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Trade officials: Telmex cutting US competition Sunday Capitol
WASHINGTON - Federal trade officials said Friday that they will file a complaint against Mexico with the World Trade Organization because Telefonos de Mexico SA is stifling competition from U.S. firms. U.S. Trade Representative Charlene Barshefsky said Mexico is violating WTO agreements by allowing Telmex to charge competitors far more than it casts the Mexican firm to provide access to its telephone customer base. Jorge Nicolin, the president of Mexico's Federal Telecommunications Commission, or Cofete, rejected the accusations. "The USTR case is very weak. It doesn't have any substance in the facts," Mr. Nicolin said. "We are fulfilling all of our commitments with the WTO." Ms. Barshefsky said Telmex reaps "windfall profits" with same of Latin America's highest telecom communications service rates, said, while Mexico lags behind in Internet growth and the number of phone lines available for its population. "Clearly the regulatory system in Mexico is entirely broken," she said. "What we have is the failure by the Mexican government to produce effective measures to reduce Telmex's monopolistic behavior. The situation is intolerable." Mr. Nicolin said the U.S. action amounted to an attempt to influence Mexico's regulatory process. The Cofetel is currently preparing new regulations that will reduce Telmex's dominance in several markets. Telecommunications companies are also about to begin a new round of negotiations on long distance interconnection rates. "It makes a lot of sense that while you're taking decisions and actions, you will receive additional pressures" he said. The complaint would involve three charges, Ms. Barshefsky said. The first maintains that Cofetel has riot disciplined Telmex's tendency to use its dominant market position to block competition. Telmex has failed to allow competitors to connect to Telmex s customer base for local, long distance and Internet service, she said, and it charges too much for interconnection service when it does provide access. The complaint will also challenge Telmex's settlement rates for long distance calls made from the United States into Mexico. U.S. customers make more than 3 billion minutes a year of telephone calls to Mexico, far more than Mexicans place to the United States. Telmex and other Mexican telephone companies collect a fee far such calls from U.S. companies at a rate fixed last year between the two governments of 19 cents a minute. U.S. officials say that fee should be lowered to no more than 10 cents a minute. AT&T; Corp. and WorldCom Inc. have subsidiaries offering long-distance and Internet service in Mexico, and other U.S. firms have formed partnerships seeking to enter the $12 billion Mexican telecommunications market. AT&T; general counsel Jim Cicconi praised the decision to file the WTO complaint. "Mexico continues to impede low-cost cross-border traffic, lacks cost-based rates for interconnection to Telmex's network, and has not implemented an effective pro-competitive regulatory regime," Mr. Cicconi said. "Mexico's participation in the information revolution will be in jeopardy as long as these problems remain." Telmex disputed the perception that the Mexican telecommunications industry is not fully open to competition. "Telmex is disappointed and concerned by the unilateral, unbalanced nature of the USTR review," the company said in a statement. "So far, mischaracterizations by the U.S. carriers of both Telmex and the state of competition in Mexico have been taken at face value." A February study by the nonpartisan research group the Alexis de Tocqueville Institution of Arlington, Va., found Mexican consumers last year paid almost four times as much as U.S consumers for a basket of telecommunications services. U.S. trade officials said a request to the WTO to "pursue consultations" with Mexico would be lodged in the next several days. If those supervised discussions fail to bring an agreement within 60 days, the U.S side can request a WTO dispute resolution panel. WTO decisions are binding on the 136 member nations, although cases can drag on for as long as two years. If the U.S. side wins this argument, Mexico would have to compel changes at Telmex or else face trade penalties from the United Slates, such as tariff's. Ms. Barshefsky said she does not expect a resolution to take long. She said she hopes President Ernesto Zedillo's government can reform Cofetel before leaving office to December. Earlier this week, Deputy. U.S. Trade Representative Richard Fisher met in Mexico City with advisers to President-elect Vicente Fox, who said they intend to make lower telecommunications costs and expanded service a priority. "If anything, this (WTO complaint) should be a political assist to the Fox administration," Mr. Fisher said, "because the Zedillo administration has within its power the ability to solve his issue, and should solve this issue." In an interview last month with The Dallas Morning News, Telmex Chairman Carlos Slim Hein criticized his long-distance competitors for lobbying government officials instead of wooing customers with better services. "Instead of going to the market, they go to the government," he said "I think they have more lawyers than engineers. We worry about the quality of our service, our infrastructure and our market position."
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