International Trade Commitments as Agents of Reform : The Case of Mobile Telecommunications in Chile

The paper analyzes the evolution of mobile telecommunications in Chile in the period 1982-2012, in a context of radical changes in the macroeconomic management of the country. In particular, the deep changes in its trade and foreign investment policies. Such policies have been marked by a rather unique shift towards a comprehensive privatization program, a deep regulatory reform accompanied by a progressive opening of its trade and investment policies. These changes had a profound effect on the country's resource allocation as well as in its international competitiveness, relative prices, and income distribution patterns. Based on historical records and recent data available for the sector, the study presents a detailed analysis of each of these topics, and how they have been influenced directly by a number of unilateral reforms and, indirectly, through the implementation of commitments derived from the subscription of multilateral and bilateral trade and cooperation agreements. Since many of the regulatory and institutional reforms have preceded the adoption of international commitments it is interesting to examine to what extent these agreements have led the reform process or their role has been more directly associated with the mooring of these changes in a context of increased transparency and legal certainty. In addition, the study also examines the following questions: to what extent these domestic reforms complemented with the implementation of international trade and cooperation commitments have resulted in a truly competitive environment for the industry, generating adequate conditions for an effective attraction of investment and technology, improving its regulatory and institutional framework for a rapidly changing service industry? Have all of these changes favored the provision of improved quality services, lower rates and a substantial enlargement of the territorial and social coverage of mobile voice and data services? After an introductory section, the second chapter provides a chronological description of the evolution of mobile telecommunications regulatory framework in Chile. The third section describes some of the key international preferential as well as multilateral trade and cooperation commitments Chile has subscribed and their impact over the sector. The fourth chapter presents a set of indicators showing the impact of these reforms on industrial competition, service quality, the evolution of voice and data service rates as well as its territorial and social coverage. This exercise relies basically on domestic and international data, whenever available, from various sources. Finally, the last chapter presents the main conclusions of the study and identifies some of the unfinished business in the Chilean telecom reform agenda as well as the main challenges facing this industry