Introduction
Mexico has one of the most burdensome regimes in the world regarding spectrum usage fees, an essential resource for mobile telecommunications operations. While other Organisation for Economic Co-operation and Development (OECD) countries have reviewed their pricing schemes and reduced nominal levels, Mexico’s fiscal framework continues to heavily tax spectrum usage.
Excessive Spectrum Costs: Negative Impacts
According to the OECD, excessive spectrum costs have led to adverse effects: frequency returns, disincentives for participating in new auctions, and a progressive loss of market dynamism in the mobile sector.
Worsening Situation
Telefónica, for example, renounced all its spectrum holdings, while AT&T has made partial returns in various bands. This has resulted in a loss of $18,712 million pesos (mdp) in revenue between 2019 and 2024. The direct consequence is less effective competition and a growing market concentration favoring Telcel, the Dominant Economic Agent in Telecommunications (DEAT).
Economic Implications
High annual rights discourage participation in auctions and make spectrum an underutilized, expensive, and unattractive asset for non-dominant operators.
Paradoxical Fiscal Losses
Ironically, the revenue-seeking approach has had the opposite effect. The former Federal Telecommunications Institute (IFT) estimates show that spectrum rights revenue has consistently dropped: from $19,980 million pesos in 2019 to $16,776 million pesos in 2024 due to spectrum renunciations. If AT&T were to renounce all its frequencies, leaving only the DEAT, the revenue could fall to $9,294 million pesos.
Operator withdrawals and spectrum band returns directly translate to lower payments to the government treasury, demonstrating that an overburdensome spectrum regime erodes fiscal revenue.
International Lessons on Spectrum Cost Reduction
The international experience shows that nominal reductions in annual spectrum costs do not mean lost revenues but rather increased ones in the medium term. For instance, Ofcom in the UK reduced annual tariffs for 900 MHz and 1800 MHz bands by 26%, India eliminated the annual spectrum usage charge for new licenses, and Croatia, New Zealand, and Australia cut their rates to stimulate deployments and competition.
These measures have freed resources for investment, accelerated network coverage, and sustained revenue through sector growth rather than fiscal imposition.
Key Questions and Answers
- What is the issue? Mexico has one of the most burdensome spectrum usage fee regimes, discouraging investment and market competition.
- Why is this a problem? High spectrum costs lead to reduced participation in auctions, underutilized spectrum, and less effective competition, favoring dominant players.
- What are the fiscal losses? The overburdensome spectrum regime results in lower revenues for the government treasury, as operators withdraw and return spectrum bands.
- What can be learned from other countries? Reducing nominal spectrum costs can stimulate investment, accelerate network coverage, and sustain revenue through sector growth.
