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Mexicans Overbilled Billions For Internet, Voice
Courtesy of Carlos Slim and Telmex Monopoly

According to a new report, Mexicans have been overcharged $13.4 billion a year for phone and Internet services, primarily thanks to the fact that the Mexican telecom market is dominated by one player: billionaire Carlos Slim and his incumbent telco Telmex. Telmex dominates 80% of the landline voice and broadband market, with Slim also controlling about 70% of the wireless market with America Movil.

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According to the new report, Mexico's uncompetitive market resulted in consumers paying $129 billion over five years, nearly 2 percent of the country's economic output. The report found Mexico had the lowest per capita public investment in telecommunications in the 34-member OECD, while Telmex maintained a profit margin of 47 percent, among the highest of all member countries.

What's to be done? The OECD report suggests that actually having a strong-willed and independent regulator that does its job would be a great start. That's in stark contrast to the dominant carrier discourse that all regulation and regulators are utterly irredeemable because government can simply never, ever work properly (ignoring of course that carrier lobbyists and guys like Carlos Slim work tirelessly to ensure this becomes true).

"Mexico should make the regulatory authority Cofetel more powerful and independent," notes the OECD. "This would include increasing its financial and administrative independence and being able to impose higher sanctions than it can today to deter anti-competitive behaviour."
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gballer
@reyrey.net

gballer

Anon

Ahhhhhhhhhhh

So this is the business plan US carriers/telcos have been trying to copy..
rocafellanrd
join:2009-05-04

2 edits

1 recommendation

rocafellanrd

Member

Pacman & monopoly teach the best business practices

Most of the richest people in the world play "monopoly" with there businesses.
1. Buy up specific sections of the board. All the 2 reds, 2 yellows, 2 greens, and 1 blue
2. Perform some vertical integration and horizontal integration mgmt while playing.
3. Control the board.
4. Slowly muscle the other players out of business by decreasing there revenue and belittling them. Make fun of the players during the game, name calling, etc.
5. Make sure you have little bit of luck or just bribe the other parties.

I think there are some other rules. Add some if I missed any

As a matter of fact the game monopoly is the best educational tool for most people.
It helps them understand why the world is the way it is and why it needs to change.

Duopoly and Monopoly fall in the same gray area. We in the US are just getting raped x2 where ever we live. Majority of us only have 2 providers in our areas.
Expand your moderator at work

Maximuh
@comcast.net

Maximuh

Anon

The future inc

I am betting the big US Tel-co owners are drooling over this, if they can keep pushing it the same direction here...
en103
join:2011-05-02

en103

Member

Time to use VoIP like Skype

If you can get Skype, bypass the market.
openbox9
Premium Member
join:2004-01-26
71144

openbox9

Premium Member

Picking Nits

How was it determined that Mexicans were overcharged $13.4B? There needs to be some frame of reference.

bbeesley
join:2003-08-07
Richardson, TX

bbeesley

Member

Re: Picking Nits

said by openbox9:

How was it determined that Mexicans were overcharged $13.4B? There needs to be some frame of reference.

The frame of reference is that study was done by the Organization for Economic Cooperation and Development who has a vested interest in getting the Mexican Government to work with them to develop their regulatory policies

they determined - apparently unilaterally - that the rates that the consumers in Mexico were "comparatively expensive"...so technically they weren't "overcharged" as they paid the advertised rate on their bills...but those rates could have been less if they lived somewhere else.

The challenge to seeing lower rates in the near term without some sort of artificial intervention by policy or regulation is is that Telmex has a majority position, whether this was gained competitively or granted to them by the Mexican government, and there are currently few competitive influences that would help drive price down.

On the other hand, if the rates for telecommunications in Mexico are really that high, it sounds like a great opportunity for some company to come in and gain market share with an alternative.
openbox9
Premium Member
join:2004-01-26
71144

openbox9

Premium Member

Re: Picking Nits

said by bbeesley:

but those rates could have been less if they lived somewhere else.

The same could be said for many things in many countries. That's an issue I have with these types of studies.

I also have an issue with propagating inflammatory headlines...unfortunately I'm becoming used to them.
sonicmerlin
join:2009-05-24
Cleveland, OH

sonicmerlin

Member

Re: Picking Nits

said by openbox9:

said by bbeesley:

but those rates could have been less if they lived somewhere else.

The same could be said for many things in many countries. That's an issue I have with these types of studies.

I also have an issue with propagating inflammatory headlines...unfortunately I'm becoming used to them.

Oh for christ's sake. This isn't at all inflammatory. Mexico's telco industry is controlled almost entirely by a single private company. It's the very definition of a monopoly. It's made Carlos Slim the richest man in the world.

