Competition in the mobile market, a complicated challenge

Last week’s announcement by AT&T Mexico, to return radio spectrum frequencies and not participate in tenders for this public domain asset -carried out by the Federal Institute of Telecommunications (IFT)-, “until tax collection policies change of the State”, as reported by Expansión magazine, is a delicate event that clearly shows us that there has been no will in our country to enter into a serious discussion on the advisability of modifying the way in which the Ministry of Finance and Public Credit , together with the Congress of the Union, have been setting what the State charges mobile service operators for the use, exploitation or exploitation of radioelectric spectrum frequencies.

The high price for the various frequencies of the radio spectrum that the SHCP proposes to Congress year after year as part of the Economic Package, and that is voted on without further reflection in both chambers, in combination with the structure of those prices, which privileges similar quotas over bands with different characteristics, or that reflect the same price differential between the various regions of the country, even when they are also different frequency bands, with different characteristics and whose demand by operators is not necessarily identical between those bands, along with The lack of effectiveness of regulatory measures implemented by the IFT has become a factor that, over the years, has deteriorated the prospective competition in the mobile market in our country.

There is the case of Telefónica, which in 2020 began a process to return the frequencies that until then had been concessioned, mainly due to the high cost incurred for the payment of rights fees for the exploitation of the radioelectric spectrum, for base their operation on spectrum leasing.

The point is that of the three concessionaires with their own infrastructure and licensed spectrum, América Móvil is the only one that remains strong, without there being a hint of doubt about its interest in continuing to exploit the frequencies that it currently has under concession, as well as about its interest in participating in other bidding processes to obtain additional frequency exploitation rights.

In other words, perhaps involuntarily, the actions of different authorities in some aspects, such as the omission of those same or other authorities in others, has given rise to the fact that, far from improving the prospective competition for the telecommunications sector in its mobile segment, today seem less optimistic. Thus, from the Executive Branch, via the SHCP, and from the Legislature, via the approval of the quotas that this dependency proposes each year in the Economic Package, added to the lack of determination of the regulatory body to make not only its presence felt, but the importance of being an authority that establishes effective measures that allow the mobile services market to function “as if” there were competition conditions, have resulted in an unfavorable mix for promoting effective competition in the mobile market.

Because many things can be argued, but the fact that América Móvil’s market share in the mobile segment, measured as a proportion of revenues, has practically dropped by only 3 percentage points, indicates that in Mexico, competition has very little progress compared to what has happened in more mature or more developed markets.

It would be well worthwhile for the SHCP to look at the Mexican mobile market to verify that its pricing approach for the use of the spectrum, far from being a factor that encourages competition and growth in the mobile segment, is becoming a brake. or obstacle. The IFT could well do something similar in the case of regulatory measures that are the exclusive attribution of that autonomous constitutional body. For now, it seems that we are inserted in a kind of routine administration.

*The author is an economist.

@GerardoFloresR