Telecommunications and Inclusive Economic Development: Affordability and Access to Telecommunications Services among Poorer Population in Mexico

Abstract

Telecommunications service infrastructure is a crucial factor for economic development and for attaining greater equality and social inclusion, meaning that services are available and affordable to all citizens regardless of income and geographic location. Given this observation, the present study examines two inherent issues. The first concerns coverage and take-up of telecommunications services among lower income citizens in Mexico: to what extent this sector of the population has access to landline, mobile and Internet services including broadband. The second issue is that of affordability of services relative to citizens’ income: in other words, the amount spent on services by the poorest members of society, in relation to their income and how this proportion compares to higher income sectors of society.

In order to address these questions, we review existing literature on access and affordability of telecommunications services in developing countries before conducting an empirical analysis of coverage of such services in Mexico. With reference to the Household Expenditure Survey, our analysis examines data broken down by prosperous vs poor states, rural vs urban populations and by income percentile. The study argues that in the case of Mexico, a broad sector of the low income population lacks access to services, especially when it comes to landline, Internet and broadband services, and that access to such services is less available compared to mobile services. We also argue that lower income populations incur greater expense as a proportion of their income in taking up these services, compared to higher income populations. In a subsequent section, by means of an econometric analysis, we examine the specific effect on the poorest sectors of society of being forced to choose particular telecommunications services as a result of social policy. This analysis takes into account expenditure on telecommunications services, regional poverty indices, level of education and sector of employment (agriculture, industry, services). Possible interpretations of these results are offered, both from the point of view of market efficiency (the levels of concentration and competition in the market for these services) and in terms of difficulties in implementing policies intended to close the access gap and reach poorer sectors of the population. Finally, the study suggests various scenarios that may arise as a result of the recently approved reforms to the telecommunications sector which may finally offer a means of regulating the dominant operator and bringing greater competition to the telecommunications market.

Keywords: Income distribution, competition policy, regulatory institutions, universal service policies, developing countries

JEL Classification: Institutions and Growth, Welfare and Poverty