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Integra(on in Telecommunica(ons
Despite NAFTA
Judith Mariscal NAFTA + 20
LBJ School of Public Affairs February 6th
Basic Telephony was excluded from NAFTA
• DomesFc Policy prevailed over Trade Policy in the three countries.
• NAFTA only included: – Value Added services – TelecommunicaFons Equipment
DomesFc Policies
Even though all three countries were pursuing liberalizaFon regulatory policies, the nature of each reform was different:
• 1990 TelecommunicaFons Reform in Mexico: PrivaFzaFon & DeregulaFon: “NaFonal Champion”
• 1996 TelecommunicaFons Act in USA: Promote compeFFon following AT&T divesFture (SWB restricFons to long distance)
• Canada: 1993 TelecommunicaFons Act: LiberalizaFon & privaFzaFon: Cultural concerns with FDI restricFons
From the Bright Side • From Mexico’s perspecFve, NAFTA was beneficial in trade in telecommunicaFons equipment.
Mexico’s imports Mexico’s exports
Main relaFonships of Mexico’s foreign trade in TelecommunicaFons Industry, 2000
96%
0.3%
U.S. Canada
53%
6.1%
U.S. Canada
Source: BANCOMEXT, 2000
From the Bright Side
• Mexico & Canada are the single most important markets for U.S. Telecom Industry
3,522 3,271 5,962
11,634
719
23,165 15,124
TelecommunicaFons equipment
Radio and TV broadcasFng equipment
Semiconductors and integrated circuits
Computers, peripherals, and
parts
Others
NAFTA
U.S. Exports of telecommunicaFons equipment, 2012
Source: United States InternaFonal Trade Commission (USTIC), 2013
Telecom Trade SpecializaFon
• A greater share of Mexican imports from U.S. are intermediate goods, while most of Mexican exports are consumer goods
Mexico-‐U.S. TelecommunicaFons Industry Trade
35%
17%
23% 48%
22%
30%
17% 3%
Mexican Imports Mexican Exports
Radio & TV BroadcasFng Equipment
OpFcal fibers (bundles and cables)
Semiconductors and integrated circuits
TelecommunicaFon Equipment
Computers, peripherials, and parts
Circuit Apparatus
Source: USTIC, 2012
Exports to U.S: Maquila Based
TelecommunicaFon Industrial Parks in Mexico, 2000
Source: BANCOMEXT, CANIETI, and SIEM, 2000
From the Bright Side
Diminished tariffs in telecommunicaFons equipment supported trade growth for Mexico:
• Mexico is Cisco’s most important global hub in manufacturing to 90 countries around the world, including U.S. ($1. 3 billion US dollars in 2014)
• IBM built 2 Data Centers for Cloud CompuFng Service • Intel is expanding its exisFng plant in Guadalajara
U.S. Capital came to the Mexican market in 1996
Despite restricFons from the Mexican FDI Law: • Southwestern Bell bought the majority of shares in a joint venture with Telmex (today AT&T)
• AT&T bought 49% of shares with Grupo Alfa & Bancomer in the creaFon of Alestra (1 billion dlls)
• MCI bought 49% with Banamex to create Avantel • Nextel arrived in 1998 with an investment of USD ($9 billion dlls to date)
However, U.S. telecom capital in fixed telephony in Mexico was short lived
• Firms with foreign capital acquired 45% of market share in 1996.
• Barriers to entry with very high interconnecFon rates and focus on U.S. market reduced this share to 21% by 1999.
• Today, mobile market is concentrated (no FDI restricFons)
Mobile telephony Market Shares in Mexico, 2013
73%
7%
10%
10%
America Movil
Iusacell
Telefonica
Nextel
Source: The CIU, 2013
In fact, U.S. Telecom Capital lel the region and most of the world
• The objecFve of creaFng a market with numerous players was not reached in LaFn America
• Today, the region faces a d u o p o l y : T e l e f o n i c a Movistar & America Movil. Both supported by their government through a N a F o n a l C h a m p i o n strategy
America Movil
Telefonica
Dominant operator in LaFn America, 2013
Source: TelecomCIDE, 2013
And yet, migraFon led to integraFon
455 406
729
628 542
709
816 856
748
630
493
317
0
100
200
300
400
500
600
700
800
900
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Immigrants to U.S.* (in thousands)
Mexicans living in U.S.** (in millions)
23.2 24 25.5 26.7 26.9
28.1 29.3 30.3 30.7 31.7
32.3 32.5
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
*Include irregular migrants **Include 2nd and 3rd Mexican generaFons Source: Bureau of Census and Bureau of Labor StaFsFcs, 2012
IntegraFon in basic telephony
Top InternaFonal Routes, 2012 (Minutes per year) 35,095
22,111 20,572
15,673
7,595
US-‐Mexico Canada-‐US US-‐India Hong Kong-‐China
UK-‐US
• North America is the most integrated region in the world
Source: Telegeograpy
IntegraFon in basic telephony
23%
12% 8%
57%
Mexico India Canada Others
Top outgoing calls from USA
• Mexico and Canada represent about one third of calls from the U.S.
• The desFny of 86 % of calls in Mexico are to the U.S.
Source: Telegeograpy
U.S. & Canada are the internaFonal interconnecFon Hub
• 98.3% of Mexican InternaFonal Internet Bandwidth come from USA
Africa Asia Europe LaFn America
Mexico US & Canada
6.2
2.0 4.5
0.02
7.9
0.01
US & Canada ConnecFons Mexican ConnecFons
Total Internet Bandwidth (in terabits)
Source: Washington Post,2014
InternaFonal Traffic in Data has further integrated Mexico with the U.S.
Source: Telegeography, 2014
Regional ConsolidaFon • Mexico is connected to the U.S. via 5 cable submarines • América Móvil connects LaFn America via AMX-‐1
Source: Washington Post, 2014
Conclusions
• All internaFonal agreements entail some loss of independence in order to achieve a more efficient regulatory system
• Telecom trade liberalizaFon require some degree of regulatory harmonizaFon (GATS)
• Current telecommunicaFons reform in Mexico has eliminated
FDI in telecom, not in broadcasFng.
• Technological innovaFon, migraFon & globalizaFon will further integraFon
Integration in Telecommunications Despite NAFTA
Judith Mariscal
