In the article, by Anthony Harrup, the Mexican government has lost income because people are using more “mobile to mobile” phone calls. The government has implemented a plan to increase revenue by lowering the rate for “fixed to mobile” phone calls. Over the coming years, this plan will increase the elasticity for the “fixed” good. Since mobiles and fixed phones are substitute goods, this new act will give the public more of a reason to make “fixed to mobile” calls. Is lowering the price of an inferior good going to increase revenue? I believe by increasing elasticity, the volume of calls will go up, and the government will eventually see a profit. http://www.smartmoney.com/news/ON/index.cfm?story=ON-20050106-001086-1800.
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It isn't correct to say that this will do anything to elasticity.
If the government is viewing this as a revenue raiser, then my guess is that they have some estimates suggesting that the demand for these calls is (price) elastic.
I am not sure if it is correct that the fixed lines are an inferior good. If they are, it is possible for the government's strategy to backfire: making the calls cheaper will make everyone feel richer, and then they may just make more cellphone calls.
As to Sandy's comment about the money going to the government, it is very common in other countries for the phone company to be a government owned monopoly. Part of the reason that cellphones ever became popular was that they were cheaper and offered higher quality service than the government's "lazy monopoly".
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