, so we've put in a handy page at the back of our testimony to remind you what those are. So I won't bore you with those further in the testimony.
But specifically, GSM, IS136, also known as TDMA in the United States, and Pacific Digital Cellular are some of the standards we provide, plus various analog ones.
We also provide numerous dual mode, dual band handsets, as well as equipment that enable network roaming between technologies, as well as bandwidths. What this allows for is a consumer, for example, here a Sprint subscriber in suburban Washington,
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DC, to use him—his or her, excuse me—home cellular number
to make and receive calls while they're roaming throughout Europe, Asia, or the Pacific region.
To make all this happen, Ericsson actively participates in all key accredited forums on all levels—countrywide, regionally, and globally—that use basically an ANSI type of format for standards. And those that are industry led. They allow for licensing on reasonable terms of any company's proprietary IPR's; open to all qualified participants—operators and manufacturers; and most importantly are customer driven.
On the international level, all these regional standards organizations work in close association with the International Telecommunications Union. And let me be clear on this point: The ITU is not, nor should it ever be, in the business of selecting and imposing a single technology for worldwide deployment. Rather, the ITU should continue to function, if you will, as the international Good Housekeeping seal of technical approval.
The rigorous scrutiny inherent in the ITU process provides member nations, private operators, government regulators, and manufacturers confidence that they can rely on an agreed upon technology to exceed ITU minimum performance capabilities.
Well, what is IMT2000? Very briefly, in 1985, the ITU began planning for the future of third generation of wireless communication systems. In 1996, the name changed for these 3G systems, and it became International Mobile Telecommunications 2000. Specifically, operators around the world will be in a position to provide their customers higher data rates—speeds up to 2 megabits per second—greater communication capacity and enhanced performance to support the emerging environment via wireless networks based on multiple technology alternatives, including the Internet.
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As mentioned by Congressman Barcia, this also is very important in meeting the needs—excuse me—of consumers. Lucent, formerly AT&T; Ericsson; Motorola; Nortel; and QUALCOMM have all been part of the IMT2000 American preparation meetings dating back to the early 1990's. With the support of this group, the U.S. will be submitting to the ITU for international acceptance and recognition what my colleagues at Lucent technologies refer to as the American 3G family of standards. Specifically, as already mentioned by Mr. Russell from the TIA TDMA136, high speed GSM wideband CDMA, which would be offered by a different standards organization, T1P1, and CdmaOne, or wideband CdmaOne, the advanced version.
This family represents the next generation development of all three digital standards deployed today in the U.S. marketplace. I would like to provide you with a little background on the first two—IS136 and GSM—and I'll try to be as brief as possible.
Bell Labs created the AMPS technology in the mid-1970's. In late 1987, Ericsson joined other manufacturers, such as Motorola, Lucent, and Nortel, in formally supporting our customers' development of the original American TDMA standard, which is called IS54. This technology continued to evolve and develop through the standardization process to its current status as the IS136 digital TDMA standard we know today.
Today, those networks have been exported to over 30 countries representing five continents, including Europe. The current worldwide subscriber base exceeds 11,000,000 people—excuse me, 11,000,000 subscribers. In the United States, AT&T wireless services, Bell South, and Southwestern Bell are among the principal TDMA operators. They have over 5,000,000 subscribers on their networks in the United States.
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GSM, on the other hand, was—started off in 1985, when the EC established by mutual agreement a single common wireless standard. The purpose of this agreement was to end the fractured picture of different systems that were hindering system interoperability and continent-wide roaming. Ericsson, together with other major manufacturers from around the world at the time, including Nortel, Motorola, Lucent, Philips, Siemens, Nokia, and Hughes, supported our respective customers in developing this standard.
In the wake of the 1993 U.S. PCS auctions, Ericsson supplied a GSM-based system modified to meet U.S. standards requirements. Ericsson was proud of the fact, and still is, that we successfully installed the first commercial PCS system in the United States right here in the Washington-Baltimore area. That system has been both a technical and financial success for our customer, now owned by Sprint Spectrum.
Today, GSM systems are installed in over 120 countries serving 82 customers with 100,000—excuse me, 82 countries with 100,000 new subscribers signing up every day. In the U.S., Pac Bell Mobile Services, Powertel, Aeriel, Omnipoint, Western Wireless, and Sprint Spectrum are among some of the new leading operators in the successful deployment of this technology which today has passed 2,000,000 subscribers in the United States.
Regarding the state of the industry, we feel that the latest statistics on worldwide market share for cellular infrastructure manufacturing specifically provide a positive picture of intense, robust, and worldwide competition.
On the technology side, all three major worldwide technologies—TDMA, GSM, and CdmaOne—are experiencing incredible growth rates, according to the most recent 1997 CTIA report. And there are statistics in my testimony that are attached to support all these—with all the specific numbers. According to the TIA, U.S. telecommunications exports grew at a record setting 24 percent last year.
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Let me conclude a little bit—excuse me, by talking a little bit about harmonization of technologies and then summarizing with the importance of having the customer's best interest as the focal point of as we develop our standards process.
And that is as the world gets smaller and the number of cross continent operators increases, the need for global standard harmonization takes on increasing significance. While Ericsson strongly supports these efforts, we also listen to our operators need for regional market variations of such a standard in order to protect their current investments and allow for a transition to more advanced systems capable of supporting high speed packet data and Internet functionality. We're working very closely with the entire U.S. operator community to support the most beneficial solutions for the majority of operators and customers in the United States and around the world. An example of recent success, and not rhetoric in this process, is in the area of European and U.S. 3G harmonization. A number of worldwide operators have just announced, with the support of their respective manufacturers—Motorola, Nortel, and Ericsson—an agreement on an international modulation format to support system compatibility. More efforts are underway to achieve greater harmony. Ericsson will continue to be in the forefront of these customer-led efforts.