You don't have a clue how Slim came upon that monopoly. The former president of Mexico basically transferred the government infrastructure to Slim, and he's used extremely dirty tactics to keep out all competition.

The guy is the very definition of scum. I don't know how you look in the mirror after defending a monopoly like that.
openbox9
Premium Member
join:2004-01-26
71144

openbox9

Premium Member

Re: Picking Nits

So, how have you determined Mexicans are being overcharged? You don't believe a headline such as "Mexicans pay more than average consumers in developed nations" is more accurate? The word "overcharged" is purposely used to insight debate IMO.
sonicmerlin
join:2009-05-24
Cleveland, OH

sonicmerlin to bbeesley

Member

to bbeesley
said by bbeesley:

On the other hand, if the rates for telecommunications in Mexico are really that high, it sounds like a great opportunity for some company to come in and gain market share with an alternative.

Do you understand the concept of a natural monopoly? Do you understand how difficult it is to compete in the area of infrastructure against an incumbent? Why do you think it hasn't happened yet if it were possible?

Jesus cow it seems like 90+% of the American population has never taken Econ 101.

bbeesley
join:2003-08-07
Richardson, TX

bbeesley

Member

Re: Picking Nits

said by sonicmerlin:

said by bbeesley:

On the other hand, if the rates for telecommunications in Mexico are really that high, it sounds like a great opportunity for some company to come in and gain market share with an alternative.

Do you understand the concept of a natural monopoly? Do you understand how difficult it is to compete in the area of infrastructure against an incumbent? Why do you think it hasn't happened yet if it were possible?

Jesus cow it seems like 90+% of the American population has never taken Econ 101.

yep...I actually studied economics at the masters level thanks much

and if you recall in your Econ 101 class, it is exactly these type of scenarios - high price and an under served market - that attract entities to attempt to subvert a natural monopoly - though I would also argue that they have a dominant position, not a monopoly but that is a deeper discussion

none99
@mcleodusa.net

none99

Anon

Re: Picking Nits

said by bbeesley:

said by sonicmerlin:

said by bbeesley:

On the other hand, if the rates for telecommunications in Mexico are really that high, it sounds like a great opportunity for some company to come in and gain market share with an alternative.

Do you understand the concept of a natural monopoly? Do you understand how difficult it is to compete in the area of infrastructure against an incumbent? Why do you think it hasn't happened yet if it were possible?

Jesus cow it seems like 90+% of the American population has never taken Econ 101.

yep...I actually studied economics at the masters level thanks much

and if you recall in your Econ 101 class, it is exactly these type of scenarios - high price and an under served market - that attract entities to attempt to subvert a natural monopoly - though I would also argue that they have a dominant position, not a monopoly but that is a deeper discussion

ah, economics at the masters level. that only means that you're unable to figure things out on your own and must be taught everything you know. therefore you haven't figured out that the world doesn't operate like a college textbook. can you imagine the kind of dirty (even deadly) tactics that could prevent these "entities" from trying "to attempt to subvert a natural monopoly?" and we're supposed to expect that the mexican government would do anything other than look the other way?
sonicmerlin
join:2009-05-24
Cleveland, OH

sonicmerlin to bbeesley

Member

to bbeesley
said by bbeesley:

yep...I actually studied economics at the masters level thanks much

and if you recall in your Econ 101 class, it is exactly these type of scenarios - high price and an under served market - that attract entities to attempt to subvert a natural monopoly - though I would also argue that they have a dominant position, not a monopoly but that is a deeper discussion

*facepalm*
Not if there's a *high barrier of entry*. This is why infrastructure always results in a "natural monopoly". You see mr. masters econ, the hypothetical "free market" has zero barrier of entry as one of its prerequisites. The area of infrastructure is the exact opposite of the aforementioned hypothetical scenario.

Carlos Slim has a monopoly in Mexico. It's not a "dominant position". There are virtually no competitors for the vast majority of Mexicans.

alchav
join:2002-05-17
Saint George, UT

alchav to openbox9

Member

to openbox9
said by openbox9:

How was it determined that Mexicans were overcharged $13.4B? There needs to be some frame of reference.

The Mexican Government has other priorities, and Carlos Slim is a rich Business Man. Carlos Slim built a State of the Art's Communications Company, linking all the Big Cities with Fiber. So yes, he caters to Government, Big Business, and The Rich. This Network was not built for the Average Common Person, so the costs are going to be higher to connect to this magnificent Fiber Network. Now if some other Company wants to come in and pick up the scraps, at their own cost I'm sure The Mexican Government will listen.
Skippy25
join:2000-09-13
Hazelwood, MO

Skippy25

Member

Re: Picking Nits

So if it wasnt built with the "average common person" who are the majority of his customers?

