Market competition following Mexico’s Telecommunications and Broadcasting Reform: Present and Future
33 Pages Posted: 28 Mar 2015
Date Written: March 26, 2015
This paper explores the effects of increased competition in the telecommunications and broadcasting sectors that will be brought about by Mexico's recent Telecommunications Reform (2013). The Reform includes measures to encourage competition in the telecommunications sector by way of a new institutional framework. A new Federal Telecommunications Institute (IFT) has been set up, with the power and autonomy to regulate competition in the marketplaces. Specialist tribunals have also been set up and an amendment made to the amparo law to prevent any immediate overturning of the regulator’s rulings. This is in addition to encouraging foreign investment by allowing 100% investment in the telecoms sector and an opening up of the broadcasting sector, allowing for up to 49% foreign capital, subject to a reciprocal investment deal in the corresponding country of origin. When it comes to policies on market competition, we examined the results of the new designation of “preponderante” (market dominant agent) implemented by the Reform, which grants the new regulator an immediate entitlement to impose pro-competition requirements on any economic agent with a greater than 50% share nationally in a given sector. The regulator may thus impose asymmetric regulation on interconnection, local loop unbundling, passive infrastructure sharing, roaming, and potentially call for the divestment of assets to prevent anti-competitive behavior. The paper is organized into two main sections. The first section presents the institutional and regulatory progress made, including the aforementioned legislation designed to foster competition in the telecommunications and broadcasting service markets. The second section focuses on the effects of the Reform, describing progress that has taken place in the implementation of these measures in 2014 and the market’s response over the course of 2015, specifically in terms of the following variables: trends in prices to end-users as a result of the investment: we determine whether there are any changes in investment flows on the part of existing operators and newcomers to the market as a result of the new regulation. Distributive effects of the Reform: we break down figures for access to and expenditure on telecommunications services by decile (Engel Curves) and analyze the distribution of telecommunications services as a function of different levels of household income. We compare the results of this analysis between 2012 and 2014. Economic activity in the telecommunications industry: changes in economic activity are examined, based on published GDP figures attributed to “other telecommunications”. We may also posit future scenarios for how the Reform might be the implemented within the wider context of Mexico’s setup. In the short term (2014-2015), it is possible to achieve successful implementation of the Reform. In the long term, however, two scenarios are foreseeable: optimistically, the Reform may see successful, long-term deployment; less optimistically, success may be limited, since it would require a far-reaching transformation of Mexico’s overall institutional setup.
Keywords: Competition, antitrust,market pricing, market structure, asymmetric regulation, institutions
JEL Classification: D4, I3, O1
Suggested Citation: Suggested Citation