U.S. Government Takes First Step to Bring Complaint against Mexican Telecommunications Sector to World Trade Organization

Article excerpt

US President Bill Clinton's administration has requested formal consultations with Mexican officials to discuss the lack of competition in the telecommunications market. The consultations, scheduled to span a period of 60 days, are the first step toward bringing the matter before the World Trade Organization (WTO).

US Trade Representative Charlene Barshefsky said the Clinton administration was hopeful the matter could be resolved within the framework of the consultations. Otherwise, the complaint will proceed to a WTO dispute- resolution panel in Geneva at the end of September.

The US government action is based on complaints presented by US telecommunications companies AT&T and MCI WorldCom, which have accused Mexican regulators of allowing telecommunications giant TELMEX to retain an unfair advantage in the long-distance and local telephone markets.

AT&T and MCI each own minority shares in Mexican long- distance companies. MCI WorldCom operates Avantel in partnership with Grupo Financiero Banamex-Accival (Banacci), while AT&T has joint ownership with Grupo Alfa and Grupo Financiero Bancomer (GFB) of Alestra.

Among other things, competitors accuse TELMEX of charging excessive interconnection fees for both outgoing and incoming long-distance telephone calls.

TELMEX's access fees range between US$0.03 cents and US$0.045 cents a minute for domestic long-distance calls and as high as US$0.19 cents a minute for long-distance calls originating outside Mexico.

Barshefsky said these rates are two to three times higher than the rates charged by most countries.

"These barriers adversely affect US interests and deprive Mexican citizens of the benefits of competition," Barshefsky said in a statement announcing the US government's decision to bring the matter before the WTO.

Mexican officials dispute the accusations of the US Trade Representative's office (USTR). Communications and Transportation Secretary Carlos Ruiz Sacristan said Mexico has made every effort to comply with international guidelines to open up its telephone market to competition. "I have no doubt that our position will be upheld by the WTO," said Ruiz Sacristan.

This sentiment is echoed by Jorge Nicolin, president of the government's telecommunications regulating agency Comision Federal de Telecomunicaciones (COFETEL). "The USTR case is very weak," said Nicolin. "The arguments presented are not consistent with the facts."

Competitors insist that TELMEX enjoys unfair market conditions, which have allowed it to increase its share of the Mexican long-distance market to 81% from 74% three years ago.

But TELMEX officials argue these claims are inflated. "We wish it were that high," said TELMEX spokesman Arturo Elias Ayub, who said the company's share is closer to 60%.

TELMEX has defended its high fees as necessary to raise the funds to meet the company's mandate to expand telephone infrastructure in Mexico.

Problems linked to weak regulatory agency

Critics contend TELMEX has failed to meet that mission. Mexico currently has 11.2 lines per 100 people, which remains low by WTO standards.

Roberto Mena, a financial columnist for the daily English-language newspaper The News, said much of the fault lies with COFETEL, which has failed to push TELMEX sufficiently to improve its service. Mena said phone-line density has increased negligibly from 9 million to 10.9 million on COFETEL's watch.

"Until now, COFETEL has been run by two regulatory wimps--Carlos Casasus, a long-time employee of Telmex, and, currently, Jorge Nicolin," said Mena. "Both have failed utterly in the fundamental purpose of opening up the market to enable more people to have phones at accessible prices.

Mena said COFETEL has failed to take significant actions against TELMEX, even though the government's anti-trust agency (Comision Federal de Competencia, CFC) has ruled that TELMEX is a monopoly and must be subject to further regulation (see SourceMex, 1997-12-17). …