The government authorized nine carriers for long distance to begin service in 1997. Both were expecting to rapidly take a significant market share from Telmex. While competitors quickly grabbed a significant market share from the former monopoly, one of the main obstacles to profitable activity has been the high international settlement connection rates to the Telmex local phone system. This is the rate international long-distance carriers pay Telmex to transmit calls over its system. More calls are made from the United States to Mexico than from Mexico to the United States.
Companies pay for the net number of calls completed.
Long distance companies had been negotiating with Telmex on the international settlement rate. Since there had been no agreement, Cofetel announced rates in 1998 of 37 cents per connection. The U.S. Federal Communication Commission s analysis concluded that the international settlement rate for connection to the Telmex local system should be reduced to 19 cents per minute by the end of 1999. MCI also settled with similar rates. Telmex estimates that one third of all long distance calls into or out of Mexico do not go on their network.