In the largest emerging markets (the BRIC nations), both government and industry are scrambling to meet satellite capacity demand. In the face of capacity shortages, particularly for Ku-band, local satellite operators are increasingly joining in to launch their own networks and compete with established players. Despite the apparent opportunity to serve broadband rollout, broadcasting and industrial sectors, service integrators, and equipment manufacturers who deploy their kit globally should be concerned about some governments’ persistence in erecting market access barriers to lock out foreign companies. Controls on equipment used nationally in a few countries are bucking the trend toward global trade liberalization seen in some quarters.

Trade agreements under negotiation, including the EU-US Free Trade Agreement (also known as the Transatlantic Trade and Investment Partnership, or “TTIP”) and the Trans-Pacific Partnership (TPP), seek to strengthen harmonization of standards and type certification procedures in order to reduce market access barriers, among other initiatives. Their aim is – in part – not just to improve cooperation in markets that already have relatively compatible regimes (such as the United States and Europe) but to extend these models to third parties. By uniting behind common or harmonized standards, these parties aim to influence countries that restrict use of equipment through “local content” or “forced localization” requirements, and to woo countries to the side of U.S. or E.U. standards, rather than leaving China to define these for emerging or developing markets where that country has significant commercial engagement.

Market access barriers are not new, but some emergent trends threaten to exclude non-national suppliers more fully. Barriers affecting telecoms equipment have emerged recently in India (regularly a subject of controversy), and similar barriers have been noted in Indonesia, Brazil, Argentina and Nigeria. A recent APEC Ministerial statement welcomed dialogue on economic development measures that exclude local content requirements, yet reports out of certain countries suggest such neutrality is not a universal value in the region.

In India, a local content policy – “Preferential Market Access (PMA)” – would, if adopted, require that a wide range of telecoms equipment contain a minimum percentage of locally produced content. Security concerns and a desire to boost local manufacturing are the drivers behind the proposal, which has been hotly debated. Many assert that the policy reverses India’s trade commitments, and is out of step with recent initiatives to increase Foreign Direct Investment (FDI) in certain sectors (FDI is currently capped at 74 percent for the telecom sector, but the retail sector was recently opened up). Adding this to retrospective taxation, spectrum licensing scandals, and confiscation of “unlicensed” equipment, the opportunity of operation in India is fraught with challenges.

Mexico has grabbed headlines with its telecom liberalization bill. In the interest of enabling greater service penetration and connectivity, the initiative opens up the telecom and satellite sector to 100 percent foreign direct investment and creates an independent regulator. Mexico has not sought to achieve manufacturing growth and development through local content requirements, and its participation in regional trade agreements seems to bode well for its GDP.

Trade deals under discussion are no magic bullet, but they may help strengthen markets that are already vibrant, and demonstrate to third parties that the local content restrictions they envision are more likely to marginalize their telecoms sectors than to make them grow. Global satellite players should track these developments and exercise diligence in understanding the effect on their global network deployments.

Gerry Oberst is a partner in the Hogan Lovells Brussels office.