“Mexico is the only Latin American country that has opted for this plan for the succulent 700 MHz band. The rest of the countries have gone for the traditional spectrum allocation model: awarding contracts to private operators.”
Irene Levy*/ Mexico, June 2015
In late 2012, Mexico introduced a political agreement to carry out reforms in various key areas for the development of society and national economic activity. These include education, energy, politics, telecommunications and what were called “structural reforms.” On June 11, 2013, the telecommunications reform was published in the Official Gazette of the Federation.
WHAT IS THE SHARED WHOLESALE NETWORK?
One of the controversial aspects of the reform is the “wholesale shared services network” (known as “the network), which refers to provisional Article 16 of the Reform. It states that the government will guarantee the installation of a shared public wholesale wireless services network through the Federal Executive Branch in coordination with the Federal Telecommunications Institute (IFETEL). That network would promote effective public access to broadband communications and telecommunications services. Under the Constitution, this wholesale network would have the following characteristics:
-Installation would begin before the end of 2014 and would be operational before the end of 2018.
-It would include use of 90 MHz on the 700 MHz band, using the fiber optic trunk network resources of the Federal Electricity Commission (CFE) and any other government asset that could be employed.
-It would involve public or private investment.
-Steps would be taken to ensure that no telecommunications service provider has influence over the operation of the network.
-It will operate under principles of sharing the entire infrastructure and will exclusively provide services to companies that sell and operate telecommunications networks under conditions of non-discrimination and at competitive prices.
-It will ensure that rate policy for the shared network would encourage competition and ensure that profits are invested back into the system for its updating, expansion and universal coverage.
THE OBJECTIVE OF THE WHOLESALE NETWORK
With the allocation of the entire 90 MHz block to a single network, there is a move to optimize the use of the spectrum and minimize the operating costs, decrease prices for users, achieve 98% coverage including rural areas, and make its capacity available to all operators including virtual ones in order to increase competition in final services. Estimates suggest that this will require an investment of US$10 billion over ten years.
Mexico is the only Latin American country that has opted for this plan for the succulent 700 MHz band. The rest of the countries have gone for the traditional spectrum allocation model: awarding contracts to private operators. There is no point to discussing the advantages and disadvantages of the proposed system compared to the bidding for three or four operators because the wholesale network is a Constitutional mandate even though we do not yet know how this project will be implemented. In fact, the Secretariat of Communication and Transportation (SCT) has already failed to meet the timeframe set out in the Constitution because the construction process did not begin in 2014.
The reality is that the weak drafting of the Constitutional text does not help the implementation process. No one knows how to do it, though based on the information set out in various studies and the reform itself, it appears that the new network could operate through a Private-Public Association (APP). The government would contribute the radio spectrum and inputs essential to its operation and private entities that are awarded the respective contracts would invest in the infrastructure required for the construction and operation of the network and would provide services. The data that we have allows us to imagine that no current mobile concession company will be able to participate in the bidding process and that the government will not operate the network directly. In any case, it should ensure that there is competitive neutrality in order to guarantee that a market structure that harms competition is not created. Some rules on this are included in the new Federal Law on Telecommunications and Radio Broadcasting, which was published in the Official Gazette on July 14, 2015.
A few months ago, the SCT published a statement of interest request known as the MDI. Its purpose is to generate belief at the international level that this project is now moving forward and that there is no turning back. The reality is that it is coming in 18 months late. It sets out five stages for bidding on the network to be developed over a period of 30 weeks culminating in the publication of the guidelines in November 2015:
- International MDI application to confirm the interest of possible participants in the bidding process. This part is not very clear because it looks like an open consultation for all who wish to share their opinions on the one hand, and on the other it looks like it limits that process to potential participants in the bidding.
- Information sessions for receiving feedback and providing clarification regarding the project.
- Public consultation on the pre-bidding conditions.
- Another round of information sessions.
- Publication of the public bidding (sic). It does not say that this addresses the conditions, but it can be supposed that it refers to that process.
We will see if this exercise works. What we do know is that the doubts as to whether this is really the best way of using the limited and valuable 700 MHz spectrum are increasing. The problem is that in order to change the system for allocating this spectrum, the Constitution would have to be changed. As such, the SCT is focusing on the design of the bill and the Federal Telecommunications Institute is preparing the specific obligations that the concession title should include. Several entities have spoken out on the topic. It is worth reading the opinion issued by the IFETEL Advisory Board.
This experiment in Mexico is being scrutinized by other regulators and by the industry. If it is a positive experience, it could change the telecommunications environment in this country and decrease the high levels of concentration. If not, we will have lost time, resources, and credibility.
*President of Observatel and professor at Universidad Iberoamericana. This column reflects the author’s personal position. Follow her on Twitter: @soyirenelevy