WT/DS204/R
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Organization
WT/DS204/R
2 April 2004
(04-1211)
Original: English
MEXICO – MEASURES AFFECTING TELECOMMUNICATIONS SERVICES
Report of the Panel
This report of the Panel on Mexico – Measures affecting Telecommunications Services is being circulated to all Members, pursuant to the DSU. The report is being circulated as an unrestricted document from 2 April 2004 pursuant to the Procedures for the Circulation and Derestriction of WTO Documents (WT/L/452).
Note by the Secretariat: This Panel Report shall be adopted by the Dispute Settlement Body (DSB) within 60 days after the date of its circulation unless a party to the dispute decides to appeal or the DSB decides by consensus not to adopt the report. If the Panel Report is appealed to the Appellate Body, it shall not be considered for adoption by the DSB until after the completion of the appeal. Information on the current status of the Panel Report is available from the WTO Secretariat.
WT/DS204/R
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TABLE OF CONTENTS
Page
I. introduction 1
II. FACTUAL ASPECTS 2
A. Mexico's telecommunication market 2
B. Mexico's Telecommunications Laws and Regulations 2
1. Federal Telecommunications Law 2
2. International Long-distance Rules 4
C. The Competition Laws of Mexico 5
1. Federal Law of Economic Competition 5
2. Code of Regulations (to Federal Law on Economic Competition) 5
D. Mexico's Commitments under the General Agreement on Trade in Services (GATS) 6
III. parties' requests for findings and recommendations 6
IV. main ARGUMENTS OF THE PARTIES 7
A. Section 2 of the reference Paper 7
1. Scope of application of the Reference Paper 8
2. The scope of "interconnection" within Mexico's Reference Paper 10
(a) The concept of interconnection 10
(b) The meaning of interconnection within the Reference Paper 12
(i) Interpretation of the term "interconnection" in its context 13
(ii) Subsequent practice 16
(iii) Supplementary means of interpretation 18
aa) Negotiating history 18
bb) The international scope and bilateral nature of the accounting rate regime 18
cc) Circumstances of the conclusion of the treaty: Mexican legislation at the time of negotiations 20
(c) Whether the Reference Paper obligations extend to accounting rate regimes 20
(i) Concept of "accounting rate" 21
(ii) Domestic interconnection v. accounting rates 22
aa) Differences from a commercial point of view 23
bb) Differences from a contractual point of view 24
cc) Differences from a technical point of view 25
dd) Differences from a regulatory point of view 27
3. Specific Commitments of Mexico 29
(a) Definition of the service and mode of supply 30
(i) Definition of services 30
aa) Half-circuit v. full-circuit regimes 34
(b) Mexico's commitment on cross-border supply 36
(c) Meaning of the limitations inscribed 39
(i) Concession requirement 42
(ii) Routing requirement 44
(iii) Commercial agency permit requirement 47
4. Whether Telmex is a major supplier within the meaning of the Reference Paper 50
(a) The relevant market 51
(b) Whether Telmex has market power 52
5. Whether Telmex' interconnection rates are "basadas en costos" 55
(a) Whether Telmex interconnection rates are "based in cost" 55
(i) The meaning of "based in cost" 55
(ii) Whether Telmex interconnection rates are "based in cost" 63
aa) Costs based on maximum rates charged for network components 65
bb) "Grey market" rates for calls between the United States and Mexico 68
cc) International proxies 70
dd) Financial compensation among Mexican operators relating to international calls 70
(b) Whether Telmex interconnection rates are "reasonable" 71
(i) The meaning of "reasonable" 71
(ii) Whether Telmex interconnection rates are "reasonable" 75
B. Section 1.1 of the Reference Paper: Prevention of anti-competitive practices in telecommunications 76
1. Panel's standard of review 76
2. Section 1.1 of Mexico's Reference Paper 77
(a) Purpose of Section 1.1 77
(b) Extent of the requirement under Section 1.1 77
(i) "Appropriate measures" 78
aa) Whether the ILD Rules are "appropriate measures" under Section 1.1 78
bb) Whether a proportionate return system could be an anti-competitive measure 82
(ii) "Major supplier" 84
(iii) "Anti-competitive practices" 86
aa) Definition of anti-competitive practices 86
bb) Government intervention 87
cc) Price fixing as an anti-competitive practice 89
(c) Relationship between Section 1.1 and Section 2.2(b) of the Reference Paper 90
(d) Relationship between Sections 1.1 and 3 of Mexico's Reference Paper 91
C. Section 5 of the GATS Annex on Telecommunications 92
1. Application of the Annex 92
2. Application of Sections 5(a) and 5(b) of the Annex 97
(a) Claims under Section 5(a) of the Annex 97
(b) Claims under Section 5(b) of the Annex 100
3. Application of Sections 5(e), 5(f) and 5(g) of the Annex 107
V. ARGUMENTS OF THE THIRD PARTIES 111
A. AUSTRALIA 111
1. Informal Understanding on Accounting Rates 111
