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MEXICO: Consumers Accuse Phone Company of Human Rights Violations

by Kent PatersonBorderlines
August 11th, 1999

Graciela Ramos is not impressed by Carlos Slim's riches. Recently named by Fortune magazine as the richest man in Mexico, Slim, the principal owner of Teléfonos de México (Telmex), increased his net worth last year to almost $8.8 billion dollars, according to the business biweekly. And the telecommunication magnate's recent purchase of a large chunk of Televisa, the gigantic Mexican television network, is a sure bet that Slim's pot of gold will keep getting bigger.

But for Ramos, an independent Chihuahua City Council member and coordinator of the consumer activist group Women for Mexico, Slim's accumulated wealth has come at the expense of Mexican telephone users.

"The money that Slim used to buy Televisa came from Telmex's 10 million customers," says Ramos, adding that many of those customers are poor and can ill afford Telmex's charges. "We've seen cases of retired people who get an 800 peso check for the month and a monthly phone bill of 800 pesos," Ramos notes.

For more than four years, Ramos and Women for Mexico have been a thorn in Telmex's side. The group has waged a campaign to force Mexico's privately-owned, local phone service giant to cancel measured service (a system by which customers are charged for the duration of local calls), provide devices that track the number of phone calls made from a home, and ensure that economically disadvantaged groups have access to both public and private telephones. Women for Mexico's demands have been raised through lawsuits, hunger strikes, and occupations of Telmex offices.

Now, in conjunction with a network of like-minded groups scattered across Mexico known as the National Alliance for Fair Payment to Telmex, Women for Mexico is taking their phone war into the international arena. In late July, the consumer advocates announced the filing of a complaint with the Interamerican Human Rights Commission of the Organization of American States (OAS), charging Telmex and the Mexican government with violating the 1988 San Salvador Protocol to the American Convention on Human Rights. Signed by Mexico, the protocol on economic and social rights includes articles that guarantee "the right to special protection in old age" and the ability to "enjoy the benefits of scientific and technological progress." Until now, human rights complaints filed with the OAS and other international bodies have largely concentrated on torture, extrajudicial assassination, and deprivations of legal and political rights.

The Chihuahua consumer activist explains that both Mexico's Secretary of Communications and Transportation (SCT) and Secretary of Commerce and Industry (SECOFI) are responsible for Telmex's alleged violations, because they are the federal agencies legally mandated to regulate various aspects of Telmex's operations. Ramos adds that copies of the complaint will be forwarded to nongovernmental human rights groups such as Amnesty International and international lending institutions, including the World Bank and the International Monetary Fund.

These complaints against Telmex demonstrate that despite the much-vaunted "information revolution," there is a long way to go before the theory of a "global village" becomes a reality. So far, new telecommunications technology has benefited those who can afford it--especially large corporations. While average people who enjoy access to the emerging global communications network can use it to converse with friends, educate themselves, and make an occasional purchase, big business has used it to move capital with even greater ease across borders, strengthening its position vis-a-vis local communities. While these new technologies certainly do permit international organizing and education on a scale not imaginable before, the case in Mexico makes it clear that until access is more equitable, the information revolution remains largely a phenomenon experienced by those with money.

The High Cost of Phone Service in Mexico

Driving the Mexican telephone consumers' movement are the escalating costs of local phone calls. Women for Mexico most recently protested Telmex rate hikes for 1999 that will increase the cost of each local call--beyond the first "free" 100 calls allowed under measured service--to about 13 cents. Telmex also announced a 14.16 percent increase in 1999 for national long distance and calls to the U.S. and Canada.

When Telmex's official monopoly on the Mexican telecommunications market was ended in January 1997, many free marketeers predicted that opening up the country's phone industry to national and foreign competition would result in better prices and services to consumers.

But instead of offering lower residential rates, Telmex increased basic monthly rental and measured service rates at the beginning of 1997, followed by the hike announced this year. And despite the entry of 20 new companies to the public telephone market, costs for using public phones, too, have gone up. The cheapest card required to activate a Telmex public phone costs 30 pesos--about one day's minimum wage salary. A low-wage worker could blow a third of his or her daily pay making a ten-minute call. At a time when satellite and cellular communications are becoming the hallmark of the age, many Mexicans are being left without basic access to telephones.

Telmex's price hikes suggest that the company still has a powerful hold on the Mexican telecommunications market, despite the fact that a decade has passed since its privatization and two years have passed since it was opened to competition. The only arguable benefit consumers have witnessed is that Telmex has come up with a variety of long distance discount plans for its now more expensive services.

Women for Mexico Wins Some Concessions

During the past year, Women for Mexico has been very busy at both the local and national level. In 1998, the Chihuahua-based group helped form the National Alliance for Fair Payment to Telmex. Other founding organizations came from human rights and consumer advocacy groups, as well as from the debtors' groups in the El Barzon movement. Participants of the alliance represent residents of Chihuahua, Sonora, Tamaulipas, Durango, Sinaloa, and other states. Bringing together the diverse forces are common complaints: the skyrocketing price of Telmex service, public telephone costs, and perhaps most troublesome of all, frequent charges for long-distance calls that were never made by the residential customer.

"These were local movements, but people got desperate as the state and federal agencies were in favor of Telmex," says Ramos. "Authorities didn't have the faculties, PROFECO [the Procuraduría Federal del Consumidor, Mexico's consumer protection agency] couldn't do anything."

