## Facts

- The United States challenged Mexico’s regulatory framework governing basic telecommunications, focusing on international long-distance services and access to Mexico’s public telecommunications network.
- Mexico’s rules operated alongside its telecommunications statutes and regulations and its competition law regime.
- Teléfonos de México (Telmex) was the dominant supplier in Mexico and played a central role in international interconnection and termination of international traffic.
- Mexico’s international long-distance regime limited which operators could terminate international traffic and used a uniform settlement rate approach associated with country-by-country routing arrangements.
- The United States alleged that Mexico’s framework (i) produced above-cost interconnection rates, (ii) permitted anti-competitive conduct by Telmex, and (iii) restricted U.S. suppliers’ ability to access and use Mexican public networks, including through leased circuits and certain resale models.
- The legal framework included Mexico’s scheduled commitments under the GATS, the GATS Annex on Telecommunications (notably “access to and use” obligations), and Mexico’s additional commitments in the Telecommunications Reference Paper (competitive safeguards and interconnection disciplines).
- A WTO Panel was established after consultations; the Panel report was circulated in April 2004 and adopted on June 1, 2004.

## Issues

1. Whether Mexico’s GATS schedule and additional commitments covered cross-border (mode 1) supply of basic telecommunications services relevant to international long-distance services.
2. Whether Mexico failed to ensure that Telmex, as a “major supplier,” provided interconnection on cost-oriented, reasonable, and sufficiently unbundled terms as required by the Reference Paper.
3. Whether Mexico failed to maintain “appropriate measures” to prevent Telmex from engaging in anti-competitive practices in violation of the Reference Paper competitive safeguards.
4. Whether Mexico failed to ensure “access to and use of” public telecommunications transport networks and services on reasonable and non-discriminatory terms under the GATS Annex on Telecommunications.
5. Whether development or universal service considerations could justify interconnection rates or regulatory restrictions inconsistent with the Reference Paper’s cost-orientation, transparency, and non-burdensome requirements.

## Decision

- The Panel found that Mexico acted inconsistently with its additional commitments in the Telecommunications Reference Paper by failing to ensure that interconnection rates charged by Telmex were cost-oriented and reasonable.
- The Panel found that Mexico breached the Reference Paper competitive safeguards obligation by not maintaining appropriate measures to prevent anti-competitive practices by Telmex as a major supplier.
- The Panel found that Mexico breached the GATS Annex on Telecommunications obligations by not ensuring access to and use of public telecommunications networks and services on reasonable and non-discriminatory terms for U.S. suppliers.
- The Panel rejected some broader interpretations advanced by the United States concerning the full reach of certain commitments, but upheld the core claims tied to interconnection, competitive safeguards, and network access.
- The Panel recommended that Mexico bring the challenged measures into conformity with its WTO obligations.

## Legal Principles

- Additional commitments scheduled under the GATS, including the Telecommunications Reference Paper, are binding and enforceable in dispute settlement.
- A “major supplier” may be identified by its ability to materially affect market participation conditions, triggering heightened duties on interconnection and competitive conduct.
- Reference Paper interconnection disciplines require interconnection on reasonable terms at cost-oriented rates, with sufficient unbundling so an interconnecting supplier does not pay for network components not required.
- Charges and conditions related to interconnection must be administered transparently and must not be more burdensome than necessary to provide the service.
- The GATS Annex on Telecommunications “access to and use” obligation operates as a functional guarantee that suppliers can obtain reasonable, non-discriminatory access to public networks needed to supply committed services.
- Development or universal service objectives cannot override specific, text-based obligations requiring cost-orientation, transparency, and non-discrimination in interconnection and related network access conditions.

## Conclusion

The Panel concluded that Mexico’s telecommunications regime, as applied to interconnection, competitive safeguards, and network access, violated enforceable GATS telecommunications commitments, and it directed Mexico to align its measures with the Reference Paper and the GATS Annex on Telecommunications.


Mexico—Measures Affecting Telecommunication Services, WT/DS204/R (WTO Panel 2004)