U.S. to Pursue WTO Action Against Mexico

The United States said Tuesday that it will pursue World Trade Organization action against Mexico over telecommunications competition despite rules announced by Mexico’s telecom regulator to rein in dominant Telefonos de Mexico, or Telmex.

Mexico’s Federal Telecommunications Commission, or Cofetel, on Monday revealed measures to force Telmex to cut the rates it charges long-distance competitors for hooking into its vast local network.

So-called interconnection fees would have to be limited to covering its costs for providing the service, Cofetel said.

The Cofetel resolution also set conditions for quality of service and the information that Telmex must make public about its operations.

But Washington said the measures were not enough to head off a decision made in July to take Mexico to the WTO if U.S. firms were not given a better chance at competing locally.

“We’re going to continue our WTO consultations,” said Brendan Daly, a spokesman for U.S. Trade Representative Charlene Barshefsky.

Telmex, owned by Latin America’s richest billionaire Carlos Slim, was privatized a decade ago. It maintains a stranglehold on local services and is by far the dominant force in the long-distance market-- opened to competition in 1997--and in Internet and cellular services.

Analysts said Cofetel’s new measures could force Telmex to cut interconnection fees by as much as two-thirds, making it vulnerable to being undercut by competitors.

They also initially believed the conditions could appease the U.S. trade representative’s concerns, which were sparked by complaints from U.S. telecom giants AT&T; Corp. and WorldCom Inc., whose local subsidiaries have been in a five-year struggle to break Telmex’s hold on the long-distance market.

Telmex, the former state phone monopoly, controls 98% of local lines in Mexico and has increased its market share of long-distance customers to 81% from 74% over the last three years, according to U.S. trade officials.

Interconnection rates in Mexico have been up to five times higher than rates in other countries, U.S. officials said.

Consultations between the United States and Mexico at the Geneva-based WTO were set to expire Oct. 17. If an agreement cannot be reached by then, Washington’s next move could be the filing of a formal complaint.