Hot on the heels of the first alliance meeting, Women for Mexico then launched its most intense campaign to date. In late 1998, Women for Mexico and allied groups in Chihuahua conducted occupations of at least 16 northern Telmex offices in Chihuahua City, Delicias, Camargo, Parral, and Jiménez. According to Ramos, more than 1,000 people participated in the takeover of eight Telmex offices in Chihuahua City alone. The wave of protest resulted in surveillance and a raid on one site in Chihuahua City by militarized elements serving under the Attorney General of the Republic. Later, at a May 1999 meeting in Oaxaca, the national Telmex consumer movement endorsed filing the human rights complaint with the OAS.

After the Chihuahua demonstrations subsided last December, Telmex entered into a number of individual settlements to restore phone service and resolve bills disputed by protestors. Ramos credited the movement for producing two important changes in Telmex's billing practices. First, the company is now required by Mexico's Secretary of Communications to issue a detailed list of calls made each month from every phone. Second, a new computerized system called Telmex Precisa is supposed to activate when a customer picks up the phone and inform the user how many calls have been made from the particular apparatus.

Other sectors of society, meanwhile, are also beginning to question Telmex. For instance, in Chihuahua City earlier this year, local authorities became embroiled in a dispute with Telmex over the company's heretofore free use of municipally-owned land for placing its public telephones and lines. Quoted in the Diario de Chihuahua newspaper, Benjamin Ojeda Flores, the head of the local chamber of commerce, said: "If even a hamburger vendor on the street corner has to pay the municipal government the right to use space, we don't see why Telmex, a business with big resources and profits, can't make this payment."

For its part, Telmex finally appears to be responding to some of these criticisms. Slim recently told the Mexican press the company would be installing new public telephones that would be free to people who get a special card. The initial cost of these cards has yet to be determined.

But from the point of view of consumer advocate Ramos, Telmex still has a long way to go in making sure that all Mexicans who want to use phones can do so, and not be charged for calls they never made. At the same time, scores of lawsuits filed against Telmex are backlogged in the Chihuahua court system.

Telmex Reaches Out to the U.S.

The Telmex consumer movement is perhaps a textbook case of economic and social struggles likely to break out when free market reforms like deregulation and free trade, which limit the power of consumers to respond, coexist with big business that has lived off government pork for years. The fight pits a large and growing internationally-oriented corporation, which is most concerned about profit margins and quarterly reports, against the interests of local consumers, who are much more interested in having an affordable service to stay in touch with relatives and friends, not to mention conducting vital personal business.

Immersed in the global market, Telmex is up against the AT&Ts of the world. In order to stay competitive, Telmex is modernizing at home and expanding abroad. In 1999, the company announced it would invest $4.6 billion toward these ends just in the next year. While hiking prices in Mexico, Telmex is broadening its investment horizons to include the United States, Puerto Rico, Guatemala, and Brazil.

Aiding the U.S. side in this battle of the titans is the United States Federal Communications Commission (FCC), which regulates on behalf of U.S. companies wanting a piece of the global telecommunications pie. The FCC has had a stormy relationship with Telmex. Last year, Telmex entered the U.S. long distance market in partnership with Sprint. FCC authorization of the deal was contingent on Telmex lowering surcharges billed to U.S. companies sending calls into Mexico. With great fanfare and publicity, the new Telmex-Sprint Company (TCS) declared that it would capture the Mexican-American and Mexican resident phone market in the U.S., because it best understood the culture and needs of customers frequently calling into Mexico.

TSC, however, proved short-lived. U.S. companies complained that Mexican surcharges remained high, prompting the FCC in late 1998 to demand that TSC comply with its conditions to operate or risk losing its license. In early 1999, while the FCC was delaying a decision on the TSC license, the company dissolved.

Ironically, even this feeble attempt to place regulations on Telmex's entrance into the U.S. market would probably get nowhere today because of recent free trade reforms promulgated by the World Trade Organization that curtail governmental pre-conditions on telecommunications companies wishing to enter a foreign market.

Despite the demise of TSC, Telmex purchased Sprint's shares in the venture, and then announced it was forming a new company, Telmex USA. Although FCC action was still pending against Telmex, the federal agency gave its approval to the new company and allowed Sprint to transfer its subscriber base to Telmex USA without having to notify the customers. Reportedly, Telmex USA is in the process of organizing its products and services. For now, the FCC says it is happy with Telmex because progress has been made in lowering Mexican surcharges on U.S. long distance carriers.

Telmex continues to step up its presence in other U.S. telecommunications markets. The company has invested in U.S. communications firms and purchased South Comm in Texas this summer. With shares offered on the New York Stock Exchange, and North American and French investors enjoying a fair amount of Telmex's action, Wall Street is generally upbeat about the growing phone company. A recent issue of Business Week magazine proclaimed that "investors love the history of Telmex."

Graciela Ramos, though, suggests that U.S. consumers exercise caution. "Be very careful. Mr. Slim seemingly has had a monopoly, which is [supposedly] anti-constitutional in Mexico, but it's been the most powerful monopoly that's been protected by our government," she says. "It seems Mr. Slim wants to have even greater monopolies.... [Y]ou all have to be on the alert and in other countries learn what is happening to the Mexicans."

Kent Paterson is a freelance writer based in Albuquerque, NM.





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