Regulation and investment: a time-series analysis for next-generation networks in Mexico

Regulatory intensity is a key determinant of investment in telecommunications. This subject has been studied extensively, yet results have been ambiguous. For such reason, this study considers the recent evolution in the Mexican regulatory environment, which has responded to specific circumstances, thus playing a key role in determining the relationship between regulation and investment in mobile networks. An empirical analysis of this relationship is carried out for such purpose. With an Instrumental Variables (IV) regression model it shows a positive relation between the said variables in Mexico. However, through a Vector Auto Regressive (VAR) model, it shows that if regulatory intensity keeps increasing, it could lead to decreasing investment levels in the future. Results are discussed considering key aspects of the development of Next-Generation Networks (NGN). This is done in order to provide insights for decisions aimed at maintaining incentives to develop new technologies, given the growing demand for quality attributes in mobile communications.