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Mexico, U.S. in Pact on Phone Rates

The agreement to implement a world trade ruling could save cross-border callers millions of dollars.

June 02, 2004|From Associated Press

MEXICO CITY — Mexico and the United States said Tuesday that they had settled a dispute over long-distance rates with an agreement expected to save customers millions of dollars on calls between the two countries.

In a statement in Washington and Mexico City, the governments said they had agreed to implement the provisions of a World Trade Organization report released April 2, which Mexico initially said it might appeal.

"This is a very significant victory for telecommunications consumers, and U.S. and Mexican families will be the big winners," said Richard Mills, a spokesman for Robert B. Zoellick, the U.S. trade representative.

Under the agreement, Mexico's main telephone company, Telefonos de Mexico, or Telmex, won't be allowed to negotiate the interconnection rates on behalf of all Mexican carriers. Instead, each company will negotiate its own rates, Mexican officials said.

Telmex is a former government-run monopoly that still controls 90% of Mexico's roughly 18 million phone lines, and U.S. officials had argued it was reaping charging inflated connection charges for long-distance calls. It can cost as much as 40 cents a minute to call the U.S. from Mexico.

U.S. companies, including AT&T Corp., also had complained that they were unable to use alternative channels for carrying their calls within Mexico.

A spokesman for Telmex refused to comment on the agreement.

Len Cali, AT&T vice president of law and director of federal government affairs, applauded the announcement.

"It appears Mexico has recognized the benefit of a competitive international marketplace, and understands the potential for growth and investment that follows from the full implementation of telecommunications trade obligations," he said.

The WTO agreed with the United States, ruling that Mexico was violating global trade rules by refusing to dismantle barriers to its telephone market. U.S. companies estimate the barriers have cost callers more than $1 billion since 2000.

The U.S. case was being closely watched by American telecom companies because it represented the first WTO interpretation of global rules on telecom services.

The agreement also will make it easier for competitors to enter Mexico and rent the equipment of Telmex and other carriers. Although the Mexican market is technically open to competition, many companies have complained that it is impossible to compete with Telmex.

The agreement was seen as a victory for the United States, which has fought for greater access to the Mexican market.

However, Mexico won a victory with the prohibition of "bypass calls" offered by companies that rent a telephone line, then resell use of that line for cross-border phone traffic. Such companies, which sell calling cards giving much lower rates on phone calls to Mexico, have become common in the United States.

Mexico had long complained about the bypass calls, which are made without paying the interconnection rate. Mexico estimates that about 20% of all incoming calls to Mexico in 2000 were made on bypass lines, costing the country $190 million.

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