On Monday April 5, the United States Trade Representative’s Office (USTR) urged Mexico’s Federal Telecommunications Commission (Comisión Federal de Telecomunicaciones, Cofetel), to take action against a company often accused of monopolistic practices: Telmex. Telmex is Mexico’s largest telecommunications company and together with Telcel (the country’s largest mobile phone carrier), they dominate over 70% of the market share for telephone services in Mexico. Both companies are owned by billionaire Carlos Slim and have been investigated by some of Mexico’s regulatory agencies for charging above-average rates and for anti-competitive business practices.
According to the USTR’s annual review of telecommunications trade agreements, Telmex currently does not offer competitive rates for long distance telephone service in 199 area codes that consist of 25% of the population in Mexico. The people living in these areas often lack access to other long distance service providers, making Telmex their only option. According to the USTR report, this makes the company a de facto monopoly in these areas, which has important affects on US consumers who frequently communicate with relatives in Mexico and must pay the abnormally high rates charged by the company.
The report’s commentary section also says that Telmex and Telcel have successfully been able to negate the effects of past inquiries by Mexican government regulators and continue operating with minimal oversight. For example, in 2008, Cofetel ordered Telemex to offer competitive rates in 70 area codes in light of the high rates being charged. However, the company responded by obtaining a legal injunction blocking the order.
The USTR officially urged Cofetel to do “what is required as soon as possible” to oblige the company to offer competitive prices in 70 area codes in Mexico. This formal request came one day before President Calderón proposed new anti-monopoly legislation (discussed in the previous Justice in Mexico blog entry). One of the most important parts of the legislation is that it would empower Cofetel to impose more stringent sanctions on businesses it determines are engaged in monopolistic or other anti-competitive practices.