Telecommunications reform in Mexico: an in-depth analysis on the socio-economic consequences of

Friso de Jong

Research output: Working paperAcademic

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The market for local telephone services was opened up to competition in 1990, but it was not until 1999 that the first local service customers were signed up by competitors. The absence of number portability, however, is the main inhibitor for competition to take off. Competition is more fierce on the market for long-distance (LD) services, which is liberalised since January 1997. Many concession titles were issued, though actual competition remains limited to three main competitors: Telmex, Avantel and Alestra, which represent over 92 percent of total LD revenues. The market for mobile telephony was initiated in 1987 and Mexico was divided into nine regions. Duopoly concessions were granted in each and Telcel obtained the sole nationwide license. This is one of the reasons Telcel has been able to remain the most important player within mobile telecommunications with a market share of 78 percent in 2002. Internet services are dominated by both telecom operators and cable operators. The dial-up market remains by far the most important, however, dominated by Telmex with close to 65 percent market share in 2002. Combining all types of Internet access, Telmex is market leader with 58 percent of total accounts in services in 2002. Competition led to increased investments, which were allocated towards building infrastructure. Higher penetration rates consequently resulted. The effect of liberalising telecom services does not totally add to higher penetration rates, however, since carriers decided to build their own infrastructure causing redundant capacity. When comparing the level of main-line penetration with penetration rates in OECD countries, Mexico’s rates are alarmingly low with a registered rate of 14.6 in 2002. Together with low Internet penetration rates (3.6 percent in 2001) a digital divide reveals itself. More importantly, based on mainline density figures per district an internal digital divide is manifest. The income gap between the northern and southern states is mirrored in telecom infrastructure development. This goes as well for mobile telephony, although prepaid mobile programs, introduced in 1995, and (local) calling party pays (CPP), introduced in 1999 have resulted in skyrocketing growth and penetration rates. The amount of mobile subscribers trespassed the amount of operational fixed-lines in 2000. Now, almost 26 million Mexicans are mobile subscribers. Overall, quality of services has been found to improve as a consequence of reform and tariffs were taken down. The objective of providing access to telecommunications to everyone against low costs remains far from being reached, however. Given low penetration rates and favourable economic conditions, there is still significant room for growing adoption of telecommunication services.
Original languageDutch
Number of pages101
Publication statusPublished - 2003

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