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Monday, February 26, 2007

Where Monopolies Rule, Cell Phones Costs Soar

By Jeremy Schwartz | Monday, February 26, 2007, 12:47 PM

When it comes to telecommunications, Mexico is a land of monopolies.

Billionaire Carlos Slim’s Telmex controls 94 percent of the landlines in the country, charging some of the highest rates on earth.

The situation isn’t much better when it comes to cell phones. Slim’s Telcel has about 80 percent of the market share and upstart Movistar takes much of the rest.

The lack of competition results in rates and pricing plans that seem outrageous compared to the U.S.

With Telcel, you need a plan that costs about $100 a month to qualify for free nationwide roaming, in a country with a minimum wage of $6 a day.

Since Movistar offered free roaming with more reasonably priced plans, and because it seemed like a scrappy underdog fighting the Telcel goliath, I recently switched to Movistar when my Telcel contract expired.

All seemed to be going well when, without warning, my cell phone stopped working. After calling Movistar I learned it had cut my service because I had surpassed my “credit limit” of about $60 (I was never told of this credit limit when I signed up, but it’s in the tiny fine print on the back of my contract).

I had traveled to Honduras for work and made international calls that had made my bill higher than usual. I certainly planned to pay the bill when it arrived, but Movistar apparently didn’t trust me and cut me off. I ended up having to make an emergency payment of the full amount to get my phone working again. I was told the only way to avoid such situations in the future was to leave a large cash deposit, which every Mexican I know tells me I’ll never recoup.

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