Analysis Highlights Flaws in OECD Assessment of Telecommunications Competition in Mexico; NERA Expert Agustin J. Ros Co-Authors Report Correcting Errors in OECD Assessment

23 May 2012

New York -- The conclusions of a January 2012 study of Mexico's telecommunications sector from the Organization for Economic Cooperation and Development (OECD) were based on flawed economics, according to a new analysis by NERA Vice President Agustin J. Ros and Jerry Hausman, Director of the Telecommunications Research Program at the Massachusetts Institute of Technology. The analysis, "Correcting the OECD's Erroneous Assessment of Telecommunications Competition in Mexico," demonstrates that the OECD study was incorrect when it concluded that a lack of competition in Mexico's telecommunications sector caused a loss in consumer surplus of over $129 billion between 2005 and 2009.

Specifically, the analysis by Dr. Ros and Dr. Hausman:

  • Shows that the OECD relied on improper use of data and flawed economic analysis in calculating the $129 billion figure, particularly by using an unrepresentative sample of rich countries and a flawed analysis of Mexican mobile telecommunications prices to claim that Mexican consumers are overpaying for telecommunications services.
  • Corrects the OECD's mistakes by comparing Mexico to a sample of "peer" countries that are similar in terms of per-capita GDP; proper international comparisons show that prices in Mexico are low and have been declining.
  • Demonstrates that there have actually been significant gains in consumer surplus in Mexico, not the loss calculated by the OECD; mobile and fixed-line telecommunications prices are below those predicted by econometric price models, and Mexican consumers received at least $4 billion to $5 billion in consumer surplus in 2011.

"Sound economic analysis and understanding of markets is the foundation of effective policymaking and regulation," said Dr. Ros. "I am pleased that I had the opportunity to work with Jerry Hausman in correcting the OECD's study and providing a more accurate view of the state of Mexico's telecommunications market."

The report by Dr. Ros and Dr. Hausman, "Correcting the OECD's Erroneous Assessment of Telecommunications Competition in Mexico," was commissioned by America Movil, but the views expressed in it are solely the authors'.

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