Last week, Forbes came out with its annual list of the world’s wealthiest people. And, once again, Carlos Slim topped the list, with an estimated net-worth of $73 billion.
So how did Slim get all of that money? He got it by controlling the majority of Mexico’s telecom industry.
Slim purchased Telmex, Mexico’s state telecoms company before it was privatized, in 1990. Since then, he’s continued to grow his Latin American telecom monopoly. This is thanks largely in part to his abundant connections with political officials in Mexico, who have let Slim put a stranglehold on the Mexican telecom industry without asking any questions.
However, it looks like Slim’s vast wealth could soon be taking a hit.
Yesterday, the Mexican government announced a sweeping new proposal to crack down on the telecom monopolies and tycoons like Carlos Slim.
The bill, which is part of Mexico’s most ambitious economic reform package in a generation, would establish a telecom industry regulator, with a wide array of powers to curb companies’ control of markets, while opening more room for competition in the marketplace.
Thanks to Slim’s Mexican telecom monopoly, competition in that marketplace has been killed, driving up the prices for Mexican consumers. America Movil, Slim’s pan-American telecom provider, controls nearly 70 percent of the cellphone market in Mexico.
Under the new proposal, the regulating body of the telecom industry could classify any company with more than 50 per cent of the market share as “dominant”. “Dominant” companies would then be subject to a variety of sanctions, including fines, pricing regulations and forced asset sales.
But why is this happening now? Why have lawmakers in Mexico finally decided to chip away at Carlos Slim’s empire?
It’s because they’ve realized that Libertarian capitalism, left unchecked, inevitably leads to monopoly. Slim’s telecom takeover was left unchecked, and he ended up gaining a virtual monopoly in the industry, at the expense of the Mexican people.
Unfortunately, here in the U.S., we’ve allowed our telecom industry to turn into a virtual duopoly, with AT&T and Verizon having a stranglehold on the market.
As a result, Americans are being squeezed dry when it comes to their cell phone plans.
With AT&T, a cellphone plan with unlimited minutes, unlimited texts and 5GB of data costs about $140. On Verizon, a similar plan would run you around $130 per month.
Meanwhile, across the pond in Europe, lawmakers and citizens caught on to the monopolistic tendencies of the telecom industry, and enforced the European version of the Sherman Anti-Trust Act.
As a result, there is plenty of competition in the cellular market in Europe, which means lower costs for the consumer.
In the United Kingdom, a plan comparable to the AT&T and Verizon plans that cost well over $100 is just under $70 per month on Orange, one of Europe’s larger cellphone carriers. And, even if you were to increase the amount of data in your plan on Orange, you would still being paying less than on AT&T or Verizon. And on continental Europe, the cost could be as low as $20 a month.
As of 2009, American cell phone customers paid, on average, $635 per year for service. Compare that to an unbelievable $131 per year in the Netherlands and Finland, and $137 per year in Sweden.
In France, the average citizen pays about $33 per month, for what the New York Times described as, “Internet service twice as fast as what you get on Verizon or Comcast, bundled with digital high-definition television, unlimited long distance and international calling to 70 countries and wireless Internet connectivity for your laptop or smartphone throughout most of the country.”
So, Europe caught on to monopolies in the telecom industry and did something about it. And now Mexico is trying to do the same thing, to help ensure more competition in the marketplace and lower prices for consumers.
Isn’t it about time that we did the same thing? I don’t know about you, but I’m sick and tired of paying hundreds of dollars for cell phone service, when dozens of nations throughout the developed world are paying far less.
In an effort spearheaded by Richard Nixon, we used the Sherman Act to break up AT&T’s Bell System into seven different companies, known as the “Baby Bells”.
This left the market open for new players to jump in offering new services and new prices. AT&T was broken up, and in the end, it was good to all the investors involved. In fact, the value of AT&T and all its former subsidiaries tripled after the break-up.
Unfortunately, Ronald Reagan functionally stopped enforcing the Sherman Act, monopolies and oligopolies began to return with the “M&A Mania” of the 1980s, and the “Baby Bells” that had been successfully broken up began merging together yet again, forming bigger and bigger telecom companies.
If we were to give the telecom and internet oligopolies the same treatment today that Richard Nixon gave AT&T in the 1970’s, then maybe we Americans could enjoy the same super-fast internet speeds and super-cheap rates that most of the rest of the developed world enjoys.
It’s time to break up the telecom industry once again, and this time, make sure it sticks.
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