U.S. trade rep not pursuing Telmex

(Telephony) The U.S. Trade Representative office said that it would set aside—at least temporarily—its regulatory case before the World Trade Organization against Mexico’s dominant carrier Telefonos de Mexico, or Telmex.

A spokeswoman said that the USTR was in a "wait and see mode" in evaluating how the Mexican government plans to regulate Telmex and its 98% hold on the country’s landlines.

The spokeswoman also said that the USTR has not dropped its complaint outright and reserves the right to ask for a WTO ruling in the future.

"While some concerns remain, especially with respect to international service rates, we’re going to wait to hear from the Mexicans on how they plan to address those issues," said a USTR spokeswoman. "We want to give this a chance to play out."

According to Ron Cowles, an analyst at Dataquest, the recent transfer of power in the U.S. presidency would resolve the conflict more readily due to the pro-business ideology of the Republican Party. The Bush administration, he said, would bring about regulatory change without using governmental strong-arm tactics used by the USTR in the past.

"All of the administration changes will spell friendlier relations," Cowles said. "It will allow it to settle itself out in a more reasonable fashion."

The U.S. filed a petition with the WTO last August asking it to review Mexico’s telecom laws regarding international interconnection fees, or settlement rates. A U.S. trade official said that one of the United States’ primary concerns was a Mexican law that specifies all international calls coming into Mexico are subject to a uniform settlement rate, which is currently an inflated 19 cents.

The law stipulates that Telmex, as Mexico’s dominant carrier, is legally the only party permitted to negotiate settlement rates. Without a competitive alternative to the current fee, the trade official said, Telmex has no incentive to reduce it.

Telmex reached an agreement in December with Mexican long-distance rivals Alestra and Avantel – which are owned in part by AT&T (Alestra) and WorldCom (Avantel) – to lower domestic interconnection fees. The deal was designed to open the Telmex-dominated $12 billion Mexican telecommunications market to competition.