How are the cost going to be higher to connect to this network then any other?

47% profit margin, you wouldnt consider that to be high?
openbox9
Premium Member
join:2004-01-26
71144

openbox9 to alchav

Premium Member

to alchav
My question was mainly rhetorical. The "overcharging" is only relative to another environment that's not Mexico. It's akin to suggesting the USA is a third world country because we don't have 1 Gbps connections to every outhouse across the country for $29/mth.
sonicmerlin
join:2009-05-24
Cleveland, OH

sonicmerlin

Member

Re: Picking Nits

said by openbox9:

My question was mainly rhetorical. The "overcharging" is only relative to another environment that's not Mexico. It's akin to suggesting the USA is a third world country because we don't have 1 Gbps connections to every outhouse across the country for $29/mth.

You are absolutely ridiculous. No one can compete or roll out any of their own lines because Slim just drops prices below cost until the competitor goes bankrupt. He also uses numerous government ties to keep out the competition.

He charges as much as he wants because there's *zero* competition. How hard is it to understand that a private monopoly will overcharge? Are you denying the possibility of such a thing?

Jeez you're like Eric Cantor.
openbox9
Premium Member
join:2004-01-26
71144

openbox9

Premium Member

Re: Picking Nits

So, your argument is Mexicans are being overcharged because a monopoly exists?
sonicmerlin
join:2009-05-24
Cleveland, OH

sonicmerlin

Member

Re: Picking Nits

said by openbox9:

So, your argument is Mexicans are being overcharged because a monopoly exists?

Why, yes I am! It's categorically impossible for an unregulated private monopoly to exist and not overcharge. Doing so would be grounds for shareholder lawsuits.

bbeesley
join:2003-08-07
Richardson, TX

bbeesley to sonicmerlin

Member

to sonicmerlin
said by sonicmerlin:

He charges as much as he wants because there's *zero* competition.

given that they have 80% market share, wouldn't you classify the other 20% as some value greater than *zero*?

Clearly, there is competition...they have a dominant position, not a monopoly and thus it is possible for an entity to come in and take their customers with a better service....I agree that given that they have a very strong position it will not be easy but it is certainly not impossible.
sonicmerlin
join:2009-05-24
Cleveland, OH

sonicmerlin

Member

Re: Picking Nits

said by bbeesley:

said by sonicmerlin:

He charges as much as he wants because there's *zero* competition.

given that they have 80% market share, wouldn't you classify the other 20% as some value greater than *zero*?

Clearly, there is competition...they have a dominant position, not a monopoly and thus it is possible for an entity to come in and take their customers with a better service....I agree that given that they have a very strong position it will not be easy but it is certainly not impossible.

Wow, you're right! Microsoft only has 90% of the desktop OS market, and plenty of alternatives exist. Therefore they don't have a monopoly!

Obviously, it's merely "difficult" to build a competing service, not impossible, when there's only one competitor with bottomless pockets. All you have to do is build enough lines and attract enough customers to reach critical mass. That means a massive advertising budget to lure people who already have Telmex. A massive opex budget to build out the lines ($1000-$2000/household). And a huge, bottomless pit of your own money, to withstand the heat of the incumbent's inevitable predatory pricing of their service at below cost. You'll lose billions, but that's okay because if you're patient and wait 10-15 years you'll finally reach profitability!

I'm sure you'll find *plenty* of venture capitalists and/or shareholders interested in your business plan!
equivocal
join:2008-01-23
USA

equivocal to openbox9

Member

to openbox9
said by openbox9 :
It's akin to suggesting the USA is a third world country because we don't have 1 Gbps connections to every outhouse across the country for $29/mth.
Yeah, that had nothing to do with why USA is a 3rd world country.

pnh102
Reptiles Are Cuddly And Pretty
Premium Member
join:2002-05-02
Mount Airy, MD

pnh102

Premium Member

Aha!

So that's why they're coming here... cheap broadband!
MrHappy316
Wish I had my tank
Premium Member
join:2003-01-02
Columbia, SC

1 recommendation

MrHappy316

Premium Member

Re: Aha!

That and so they can send money back home so their family can pay the phone bill.

pnh102
Reptiles Are Cuddly And Pretty
Premium Member
join:2002-05-02
Mount Airy, MD

pnh102

Premium Member

Re: Aha!

said by MrHappy316:

That and so they can send money back home so their family can pay the phone bill.