A global wireless telecommunications standard that is feature rich and provides support for high speed data and multimedia services is what the majority of operators would like to see deployed worldwide in order to provide high quality services to the end users. Such a standard would reduce the cost of equipment for operators and allow those savings to be passed on to the end users. However, as I've stated earlier, the standard must enable a smooth transition from all existing digital standards—that's TDMA, or IS136; CdmaOne, and GSM—to help protect all existing investments and the consumers, who will use the current systems for a number of years while 3G systems are in the process of being deployed.
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Thank you.
[The prepared statement and attachments of Mr. Piekarski follow:]
"The Official Committee record contains additional material here."
Mrs. MORELLA. Thank you, Mr. Piekarski. You all are very thorough. I just want to reiterate the thorough statement you have submitted will be part of the record because it's a very technical issue and so very, very important.
I guess I discern from the statements that all of you made in trying to bring everybody together in the sense of harmonization that what you consider to be important is certainly the backward compatibility—I heard that over and over again—interoperability as being critically important, and, as Mr. Piekarski said, a smooth transition. And so, in each of your testimonies, you indicate that, specifically or by implication. And I wonder, do you all agree that this is critical to ensure that companies do not lose their initial investment in digital wireless systems? Do you agree that is the fundamental principle that must be included in 3G, the third generation? I mean, I guess what I'm also getting at, in each of your minds, can you differentiate what you mean by those similar sounding terms? Do we have an agreement here? You know, maybe, so maybe I'll start off, maybe, Mr. Smoot, would you like to start off with that?
Mr. SMOOT. I'd be pleased that my comments would come from the perspective of the information technology sector which, of course, in a way, is a customer, a user of these technologies as it embodies them in their products and technologies. And so we don't want to see the investments that we've made already evaporate. And so, as I said in my statement, we do put backward compatibility—give it a very high priority.
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Now if you look at our customers, they're just like the customers using cell phones. They want to be able to use their laptop worldwide, and so worldwide roaming is important to them also. There are four or five factors I think you will find—that probably it's the order of these factors that we might differ on, if at all.
Mrs. MORELLA. I also heard all of you state in one way or another, ''no mandating.'' That seemed to be something else that I heard. What? Mr. Major?
Mr. MAJOR. We talk a lot about no mandating in this industry. That's correct. You know, it's interesting we talk a lot about it, but at the end of the day, the only system that's allowed to operate in Europe is the GSM system. I remember years ago in Japan, when they had regionally isolated systems, and the U.S. Government asserted itself and said that's not—doesn't meet the standards of open competition and open markets. And the reaction was that regionally isolated systems were eliminated and the cellular systems in Japan were made competitive throughout the country. The result was explosive growth in the Japanese cellular market, and the result was much, much more equipment was sold, and the consumers came out way ahead.
So how do we deal with the migration question? Frankly, the current process doesn't take into account the migration needs of the CDMA1 and the TDMA users. It is highly ''Europeancentric.'' That is—the process should work both ways. In Europe, there should be a consideration to allow existing GSM users to migrate to CDMA systems. There should be the ability for people to operate on GSM and CDMA systems just the way they now operate on AMPS and CDMA systems.
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So we've got a closed market. It's a big market. And it's going to create a problem going forward.
Mrs. MORELLA. I know Mr. Piekarski probably wants to respond to that. Maybe you'll do it that way before I go to Mr. Russell.
But, Mr. Major, do you want to comment at all on the chip rate?
I know it's ''technifying.''
Mr. MAJOR. I spend a lot of time on chip rate. Fundamentally, we have suggested that migration of the current CDMA users will be enhanced if the chip rate in the next generation system is the same as the chip rate in the current generation system. I might offer this isn't an intellectual property question. Patents transcend details like chip rates. This is a question of migration. And more recently, it's a question that has been brought into the public forum. It's a discussion of whether the systems will perform as well. We believe, for arbitrary reasons, the chip rate has been incorrectly and differentially set. And the result is a standard that's emerging that is not compatible with the needs of the current CDMA1 users.
Mrs. MORELLA. Mr. Piekarski?
Mr. PIEKARSKI. Yes, I guess I'd like to respond first on the closed European market. I think this has been a misconception for a long time. This has been a misconception for a long time that only GSM systems are allowed to operate in Europe. First off, there are IS136 TDMA systems that we supply, for example, in Moscow. And then in QUALCOMM's testimony where if I happen to see it as coming in here in the first page, they mention themselves that they've deployed systems in Russia and eastern Europe. And I believe the most recent ''wireless-week'' talked about systems that they own in the Ukraine—I believe all those qualify as European countries. And so I don't see that being a closed market. And also, QUALCOMM most recently, I believe at the GSM summit in Cannes, earlier this year discussed and presented the results of their testing with Vodaphone in the UK and talked about backward compatibility between CDMA1 and GSM systems. So I think that that's a misconception that we should put to bed. And maybe this is an opportunity to do that. If you'd like me to respond to the compatibility, I'll wait until after Mr. Russell.
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Mrs. MORELLA. If that would—either way. Mr. Russell?
