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The Price of the Air(waves)
How Mexico’s costly spectrum undermines its digital future
BY DIEGO MARROQUÍN BITAR,
HENRY ZIEMER, AND RYAN C. BERG
Mexico’s costly spectrum has become a barrier to growth, competition, and credibility under the United States–Mexico–Canada Agreement (USMCA). By treating spectrum as a source of fiscal revenue rather than a foundation for productivity, Mexico risks slowing its 5G rollout, widening its digital divide, and further discouraging private investment. As the 2026 USMCA review approaches, the next spectrum auction offers a chance to reset course. Lower fees, regulatory independence, and a level playing field could unlock digital inclusion and signal Mexico’s readiness to lead in North America’s next phase of economic cooperation. Spectrum reform is no longer a technical issue: It is a test of Mexico’s economic strategy and its commitment to the USMCA
The Cost of Short-Term Thinking
For years, Mexico’s spectrum policy has privileged immediate fiscal returns over long-term competitiveness. Spectrum—the invisible infrastructure that carries every call, message, and data transfer—should be a lever for growth and digital inclusion. Instead, it has been treated as another revenue line. Recurring annual charges under the Ley Federal de Derechos have turned spectrum into one of the costliest assets in Latin America, with Mexican operators paying roughly 60 percent more above the global average.
The result is a market that collects revenue but forgoes development. Auctions fail to clear, operators surrender frequencies, and network investment stalls. Telefónica’s decision to return its bands between 2019 and 2022 and the lack of bidders in the IFT-10 tender are telling examples. While the government captures short-term income, consumers and small firms pay the price through slower service and weaker connectivity, particularly in the country’s most remote and rural communities.
As Mexico prepares for the 2026 USMCA review, the implications extend far beyond spectrum policy. These fees now speak to the policy coherence of Mexico’s broader economic strategy and to its role in a North America that values secure, technologically independent, and resilient supply chains. The question is no longer technical. Will President Claudia Sheinbaum continue to monetize Mexico’s airwaves or leverage them for domestic growth and regional influence?
The Spectrum Trap: High Prices, Low Competition
Mexico’s pricing model departs sharply from international practice. Most countries rely on one-time auction payments and modest renewal fees that reflect market conditions and technology cycles. Mexico instead imposes steep annual charges written into its fiscal law. These fees account for about 85 percent of total spectrum costs and bear little relationship to market realities or connectivity needs. The result is a uniquely heavy burden that discourages new entrants and limits investment from existing carriers.
High spectrum fees do not even guarantee substantial revenue for the government. During Mexico’s 2021spectrum tender (IFT-10), only 3 of 41 blocks received bids. AT&T and Telefónica have scaled back their expansion plans, and large portions of valuable spectrum remain idle. Indeed, Mexico’s telecommunications regulators have cancelled subsequent spectrum auctions amid a malaise of flagging interest from industry and internal complications. América Móvil’s Telcel, which controls about 70 percent of the mobile market, can absorb these costs because of its scale. Smaller competitors cannot. The outcome is a market where concentration deepens, 5G deployment slows, and the digital divide persists, where roughly 32 percent of Mexico’s poorest households have access to the internet.
As it stands, government policy has made this imbalance even more severe. Altán Redes, once a public-private partnership, now operates under the state-owned CFE Telecomunicaciones e Internet para Todos (CFE TEIT). It benefits from subsidized spectrum, public financing, and permission to sell retail services. These advantages tilt the field against private operators and erode market neutrality, a core principle of both sound regulation and the USMCA’s telecommunications chapter. When the state becomes both referee and player, confidence in fair competition erodes. Private investment retreats, and consumers are left with fewer choices, slower innovation, and declining trust in Mexico’s regulatory credibility.
Mexico’s approach collects revenue but weakens its own digital potential. Adjusting annual fees to match regional averages and tying future auctions to coverage commitments, as Brazil has done, would attract investment and expand connectivity. These steps would signal that Mexico is ready to move beyond fiscal short-termism toward a growth-oriented strategy that promotes competition and prepares the country for the digital demands of nearshoring.
A Missed Growth Opportunity
Affordable spectrum is an investment in the country’s productive capacity and growth potential. Lowering fees would unlock investment and productivity gains across the economy, reaching far beyond telecoms. Expanding broadband access would increase productivity for small businesses and entrepreneurs, improve competitiveness for export-oriented industries, and strengthen Mexico’s position in regional supply chains. The World Bank and the Organisation for Economic Co-operation and Development estimate that every 10-percentage-point increase in broadband penetration can raise per capita GDP by more than 3 percent. For Mexico, which still lags its peers in digital infrastructure, the potential return is enormous.
The benefits would extend to strategic industries tied to nearshoring and to the country’s efforts to boost domestic manufacturing while reducing dependence on China under Plan México. Manufacturers investing in Mexico depend on reliable, high-speed connectivity for logistics, data analytics, and industrial automation. Lower spectrum costs would also attract new investment in data centers, cloud services, and emerging AI applications—sectors that create high-value formal jobs and enhance national competitiveness. The availability of midband spectrum forms a bottleneck for AI adoption, representing the connective tissue between end users and cloud-based large language models. Spectrum is already a concern across the border in the United States, where demand for spectrum is projected to dramatically outpace supply. In Mexico, prohibitively high spectrum costs are liable to pose an even greater challenge and may scuttle the country’s current multibillion-dollar bid to seize the AI moment. A more competitive spectrum regime would therefore serve as a foundation for innovation, stronger human capital, and deeper regional integration.
The link between connectivity and growth is clear, yet policy continues to treat spectrum as a fiscal commodity rather than a strategic asset. Mexico’s current approach limits rural coverage, slows digital adoption, and reduces the country’s attractiveness to investors seeking stable, high-performance digital ecosystems. By viewing the spectrum through an economic lens rather than a fiscal one, Mexico could turn its digital divide from a liability into a frontier for growth and inclusion.
