Telecommunications in Mexico are regulated by the Secretariat of Communication and Transportation (Secretaría de Comunicaciones y Transportes or SCT), which is s federal agency, and by the Federal Telecommunications Institute (Instituto Federal de Telecomunicaciones) or IFT. This fact is important in understanding how the government involvement in regulating Mexican telecoms has been crucial and at the same time it shows why the industry has flourished in such a particular way in this emerging Latin American economy.
Even after regulations, the IFT announced a couple of years ago that the country’s telecom industry has shown an 8.4% year-over-year growth in revenues. This makes it the fastest growing industry across all sectors of the economy. To make matters even more remarkable, the growth shown by the telecom industry is three times higher than the country own GDP during the same time frame. This is most likely the result of a direct increase in the amount that is being used in infrastructure, research, upgrade and overall investment in the telecom industry.
At this moment there are three main nationwide telecom service operators in Mexico and they are: America Movil SAB, Telefonica SA and as of two years ago AT&T, the newest participant joined the market after acquiring Grupo Iusacell and Nextel.
In 2013, Mexico’s president signed a constitutional amendment that deeply changed the role government had gone it came to handling telecommunications and also attempted to stop the power that comes as a consequence from media monopolies, specially when it comes to this particular industry. The reform, called Pacto por México (Pact for Mexico) brought forth two major reforms and they are:
First of all, there was a new regulatory agency backed by constitutional status called the Instituto Federal de Telecomunicaciones (Federal Telecommunications Institute—IFETEL) that helped the state regain their role as regulator of the telecommunication industry. One of the things that the IFETEL attempts to accomplish is to ensure that economic competition is fair, that coverage is universal and that access to services is available and of great quality. It can even dissolve and separate companies that do not comply as well as sanction them. Most of these measurements apply to companies that own above 50% of the market share due to the size of their user base and the capabilities and reach of their network infrastructure, and thus can be considered “dominant” in the industry.
The second part of the reform comes as the creation of a public service broadcast company with the responsibility of generating content that is produced fairly, neutrally and independently. Senate has the task of appointing a director advised by a citizen’s council to be in charge of governing the company.
The reform seeks to ensure citizens that free speech is to have the utmost importance a will focus on protecting the listeners as much as doing the same for speakers.
Three years later, it seems that to the surprise of many, billionaire Carlos Slim and his family continue to control the majority of landline and wireless network market in the country of Mexico. American Movil continues to hold a staggering 60% of market share control. Experts speculate that it will not be until 2020 that the benefits of the reform will actually start to bear fruits of success. It apparent that the measures imposed on America Movil have not been sufficient into actually regulating the chokehold this company seems to have in the local market as they continue their dominant stance in the sector. Also it seems that the company itself has been less than forthcoming when it comes to sharing their towers with other carries and being transparent about the location of said towers, both of these being points that were supposed to be followed according to what it was laid out per the agreement.
The truth in the end is that while Telmex and Telcel have been the main key players in the arena for decades, even with the presence of Carlos Slim looming behind the curtain and the one truly in charge, this was the opportunity for AT&T to finally come into the country and ramp up its presence in the country. AT&T has not been foreign to the Mexican telecommunication industry since it has participated in it for over a century under different names, but now it sees this reform as a true opportunity to stand its ground and truly come in as a force to be reckoned with. This reform does mean that Slim’s empire will have to adapt or suffer by being forced to share the market or start to lose revenue, something that in a way opens up the doors to a new era of telecommunications in Mexico where more companies can come in and be competitive, something that will benefit everyone involved in the long run.
For more great articles check out our publications at Peter Foyo Blog today.