WTO Rules Against Telmex

Telefonos de Mexico, Mexico’s largest phone company, may have to reduce the connection fees it charges AT&T; Corp. and WorldCom Inc. because a World Trade Organization panel ruled Friday that Mexico broke global trade agreements.

The WTO ruling in Geneva against Telmex, owned by billionaire Carlos Slim, followed complaints by the U.S. companies that Telmex collected more than $1 billion in overcharges since 2000 for connecting U.S. callers to telephones in Mexico. An interim ruling, issued March 12, reached the same conclusion.

“Mexico has not met its obligations” under the WTO’s commercial services agreements “since it fails to ensure access to and use of public telecommunications networks on reasonable terms,” the panel wrote.

The Mexican government hasn’t decided whether to appeal.

Telmex charged U.S. carriers 5.5 cents to 11.75 cents a minute to complete calls, but those carriers paid 3 cents to 4 cents a minute to place calls to Canada, the U.S. complaint said.

Ricardo Ramirez, deputy general counsel at Mexico’s Economy Ministry, denied that Telmex violated any trade agreements. The effect of the ruling may be minimized as Telmex continues to lower the fees voluntarily, he said.

The panel’s decision does not require Telmex to repay the U.S. companies.

The WTO also determined Mexico’s procedure for negotiating interconnection rates was anti-competitive. Under Mexican law, the phone company that receives the largest long-distance call volume negotiates uniform rates for all Mexican phone companies. Telmex controls about 98% of Mexico’s fixed-line phone market.

Ramirez denied the procedure was anti-competitive, saying it was intended to promote competition by removing a advantage Telmex might have over smaller phone firms in winning higher rates from foreign long-distance providers.

The WTO ruled in favor of Mexico in a counter-complaint that the U.S. phone firms were using the Internet or private networks to disguise international calls as local calls to avoid fees.