telecommunication and corn products are calculated using the ENIGH from 2014. Furthermore, the per capita income (welfare variable) measured using the monthly income is also calculated from the ENIGH for each household. WELCOM requires the poverty line as a variable in the data set to provide insights on impacts on poverty levels. The poverty line used in this case is based on the same survey, following the calculations of the Consejo Nacional de Evaluación de la Política de Desarrollo Social (National Council for the Evaluation of Social Development Policy).<sup>20</sup> For the market structure parameters, the market share of the largest firms in each sector is calculated based on the 2014 economic census produced by the Instituto Nacional de Estadística y Geografía (INEGI, National Institute of Statistics and Geography). The demand price elasticities are derived from existing research papers and from the forthcoming Stata module for WELCOM that will enable users to estimate price and income elasticities.<sup>21</sup>

# **4.1. The mobile telecommunications industry**

The telecommunication sector became a key element of Mexico’s economy during the process of liberalization in 2013. According to the OECD (2017), since the reform started, there has been a 75 percent price reduction in mobile broadband packages alone, adding 50 million subscriptions, more than the entire population of all (seven) Central American countries. Furthermore, Mexico now has the eighth lowest fixed broadband price basket in the OECD for low end users. However, despite the advances in the reform, Mexico still has the highest fixed broadband price basket in the OECD for high end users, demonstrating that higher quality and speed of service remain out of the reach among lower-income groups.<sup>22</sup> Since 2012, mobile cellular basket prices have decreased by 61 percent, well below any of the aforementioned income groups as its subscriptions per 100 population increased by 6 percent (figure 2). However, the market remains highly concentrated. Mexico has the second most highly concentrated market in the world measured through the Herfindahl-Hirschman index (HHI), after the Philippines (Ayala et al. 2017), resulting in the highest HHI among OECD countries (Figure 3). Moreover, per the _OECD Review of Telecommunication Policy and Regulation in Mexico_ (2012), the average loss in consumer surplus due to overpricing and unrealized subscriptions in this sector was 1.8 percent of Mexico’s GDP (2005–09), highlighting the important implications of market concentration for consumer welfare.

> 20 For the purpose of this paper, the definition of poverty is based on household per capita income (instead of adult equivalent). It is thus not exactly the same as the official poverty headcount published by the government of Mexico. The indicator used is the percentage of the population with an income that is lower than the well-being line (linea de bienestar) as defined by the National Council for the Evaluation of Social Development Policy.

> 21 See http://dasp.ecn.ulaval.ca/webwel/welcom.html for more information.

> 22 OECD Prices and Termination rates June 2017. Includes 200 gigabyte/month and 25.0 megabytes per second and above.

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