The Line to the Gold

For the last 48 years all telephone calls in Mexico were carried by a company called Telefonos de Mexico. The service was poor and expensive, but Mexicans had no alternative. This week the monopoly was finally broken when Avantel S.A., a partnership between MCI and Grupo Financiero Banamex-Accival, began the first phase of the competitive era for long-distance communications in Mexico.

Don’t hang up. This is good news for consumers both in Mexico and in the United States, and an excellent opening for several U.S. telecommunications companies that have long waited to crack the Mexican market.

From now until the end of the year, Avantel will be offering its services through a fiber-optics network that connects 33 Mexican cities and will link up with the MCI network and the world. The new partnership will provide large companies with an advanced communications system including sound and video imaging. And next Jan. 1 Avantel will be connected to the existing Mexican network, which means Mexicans anywhere in the country will have a second option on long-distance service. And, the backers say, at less cost per call.

Politically, breaking the telephone monopoly sends a powerful message confirming the vigor of the privatization process begun in 1992 by then-President Carlos Salinas de Gortari. In an effort to regulate the industry through independent institutions, the Mexicans have created the equivalent of the Federal Communications Commission, independent from government control, to regulate the industry.

Currently, the long-distance market in Mexico is worth $3 billion and is growing at an annual rate of 25%, and 80% of the calls between Mexico and the United States are made to California and Texas. Seems there’s a chance of telecommunication gold in this hookup with the Golden State.