Mexicans revolting against telecom monopoly

Monopoly electricbankingJune 25, 2013

By John Seiler

As I’ve written a couple of times on our site, Mexico’s economy now is growing faster than America’s. The country has enjoyed almost two decades of capitalist reforms, contrasting with the equivalent plunge into socialism of El Norte.

But I also noted there’s one big area where Mexico lags: telecommunications, the life’s blood of modern economies. It still suffers from a government-granted monopoly to mega-billionaire Carlos Slim, who alternates every few months with Bill Gates as the world’s richest man.

The costs for phone, cell and Internet connections are much more than they would with competition. The cost also hurts American businesses selling and buying in Mexico; and Mexicans who call from the U.S. to Mexico, or vice versa.

Now, a revolt against the monopoly is advancing. It’s explained on the Website Dos Paises, Una Voz (Two Countries, One Voice):

Carlos Slim’s power and fortune is made up primarily from his monopoly on the Mexican telecommunications system with exorbitant prices and inadequate services.
  • Slim’s company, America Movil (comprised of Telmex and Telcel), has nearly 75 percent of the TOTAL Mexican telecommunications system – from telephone landlines to mobile telephone services.2
Mexico has a tremendous poor, rural population that could elevate its socio-economic status if it could end Slim’s monopolistic practices and achieve better access to reliable and affordable telecommunications.
  • According to the January 2012 Organizations for Co-operation and Development (OECD) study “Review of Telecommunications Policy and Regulation in Mexico,” the country has a tremendous poor, rural population that could increase their socio-economic status given access to resources such as broadband.3
  • It has been consistently proven throughout developing countries that access to services like mobile banking provides a route out of poverty.
Carlos Slim’s telecommunications empire has overcharged billions and billions of dollars to the Mexican people, especially to the rural poor. The welfare loss Mexico has endured is estimated at $129 billion.
  • To date, Slim’s telecommunications empire has overcharged billions and billions of dollars to Mexicans, especially to the rural poor. Carlos Slim price gouged Mexican customers a total of$13.4 billion each year from 2005 to 2009 for basic telephone and Internet service according to the OECD study.
  • Slim’s price gouging cost the Mexican economy $129 billion or about 2 percent of the country’s total annual GDP.4
In March 2012, Mexico’s anti-trust agency, the Federal Competition Commission (CFC,) ruled that one of Carlos Slim’s telecommunications companies holds too much power – bringing to light decades of Slim’s monopolistic practices and its impact on Mexicans.
  • The five-member CFC voted unanimously to let regulators proceed with rules to target Telcel’s prices and call quality.
  • This latest action in one in a series beginning in 2011, when the CFC deemed Telcel “too dominant” in the mobile call termination game. The CFC served the phone outfit with an 11,000,000 pesos fine (around $864,000) for monopoly practices. The 2011 ruling allowed the CFC “to cut by more than half the fees Mexico City-based America Movil can charge to complete incoming calls to its users.”5
  • Referencing these monopolistic practices, Mexico’s Central Bank Governor noted “in unusually bold language… that successfully promoting an agenda of economic or ‘structural’ reform could see the country reach growth rates in excess of 5 percent a year – more than double the annual average over the last decade.”6
Carlos Slim’s empire has stopped the economic progress of Mexico and hurt the standard of living for ALL Mexicans.
  • The country’s poorest are disproportionately hurt by the price gouging, coupled with the unreliable and poor services. Carlos Slim’s monopolistic interests resulted in Mexico ranking LASTin public investment in telecommunications (#34 out of #34) whileSlim’s company Telmex had a profit margin of 47 percent – one of the highest of the 34 countries.7
  • According to the OECD report, Mexico loses 2.2% of its gross domestic product each year because of astronomically high cellphone rates, low Internet penetration, and mediocre connectivity.
  • Mexico has 10 percent as many wireless Internet subscribers per 100 inhabitants as Turkey. Its cellular phone rates are by far the most expensive in the OECD. Relative to other OECD countries, Mexico is ranked last in terms of investment in telecommunications per capita; but, says the study, “profit margins of the incumbent nearly double the OECD average.”8

While the recent CFC holding is an important ruling, more must be done to end the crippling effect Slim’s monopoly has on Mexico’s poor and the entire nation’s economic development.


Tags assigned to this article:
Carlos SlimjJohn SeilerMexicomonopoly

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