In a significant move impacting trade relations, the United States has raised concerns regarding Mexico's telecommunications sector as outlined in the recently released National Trade Estimate (NTE) report by U.S. Trade Representative Jamieson Greer. This report, the first under the Trump administration, highlights various barriers American companies face while operating in foreign markets, particularly in Mexico.
The NTE report emphasizes that despite reforms implemented in 2013 and 2014 aimed at increasing competition in the telecommunications market, the sector remains largely dominated by a single provider, which holds nearly 70% of the market share. This monopolistic hold raises alarms for U.S. officials, who fear the implications it has on fair competition and consumer pricing.
One of the most pressing issues identified is the recent constitutional reform that dismantled the Federal Telecommunications Institute (IFT), an autonomous body established to regulate the sector and promote competition. The reform, enacted in December 2024, transferred the IFT's responsibilities to the Secretariat of Infrastructure, Communications and Transportation (SICT) and the new Agency for Digital Transformation and Telecommunications. This shift has led to concerns that the new regulatory framework may not uphold the standards necessary for a competitive market.
According to the Organization for Economic Cooperation and Development (OECD), prior to the establishment of the IFT, the lack of competition in Mexico's telecommunications sector resulted in a social cost of at least $129 billion. In 2010, only 34% of the Mexican population had internet access, underscoring the historical challenges in this sector.
Moreover, the high costs associated with spectrum allocation in Mexico have been a barrier to entry for potential competitors. The Competitive Intelligence Unit reports that the total cost of spectrum, considering fixed annual costs over 20 years, amounts to approximately 213.6 billion pesos. This exorbitant pricing structure disproportionately favors the dominant provider, complicating efforts to foster competition.
In light of these challenges, the U.S. government is urging Mexico to reconsider its regulatory policies that currently benefit the dominant provider at the expense of competition and consumer choice. The timing of the NTE report is critical as it coincides with the anticipated announcement of new tariffs by President Trump, which could further complicate trade negotiations between the two nations.
On April 3, 2025, at 2 p.m. Mexico City time, Trump is expected to unveil his plan regarding tariffs, a move that has already prompted Mexican officials, including Economy Minister Marcelo Ebrard, to convene a meeting with business leaders at the Mexican Cultural Institute in Washington, D.C. This meeting aims to strategize the government’s approach to the upcoming negotiations.
In addition to the NTE report, the USTR has also expressed concerns about the potential establishment of a new telecommunications regulator under the direct control of the President, which could lead to further regulatory challenges for U.S. companies operating in Mexico. The USTR's report, sent to Trump on March 31, highlights that the elimination of independent regulatory bodies, like the IFT, raises significant questions about Mexico's compliance with its commitments under the United States-Mexico-Canada Agreement (USMCA), previously known as NAFTA.
The USTR notes that while Mexico has made strides in improving access to internet services, the current market structure still lacks sufficient competition, with 70% of services controlled by a single economic entity. This concentration of market power not only stifles competition but also poses risks to consumers, who may face higher prices and fewer choices.
Furthermore, the tax burden associated with spectrum usage is another area of concern. In 2024, Telcel, a major player in the telecommunications market, paid taxes equivalent to 5.7% of its income for spectrum usage, while AT&T faced an even higher rate of 17.3%. These high taxation rates have led some companies to surrender their spectrum licenses, further reducing competition in the market.
The USTR has pointed out that Mexico's pricing for spectrum frequencies is significantly higher than the international average. For instance, the cost for 2.5 GHz frequencies is 96% more expensive than what is typically charged worldwide, which hampers the ability of new entrants to compete effectively in the market. The USTR has recommended that the U.S. government press Mexico to reform its fiscal policies regarding spectrum usage, especially in light of the upcoming discussions about a revised trade agreement.
As the situation develops, it remains to be seen how Mexico will respond to these pressures from the U.S. government. The concerns raised in the NTE report and the upcoming tariff announcements could set the stage for a pivotal moment in U.S.-Mexico trade relations, particularly in the telecommunications sector.
In a related development, Sempra Energy has announced plans to divest from certain infrastructure assets in Mexico, including a minority stake in its subsidiary Sempra Infrastructure Partners. This move is part of a broader strategy to streamline its portfolio and redirect capital towards new investments in Texas and California. Sempra’s decision to sell its assets, which include Ecogas Mexico, a company serving 600,000 clients, reflects the shifting dynamics of international investment in the region.
As the U.S. and Mexico navigate these complex trade and regulatory landscapes, the focus will likely remain on fostering a competitive telecommunications market that benefits consumers and encourages innovation. The outcome of these discussions could have lasting implications for the economic relationship between the two countries.
