Mexico. Four years after the Telecommunications Reform, several changes associated with the adoption and consumption of telecommunications, the competitive dynamics in prices and investments, as well as those related to technological development, expansion of coverage and improvement in the quality of services are identifiable.
Some of these effects result in the main results of new market conditions and infrastructure development, from the exercise of higher investment amounts. These include: the increase in fixed broadband penetration from 39.3% to 48.4% and 15.2 percentage points (pp) in Pay-TV service (60.5%) among Mexican households, during the second quarter of 2013 (2Q13) and the fourth quarter of 2016 (4Q16); the increase in the contracting of mobile telephony, going from a teledensity coefficient among the population of 87.9% to 91.0% and in mobile broadband from 23.0% to 61.0%; as well as the increase in coverage, speed and quality in AT&T's network that reaches an availability of its 4G LTE network for 78 million people in 2016.
Other market circumstances resulted from technological evolution, cost efficiency and its consequent generation of economies for consumers. For example, the advance in the adoption of Smartphones among mobile lines that amounts to 80.6% at the end of 2016, 52.3 pp. more than in 2Q13, and the elimination of international long distance to destinations such as the US, Canada and Europe.
More limited changes come directly from the institutional, legal and regulatory corpus of the Reform, namely: the significant additions of FDI in telecommunications of $ 3,578 million dollars exercised between January 2015 and December 2016, the elimination of charges for long distance national and in part, the decrease in prices registered in recent years, with asymmetric interconnection tariffs. Even at times, this component has still proved to be of limited effectiveness in fulfilling the mandate to reconfigure and level the competitive terrain, as well as in reducing the excessive market share of the dominant operator.
In terms of prices, the asymmetry of call termination rates at current levels has allowed the implementation of aggressive and competitive strategies in terms of prices, packages, coverage and quality, with a substantial decrease in rates to the end user of communications in Mexico that amounts to 29.0% from 2Q13 to 4Q16.
Precisely, it is these conditions of offer at lower prices and richer baskets of mobile services, with unlimited call and SMS minutes and a greater amount of MB of Internet browsing, that have detonated the consumption of mobile services. In the last year concluded, the average consumption of minutes of calls made per user per month (MOU) of 377 during 4Q16, exceeds by 60.4% to 2015. On the other hand, the sending of SMS increased 54.7% and the number of MB browsed on the mobile internet 129.3%.
In the aggregate of effects it is identified that, for the most part, the direct cause of its materialization in the market has been in some proportion the implementation of the terms of the Reform, particularly the positive impact on the dynamics of prices and investments that results from the asymmetric tariff between operators.
Abandoning this scenario would be a counter-reform, equivalent to reversing and preventing access to telecommunications in the tariff and quality terms currently offered, with its consequent negative effects on the well-being of consumers, as well as telecommunications service providers.
Text written by Ernesto Piedras of The Competitive Intelligence Unit S.C.
