Mexico should quickly reform the laws and regulations governing its telecommunications sector to boost competition and investment and drive growth across the economy, according to a new OECD report. The report says that the lack of competition has led to extremely high prices for consumers and businesses and slowed the take-up of new services.

The OECD estimates the cost to the Mexican economy to be around US$25 billion each year, equivalent to nearly 2% of GDP.

The report highlights the ineffective competition and impaired regulation that have resulted in the incumbent operator having 80% of fixed and 70% of mobile telephony market share. The average market share of the mobile incumbent in OECD countries is roughly 40%.

Mexico is at the bottom of rankings with other OECD countries in market penetration for fixed, mobile and broadband markets. Profit margins of the incumbent are much higher than the OECD average, while investment per capita is lower than in any other country.

Reforming the court system (especially the "amparos") that enables firms to appeal regulators' decisions systematically would help. The current system encourages firms to file a virtually endless number of injunctions in order to delay or prevent new regulations coming into effect. Instead, regulators' decisions should remain in force until the appeals process is finished, as is the norm in OECD countries, says the report. The appeal process should be streamlined and the government and regulator made responsible for policy making and regulation, not the judiciary.

The OECD also says that the government should make the regulatory authority Cofetel more powerful and independent. This would include increasing its financial and administrative independence and being able to impose higher sanctions than it can today to deter anti-competitive behaviour. The "double window", whereby a regulatory process is conducted twice by two different authorities, should also be removed and the procedures leading to regulatory decisions simplified.

At the same time, wider public consultation processes should be put in place to make its decisions more transparent.

Looking ahead, the OECD says that Mexico should also relax foreign investment and ownership restrictions in fixed-line networks to encourage new market entry and investment.