The Mexicans must think we're a strange country indeed. The agency tasked with enforcing our borders is too busy doing other things to do that job.
elray
join:2000-12-16
Santa Monica, CA

elray

Member

Corruption, not Monopoly

Its easy to claim a population is being "overcharged by a monopoly".

Its quite another to find a way to encourage investors to compete in a country where corruption is rampant, and the business climate is rated dead last in the civilized world.

Service may not be the best, price/performance-wise, but I'd rather have "overpriced" service than no service at all.

FFH5
Premium Member
join:2002-03-03
Tavistock NJ

FFH5

Premium Member

SBC & NAFTA helped get Slim his monopoly

Some interesting tidbits I came across while researching Carlos Slim and how he got a monopoly on the Mexican landline business.

First, the Mexican govt in the late 80's was privatizing and SBC (before they became AT&T) helped Slim buy up the government owned telecom company. »en.wikipedia.org/wiki/Ca ··· los_Slim

Two, when NAFTA was signed one of the provisions was that no US company could go into Mexico and compete with Slim. Maybe that was to keep him out of US. Instead he moved in to Latin & South America.

Oh_No
Trogglus normalus
join:2011-05-21
Chicago, IL

Oh_No

Member

Re: SBC & NAFTA helped get Slim his monopoly

It is BS that NAFTA allows for outsourcing of manufacturing jobs, but not competition between mexico, US, and Canadian telacom companies.

FFH5
Premium Member
join:2002-03-03
Tavistock NJ

FFH5

Premium Member

Re: SBC & NAFTA helped get Slim his monopoly

said by Oh_No:

It is BS that NAFTA allows for outsourcing of manufacturing jobs, but not competition between mexico, US, and Canadian telacom companies.

Where are your links?

Slim's monopoly was guaranteed for 10 yrs in Nafta:
»isteve.blogspot.com/2007 ··· est.html

Slim made his big move in 1990 during President Carlos Salinas' corrupt privatization binge (which was enthusiastically endorsed by the elder President Bush). He bought the government's telephone monopoly. Interestingly, Slim's telephone monopoly was written into NAFTA, negotiated during Bush I, granting Slim a decade without foreign competition.

»books.google.com/books?i ··· &f=false
etaadmin
join:2002-01-17
united state

etaadmin to FFH5

Member

to FFH5
If I remember correctly at&t was as late as 2011 Telmex's partner in crime.

»www.bizjournals.com/dall ··· ake.html

»www.bing.com/videos/watc ··· 7C%7C%7C

Telmex use the same technology as at&t use in their internet product, they even use the same modem brand as at&t (2Wire) So I guess their business relationship went deep very deep.
sonicmerlin
join:2009-05-24
Cleveland, OH

sonicmerlin to FFH5

Member

to FFH5
said by FFH5:

Some interesting tidbits I came across while researching Carlos Slim and how he got a monopoly on the Mexican landline business.

First, the Mexican govt in the late 80's was privatizing and SBC (before they became AT&T) helped Slim buy up the government owned telecom company. »en.wikipedia.org/wiki/Ca ··· los_Slim

Two, when NAFTA was signed one of the provisions was that no US company could go into Mexico and compete with Slim. Maybe that was to keep him out of US. Instead he moved in to Latin & South America.

There's a long story behind this that I read a while ago, but Slim is as dirty as it gets. He makes Bill Gates and Microsoft of the 90s look angelic.

His pals in government let him buy up the government infrastructure at dirt cheap prices.
pkorx8
join:2003-06-19
San Francisco, CA

pkorx8

Member

Real world and performance numbers?

Can anyone report on the real world costs (plan costs) and performance numbers on this monopoly network?
Like per GB costs and wireless plans.

We hear a lot from our neighbors in the north, just curious to what is happening in the south.
Kamus
join:2011-01-27
El Paso, TX

1 recommendation

Kamus

Member

This is nothing new. But it's true.

This is true, Telmex has been losing ground, but it's still a dominant monopoly here in Mexico, same can be said about Telcel.

The problem is, their main "competition" (Televisa) is just as bad as they are, and until recently, far worse than them.

This has changed a bit since they started getting serious about upgrading their cable services and they now offer docsis 3.0 while most of Telmex customers are still stuck on DSL (ADSL, not even ADSL2+)

So right now Televisa's multiple cable companies (They own all of them) are finally offering faster service than Telmex can offer.

So Telmex is in a bit of a pinch, since they are now losing a lot of DSL customers to cable.
In response, Telmex upgraded their DSL speeds to kind-of-ADSL2+ speeds (went from 1-2-5 mbits to 3-5-10 mbits in their respective packages) but that's still not enough to catch up to the speeds cable is offering right now.

