U.S. Threatens to Take Complaint against Telmex to World Trade Organization

SourceMex Economic News & Analysis on Mexico, April 12, 2000 | Go to article overview

U.S. Threatens to Take Complaint against Telmex to World Trade Organization


The dispute between Mexico and the US regarding access to the telecommunications market has escalated further. In early April, the US Trade Representative's Office (USTR) accused the Mexican government of failing to take sufficient steps to curb the monopoly powers of Telefonos de Mexico (TELMEX), which has created unfair conditions for the Mexican subsidiaries of AT&T and MCI Worldcom.

The USTR complaint against Mexico, the latest episode in the ongoing conflict about TELMEX's status, was included in its annual review of major trading partners and their compliance with the Word Trade Organization's (WTO) agreements on telecommunications. The report also found unfair practices in South Africa and Japan.

"In Mexico, it appears that progress toward a level playing field for telecommunications carriers now is stalled," said US Trade Representative Charlene Barshefsky.

In the last several years, the US and Mexico have been embroiled in heated disputes about the near-monopoly status of TELMEX, which was privatized in the early 1990s (see SourceMex, 1990-11-21). Competitors Alestra and Avantel have frequently accused TELMEX of erecting barriers to fair competition, such as charging interconnection fees two to three times higher than international norms (see SourceMex, 1996-04-17, 1997-11-05, 1998-03-04, 1998-11-11). Alestra is a partnership among AT&T, Grupo Bancomer, and Grupo Alfa, while Avantel is a joint venture formed by MCI WorldCom and Grupo Banamex-Accival.

AT&T and MCI have also been instrumental in delaying TELMEX's entry into the US market. For several months, the two companies successfully argued that TELMEX should not receive an operating permit until it eliminated barriers to competitors in Mexico. But after a lengthy investigation, the US Federal Communications Commission (FCC) in 1998 awarded TELMEX a permit to provide services in the US (see SourceMex, 1998-08-12).

TELMEX says high interconnection fees are justified

TELMEX, which still controls the majority of Mexico's telecommunications infrastructure, including telephone lines, argues that the company has lost 30% of its share of the long- distance market since 1997, which is evidence that competition is working fairly well.

A recent study published by the daily newspaper El Universal backs TELMEX's argument. The study says 87% of the long-distance users in 150 cities in Mexico now have a choice of long-distance providers. The competition among TELMEX, Avantel, Alestra, and other companies has reduced long- distance charges by as much as 50%, the study said.

Meanwhile, TELMEX continues to defend its high interconnection fees on the grounds that the company needs to recover costs of extending service to remote areas and purchase equipment.

The Secretaria de Comercio y Fomento Industrial (SECOFI) has jumped to TELMEX's defense against the USTR complaint, saying that the company has not violated any WTO telecommunications norms. But Luis de la Calle, SECOFI's deputy secretary for trade communications, said the Mexican government would prefer that the case not be presented to a WTO dispute-resolutions panel. "Before a panel is established, we would like to consult with US authorities," said de la Calle.

TELMEX has presented a more defiant stance. Claudio X. Gonzalez, a member of the company's board of directors, said TELMEX would fight any WTO action with countersuits. "Some of the competitors thought they were going to have it easier," said Gonzalez. "Now they are trying to change certain things."

TELMEX president Carlos Slim Helu criticized the US government for interfering in Mexican affairs. …

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