2. Scope of "interconnection" in Section 2 of the Reference Paper 111
3. Interconnection and accounting rates 112
4. Meaning of "cost-oriented" rates in section 2.2(b) of the Reference Paper 112
B. BRAZIL 113
1. Introduction 113
2. Scope and reach of specific commitments 113
3. Non-discrimination and the concept of "like circumstances" 114
C. EUROPEAN COMMUNITIES 116
1. Interpretation of Mexico's specific commitment under mode 1 116
2. Mexico's commitments under mode 3 118
3. Application of the interconnection rules contained in the Reference Paper 119
4. Rates relating to termination of international calls 119
5. The meaning of "reasonable" 120
6. Requirements of Section 1 121
7. Applicability of the Annex on Telecommunications 121
8. The notion of likeness 122
D. JAPAN 122
1. Validity for an action by the United States 122
2. The term "cost oriented" 123
3. The term "cost-based" 123
4. Election of a uniform accounting rate and proportionate return system 124
VI. interim review 125
VII. findings 138
A. Introduction 138
1. Telecommunications in the WTO 139
2. Measures at issue in this dispute 139
3. Mexico's legal framework for the regulation of telecommunications services 140
4. Rules of interpretation 141
5. Order of analysis of the claims 142
B. Whether Mexico has fulfilled its commitments under Sections 2.1 and 2.2 of the Reference Paper 142
1. Whether Mexico has undertaken an interconnection commitment, in Section2 of its Reference Paper, with respect to the telecommunications services at issue 143
(a) What are the services at issue? 143
(b) Are the services at issue supplied cross-border? 144
(c) Has Mexico undertaken commitments on the cross-border supply of the services at issue? 149
(i) Cross-border services in Mexico's Schedule 150
aa) Service sectors inscribed in Mexico's Schedule 150
bb) Introductory heading 151
cc) Supplementary documents used to schedule commitments 152
i) Description of the supplementary documents 152
– Draft Model Schedule 153
– The Note by the Chairman 154
– Scheduling Guidelines 154
ii) Interpretative value of the supplementary documents 154
dd) Mexico's cross-border telecommunications commitments 155
(ii) Market access and national treatment commitments for cross-border supply 156
(iii) Mexico's "routing restriction" 157
aa) "International traffic" 158
bb) "Routed through the facilities" 158
cc) "Enterprise that has a concession" 159
(d) Do Mexico's specific commitments provide "the basis" for its additional commitment on interconnection? 160
(e) Do Mexico's additional commitments on interconnection apply to suppliers of cross-border services? 161
(i) Ordinary meaning 163
(ii) Context provided by the term "interconnection" 164
(iii) Other contextual elements 167
(iv) Object and purpose 167
(v) Supplementary means – the "Understanding" 168
(vi) Supplementary means – other 172
2. Whether Mexico has fulfilled its interconnection commitment, in Section 2.2(b) of its Reference Paper, with respect to the services at issue 173
(a) Is Telmex a "major supplier"? 173
(i) What is the "relevant market for basic telecommunications services"? 174
(ii) Does Telmex have "the ability to materially affect the terms of participation (having regard to price and supply)" in that market? 175
(iii) If Telmex has the ability to materially affect the terms of participation in that market, does it result from "control over essential facilities", or "use of its position in the market"? 175
(b) Are the Telmex interconnection rates "cost-oriented"? 176
(i) Meaning of "cost-oriented" rates 178
(ii) Does Telmex interconnect United States suppliers at cost-oriented rates? 182
aa) Comparison with domestic prices in Mexico for the same network components 182
i) Relevant network components 183
ii) Prices for the relevant network components 184
– Termination in Zone 1 (large cities) 184
– Termination in Zone 2 (medium cities) 184
– Termination in Zone 3 (other cities) 184
iii) Difference between component prices and Telmex rates 184
bb) Comparison with "grey market" prices on the Mexico-United States route 185
cc) Comparison with termination rates on other international routes 186
dd) "Proportionate return" procedures among Mexican operators 186
(iii) Are the Telmex interconnection terms and conditions "reasonable"? 188
C. Whether Mexico has met its Commitment under Section 1 of its Reference Paper 190
1. Is Telmex a "major supplier"? 191
2. What are "anti-competitive practices"? 191
(a) Meaning of "anti-competitive practices" 191
(b) Whether practices required under a Member's law can be "anti-competitive practices" 193
3. Do the ILD Rules require a major supplier to engage in "anti-competitive practices"? 195
(a) What acts do the ILD Rules require of Telmex and other Mexican operators? 195
(i) Uniform settlement rate 195
(ii) Proportionate return 196
(b) Are the acts required of Telmex and other Mexican operators "anti-competitive practices"? 197
(i) Uniform settlement rate 198