Telecoms, Trade, and the Sheinbaum Test
The latest set of constitutional reforms that eliminated the Federal Telecommunications Institute and created the Agency for Digital Transformation and Telecommunications has introduced uncertainty at a delicate moment. Chapter 18 of the USMCA requires each country to maintain an independent telecommunications regulator, separate from service providers and free from political or commercial influence. Chapter 19 adds obligations on digital trade and nondiscriminatory treatment. By folding the regulator into the executive branch and extending preferential terms to state-linked entities such as CFE-TEIT and Altán Redes, Mexico risks breaching these commitments.
When the state directs both regulation and market participation, private firms face higher uncertainty, and investors begin to question whether Mexico offers a level playing field. This dynamic erodes competitive neutrality—the principle that state-owned and private firms should compete under the same rules without preferential treatment. Losing that balance not only distorts the domestic market but also undermines Mexico’s credibility under the USMCA, which commits members to transparent and nondiscriminatory practices. The weakening of regulatory independence, therefore, invites scrutiny from Washington and Ottawa, where concerns about state favoritism and the use of Chinese technology suppliers already run high. What began as a domestic governance issue could easily evolve into another point of contention in the upcoming USMCA review.
The Sheinbaum administration faces an early test of whether it will treat telecommunications as an engine of competitiveness or as a tool of fiscal and political control. Maintaining the current framework may offer short-term administrative simplicity and fiscal flexibility, but it weakens Mexico’s credibility as a partner in a North American economy built on shared norms and integrated economic activity. Restoring clear separation between policymaking and market participation, reaffirming the autonomy of the new agency’s leadership, and aligning spectrum policy with USMCA principles and international best practices would send a powerful signal of continuity and reliability.
If Mexico takes these steps, it could turn a potential vulnerability into a strategic asset. Demonstrating compliance in telecommunications would strengthen its negotiating hand in other sensitive areas such as energy, agriculture, and automotive rules of origin, where frictions with the United States are likely to intensify as the review process gains pace. The choice before the administration is therefore strategic: reinforce predictability and reassure investors or allow regulatory backsliding to become another obstacle in Mexico’s pursuit of regional leadership and leverage in bilateral and trilateral negotiations.
A Roadmap for Reform
The Sheinbaum administration still has time to recalibrate before the 2026 USMCA review. The next spectrum auction to be announced in January offers a natural window to do so. Telecommunications policy may not rank high on the domestic political agenda or in the USMCA review process, but it offers a low-cost, high-impact opportunity to demonstrate Mexico’s commitment to regional competitiveness and economic integration. Reforming spectrum policy would signal to investors and partners that Mexico intends to anchor its digital transformation in transparency, predictability, and fair competition.
- Redefine the objective: Spectrum should be managed to maximize economic spillovers, not fiscal intake. Adjusting annual fees to match regional averages, introducing pricing differentiated by region or proportional to operator revenues, and linking future auctions to coverage commitments would expand connectivity while keeping public revenues stable. Lower fees would also boost small- and medium-sized enterprises, digitalization, and attract private investment in emerging technologies such as AI, Internet of Things, and cloud computing, all essential for nearshoring success and digital competitiveness.
- Restore regulatory confidence: The new Agency for Digital Transformation and Telecommunications must demonstrate independence in practice, not only in name. Clear appointment processes, transparent rulemaking, and regular consultation with industry stakeholders would help rebuild trust in Mexico’s digital governance. Reaffirming competitive neutrality should also be central to this effort, ensuring that state-linked entities and private operators compete under the same standards.
- Leverage North American partnerships: The USMCA provides a natural venue to align with the United States and Canada on telecommunications standards, data governance, and digital infrastructure. Integrating information and communications technology (ICT) cooperation into broader economic dialogues, such as the High-Level Economic Dialogue or the USMCA Telecommunications Committee, would help position Mexico as a credible, proactive partner in North America’s digital future. Mexico’s reliance on compliance will directly affect its leverage in other sectors such as energy, automotive, and agriculture, where frictions with Washington and Ottawa are already mounting.
In the best case, reform signals good faith ahead of the 2026 review; in the worst, it still leaves Mexico with a more competitive, inclusive industry. Either way, spectrum policy will reveal whether the administration views telecommunications as a fiscal asset or as a foundation for North American prosperity.
The Cost of Standing Still
Telecommunications rarely dominate headlines, yet they quietly shape a country’s capacity to grow, innovate, and compete. For Mexico, the stakes are particularly high. A modern and competitive ICT sector is not only central to productivity and inclusion, but it is also essential to the credibility of Mexico’s broader development model. The next two years will test whether the Sheinbaum administration can move beyond the logic of fiscal extraction and embrace a strategy of digital empowerment that aligns with North America’s shared economic vision.
Failing to act carries real costs. Each month of delay widens the digital divide, erodes investor confidence, and weakens Mexico’s negotiating position as the 2026 USMCA review approaches. Conversely, a transparent, competitive, and forward-looking telecom policy would reaffirm Mexico’s place as a reliable partner in a region seeking resilience and technological self-sufficiency. The path forward is clear: spectrum policy can either remain a fiscal instrument of the past or become a cornerstone of the country’s economic future and a pillar of North American prosperity.
Diego Marroquín Bitar is a fellow with the Americas Program at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Henry Ziemer is an associate fellow with the Americas Program at CSIS. Ryan C. Berg is director of the Americas Program and head of the Future of Venezuela Initiative at CSIS.
This commentary is made possible by the generous support of AT&T.
This article was originally published by the Center for Strategic and International Studies on November 13, 2025.
