Introduction
The proposed reform to Mexico’s Federal Telecommunications and Broadcasting Law (LFTR) introduces modifications that not only affect the institutional structure but also generate a wave of economic impacts that could cost the country more than $76 billion pesos (mmp) annually, representing 12.6% of the sector’s total income.
Key Concerns
If the proposed changes are implemented, competition would be undermined, investment disincentives would arise, and services would become more expensive for millions of users.
Loss of Regulatory Autonomy
The disappearance of the Federal Telecommunications Institute (IFT) to make way for an agency under executive control could lead to decisions based on short-term criteria or non-strategic priorities.
The current regulator ensures that decisions are based on technical, not political, criteria. Its elimination would result in a loss of efficiency, neutrality, and certainty, reducing annual sector productivity by at least 0.5%.
Translated into figures: annual losses of $2.8 billion mmp would be generated, along with a domino effect that compromises investment and competitiveness.
Risks of Re-concentration
Another critical risk is the relaxation of the dominant market position regime imposed on America Movil, the operator with the largest market share.
Since 2014, the definition of asymmetric regulation mechanisms has enabled the entry and reduced barriers for new competitors. Its potential dismantling would imply an estimated loss of investment of $9.7 billion mmp annually.
More worrying still, it would reverse the progress in affordability of services: between June 2013 and June 2024, mobile services have decreased by 49.3%, a benefit that could disappear if the market returns to concentration.
TV of Paid: Gateway to Total Dominance
America Movil’s entry into the paid TV market also poses risks of vertical integration, cross-subsidies, anti-competitive practices, and potential sector dominance.
If authorized, the company could absorb an estimated $229 billion mmp in additional annual revenue over the next decade. Although this does not imply a direct loss for the economy, it does mean a redistribution to the detriment of other players and competition itself.
Expensive Spectrum: Structural Barrier
Mexico already pays one of the highest prices for radioelectric spectrum usage, up to 85% more than the OECD average.
If this overpricing is maintained despite a proposed discount model in exchange for coverage obligations, annual costs for operators are estimated at $23.1 billion mmp, which will eventually reflect in the final consumer price and reduce coverage, especially in rural areas.
Blocking Digital Content and Advertising
Provisions allowing the state to block or censor content or advertising on digital platforms have broader implications beyond freedom of expression.
The digital advertising market, exceeding $45 billion annually, could contract by 10% due to regulatory uncertainty. This represents a direct loss of $4.5 billion mmp, impacting sectors such as e-commerce and streaming.
Mandatory Undergrounding: Unviable Burden
Moreover, the obligation to underground infrastructure could cost up to $198 billion mmp if imposed immediately.
In its most moderate version —a 10-year deployment— the annual cost would be around $13.5 billion mmp. For smaller-scale operators, this would be an insurmountable barrier and a direct blow to network expansion.
Conclusion
The LFTR reform, in its current draft, would generate a significant economic decline for Mexico’s digital ecosystem.
Instead of fostering a stronger industry, it would create risks of greater concentration, less competition, more expensive services, and reduced investments. The economic cost would not only be measured in pesos but also in lost opportunities for a country that should bet on connectivity as a development motor.
Key Questions and Answers
- What is the proposed LFTR reform? The proposed changes to Mexico’s Federal Telecommunications and Broadcasting Law (LFTR) aim to modify the institutional structure and regulatory environment.
- What are the potential economic impacts? The reform could cost the country over $76 billion annually, representing 12.6% of the sector’s total income.
- How would regulatory autonomy be affected? The disappearance of the Federal Telecommunications Institute (IFT) could lead to decisions based on short-term criteria or non-strategic priorities, reducing annual sector productivity by at least 0.5%.
- What are the risks of re-concentration? Relaxing the dominant market position regime could imply an estimated loss of investment of $9.7 billion mmp annually and reverse progress in service affordability.
- How would America Movil’s entry into paid TV impact the market? If authorized, America Movil could absorb an estimated $229 billion mmp in additional annual revenue, potentially leading to a redistribution disadvantageous to other players and competition.
- What are the implications of expensive spectrum? Mexico’s high radioelectric spectrum usage cost could result in annual costs of $23.1 billion mmp for operators, reducing coverage and increasing consumer prices.
- How would blocking digital content and advertising affect the market? Provisions allowing state intervention could contract the digital advertising market by 10%, leading to a direct loss of $4.5 billion mmp and impacting sectors like e-commerce and streaming.
- What are the challenges posed by mandatory undergrounding? The obligation to underground infrastructure could impose an unviable burden, with immediate implementation costing up to $198 billion mmp and moderate deployment costing around $13.5 billion mmp annually, hindering smaller-scale operators.