Mr. RUSSELL. Thank you. I guess I'd like to expand the discussion, though slightly. There are about four areas that we think are critical. As you obviously know, we are an open standard-setting body and open to all; and that there are four areas. One is performance of this new emerging standard, the other one is interoperability, interconnectibilty to existing networks. And then the last one, which we think is equally important, is the flexibility of the radio-air interface to support the kinds of services that are here today which is the backward compatibility question as well the position to support those emerging that we think end user will want and utilize as we look into the future. So, the backward compatibility is an important issue, but it has to be balanced with all of the other issues. Of course, we support backward compatibility, but I think it also has to be balanced with these other dimensions as well.
Mrs. MORELLA. Did you want to make some comment on the compatibility issue?
Mr. PIEKARSKI. Yes, if I could, Chairwoman. The compatibility issue, as Mr. Russell has stated, as you are all well aware of, is extremely important because of the investments that the operators have currently made. But one thing that should also be kept in mind. The types of systems that we're talking about in the future for third generation services will be based on packet data. And this is an opportunity for having new compatibility with really what are IP or TCP/IP Internet protocol types of networks—where these systems will be connecting to routers and servers and computer systems as much, if not more so, as the technology evolves going forward, offering by far for the U.S. advantages for the companies like the CISCO's and the Sun's and the Microsoft's who are most advanced in this area to compete in a global market. And we shouldn't forget about that because even though we want to have backward compatibility with the existing systems, the systems of the future would be much more IP based.
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Mrs. MORELLA. I know that Mr. Major probably would like to respond, but I'm going to move on. I have more questions I want to ask the panel, but I'd like to defer to my colleagues to give them a chance to amply ask questions, and we'll get back for a second round. We've been joined by Eddie Bernice Johnson, from Texas, and I'd like to recognize her for any questioning.
Ms. JOHNSON of Texas. Thank you very much, Madam Chairperson for having this third hearing. It's very interesting and I would like to ask a couple of questions. It appears to me that there's been some not quite agreement on the use, the standardized use of one system in Europe. But I know how global we are, and I know how global our economy will continue to be if it's going to continue to be healthy. It's usually to the benefit of the American people to have standards. As much as we don't like regulation, we tend to demand it because we want things to be alike so we can understand it easily, and we can have easy access. What—other than having, of course, the investment and the ownership, not necessarily financial ownership, but the philosophical ownership of certain systems, what else would stand in the way or what would be the real downside of having standards so that the user would have the benefit of being able to be transferrable internationally? Anybody?
Mr. SMOOT. I think that providers of services are going to try to meet what they perceive as the market need. If the perception is that your market consists of people who are going to go from different—from one country to another all the time, then you're going to put a very high priority on being able to provide global service. But that doesn't necessarily mean that only one technology can provide that. I mean, this is the perception of the user, and I believe that manufacturers and service providers are quite expert at sort of splitting the back office from the front office and providing convenience and usability while they employ different technologies.
Ms. JOHNSON of Texas. Anybody? Yes.
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Mr. MAJOR. The way the industry wrestles with roaming issues today is to produce what we call multi-modal radios. Multi-mode radios, given the state of the technology today, are still more expensive and larger than dedicated radios. So, if you, in fact, made it mandatory that all the products roamed internationally, you could disadvantage users that don't need that feature. What we're trying to do with the standards is to accommodate the feature but be flexibility about when it's necessary.
Mr. PIEKARSKI. Yes. I guess maybe an easy way—hopefully an easy way to explain this to the Subcommittee is in one of the attachments to my testimony, I have a table. And that table basically describes each of the standards today. It's referred to as Table One. And there you have each of the standards as well as what are proposed as the evolutionary steps for those standards going forward. So what the operators could do, and we as manufacturers will provide, are either phones where you see these checkmarks that are individual only for that standard to have a low cost end-user product, or for those consumers that want to travel throughout the world or in different regions of the world, we will make phones that do both. And those would be, then, a combination of any of these checkmarks. And, of course, that's dependent on what the volumes would be, and how interested the consumers would be in any combination of these types of phones. And that's what's being done today basically for GSM systems, for the CdmaOne systems going over to analog AMPS or the GSM systems going over to AMPS systems today. So that's how we would handle the problem for the end user and try to make it as transparent as possible to them.
Mr. RUSSELL. If you look just domestically within the United States and you're dealing with users that are roaming throughout the United States, as you obviously know, we have different systems today, and the way that's done has been stated by the other panelists is interoperability from a frequency point of view, which is called multi-band phones as well as multi-modes to deal with different types of air-interface standards. The technology and the cost of doing those kinds of systems in the future will continue to come down, and as a result, you'll see more phones at lower cost that can deal with different bands and different modes of operation like TDMA, CDMA, and so forth. I think that is the way, we believe, that overall, from the end user point of view, to create a tier of products that would allow users to roam both throughout the United States or domestically or roam internationally. But to build one phone that fits all is probably much too costly for the marketplace in terms of the average user.
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Mr. PIEKARSKI. If I'm allowed just to put a footnote on that? One thing we very much have to keep in mind is that we're not necessarily talking about phones anymore. We're talking about personal communications devices. It could very much look like some type of small Nintendo game, for example, that allowed you to get e-mail on it as well as voice and voice messages. So the devices we're talking about are very different than what we're talking about today. It's not a typical phone that we're talking about for these third generation systems.
Ms. JOHNSON of Texas. My time is up, right?
Mrs. MORELLA. We'll have another round Ms. Johnson, too. I would now like to recognize Mr. Ehlers for questioning. We'll each take about 5 minutes at a swipe.
Mr. EHLERS. Thank you, Madam Chairwoman. First, a comment. Don't ever after this hearing—I don't ever want any of you to comment about the alphabet soup and the government.
[Laughter.]
You have served up more alphabet soup than I've ever seen in any government operation.
Mrs. MORELLA. Couldn't be more.
