Mar 14 2013
Thom Hartmann: Last week Forbes came out with its annual list of the world’s richest folks and once again the guy at the top of the list was Carlos Slim. He’s worth $73 billion dollars. Now, who the heck is Carlos Slim and how did he get all that money? He got it by controlling the majority of Mexico’s telecom industry. The richest guy in the world is Mexican. Slim purchased Telmex, which was the state national telecommunications company in 1990 when it was privatized, and ever since then he’s grown this Mexican telecom monopoly quite well. Largely in part due to his political connections and the ability to buy politicians. He’s basically been able to have a stranglehold on the telecom industry, both cell phones and hard wired phones. But it looks like (there was a piece I saw in the Financial Times yesterday that got me thinking about this), maybe Carlos Slim’s vast wealth could soon be taking a hit.
The Mexican Government, and this is the PRI party (which used to be the ruling party and then it wasn’t and now it is again) announced a sweeping new proposal to crack down on telecom monopolies and tycoons like Carlos Slim. This is like the U.S. Government going after Bill Gates. This bill, which is part of Mexico’s ‘most ambitious economic reform package in a generation’ (their phrase not mine), would establish a telecom industry regulator who would have a wide array of powers to curb companies’ control of markets. Now why would you do that? Because it opens room for competition.
Thanks to Slim’s Mexican telecom monopoly, competition in that marketplace has been basically killed which drives up the prices of phone and internet services for Mexican consumers. America Movil which is Slim’s Panamerican telecom provider controls 70 percent of the cell phone market in Mexico. Sort of like AT&T and Verizon. Anyhow, under the new proposal the regulating body of the telecom industry could classify any company with more than half of the market share as a so called ‘dominant company’. And dominant companies would then be subjected to a variety of sanctions, fines, pricing regulations and they could even be forced to sell off their assets, in other words, they are breaking them up just like we broke up AT&T. Why is it happening now? Why have the lawmakers in Mexico finally decided that they will chip away Carlos Slim’s empire? Well, it’s pretty simple. The Mexican people and by extension the Mexican Government, have realized that libertarian capitalism left unchecked, always leads to monopoly. Carlos Slim’s telecom takeover was left unchecked and he ended up gaining a virtual monopoly on the industry at the expense of the Mexican people.
Unfortunately, here in the United States we’ve allowed our telecom industry to also turn into a virtual monopoly, really more of a duopoly, with AT&T and Verizon having a stranglehold on our market and as a result of that, Americans are being squeezed dry when it comes to our cell phone plans. Have you looked at your phone bill recently? With AT&T, a cell phone plan with unlimited minutes, unlimited text and 5 gigs of data costs $140 bucks a month, on Verizon it’s about $130 bucks a month. Now on the other side of the Atlantic, over in Europe, they figured this thing out and they said we’re not going to have monopolies and they enforced the European version of the Sherman Antitrust Act. The EU has very strong anti-trust policies and as a result there is plenty of competition in the cellular market which means lower costs for the consumer. For example, in the UK, a plan comparable to the AT&T Verizon plans that I just laid out, would cost a little under $60 on Orange, which is one of Europe’s largest cell phone providers. And even if you were to increase the amount of data on your plan on Orange, you would still be paying less than AT&T and 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 a year for service. That is one year. Compare that with the Netherlands and Finland where it is $131 a year, which is like $15 a month. In Sweden it is $137 a year. In France, the average citizen pays $33 a 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 smart phone throughout most of the country.”
So Europe caught on to monopolies in the telecom industry and they did something about it. And now Mexico is trying to do the same thing to help ensure competition in the market place and lower prices for consumers which to me sounds like a reasonable thing. Right? I mean, isn’t it about time we did this? I am so sick and tired of spending hundreds of dollars on cell phone service. I mean, between my wife Louise and me, we just have a simple plan with 5 gigs of data, enough so you can use your phone as a hot spot when you’re traveling, and it’s a couple hundred dollars a month. I mean, it’s insane. We’d be paying $70 a month if we lived in France or less if we lived in Germany. Dozens of nations throughout the developed world are paying less.
Richard Nixon used the Sherman Antitrust Act to break up AT&T’s Bell System into 7 different companies known as the Baby Bells and it ended up really happening under the Carter and early Reagan Administration. This left the market open for new players to jump in. You had MCI and Sprint, companies that just came out of nowhere, and in the end it was good for everybody because if you owned stock in AT&T, now you owned stock in these 7 companies which was made up of 6 Baby Bells and Bell Labs. Their value tripled. You made a lot of money on that stock. But then came Reagan, and he functionally stopped enforcing the Sherman Antitrust Act and the monopolies, the oligopolies, the duopolies, and the triopolies began to return and the M&A or mergers and acquisitions mania in the 1980s and the Baby Bells that had been successfully broken up started to get back together again.
If we were to give the telecom and internet oligopolies the same treatment today that Richard Nixon gave AT&T in the 1970s, then maybe Americans could enjoy the same super fast internet speeds and super cheap rates that most of the rest of the developed world enjoys and that Mexico is trying to grab hold of right now. It’s time to break up the telecom industry once again, and this time make sure it sticks. It is insane that you have a choice of two or three cell phone providers and in a lot of areas the coverage is so bad its basically one cell phone provider. Even in the rural parts of Europe you can pick from 30 or 40 companies. Why is that? Even though one company may own the towers, multiple companies can carry the signals on those towers. The technology is straight forward, they pay rent, you know it’s not like they are getting a free ride. But guess what? You have competition. And in unchecked capitalism and libertarian capitalism, the one thing that companies will always try to do is destroy competition. They did it here in the United States and they did it in Mexico.
Take a look at Thom Hartmann’s website.
SONALI KOLHATKAR IS ON MATERNITY LEAVE.