(ii) Proportionate return 198
4. Has Mexico maintained "appropriate measures" to prevent anti-competitive practices by a major supplier? 199
D. Whether Mexico has met its obligation under Section 5 of the GATS Annex on Telecommunications 199
1. Whether the Annex imposes obligations on Mexico to ensure access to and use of public telecommunications transport networks and services for the supply of the basic telecommunications services scheduled by Mexico 201
(a) Does the Annex apply to access to and use of public telecommunications transport networks and services for the supply of basic telecommunications services? 201
(b) Does Section 5 of the Annex apply to the basic telecommunications commitments scheduled by Mexico? 204
2. Whether Mexico has fulfilled its obligations under Section 5 of the Annex 205
(a) Structure of Section 5 206
(b) Claim under Section 5(a) 208
(i) "Any service supplier of any other Member" 209
(ii) With respect to "public telecommunications transport networks and services" 209
(iii) "For the supply of a service included in its schedule" 209
(iv) "On reasonable … terms and conditions" 210
aa) Rates charged for access and use 211
bb) Underlying ILD Rules 215
(c) Claim under Section 5(b) of the Annex 216
(i) Whether Mexico has a commitment in effect to allow commercial agencies to supply the services at issue through commercial presence (mode 3) 217
(ii) Whether Mexico's commitments on the supply of the services at issue by commercial agencies through commercial presence include the supply of international telecommunications services (from Mexico to the United States) through mode 3 221
(iii) Access to and use of private leased circuits 222
(iv) Interconnection of private leased circuits 223
(v) Subject to paragraphs (e) and (f) 223
(d) Invocation of Section 5(g) 224
VIII. conclusions and recommendation 224
IX. Annexes 227
A. Abbreviations used for dispute settlement cases referred to in the Report 227
B. Mexico: Schedule of specific commitments, supplement 2 228
C. ILD Rules 238
WT/DS204/R
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I. introduction
1.1 On 17 August 2000, the United States requested consultations with Mexico pursuant to Article4 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (the "DSU") and ArticleXXIII of the General Agreement on Trade in Services (the "GATS").[1] This request concerned Mexico's GATS commitments and obligations on basic and value-added telecommunications services.
1.2 The consultations took place on 10 October 2000, but the parties failed to reach a mutually satisfactory resolution. On 10 November 2000, the United States requested the Dispute Settlement Body (the "DSB") to establish a panel, in accordance with Articles4 and 6 of the DSU, in order to examine Mexico's measures with respect to trade in basic and value-added telecommunications services.[2] On the same date, the United States requested additional consultations with Mexico, pursuant to Article4 of the DSU and ArticleXXIII of the GATS, regarding Mexico's measures affecting trade in telecommunications services.[3] The additional consultations took place on 16January 2001, but the parties failed again to reach a mutually satisfactory resolution. On 13February 2002, the United States again requested the DSB to establish a panel, in accordance with Articles4 and 6 of the DSU in order to examine Mexico's measures affecting telecommunications services.[4]
1.3 At its meeting on 17 April 2002, the DSB established a Panel in accordance with Article6 of the DSU.[5] At that meeting, the parties agreed that the Panel should have standard terms of reference as follows:
"To examine, in the light of the relevant provisions of the covered agreements cited by the United States in document WT/DS204/3, the matter referred to the DSB by the United States in that document, and to make such findings as will assist the DSB in making the recommendations or in giving the rulings provided for in those agreements."[6]
1.4 On 16 August 2002, the United States requested the Director-General to determine the composition of the Panel pursuant to Article8.7 of the DSU, which provides:
"If there is no agreement on the panelists within 20 days after the date of the establishment of a panel, at the request of either party, the Director-General, in consultation with the Chairman of the DSB and the Chairman of the relevant Council or Committee, shall determine the composition of the panel by appointing the panelists whom the Director-General considers most appropriate in accordance with any relevant special or additional rules or procedures of the covered agreement or covered agreements which are at issue in the dispute, after consulting with the parties to the dispute. The Chairman of the DSB shall inform the Members of the composition of the panel thus formed no later than 10 days after the date the Chairman receives such a request."
1.5 On 26 August 2002, the Director-General composed the Panel as follows:[7]