Mr. EHLERS. The—one thing just to clarify some of the lingo and some of the alphabet soup. CDMA is Code Division, correct? TDMA is Time Division? GSM, I don't understand. It seems to me, you know, that's global standards, but does it include both CDMA and TDMA or not?
Mr. PIEKARSKI. If I may answer. It's TDMA. GSM was just adopted as a name here.
Mr. EHLERS. Could you pull the mike in front of you? It's hard for us to hear. These are very directional mikes.
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Mr. PIEKARSKI. GSM is TDMA. It's also Time Division. It's just that TDMA became a colloquial name for the standard, as you pointed out, due to the alphabet soup that was IS136 and prior to that IS54. So, the industry refers to it typically as TDMA or digital AMPS.
Mr. SMOOT. The—you have been mostly not subjected to the pure numeric part of standardization where we don't even use acronyms, but simply refer to IS–X–X–X, and that's really hard to penetrate unless you're in the business.
Mr. EHLERS. I have been subjected to that as well.
[Laughter.]
In Congress, it's fair to say we get subjected to everything—usually undesirable things.
Mr. Major, and first of all I have to comment. Mr. John Major—I have a constituent named Mr. John Minor. It would be interesting to have you sing a duet together.
[Laughter.]
But in any event, you seem very concerned that your technology that you've developed and are manufacturing will not—that you will not be able to market that in Europe. By which, I think you probably mean the European Union. And yet, your competitor says, well, you are able to market it and gave examples of certain parts of Europe. I'd like to clarify your statement. Are you saying that within the European Union, you're not able to market this, or? I just sense a great subterranean ball game going on here, and I'm not able to figure it out.
Mr. MAJOR. Your sense is 100 percent accurate. But before I answer, I might offer that I had a fraternity brother that was named John Minor, so perhaps I could find out if he's now living in your District.
[Laughter.]
And yes, it did cause a lot of good humor. The—you're right. I did mean European Union—the countries of Spain, United Kingdom, France, Sweden, Germany—none of these countries have CDMA systems, and they represent a huge market.
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Mr. EHLERS. And are you prohibited from going in there? Or unable to because their standards will not allow your particular product to be used?
Mr. MAJOR. The CDMA standard is not allowed to be transmitted in those countries, and that's not something a little company from California can solve. But it's the kind—but it's an issue on the order of what I referred to when I gave my Japan example. When that kind of thing happens, competition is stifled. Now whether we could successfully sell or not in those countries is a separate question, and something we'd have to prove. But the fact is that you can't sell CDMA in a great many countries in Europe.
Mr. EHLERS. And have you involved the State Department in this issue at all?
Mr. MAJOR. This industry was moving so fast that this subject more or less got put to the side for a number of years, but it's drawing increasing attention now. People are asking the question why it is the United States market is open to a diversity of technologies and why aren't the other major markets—all the other major markets open to a diversity of technologies. Frankly, the only major market that isn't open to a diversity of technologies is the European Union.
Mr. EHLERS. And has the State Department been active in that? Or have they been asked to be active?
Mr. MAJOR. Increasing interest but not the level of focus that we saw with the Japan example I gave, where they were somewhat more aggressive.
Mr. EHLERS. I wish I could pursue that further in terms of pinning it down. Maybe I can talk to you afterwards if you have a chance.
The—I still don't quite get the picture from the technical standpoint. Your system, of CDMA—what is it? CdmaOne?
Mr. MAJOR. CdmaOne, that's correct.
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Mr. EHLERS. That is being marketed in the United States, correct?
Mr. MAJOR. That is correct. Sprint and all of its systems outside of Washington uses it. And PrimeCo uses it. Ameritech recently adopted it. Airtouch in the west had—uses CDMA. USWest uses CDMA.
Mr. EHLERS. And so, basically, what it means is that a distributor of services has to buy your transmitters and consumers have to buy phones that are compatible with those transmitters. Is that correct?
Mr. MAJOR. That's correct, except we're actually the inventors of the technology. We do supply equipment for the technology. But we're, by no means, the largest suppliers. Lucent is a major supplier of this technology as is Motorola and other companies.
Mr. EHLERS. And what other competing systems are there in the United States currently? And are they incompatible with each other?
Mr. MAJOR. More or less compatible. There's a TDMA system. There are TDMA systems, and there are GSM systems operating in the United States. There's also the old AMPS system, the old analog system operating in the United States
Mr. EHLERS. Right. And how many of the TDMA systems are currently being marketed and are they compatible with each other or not?
Mr. MAJOR. No, they're not. But I'm not an expert on compatibility between TDMA and GSM systems. And so, I would say the U.S. market is today roughly equally divided between the new, the emerging U.S. market—the AMPS market now is fading—is about equally divided between CDMA and TDMA/GSM.
Mr. EHLERS. Okay. And a final question. Are you likely to see sometime soon a fourth generation? And any of you can answer this so that all that we're talking about today will be passé in 2 years or 5 years or whatever.
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Mr. MAJOR. I don't know about. My last role I was Chief Technology Officer at Motorola, so I did spend some time worrying about what happens after the Year 2005. And frankly, I do think—I am a believer that multi-modal products will continue to press forward, and in that time frame, we'll spend a little less time talking about multi-mode. What I really think the end game is today for what we call the last mile, you're locked into a wire line choice, which is hard to make diverse, or a cable choice, which is equally hard to make diverse. If I'm allowed to dream for a moment, I see the kind of choice diversity 2005 out that we—for communication services that you'd today have for clothing, fast food franchises, restaurants, and all of the other consumer services you have. And I think pushing for open competition, open markets, and spectrum to support a diversity of alternatives for the last mile is a very useful goal as our society gets more information intensive.
