Public Policy and the Regulatory Environment in Mexico and the World: Bridging the Digital Divide?

Abstract

The present study examines public policy intended to ensure communications service provision to low-income populations in Mexico. The study takes as its starting point the distinction made in the literature between a “market efficiency gap” and an actual “access gap”. Regarding the former, we posit that failures in regulation occur as a result of a weak institutional framework and a marked imbalance of power between the regulatory authorities and operators from the market-dominant conglomerate comprising Telmex, with 78.4% of landlines, and Telcel, with 67.1% of mobile lines.Difficulties in attempting to regulate these operators have meant a limited ability to remove barriers to entry into these markets and to counter the anti-competitive practices in which the operators engage. The latter behaviour has impeded new operators by raising costs, not least those relating to risk and uncertainty, in the absence of a fair playing field.A recent study found that the lack of competition among telecommunications providers in Mexico has imposed significant costs on the Mexican economy and increased burdened the welfare of the country’s population. It has resulted in low market penetration rates and poor infrastructure development. The loss of benefit to the economy is put at USD 129.2 billion (2005-2009) or 1.8% GDP per annum.On the question of access gap, Telmex’s dominance has led to the various difficulties faced by government authorities in enforcing the social coverage commitments agreed to by the company, firstly as a condition for the exclusive rights granted to it, and subsequently as operator of the government-funded Social Coverage Fund, resulting in a lack of process transparency in the use of resources and little improvement to service accessibility. In short, the two types of gap - market efficiency and access - have different underlying causes and distinct policy implications. However, in the case of Mexico, there is a common factor in both cases: the power exercised by the dominant operators over regulatory authorities. As a result, it is in Mexico’s poorest states, home to 33.3% of the country’s population and 37.8% of the rural population, that low penetration rates are most evident.The aim of the present research is to examine the implications of such market power for achieving socially equitable and affordable access to high-quality telecommunications services (1990-2011). The study examines the coverage of telecommunications services in various regions of the country, ranked according to their respective level of development, analyses the scope of public policies on universal service provision and presents the main research results regarding these policies (1990-2011). The sources underlying this research are the recently published Household Survey of Access to and Use of Information Technologies and Household Survey of Income and Expenditure, recent information on regional economic development based on Poverty Indexes and growth and employment figures from Mexico’s Census Bureau (2010), and statistics published by the Ministry of Communications and Federal Telecommunications Commission (2011).In the light of available evidence, the paper discusses possible explanations for the apparent failure of previously-implemented policies to bring telecommunications services to those regions of Mexico lacking coverage (access gap). It also examines the difficulties faced by the regulatory bodies behind the design and implementation of pro-competition policies that could help to improve service density through increased affordability (market efficiency gap).