This is about 2 years overdue, since that's when they started to rollout ADSL2+ in "beta form"

And even now, they can't get their act together, as the vast majority of customers have yet to receive the new speeds, even though it's now "official". and by vast majority i mean almost all of the clients.

There are other games in town as far as internet access goes... but either the coverage is very limited, or the internet sucks from them.

Axtel offers wimax trough out the country, but it's not that reliable.
They also offer FTTH, but in VERY limited areas, but at least they offer it.

Totalplay offers somewhat affordable FTTH, but in even more limited areas to the point where it's a joke. (totalplay is owned by the other TV station, TV Azteca, and Televisa recently bought half of totalplay)

And as many of you know if you read this site, Telmex also has rolled out FTTH and it is in fact by far the biggest FTTH roll-out in Mexico... except for one small problem:
They don't offer any services on that new infrastructure, right now the FTTH customers they have are all "beta testers" like me.
They give the testers either 10 or 20 megabits (i have 20)
and only a 2 megabit upload.
But about a month ago they changed the upload speed from 2 megabits to 100 megabits (!) on some of the users (i'm one of them), i assume for testing purposes. Download speed however, remains unchanged.

It's been well over 8 months since they started installing FTTH across the country, and Telmex has yet to announce they'll sell anything on it (apparently they can't take a hint from Verizon and their FIOS service, which is a separate service from their DSL one)

To put things in perspective, as big as their FTTH infrastructure is compared to their competition, it's still a very far cry from their DSL customers, some of which will probably never get FTTH. And like i said, even though it's the biggest, you wouldn't know it since they don't offer any services on it yet.

At least i live where there's coverage, all i need now is for Telmex to sell me the damn thing so i can get 100/100. If the price is right...

RARPSL
join:1999-12-08
Suffern, NY

RARPSL

Member

Mexico should make the regulatory authority

"Mexico should make the regulatory authority Cofetel more powerful and independent," notes the OECD. "This would include increasing its financial and administrative independence and being able to impose higher sanctions than it can today to deter anti-competitive behaviour."

The first thing that the membership of the authority would need to spend money on is protection against Lead Poisoning due to exposure to Supersonically delivered copper covered pellets.

Due to this type of risk, they may not want to work too hard at their control and oversight job.

MoretoStory
@comcast.net

MoretoStory

Anon

Re: Mexico should make the regulatory authority

The OECD said its report was produced at the request of the Mexican government, which also paid for the report.

The OECD has just stated (news at 2:30pm) that its study was requested and paid for by the Mexican government. Interesting.
Kamus
join:2011-01-27
El Paso, TX

Kamus

Member

Re: Mexico should make the regulatory authority

said by MoretoStory :

The OECD said its report was produced at the request of the Mexican government, which also paid for the report.

The OECD has just stated (news at 2:30pm) that its study was requested and paid for by the Mexican government. Interesting.

This isn't surprising at all...

And if it's paid by the government. What it really means is, "at the request of Televisa"

Televisa is nowhere near the economic powerhouse Slim is. However...
They have something Telmex doesn't:
The power of mainstream media. This isn't a coincidence either, Televisa has been having their way with the Mexican government for a long time now.
With elections looming, the current government wants to be sure they have the support of Televisa for the upcoming elections.
And let's not forget the fact that in Mexico, Telcos and cable operators where forbidden to offer triple play services (you could offer two, but not 3 services)

Yet somehow Televisa managed to get all of it's companies to offer all 3 services, and Telmex has been denied time and time again.

So you may think Slim is the root of all evil (and you wouldn't be far off)

But in truth. Televisa, at the moment at least is either much worse or at the very least just as bad.

Richman
@sbcglobal.net

Richman

Anon

There is always a story behind a rich man

Carlos Slim is not the third riches man in the world for nuthing.
Liberty
Premium Member
join:2005-06-12
Arizona

Liberty

Premium Member

Mx to US charges

My sister went to Matzalan last year and texted her bf a few hundred times.
She is on ATT

When she got her bill, she had >$800 for the texts from Mx to US
Turns out her billing cycle was in middle of vacation
Next month had another $400

ATT said too bad, pay
flyingjoey
join:2005-11-07
Jersey City, NJ

flyingjoey

Member

No wonder... now I get it.

So this is the reason why Mexicans are jumping over the border... They simply can't pay their telephone bill.

I knew there was a valid reason... I just never knew what it was.

So TelMex is the Mexican version of the 1980s-AT&T?