Mexico competition chief urges telecoms reform

Mexico’s top competition official has urged the government of Vicente Fox to push ahead with reforms to the country’s telecommunications market to allow companies to compete with Telmex, the privatised telephone monopoly.

For months, the Federal Competition Commission (CFC) has been working with the Telecommunications and Transport Ministry (SCT) to lay the foundations for so-called “convergence” – allowing cable companies to offer telephone services while permitting telephone operators to provide video.

But Eduardo Pérez Motta, who heads the commission, said he perceived a loss of momentum in recent months that could spell trouble in his fight to make Mexico a more competitive country.

“I was very optimistic in November, and the SCT said they liked our proposals. What has happened since then? November has passed, so has December, January and February. And they haven’t done anything,” he told the Financial Times in a recent interview.

The SCT was unavailable for comment yesterday. Mr Pérez Motta’s comments will fuel a raging debate in Mexico over the issue of competition – or the lack of it. At a conference last week, Guillermo Ortiz, the central bank governor, lashed out at the many virtual monopolies that dominate the country’s corporate landscape. 

In reference to the telecoms sector, though without mentioning Telmex, Mr Ortiz said: “The dominant industries and corporate groups do not like competition, and that affects Mexico’s economic performance.”

Mr Pérez Motta insisted that introducing greater competition into the country’s telecoms sector was central to making Mexico more competitive. “This is a once-in-a-lifetime opportunity,” he said. “If we do it well we can change the telecommunications market and that of video, too. If we don’t we will leave it the same or probably worse than it is today.”

Many economists and commentators have long complained about the dominance of Telmex, owned by Carlos Slim, Latin America’s richest man. With about 18m lines, the company controls 94 per cent of all fixed phone lines. Mr Slim also controls an estimated 80 per cent of the mobile phone market.

The result is a virtual stranglehold on Mexico’s telecoms market, and independent studies show that Mexico has some of the world’s highest phone charges.

Since last year, the CFC has pushed to allow cable TV operators to start offering telephone services. Until now, these companies have only been allowed to rent their networks to separate companies offering such services. But even there, the companies can only offer telephony to customers using that network. The result, said Mr Perez Motta, is like “offering a service akin to walky-talkies”.

One of the big debates in Mexico is whether Telmex should be allowed to provide video services as part of an eventual liberalisation effort.

Mr Pérez Motta said that if the SCT allowed Telmex to offer video services, it should first ensure the company complied with three demands: first, that it allow cable companies to hook up to its existing network; second, that it ensures the networks are compatible; and last that its customers can keep their existing telephone numbers if they opt to switch to another provider.

“If you put the factors in that order, you generate the right incentives for everything to converge. Why? Because you force Telmex to comply with certain disciplines,” he said. “Telmex will do it because it knows that if it does it will receive a carrot in the form of video. But if you give Telmex video first, when will it comply with the other things? Never.”

Mr Pérez Motta urged the SCT to adopt all its recommendations, and expressed concern that the final package would take only some of the CFC’s proposals, in effect diluting the reform. “There is a danger that the dog ends up with the head of a cat,” he said. “In this case the dog has to be whole – from head to tail. We are going to keep pushing on this issue. We are going to be intransigent.”