Synopsis
Broadband is one of the highest growth sectors in Mexico’s telecommunications market. Nevertheless, the market suffers from a lack of competition, with Telmex still accounting for the lion’s share of ADSL subscribers. The main cable TV providers, Megacable, Cablemás and Cablevisión, have begun to incentivise the purchase of triple play bundles of cable TV, broadband and telephony, and as a result their broadband subscriber base continued to enjoy healthy growth in recent years. Nevertheless, there is significant scope for additional growth as Mexico’s broadband penetration is less than half of the OECD average while its broadband prices are amongst the highest in the OECD. This report provides an overview of Mexico’s broadband and internet market, accompanied by relevant statistical data and broadband forecasts to 2016.
Key Developments:
Low broadband penetration around 13% well below the OECD average; ADSL remains the most popular form of broadband internet access at 75%; Telmex leads with a 75% ADSL market share; cable operators report lower churn due to triple-play services; Smart Grid deployments to gather pace into 2012; LTE looms over further substantial WiMAX investment; government’s CompuApoyo initiative targets 1.7 million homes for computers and broadband access; operator data to end-2011; market developments into 2012.
Companies covered in this report include:
Telmex; Megacable; Cablemás; Cablevisión; Maxcom; Sistemas Interactivos de Telecomunicaciones (SIT); Axtel; Megafón; InterCable; CFE
The internet came to Mexico in 1992. Until liberalisation of the telecommunications sector in 1997, internet services were expensive and of poor quality, mostly due to the difficulties faced by Internet Service Providers (ISPs). Telmex often forced ISPs to wait for months before providing new lines and increasing routing capacity and ISPs accused Telmex of anti-competitive practices.
Since then, however, the internet market has become the fastest growing segment in the country’s telecom sector. In terms of market size, Mexico is the second largest internet market in Latin America after Brazil. However, in terms of broadband penetration by OECD standards, Mexico has some of the lowest penetration rates. Little more than 30% of the population regularly uses the internet and broadband subscriber penetration by early 2011 stood at an estimated 13% of the population, well below the OECD average of around 25%.
Penetration is partly limited by the fact that an estimated 18% of the population live below the national poverty line. In addition, the market suffers from a lack of competition, as there has been no local loop unbundling and some foreign investment restrictions remain. Low computer ownership also constrains internet penetration. Thus Telmex has been financing or subsidising the purchase of computers to assist with increasing internet penetration growth, and by early 2011 had financed or discounted the purchase of approximately 2.9 million computers. Nevertheless, broadband growth is still constrained by the country’s low computer penetration in households, standing at around 25%, well below the OECD average of approximately 70%.
In order to promote internet uptake, in 2002/03 the government conceived an ambitious project, called e-Mexico, aimed at transforming the country into a digital economy. Part of this project involved the installation of cybercafés throughout the country, offering free email accounts to every Mexican and the provision of universal access to educational, health and government services. Despite this initiative however, improved penetration is dependent on increased private investment in the sector. Increased penetration is more likely to come from new deployments by Telmex itself, from the cable broadband providers and from new broadband wireless networks.
By early 2012, there were only an estimated 20 major ISPs operating in contrast to the nearly 350 companies which have over the years registered to provide ISP services. Telmex/Prodigy remains the dominant carrier and the major provider of local lines and interconnection links to ISPs. Telmex’s backbone is the main path to the US internet nodes that route all of Mexico’s internet access.
The telecommunications industry more generally benefited from an economy-wide recovery in 2010, with GDP growth at 5.5% and predictions of ongoing growth at 4.5% in 2011 and 3.8% in 2012. In addition, the introduction of stronger competition laws in 2009/10 may help to create a more competitive environment in an otherwise highly concentrated industry.
Mexico’s broadband plan has called for broadband penetration to reach 22% by the end of 2012.
In a bid to ensure that all citizens can access broadband, the government in early 2012 devised a program to enable low-income families to get both computers and broadband services. The CompuApoyo initiative is focused on closing the digital gap within the country and extending the availability of online access to services such as health and education. The initiative is targeting 1.7 million homes, initially using the Infonacot credit scheme, while broadband will be available at a subsidised price for one year.
To encourage broadband adoption – currently near the lowest among the 34 OECD countries – the government also decided to auction leases on state-owned fibre lines for ISPs to use in unserved areas. ISPs will also be able to bid on leases for fibre lines that run alongside the federal highway network. Winning bidders will be able to use two fibre lines from Comision Federal de Electricidad (CFE).
The CFE also plans to connect local operator networks with its own network through more than 100 ‘carrier hotels’, thus providing internet access to remote regions.
In addition, the government is pursuing a program to connect schools, health centres and government offices across the country (via funding from the Secretariat of Public Education and state governments) via a wireless local network using the 3.3GHz band.
