continued Don't blame us, says Cheryl Hammond of AT&T. She says if prices to Mexico are high, you have to look at what Telmex is doing. "Long-distance [to Mexico] brings in the relationship that AT&T has to have with Telmex," she says, referring to the giant Mexican virtual monopoly that rules Mexico's telephone industry. "We negotiate 'settlement rates.' They are the rate at which we pay foreign carriers to receive our outbound traffic. So in this case it would be, 'What rate does AT&T pay Telmex for the termination of our southbound calls?' That series of negotiations has been going on for almost two years. We were paying 39H cents per minute to Telmex [on each U.S.-Mexico phone call] when the rate expired at the end of December 1997. [It's now 37H cents.] This rate impacts very much what charge the carrier then passes along to the customer. We have argued to the FCC that the customers have been paying excessive amounts in long-distance charges from the U.S. to Mexico because Telmex is the only carrier in Mexico authorized to negotiate these settlement rates. We argue that these settlement rates should be far closer to what they are, for example, in Canada, which is a country of comparable calling volume. They have a termination rate of less than 10 cents per minute on calls. With Mexico we're looking at almost three, four times that amount.
"Ideally, if you're both sending each other the same volume of minutes, neither carrier owes each other any money. So the commensurate rate you pass along to your customer can be lower. We believe that U.S. consumers have been unfairly subsidizing the high cost of settlement rates to Telmex."
With people in the United States making nearly 3 billion minutes of phone calls a year to Mexico, according to the FCC's 1997 figures, while Mexicans calling north talk to the U.S. for less than 1 billion minutes, how can Telmex resist the 3-to-1 gravy train? And even for the U.S. carriers, getting just one settlement dollar for every three that Telmex earns, those billion 37H cents do help offset what they pay Telmex. Why stop a good thing?
But in a deal with Telmex, the FCC has decreed that settlement fees must come down to 19 cents a minute by January 1, 2000. What did Telmex get by agreeing to this revenue drop? Well, their brand-new offices in San Diego that President Zedillo opened last week, for a start. The FCC has given Telmex permission to operate in the U.S., so effectively it pays itself the settlement rate on calls in both directions. With Southwestern Bell as a long-standing partner, Telmex looks set to continue its domination of U.S.-Mexican telephone communications.
AT&T spokesperson Dianne Bernez says that in 1997, Telmex earned "$800 million from U.S. carriers." AT&T has tied up with another Mexican company called Alestra, and MCI with Avantel, but neither can compete with the giant Telmex, which continues to control local Mexican telecommunications -- and to have a close connection to President Zedillo's government.
In other words, Professor Eger is playing in the land of larga-distancia tigers here. Things don't auger well for his plan to make all San Diego-Tijuana calls local. Yet, it turns out it has been done before.
"A long time ago, there used to be a local service, just from Tijuana to San Ysidro," says Vicente Hérnandez, an engineering manager with Telnor, a Tijuana affiliate of Telmex. "It was like between sister-cities, because the community [along the border] was really one city then. But in 1979, when AT&T came into the game, the FCC said international calls couldn't cross the border without going through an international carrier. Now both sides, COFETEL [Mexico's Comisión Federal de Telecomunicaciones] and the FCC, regulate the way in which the long-distance traffic is carried out."
So how about repeating history? "This is something that could be interesting for anybody who lives on the border, but we'd have to fight against those regulations," says Hérnandez. "If you eliminate the [electronic] border, you'll wipe out long distance. It's difficult to control technically, [but] these conditions are going to disappear sometime anyway. Because long distance itself is already losing its meaning."
Ken Stanley of the FCC in Washington, D.C., agrees. "The problem today is that distance is not a significant cost-creating factor. Using a transoceanic cable, the cost of a minute of service is so small that distance is simply not a consideration anymore."
Does Professor Eger stand a chance, or is he tilting at windmills?
"He would have to file here for approval," says Stanley. "The FCC has jurisdiction over international service. They may want to call it local service, but according to our definition it is an international service. They would have to get our approval and authority to do it. That probably would lead to oppositions from U.S. carriers that wanted to prevent this from happening for [loss of profit] reasons. I wouldn't want to guess on how the commission would come out on this, but [our] tendency has been to allow international liberalization where it promotes the interests of U.S. consumers. And that includes people coming up from Mexico to use U.S. phones. The [FCC] has the authority to do [this]. Whether or not it has the will to oppose Telmex, AT&T, and probably MCI remains to be seen. But the [FCC] has crossed swords with Telmex before and in many cases told them to take a hike. The same is true with AT&T."
After five years, Eger is sounding tired of preaching.
"We're not asking for anyone to lose sovereignty here. There's a lot of concern that we got too big for our britches. We'll be advisers every step of the way. SDSU's president Steve Weber is supportive of it. [County supervisors' chairperson] Pam Slater endorses it. We've had conversations with the Colegio de la Frontera Norte, and another expression of interest from the Instituto Tecnológio de Tijuana, and we will team up with them, once we've gotten a favorable nod, and we know we're making some progress."