WTO RULES AGAINST MEXICO'S TELMEX IN FIRST TELECOM CASE OF ITS KIND
In the first telecom decision of its kind since the Basic Telecom Agreement of 1997, the World Trade Organization (WTO) ruled in favor of U.S. long distance carriers in their dispute with Mexico’s Telefonos de Mexico (Telmex), a U.S. Trade Representative (USTR) official confirmed Wed. The WTO late last week issued a preliminary decision requiring Telmex to reduce the rates it charges U.S. carriers to connect incoming calls.
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The confidential decision isn’t expected to be finalized until early next year and can be appealed, officials said. But if the ruling stands, it would mark the first time that a complaint on implementation of the 1997 WTO basic telecom agreement has made it all the way through the organization’s dispute procedure, they said.
The USTR took its complaint against Mexican telecom rules -- which it said “create a price-fixing mechanism led by” the country’s dominant carrier -- to the WTO in Feb. 2002 (CD Feb 14/02 p5). It expressed concern Mexico hadn’t opened the cross-border telecom market to competition, meaning U.S. carriers had to pay high wholesale rates for terminating their calls in Mexico. “The result is steep telephone charges that penalize American and Mexican families seeking to maintain cross-border ties, raise the price of doing business across the border and burden U.S. telecom firms with unnecessary costs,” USTR’s Robert Zoellick said in the complaint.
That was the 2nd time the USTR had gone to the WTO with the Telmex complaint. The U.S. first sought a WTO dispute settlement panel on Mexican telecom concerns in 2000, but Mexico used prerogatives to block the request. In 2002, Telmex, WorldCom and AT&T agreed to cut average 19-cent-per- min. termination fees paid to the Mexican carrier. The carriers then introduced 3 new rates depending on call destination, with a weighted average of 8-9 cents per min. However, the USTR said the new average rate still was at least double the actual cost of terminating those calls in Mexico, and it cost U.S. consumers $500 million in excess annual fees.
The WTO decision last week reportedly concluded that Mexico had violated the organization’s basic telecom agreement and the Reference Paper signed by half of the WTO members, including Mexico. It reportedly found that Mexico’s rates weren’t cost-based, prevented competition and restricted calls made within and from Mexico. However, the decision affirmed Mexico’s restrictions on calls originating in the U.S. on which no connection fee was paid. Telmex had said earlier that practice cost it $200 million per year in lost revenue.
AT&T applauded the decision, saying it “appears that the WTO has agreed that Mexico has not implemented its telecommunications commitments.” It said it had “long been concerned about high termination rates on the U.S.-Mexico route and Mexico’s restrictions on competition for terminating international calls. We hope Mexico will at long last take its commitments seriously and take the necessary steps to fully implement all its telecommunications trade obligations.”