(UPDATE) Mexican Regulators Propose Steps To Curb Dominance Of Telmex
Dow Jones Online News, Thursday, June 03, 1999 at 21:59
(Published on Thursday, May 27, 1999 at 18:57)
MEXICO CITY -(Dow Jones)- Telefonos de Mexico SA would be subject to
tariff floors under proposed regulations to curb its power as the
country's dominant phone carrier.
Meanwhile, Telmex agreed to invest as much as $100 million in common
stock of Williams Communications Group Inc. (WMB), the fiber-optic
network unit of Tulsa, Okla.-based energy company Williams Cos. Telmex
expects to make the investment simultaneous to Williams's initial public
offering of the telecom unit, which is worth $750 million in common
shares. The companies also said they would interconnect their
fiber-optic networks.
Williams Cos. is the largest natural-gas shipper in the U.S. Its
communications unit is attempting to become one of the country's main
providers of the high-speed communications services. Such networks are
increasingly in demand for voice, video, and data traffic.
Under the proposed new Mexican regulations, Telmex (TMX), as the
Mexican Stock Exchange bellwether is known, would also be forced to
share more information with rivals who pay for use of its vast network.
The services it provides to competitors would have to satisfy minimum
standards and, in many cases, fees would have to be based on costs.
The regulations, a draft copy of which was obtained by Dow Jones,
mark the government's third big move in recent months to alter a
regulatory landscape that was widely seen to favor the former state
monopoly. The government ordered Telmex to halve network access fees in
December and three months later told it to raise long-distance rates.
The Federal Telecommunications Commission, or Cofetel, was expected
to announce the additional regulations within days. They result from a
March 1998 ruling by Mexico's antitrust authority that Telmex dominated
markets for most telecommunications services.
The regulations are likely to draw fire from Telmex for going too far
and from its rivals for not going far enough.
Telmex's long-distance rates would have to at least cover costs, a
measure likely to please rivals backed by AT&T Corp. (T) and MCI
WorldCom Inc. (WCOM) who have reeled under a pricing war that followed
Mexico's introduction of long-distance competition in 1997.
Cofetel also plans to remove long-distance from a basket of services
to determine Telmex's average rate hikes, an important nod to rivals who
criticize Telmex for driving down long-distance rates while dramatically
raising rates for local calls, a market in which it hasn't yet faced
serious competition. By removing long-distance from the basket, Telmex
couldn't offset a local rate hike with lower long-distance rates.
The regulations would establish a floor and a ceiling for local
rates. Setting a floor helps upstarts backed by BCE Inc.'s (BCE) Bell
Canada International and Mexican media companies Grupo Televisa SA (TV)
and TV Azteca SA (TZA), who are pouring billions of dollars into efforts
to loosen Telmex's stranglehold on local service.
Some rivals welcomed the stiffer tariff guidelines but faulted them
for failing to require an independent auditor to verify Telmex's costs.
In another nod to Telmex rivals, Cofetel would require lower network
access, or interconnection, fees as Telmex becomes more efficient. It
would also limit Telmex to "adequate profit margins" for services it
provides to rivals, who complain that they are now overcharged. Those
services include use of ports, renting space at switching centers and
some customer billing.
Telmex would also be forced to turn over to rivals a host of
technical information, giving competitors a better idea of what they are
paying for. Telmex, with a network of 10.1 million lines, is a crucial
resource for competitors, whose networks have limited reach.
Complicating the government's plans to issue new regulations, a
Mexican judge agreed to review the antitrust ruling that Telmex was a
dominant phone carrier.
The First District Administrative Court on Monday temporarily
suspended the March 1998 ruling by Mexico's antitrust panel that Telmex
dominated most telecommunications markets. No date was set for a
definitive ruling.
Copyright (c) 1999 Dow Jones & Company, Inc.
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