Mexicans have been overcharged $13.4-billion (U.S.) a year for phone and Internet services as the industry dominated by billionaire Carlos Slim gouges customers and keeps the economy from growing, a new study says.
Mexico, the second-largest economy in Latin America, cannot reach its growth potential until the cost of phone and Internet access comes down and more people have easy access to telecom services, the report from the Organization for Economic Co-operation and Development said.
From 2005 to 2009, Mexican consumers paid $13.4-billion a year excess for phone and Internet services, with high fees disproportionately hitting the poor, according to the report. In total, overcharging cost the economy $129-billion over the five-year period, nearly 2 per cent of the country’s economic output, the report found.
“Inefficient telecommunication markets impose a significant cost on the Mexican economy and the welfare of its population,” according to the report that reviewed the country’s telecom sector.
Mexican home phone service is dominated by Mr. Slim’s Telefonos de Mexico, or Telmex, which provides about 80 per cent of services. The billionaire also controls about 70 per cent of the cellphone market through his America Movil.
“This is a critical study … that exposes the weakness of the telecommunications sector in Mexico,” Dionisio Perez-Jacome, Minister of Communications and Transport, said at a press event accepting the report.
The report found Mexico had the lowest per capita public investment in telecommunications in the 34-member OECD, while Mr. Slim’s Telmex had very high profit margins compared with other countries.
In 2008, Telmex had a profit margin of 47 per cent, while the average for countries including Canada, the United Kingdom and the United States was 28 per cent.
A spokesman for Mr. Slim declined to comment on the findings of customers being overcharged, but pointed to other reports that Mexico enjoys a relatively-affordable broadband base.
The report found broadband Internet speeds are low compared to the OECD average and comparatively expensive – a three-minute call from a cellphone to a local phone would cost a Mexican travelling in another OECD country $8.65, compared with the OECD average of $6.76.
It suggested that Mexico eliminate restrictions on foreign investment in the telecom sector and cut judicial red tape that lets the telecom industry stall new rules, fines and restrictions.
Mexico’s President Felipe Calderón, at a separate event, said that his government planned to auction strands of fibre optic cable that would increase broadband service across the country.
Mexico’s cable giant, Megacable, is in a partnership with cellphone company Telefonica and television giant Televisa to share one fibr eoptic project that should deliver more high-speed internet and telecom services.