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The OECD's proposed regime of asymmetric ex ante regulation for Mexico's telecommunications marketplace would reduce competition, contrary to the OECD's aims. The OECD's proposals would harm Mexican consumers and force an increase in prices paid for telecommunications services. They would create a government-sanctioned price cartel among the telecommunications providers. They would reward inefficient competitors and penalize efficient carriers, all to the detriment of the consumers. Instead of relying on new layers of counterproductive or ineffective regulations, the Mexican government should remove regulatory entry barriers between video and telephone, thereby creating enduring, facilities-based competition.


The Comisión Federal de Telecomunicaciones (Cofetel) hired the Organization for Economic Cooperation and Development (OECD) to produce a report on telecommunications regulations in Mexico. In the report, released in January 2012, the OECD asserts that there is a lack of competition in Mexican telecommunications markets, resulting in harm to Mexican consumers. Based on that finding, the OECD concludes that those consumers would benefit from heavier regulation of Mexico's telecommunications sector.

The OECD thus proposes new kinds of regulatory powers that would dismantle Mexico's existing legal and regulatory institutions. The proposed regulations would significantly harm consumers, turn competitive markets into government sanctioned cartels, and redirect efficiencies away from consumers and into the bank accounts of less efficient competitors. Far from improving the state of Mexico's telecommunications sector, the OECD's policy prescriptions would reduce competition, retard innovation, and harm consumers.

The OECD's harsh criticisms of Mexico's govcizes Mexico's amparo process and the filing of such appeals by Telmex and Telcel with regard to various Cofetel rulernment and legal system are equally baseless and demonstrate a clear bias for regulation over competition. The OECD critiings, despite that fact that, as the OECD report itself admits, the courts more often than not found that Telmex and Telcel were correct and that Cofetel had in fact acted unlawfully. Despite this fact, the OECD urges that Cofetel, the organization that requested the OECD report, be given absolute and unquestionable authority over the telecommunications sectors, subrogating the role of the SCT, Cofeco, and the Mexican courts.

In Part I of this paper, I analyze the OECD's specific policy and regulatory recommendations. I demonstrate why, even if one assumes (contrary to the facts) that a market failure exists in Mexico's telecommunications market, the OECD's proposals would not improve matters. The proposals are warmed-over policies that have failed to achieve competitive outcomes in other countries; the result would be no different in Mexico. The proposals would harm Mexican consumers and force an increase in prices paid for telecommunications services.

In Part II, I explain how the OECD's solution of dismantling Mexico's legal and regulatory systems would be grossly overbroad. The OECD's denunciation of amparos lacks any rigorous legal or economic foundation. Moreover, there is no credible reason why requiring courts, the Secretaría de Comunicaciones y Transportes (SCT), and the Comisión Federal de Competencia (Cofeco) to defer to Cofetel would solve the purported problems in Mexico's telecommunications sector.


Read entire article (PDF).

J. Gregory Sidak is an Expert Economist in the fields of Antitrust, Telecommunications Regulation, Commercial and Investment Arbitration, and Intellectual Property Law. Prof. Sidak is the Ronald Coase Professor of Law & Economics at Tilburg University and the Chief Economic Expert at Criterion Economics in Washington, DC. The focus of his research has been regulation of network industries, antitrust policy, the Internet and electronic commerce, intellectual property, and constitutional law issues concerning economic regulation.

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