United States-Mexico Telecommunications WTO Dispute

The Dispute

The United States filed a complaint with the World Trade Organisation (WTO) in 2002 that Mexico’s International Telecommunications Long Distance Rules were anti- competitive and above cost. Mexico’s international telecommunication rules:

  • Required United States carriers to interconnect with Mexican telecommunications network operators in order to terminate calls into Mexico,
  • Gave Telmex, Mexico’s dominant operator, exclusive authority to negotiate termination rates into Mexico on behalf of all Mexican carriers, and
  • Prohibited United States carriers from obtaining leased lines to terminate calls into the local market.

As a result, rates for terminating international traffic into Mexico were higher than for countries with a competitive telecoms sector.

The Decision

The World Trade Organisation (WTO) ruled in March 2004 that Mexico’s international telecommunication regime at the time had violated its WTO obligations. The WTO panel found that most of the major claims made by the United States had merit. Mexico was found to be in breach of:

  • Its commitment to ensuring that rates paid by United States operators to connect international calls to Telmex were cost-based,
  • Its obligation to implement measures to prevent Telmex from engaging in anti-competitive behaviour. In particular, Telmex’s exclusive authority to negotiate international call termination rates charged by all Mexican carriers provided scope for anti-competitive behaviour,
  • Its obligations under the General Agreement on Trade and Services to ensure Mexican carriers lease lines to United States carriers with operations in Mexico. Lack of access to leased lines prevented United States carriers from being able to provide resale services in Mexico.

The WTO panel found that Mexico was within its rights to prohibit United States carriers from using leased lines in Mexico to terminate calls originating in the United States.

The ruling by the WTO was expected to benefit the United States consumers who make calls to Mexico. It is estimated that consumers were over-charged more than US$1 billion since 2000 as a direct result of above cost interconnection rates charged by Telmex.

The Mexican Government chose not to appeal the WTO decision, after the affected parties reached a mutually acceptable agreement. In 2005 the Government passed new legislation to comply with the WTO ruling.

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