Mr. EHLERS. Provided the consumer can use his or her product anywhere they want to use it. That's where we get involved in worrying about consumers.
Mr. MAJOR. Yes, and I think the G4 will probably pick up quite a bit of that.
Mr. EHLERS. All right. I'm very concerned about that after we've gone through the beta/VHS battles, and, to some extent, the Macintosh/Bill Gates battles. In both cases in which I think the inferior product seems to have won.
[Laughter.]
And I would hate to see that happen in your industry. Thank you.
Mrs. MORELLA. Thanks, Mr. Ehlers.
Mr. SMOOT. Madam Chairwoman, could I make a comment?
Mrs. MORELLA. Yes, you may, Mr. Smoot.
Mr. SMOOT. I certainly wouldn't touch the, coming from the computer industry, the last comment made. The comment I wanted to make is that I believe it was in John Majors' statement, where he talked about intellectual property, and it's important I believe to understand that this level of standardization if your technology is accepted, then you agree to license your intellectual property on reasonable terms and without discrimination. So even if you have a strong patent portfolio that you are—by submitting your technology, you are opening that up to licensing under these terms. And similarly, you have access to licenses from the others. So that—it's not a matter of using patents to lock through a standard your technology in with nobody else having access. There are a lot of other business considerations, however, even if you do give these licenses.
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Mrs. MORELLA. Thank you, Mr. Smoot. I'd now like to recognize for any questioning Mr. Tauscher, from California.
Ms. TAUSCHER. Thank you, Madam Chairwoman. I want to go back to the question of the standards process being used to ensure that these technologies and modes are being used to the right extent to enable and facilitate this new 3G, 4G systems. Given that CdmaOne is an American invention and dominant in the United States and Mexico, and that GSM is predominant, may be the only thing offered in the EU, how do we use this standards process to make sure that we can fully integrate the bandwidth of offerings of different technologies for the American consumer and the consumer in general. I think that if we can use the standards process to facilitate this, we're going to be a little ahead of the game. Mr. Smoot, perhaps?
Mr. SMOOT. I'd love to answer this, but one of the points that I wanted to get across is that standardization is extremely sector specific, and I think you would be much better informed by Mr. Russell or the other panelists answering that.
Ms. TAUSCHER. Okay.
Mr. RUSSELL. If I might respond, as I stated earlier, our process is extremely open in that it is driven by contributions. So anyone that has a new interesting, challenging, or valuable technology that will offer new capabilities to consumers can bring forth that invention or technology into the standard setting process through what we call contributions.
The thing I think it's important to note here in terms of—as you look at 3G or 4G—is that what determines—1G, 2G, and 3G—if you look at it typically we think of 1G as an analog based system—voicecentric, but analog based. As we look at 2G, we tend to think of voice specific, but digital based. Three G is more of what we're moving away from a voice centric environment more to what we call a datacentric environment, so we're looking for a very broad band access to information where voice is carried on top of data. So you're looking for interoperability with packet networks and so forth.
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Many of the technologies that are being submitted into our standards-setting process, that we tend to characterize as 3G, have the attributes of supporting this third dimensionality, which is this broad band, tremendous amount of information, multi-media in nature that allows users to have not only voice, but data as well as imaging transmitted over a wireless interconnect. And I think the process we have now permits that. Now, we have a committee that I chair that's been directed by the board of directors to obviously look at harmonization for 3G and to look at all of these technology submissions and try to determine which one really addresses this true third generation kind of capability in that we look at basically three things: the first one is the degree of performance that you would get out of such a system. This is a price performance issue. The second thing that we tend to like to look at is the degree of backward compatibility to allow the user to more gracefully move to this new type of service. And then the fourth one is, is it interoperability with circuit-based networks, which are voicecentric, or packet-based networks, which are datacentric. And those are the parameters. And what we're doing now is trying to sort through all of those issues and try to make a recommendation and try to get the various manufacturers to address those issues and hopefully to harmonize the standards.
Ms. TAUSCHER. Well, I guess my concern is that perhaps this is not as much about the standards as it is about trade barriers. Mr. Major, are we locked out of the EEU on CdmaOne?
Mr. MAJOR. Absolutely.
Ms. TAUSCHER. So is this a question of standards or is this a question of trade barriers?
Mr. MAJOR. It gets all together in that given that it's likely we'll always be locked out of the EU because they're going to link the standard with the allocation of spectrum. So the two—so if the standard, if the standard could be fairly developed, then you might not have to worry about the fact that there's a trade barrier and that you're being locked out. It's a tough challenge to do a standard fairly developed. It's interesting that one of the areas where QUALCOMM and Ericsson agree is the next generation standard will likely be CDMA. That's exciting. That's progress. Now to the extent that at least one of the next generation standards will likely be CDMA, now to the extent we could make that CDMA standard highly compatible with current CDMA use, as well as current GSM use, we'd have a chance for some real progress. We think the process is being politicized to present that.
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Ms. TAUSCHER. Final question. What is the length of the generation life cycle? You're talking—you know, 1G, 2G, 3G—you know, I think we're kind of—we know Morse law has leaped itself—gone beyond—way below 18 months for chip development. Are we talking about months here? Is the fourth generation about these personal communication devices that are going to look, not like phones, but take on a different light—are they in the fourth generation? Are they in the fifth generation?
Mr. MAJOR. I'll start. I'm sure everyone has a different opinion. I'm going to suggest just a little under 10 years—very similar to what we saw with 8-track cassettes, 4-track cassettes, CDs—moving on. So on the order of a little under 10 years.
