Today marks the second anniversary of the U.S.-Mexico-Canada Agreement (USMCA). This landmark agreement, which went into effect on July 1, 2020, promised to strengthen economic integration, cooperation, and governance across North America.
In many ways, the agreement has been a success. Trade between the U.S., Mexico and Canada quickly recovered from the economic downturn during the pandemic, rising an average of 6% across the region between 2019 and 2021. The agreement has also helped to lay a firm foundation for greater regional cooperation and dialogue, strengthening the collective ability of its members to address pressing global challenges and boosting regional competitiveness.
While these successes are real and worth recognizing, they make the unfulfilled promises of the agreement stand out even more. In particular, Mexico’s failure to take the necessary steps to promote competition in the telecommunications market, despite its commitments to do so in the USMCA, is glaring.
The Agreement’s chapter on telecommunications contains critical provisions that guarantee a level playing field, non-discrimination, and regulatory certainty for the sector. It incorporates Mexico’s 2013 constitutional reforms in the telecommunications sector, thereby establishing a regulatory framework that promotes competition, allows for foreign investment, and creates an independent, autonomous, and specialized regulatory body.
When the agreement passed, these provisions were lauded as a way to provide a level playing field for investment in Mexico’s telecommunications sector and ensure that foreign and domestic operators can compete on an equal footing.
Yet Mexico hasn’t lived up to its end of the bargain. The regulatory agency responsible for promoting telecommunications competition is operating without a full set of commissioners, impeding its efforts to act, and the Compliance office is over two years behind on resolving several key outstanding issues.
As a result of these unfulfilled promises, the competitive landscape in Mexico’s telecommunications sector has barely changed over the past two years. Indeed, since USMCA went into effect, the sector’s preponderant economic agent has seen its market share by revenue increase, from 70.8% in 2019 to 73.6% in 2021, and its profit margin rise. This unfair competitive landscape is exacerbated by spectrum fees that distorts the market in favor of the largest operator.
To its credit, the Biden administration is closely engaged on these issues, and has taken positive steps to urge Mexico to meet its telecommunications obligations under the USMCA. The issue was raised during last fall’s High-Level Economic Dialogue, where U.S. Vice President Kamala Harris and Cabinet secretaries met with their counterparts from Mexico. Similarly, at the USMCA Deputies Meeting in January, competition policy in Mexico’s telecommunications sector was one of several issues discussed.
AT&T has invested over $11 billion in the sector to provide access to 4G service to nearly 77% of Mexicans, helping to lower prices by more than 40%, and doubling mobile broadband subscribers since 2014. The benefits of AT&T’s service in Mexico are real and they impact all sectors of the economy, including distance learning and telemedicine, even as it helps support the economically disadvantaged.
For Mexico – and North America writ large – to miss out on these advances would be a major setback. To do so because of an outdated and anti-competitive regulatory regime would be harmful to Mexican consumers.
Fortunately, the way forward is clear: Mexico must make good on its commitments and fully implement and enforce the USMCA’s protections of regulatory independence and effective competition.