Mexicans overcharged billions a year for phone, Internet

By on January 31, 2012, 6:30 PM

A new report alleges that billionaire Carlos Slim's telecommunication companies have overcharged Mexican phone and Internet customers $13.4 billion a year between 2005 and 2009. Released Monday by the Organization for Economic Co-operation and Development (OECD), the study claims that Mexico's economy is being negatively affected by Slim's price-gouging telecom empire, which includes about 80% of the nation's landline subscribers via Telmex and 70% of cellular users through America Movil.

Among the OECD's 34 members, Mexico is said to have the lowest per capita public investment in telecom infrastructure while Slim's operations have disproportionally high profits. In 2008, Telemex had a 47% profit margin, while the average for nations including the United States, United Kingdom and Canada was 28%. In one example, the OECD noted that Mexicans traveling in another OECD country would pay $8.65 to make a three-minute local call versus the $6.76 average for other participating nations.

The report also found that Mexico's broadband speeds are slower and pricier than the OECD average. By overcharging subscribers, Slim has purportedly cost the Mexican economy $129 billion over the five years, or nearly 2% of the country's annual GDP. Mexico "needs the socioeconomic boost provided by greater access to more efficient communication services, in particular high-speed broadband," the OECD said.

"The poor development of telecommunication infrastructure in Mexico is due in large part to [a] lack of effective competition and the resulting high level of market concentration," the report continued. "This is a critical study...that exposes the weakness of the telecommunications sector in Mexico," said Dionisio Perez-Jacome, minister of Communications and Transport during a press event about the findings.

The OECD uses a comparison method called "purchasing power parity" to account for economic differences between countries, but Slim says "It's difficult to compare a country with $1,000 per capita with countries with $40,000."It's not that the lower broadband impacts GDP growth, it's that the lower rate of growth affects the broadband." He added that the OECD's data is a "fantasy" and "pulled out of thin air."

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