Ms. TAUSCHER. But the life cycle, is it less than a year?
Mr. MAJOR. No, 10 years.
Ms. TAUSCHER. 10 years.
Mr. MAJOR. It takes time to invent them, deploy them significantly and then the next ones—next wave sort of starts up.
Mr. RUSSELL. I would think that you would have difficulty building a new technology in the associated platform in anything under 5 years—so you're talking between the 5–10 year range.
Ms. TAUSCHER. Yes.
Mr. PIEKARSKI. There's always the issue of backward compatibility because part of it is not only the networks you could deploy but how you could get the product to the consumer.
Ms. TAUSCHER. Consumer.
Mr. PIEKARSKI. You have to protect the consumer's interest and always keep those systems up and running and make sure they have that compatibility. So then it's up to the high-end users and usually the ''pioneer users'' of trying to evolve towards this new technology and that's part of the inherent time process.
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Ms. TAUSCHER. I yield back the balance of my time.
Mrs. MORELLA. Thanks, Ms. Tauscher. I appreciated your questions, too. I'm going to direct a number of my questions to Mr. Russell and all of you may feel free to respond at any point if you would like to. That's why we put a mike sort of in the middle.
[Laughter.]
TIA, we know, would like to recommend a single third generation standard to the ITU. I just wondered if you could respond to what are the obstacles to developing a single U.S. proposal? We know that the deadline to the ITU is like the end of June; that's coming up very soon. Is it likely that the United States is going to be able to get behind a single proposal and, you know. If not, why not? That's question number one.
Mr. RUSSELL. First of all, I'd like to just to respond to the—June 30th is the submission date. There was a much longer time after that to do the harmonization which probably to the end of 1999. Let me respond to the first part of your question. I think the process that we have, we have put a specific focus committee in place to try and facilitate harmonization. Not the submission of RTT proposals—we've allowed that to be completely open. But now that we know what warped submissions are there, what we are now doing is working with the members of the carrier community—it was the manufacturing community—to begin to look at the technical differences between these various standards of making sure that they meet at least the vision of the ITU in terms of the requirements of 3G. Looking at intellectual property issues and trying to petition these items into multiple buckets and looking at each one and seeing whether or not we can get our various constituency to come to agreements on those items. But looking at them category-by-category and that it is a challenging process, it is difficult at this point and time to predict that we will be successful at that our intent is to create an open forum to allow the dialogue to take place—to allow all parties to be represented and to discuss the issues. But I cannot assure you or anyone else that we will be able to ride at a single standard as a result of the process we have.
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Mrs. MORELLA. So what do you submit on June 30th? You don't do the harmonization, it comes later? And again what is that timeframe?
Mr. RUSSELL. It typically starts—we'll begin to see the first segments or discussions at the ITU level probably near the end of this year. But on June 30th, we simply submit the proposals that are coming in from—obviously within the United States—but other places, as well. They get registered and now we all know exactly what the proposals are and then we start the process of harmonization.
Mrs. MORELLA. Yes.
Mr. RUSSELL. So the harmonization really starts after June 30th.
Mrs. MORELLA. Right. Again, I reiterate, if any of you want to comment at any point, I hope you feel free to do so. But now we have heard—not only today—but we've heard even before today and from testimony, kind of the belief that ITU seems to be skewed in favor of Europe's position. I wonder what—what's been TIA's experience in working with the ITU and with the European Union standard sitting bodies.
Mr. RUSSELL. Well, I certainly can't respond to whether they're skewed this way or that way. I think what I would suggest is that we have cooperated in terms of sharing information, which is their SDO, and vice versa. I think the issue of the TIA is that I prefer to focus our attention on what we do and how we do it. We believe we have an open process. We believe it's one of the best processes in the world for getting toward a very advanced technology and to its standards process in allowing manufacturers to roll out products based on that. It's open. It allows input from all dimensions of most of the companies that participate in our process have divisions that are within the United States and that they obviously work in other parts of the world. So they participate in both—in Europe and here. So I really can't speak to whether the Europeans process is more skewed or not. I can only tell you about what our process is like.
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Mrs. MORELLA. Picking up on something that Mr. Major had said—kind of the concept that U.S. technologies have to-date been sort of shut out of the European market, while European technologies have been allowed to compete in the United States. Your response to that statement.
Mr. RUSSELL. The answer is yes. We have received submissions from companies that are subsidiaries or divisions of European companies that are stationed within the United States. They are members of the TIA and as a result, they are at the option to submit those proposals—or any proposals to our process. Then they go through the same procedures that all submissions go through. That is that they are handled by our technical committees. They are debated and as a result, we resolve those and then recommend results which are typically the standards.
Mrs. MORELLA. Yes, yes. But you do feel though—getting back to the initial response that is correct?
Mr. RUSSELL. I beg your pardon?
Mrs. MORELLA. But you do feel that he is correct? That U.S. technologies have been shut out of the European market and vice versa has happened—have been allowed?
Mr. RUSSELL. I agree that we have permitted European systems to be available in the United States.
[Laughter.]
I think that to the degree that they are not there, I guess the answer is obvious—right?
Mrs. MORELLA. Yes, yes. Mr. Smoot.
Mr. SMOOT. It seems to me the—while the point is true, it is not a matter of the standardization process. The European Commission took the outcome of a European standards process and they only allow licenses to that technology. The openness of the standards process that TIA runs, that we run, that Committee T1P1 runs—I think we all have similar rules. We allow all materially interested parties to participate. That's because our philosophy is—I think as you just said, that we're going to come out with the best result for the manufacturers and the customers if everybody plays. It's—Europe has a different view about this. They're standard bodies at the European level are not as open as U.S. standards bodies. Generally we think that's a penalty that they've put on themselves. It's not a problem because—where unless the European union decides that they're going to mandate only the outcome of that standards process.
