The OECD's Proposal to Cartelize Mexican Telecommunications

Gregory Sidak, Jun 14, 2012

The Comisión Federal de Telecomunicaciones hired the Organization for Economic Cooperation and Development 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 government and legal system are equally baseless and demonstrate a clear bias for regulation over competition. The OECD criticizes Mexico's amparo process and the filing of such appeals by Telmex and Telcel with regard to various Cofetel rulings, 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 The OECD's Proposal to Cartelize Mexican Telecommunications here. 


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