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U.S.
phone carriers target Telmex fees Traci Carl Fresno Bee August 19, 2000 Mexico CITY- Label Reyes, like most Mexicans, can't afford the $l16 fee charged by Telmex to install a telephone line in her home -forcing her to use pay phones in the street. Even if Reyes had a phone, just one 15-minute call to the United States would cost her about $6, more than half Mexico's average daily wage of $11. Consumers aren't the only ones frustrated by phone rates in Mexico. AT&T; and other U.S. phone giants also are griping - and they want the Clinton administration to make an international case of it. In an unusual confluence of corporate and consumer interests, the largest U.S. long-distance carriers accuse Telmex, the dominant Mexican carrier, of inflating phone fees to unfairly shut out rival companies. The Clinton administration began July 28 to bring charges against Mexico before the World Trade Organization, in a move backed by U.S. carriers vying for Mexican business. If an agreement is not reached by late September, the United States says it will file a WTO case against Mexico, which could lead to economic sanctions. Telmex's critics say the fee it charges to connect a competitor's call to its lines -4.6. cents a minute for calls within Mexico and 19 cents a minute for calls originating outside the country - is inflated. The fee typically is passed to the consumer. The 19-cent fee compares with 6 cents, a minute to connect international calls to people in Canada and Britain. Fox promises competition Although he doesn't lake office until Dec. 1, President-elect Vicente Fox has pledged to loosen Telmex's historically cozy relationship with the government, opening the market more to competition. Still, Mexico's government and Telmex strongly deny the U.S. accusations. They argue the Mexican phone market already bas more than a dozen competitors, most backed b foreign investors, and that the US. move is simply an attempt to help 'U.S. phone AT&T; end WorldCom steal Telmex customers. They also contend telephone service is better and that rates nave come down from a few years ago. "Telmex is, disappointed and worried about the unilateral and inequitable nature" of the U.S. move to bring charges against Mexico, the company maid in a statement. But U.S. carriers battling Telmex will find plenty of company among disgruntled consumers here; where the national phone monopoly long had a reputation for shoddy and expensive service. Only 11% of Mexicans have phones, as increase of less than 2 percentage points from 1997. A oils of service in some areas and high installation costs elsewhere have helped push the number of Mexicans with cell phones, to 8%, up from 1.8% in 1997. After years of going without, Catarina Medillin, 66, finally was able to afford a line in her Mexico City apartment. But she complains Telmex Latin America's biggest telephone company ^charges her for calls she never made. "They charge more and more, and ifs tort the truth," she said. Telmex has made some improvements under privatization. In 1993, three years after the government monopoly was privatized, customers had to wait an average of a year for a telephone line. Today, the average wait is leas than a week, the company says. Domestic and international long distance rates also have decreased, although they remain high by mast standards -owing in large part to Telmex's a fees for connecting two customers of different phone companies. Of particular concern is the 19-cent fee paid by carriers to connect phone calls between the United States and Mexico. Such cross-border fees usually are set by international agreement. But the United States argues Mexican law unfairly allows Telmex to negotiate the 19-cent fee, giving it an incentive to keep rates as, high as possible to hurt competition. While Telmex also has to pay this fee to connect to U.S. phones, U.S. competitors argue they get hit harder because most calls between the two countries originate in the United States. Fee rallies U.S.-call Costs The fee driven up long distance costs for Mexicans and the 20 million Mexicans and Mexican-Americans living m the United States, with rates between the two countries hovering around 40 cents a, minute. Roberto Mariques wanted to keep in touch with his wife when, she traveled recently to Sacramento-but the Mexican couple couldn't afford the per-minute fm charged by major phone companies. They resorted to wing a VS. calling card, punching in extra numbers to get around the steep connection fees charged for calls between the two nations. Although the United States has had similar disputes over telecommunications competition with Briton, Canada, Germany, Japan and Peru it hoe titan action only against Mexico. Part of the problem, critics say, is that Mexico's regulatory agency, the Federal Telecommunications Commission, is not fully independent and lacks the power to enforce its own rules. Fox has promised to change that. "Somebody is, going to have to say no to Telmex on some important issues and make it stick; said telecommunications expert Phil Peters of the Arlington, Va.-based think tank Lexington institute.
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