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Mrs. MORELLA. Mr. Piekarski.
Mr. PIEKARSKI. Thank you, if I could be allowed to comment.
Mrs. MORELLA. Absolutely.
Mr. PIEKARSKI. I think one thing that's happening is we're confusing a little bit of history with the future. What we're trying to do is solve the past while we're really talking about the future. The whole idea of the future is—and the openness of having one global standard is the idea that anyone can participate, whoever would like and that's standard in whatever region, in whatever part of the world. Much like today, Lucent, Motorola participate in other markets and make business decisions to provide GSM systems for other parts of the world. So those can be business decisions everyone makes based on future standards, as well as American companies that participate in the process.
For example, what I had just mentioned awhile ago the recent harmonization effort by Motorola along with Nortel contributing to agreeing on a modulation technique to move wide-band CDMA forward and having the harmonization, if you will, on that particular subject of modulation. So I think what we need to make clear is that this is a new opportunity going forward to allow everyone to participate in a global market. If there are these issues that are current issues and more business-related, those should be handled in a separate fashion and not try to be solved by the standards process.
Mrs. MORELLA. So basically you're saying that they may well be correct—that is present and past, but now we look to the future?
Mr. PIEKARSKI. Correct.
Mrs. MORELLA. In terms of pulling things together. That's one of the reasons for the meeting. Did you want to comment, Mr. Major?
Mr. MAJOR. At the end of the day, if we believe the European standards process was as open and fair as the U.S. standards process, there might not be an issue. Unfortunately, we don't believe it is. Then linking the standards that come out of that process to the—to whether or not you have the right to sell other products in the European market makes for a pretty fatal combination. As I understand it today, the spectrum that's being auctioned in the UK for next generation systems will be mandated to follow the standards. The standard process is politicized and not a free and open exchange as you have in the United States, you can be predicted that—I think will U.S. manufacturers be able to compete? We have a rich technical diversity in this country that allows us to survive almost all obstacles as we compete in the global market. But will we compete as effectively as we could otherwise? No.
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Mrs. MORELLA. Yes. Mr. Piekarski, in line with your comment that you desire to make, do you feel the U.S. consensus standard setting process is working? If not, how should it change?
Mr. PIEKARSKI. Let me first answer your question, Congresswoman—Chairwoman.
Number one, that we do feel that the process is working. We, along with all the other major manufacturers and most importantly our customers, participate in both the TIA and the T1–P1 and have contributed to technical contributions that will be submitted to the ITU, as Mr. Russell has stated. We find that process fair and open, and ongoing for a long time, and has been very instrumental in establishing the standards that we have today, for example, TDMA which was established in this country. When it comes to the other issues again of competition and Mr. Major's comment that part of the issue, I believe, is most diplomatically stated that we as a manufacturer provide systems for various standards. In our case, the ones I mentioned earlier—GSM, IS–136 and even systems in Japan called Pacific Digital Cellular. While in—so we want to protect all those customers. While in the case of Mr. Major's company, the only standard they promote is IS–95. If they want to manufacture and compete in these other markets, that's what I was implying earlier—it is strictly a business decision.
Mrs. MORELLA. As you all may know, this Committee and it's been mentioned recently passed legislation to fund the development of the Next Generation Internet (NGI). The intent of NGI is to create networks 1,000 times faster than today's Internet or over 1 billion bits per second. Will wireless ever be able to attain such speeds or we will always need land lines for the rapid transfer of massive amounts of information? Anyone want to comment on that? Mr. Major?
Mr. MAJOR. I'm bullish on wireless. I've set my life in that industry. It has come a long way. There's now general agreement that the next generation will handle a couple of megabits per second. That's way up from where it is today and essentially running 13 kilobits. We have a number of companies that are bringing even higher speed wireless solutions to the market—tremendous diversity. I believe that the users will have information service diversity. The way they're going to get it as we move from the Year 2000 to the Year 2010 is going to be wireless—not extra cables run through the street, not extra phone lines strung on the telephone poles—it will be wireless. That's what makes this debate so terribly important in terms of how these wireless standards are set and then how the spectrum is accessible to manufacturers. This is where the real competition is going to happen.
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Mrs. MORELLA. Yes, yes. Mr. Russell.
Mr. RUSSELL. I would agree with Mr. Major, is that I've spent the majority of my professional career developing radio-based communications technologies. If I look at what we're doing today, where the systems you're seeing that we're about to roll out on the 1 or 2-megabyte range were beginning to work on systems 4 or 10-megabits. So we believe as you continue to reduce the size of the cells, you'll be able to use more spectrum to transmit at even higher speeds. So I'm extremely bullish on the potential and future wireless communications. To meet all of the demands of end users as they thirst for the Internet and the kinds of speeds and information that will be in that within that network.
Mrs. MORELLA. Yes, yes. If no one else wants to comment. You know, we asked some questions—I think you know that—of our federal agencies. I kind of scanned their responses and just wanted to ask you how you would respond generally in terms of the responses that they gave. I think that the FBI said it was not applicable; Commerce said they should be multiple; DoD said there should be a single-standard; our ambassador at UN—I think said one-standard, but only if there's consensus and it went on and on. I just wondered, do you think that the Federal Government is kind of clueless?
[Laughter.]
