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Identifier
Created
Classification
Origin
06MEXICO1123
2006-03-02 14:30:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Mexico
Cable title:  

CEO SAYS UNFAIR TO LABEL TELMEX A MONOPOLY

Tags:   ECPS  ECON  MX 
pdf how-to read a cable
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DE RUEHME #1123/01 0611430
ZNR UUUUU ZZH
R 021430Z MAR 06
FM AMEMBASSY MEXICO
TO RUEAFCC/FCC WASHDC
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INFO RUEHXC/ALL US CONSULATES IN MEXICO COLLECTIVE
						UNCLAS SECTION 01 OF 02 MEXICO 001123 

SIPDIS

SENSITIVE
SIPDIS

STATE PASS TO USTR, JONATHAN MCHALE,
AND TO FCC, EMILY TALAGA

E.O. 12958: N/A
TAGS: ECPS ECON MX
SUBJECT: CEO SAYS UNFAIR TO LABEL TELMEX A MONOPOLY

REF: 06 MEXICO 01080



1. (U) Summary: In meeting with Econ Mincouns and Econoff
February 10, Jaime Chico Pardo, CEO of Telmex, refuted
accusations that Telmex and Telcel are monopolies. He
claimed Telmex has experienced a major decline in revenue and
currently controls only 38 percent of traffic. Chico Pardo
focused on future trends and how Mexico can improve its
competitiveness and increase access to technology throughout
Mexico. End Summary.

TELMEX'S FUTURE



2. (U) Chico Pardo noted that although Telmex owns 90 percent
of fixed lines in Mexico, it is responsible for only 38
percent of the traffic. Chico Pardo said that there is now
little money in fixed line services. He claimed Telmex
revenues are declining and explained that Telcel is worth
twice as much. He said more competition, lower tariffs, and
higher discounts have sparked a decline in revenue for
Telmex. (He mentioned he was going to give a presentation to
the Federal Competition Commission (COFECO) on how Mexico's
tariffs are in line with global standards.) Chico Pardo said
the future is centered on broadband and triple play services
(voice, data, and video), as well as quality of service
guarantees.



3. (SBU) Chico Pardo believes that dealing with convergence
issues is challenging. He believes Vonage and some other
internet phone companies have become "free riders." He also
categorized the ruling to allow Nextel to offer Short
Messaging Services (SMS) by the Federal Communications
Commission (COFETEL) as an endorsement of "free ridership"
since other companies paid for a license to offer such
services and Nextel only paid to be a trunking operator.
When asked whether Telmex supported the pending Radio and
Television Law proposal (reftel), Chico Pardo said the
legislation could weaken Telmex and other telecom companies
because the legislation enables the broadcasting companies to
have convergence more easily than telecommunications
companies.

ANTI-COMPETITIVE PRACTICES



4. (SBU) On the day of our meeting, the Wall Street Journal
published a negative editorial on Telmex, basically calling
it a monopoly. Chico Pardo referred to the article and said
it was unfair to label Telmex as a monopoly. In addition, he
claimed Mexico's Federal Competition Commission, COFECO,
ruled that neither Telmex or Telcel are monopolies. Chico
Pardo said COFECO should worry more about anti-competitive
practices in the media sector and cited Televisa as having
too much control over content access. He believes
accusations are unwarranted and are made because people don't
see past Carlos Slim's other business interests.

INDUSTRY OPPORTUNITIES



5. (U) Chico Pardo said that the GOM "missed the boat" on
establishing a strong software and PC manufacturing
industry/maquila sector. He believes that that Mexico could
have remained competitive even with other countries that
offer cheap labor by operating the maquilas 24/7 using
shiftwork.

ACCESS TO TELECOMMUNICATIONS AND TECHNOLOGY



6. (U) Chico said Mexico has one of the most modern
telecommunication and technology infrastructures in the world
but it is extremely challenging to ensure access for
everyone. He believes community access to telecommunications
and technology in Mexico is much better than individual
access. He praised E-Mexico, a project to increase community
access to the internet, as a good starting point but said the
project was small and did not have a lot of private sector
support. He touted the efforts of the Telmex Foundation to
increase access for school systems and train teachers in
computer skills. He also mentioned that the Telmex
Foundation had been working with MIT to develop low-cost
affordable PCs with a plan to buy the systems in bulk for a
very low price to distribute throughout Mexico. However, he
said the project needs more private sector backing before it
can proceed.

COMMENT



7. (SBU) Chico Pardo appeared sincere about increasing

MEXICO 00001123 002 OF 002


Mexico's competitiveness and access to technology and
discussed ways in which he and his company were contributing
to the community. However, Telmex charges tariffs and
inter-connection rates far above cost, making it unclear
whether Chico Pardo wants to truly improve access to
technology or whether he wants to improve access only to
Telmex and Telcel.




Visit Mexico City's Classified Web Site at
http://www.state.sgov.gov/p/wha/mexicocity

KELLY