Mr. PIEKARSKI. Well, I can comment on that I don't think it's clueless. I think that the USTR responded in a way that we very much agree with. Specifically, I have one of their quotes from their contribution and that's that on balance innovation and market development appear to be best-served not by requiring a single standard but by encouraging inoperability and backward compatibility and letting markets determine the value of the competing technologies. That very much echoes our position—to let the market decide and protect current customer investments and have backward compatibility but yet have some overall systems that allow for global roaming and provide high quality services for the end users.
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Mr. RUSSELL. Congressman, as I indicated in my remarks, we clearly support the response from the FCC Chairman on that particular issue.
Mr. SMOOT. It seems to me also that all of these agencies have taken the technology transfer amendment to heart. The one they did all say is let's rely on the private sector standards process to come up with a solution and basically stuck to their agency knitting. They said where they didn't have statutory mandate to get involved and mostly ducked on those issues.
Mrs. MORELLA. Last month when we discussed the ISO process, we've heard a lot of complaints. Maybe this should be more directed to Mr. Russell, especially from small companies about the fact that ISO is located in Geneva and then it gives European countries sort of a home court advantage. Oftentimes, the expense of a prolonged stay in Geneva might well be enough to discourage companies from relatively small, niche markets. I wondered if you find this to be a problem with the ITU or the IEC—which are located in Geneva. Have you heard this complaint?
Mr. RUSSELL. Well, first of all, let me state that we have and that we understand as you know we have these large constituency of small companies that are somewhat limited in their ability to travel to Geneva or to other places to support or engage in these international standardization activities. One of the things that we are very proud of within the TIA is that the companies that do go in our staff typically operate within those forms and bring that information back to the United States. We use our processes within the TIA to ensure that our smaller companies are abreast of what's going on and are engaged through the U.S.-based TIA process in facilities and meetings that we hold. So we try to bring the information back, but I do understand and appreciate the problem. We have heard that.
Mrs. MORELLA. Mr. Smoot, I bet you've heard—have you heard it?
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Mr. SMOOT. Well, I'm actually shocked that this keeps getting brought up. We operate in the ISO–IEC world. It's true their headquarters are in Geneva. I haven't done a count of meeting days, but the system works from a U.S. viewpoint. I think for most standards developers that are active internationally, is by virtue of a group in the United States such as TIA runs or we run, where U.S. participants get together and develop a U.S. position. That position is carried forward by a delegation who seeks to achieve the U.S. objectives in the international meeting. Now to the extent that yes, you need more money to go from the U.S. meeting if you also want to be on the delegation, I think most business people—this is a matter of investment, a matter of priorities.
Second, at least in the information technology standardization business, we don't allow committees to meet only in one geography. Typically, you know the Chair and the secretariat would love to always have all their meetings in their hometown. But in our business, it's a global technology and so the committees meet around the world. Now, from—if you were going to go that would mean that instead of going to Geneva all the time, sometimes you have to go to Beijing which is even more expensive. So—but it does provide better access to the different regions if your goal is a global standard you need to pay attention to the global participants.
The third point is there's a lot of history in this standards business. One of the things that the American National Standards Institute has tried to do internationally in both ISO and IEC is to attack these kinds of informal things that have developed over the years and change them. As you can imagine, that's very difficult because people who have gotten say an incumbent's edge in things, they don't give it up without a fight and we're making that fight. It's not a very quick process.
Mrs. MORELLA. Mr. Major, I'm going to ask you to make it quick so I can go vote.
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Mr. MAJOR. I'll make it very quick. As he reached his concluding comment, I think the answer to your question emerged. Of course, it's unfair. Yes, all the standards organizations are trying to work cooperatively to fix it, but it's taking a very long time. It's about time we had some of these meetings in California—and yes, in fact, in Beijing as well as in Rio.
[Laughter.]
Mrs. MORELLA. You've been great. I don't know whether you could—if very quickly, there's any specific recommendation you would have for Congress or for government for our role in international standard setting process. For instance, should our government be promoting U.S. standards in international standards bodies. I realize you already talked about backward compatibility, interoperability, no mandating—all of these things I know, but is there anything else you think we should do?
Mr. SMOOT. You should promote the competitiveness of U.S. businesses. Sometimes that might mean a European technology. These things you have to look at. The one thing I would say from today is would you please continue to pay attention to this rather unsexy area because every time you do it puts us on our metal and we get better at solving the problems.
Mrs. MORELLA. Mr. Major.
Mr. MAJOR. We've got a tough problem in Europe with a link between ETSI and the European Union. Any attention that will draw interest in that area, a trade barrier has developed and we should work on why it's developed, and what we need to do to eliminate it.
Mr. RUSSELL. I would say the principle from the TIA point of view that we would ask you to continue to focus on and I think this particular hearing is a good example of just focusing on 3G and that is the open process for participation at all levels in terms of a level playing field. I think that's really what our association is about and what we're trying to promote. I think it would be helpful if we could get some input from the government—and support from the government in terms of doing that.
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Mrs. MORELLA. Very good, Mr. Russell. Mr. Piekarski, any final comments?
Mr. PIEKARSKI. I think you summarized most of it.
Mrs. MORELLA. I want to thank you all very much. I've learned a great deal from this. I hope I can retain it. I hope that we can continue in some way with sort of finding out where we're at because it is a very important issue and I know that harmonization is what's critically important.
So Mr. Smoot, Mr. Major, Mr. Russell, Mr. Piekarski—I think you've been great. May we also continue to feed questions to you for your responses? Great. Very good. Thank you all very much.
The Subcommittee meeting is adjourned.
[Whereupon, at 12:00 p.m., the hearing was adjourned.]
[The following material was received for the record:]
"The Official Committee record contains additional material here."
"The Official Committee record contains additional material here."