Mexico takes steps to update its telecoms law 123455543
In the eighties and nineties the band of 2,500-2,690 MHz (the “2.5 Band”) was used for wireless television and radio services (Multichannel Multipoint Distribution Service - “MMDS”). As the technology evolved, the 2.5 Band is preferred for the provision of broadband services. As in other countries, Mexico originally licensed the 2.5 Band for the provision of MMDS. In recent years, the Government has faced a challenge changing the use of the 2.5 Band in accordance with international practice.
In Mexico there were 11 operators in the 2.5 Band (190 MHz) holding a total of 68 concessions across the country. The principal operator was MVS Multivision (“MVS”) with 42 concessions. All concessionaires submitted before the authorities a request to extend the term of the concessions that were going to expire. At that moment, most of the concessionaires asked the Government to modify its concessions in order to provide additional last generation services. MVS particularly presented a project to act as a carrier of carrier in the 2.5 Band holding all 190 MHz.
The Ministry of Communications and Transport (the “Ministry”) and MVS negotiated the terms and conditions of an arrangement to properly exploit the 2.5 Band during almost all of the past administration (2006-2012). However, the price of the consideration to be paid for the change of use of the 2.5 Band saw major disagreements between the parties.
The procedure of recovery
On August 8, 2012 (months before the change of administration), the Ministry: (i) denied the extension of all expired concessions in the 2.5 Band and (ii) initiated the procedure to recover all of the existing concessions in such band, according to the principles of public policy, competition, introduction of new technologies and international best practices. The law clearly provides the recovery (through indemnification) of spectrum as a measure for the government to take back bands for different purposes, including for public utility purposes and the introduction of new technologies. It is worth mentioning that this procedure was the first time to be used in Mexico for the sector.
With the entry of the new government at the end of 2012, new negotiations started between the parties, although the recovery process was running. On October 14, 2013, the Ministry announced that nine of the 11 concessionaires operating in that Band 2.5, including MVS, waived their concession titles representing 130 MHz and kept 60 MHz for an additional 15 year period starting from 2016. From that year, such concessionaires need to start providing broadband services. The two concessionaires not part of the agreement must continue with the recovery process. Although the Ministry did not announce the agreement until October, the arrangement was actually executed before the integration in September 10 of the new Federal Institute of Telecommunications (“IFETEL”).
The future of the 2.5 Band apparently is better than before. However, the negotiations process and final agreement were not transparent and there are certain requirements to be fulfilled. The concessionaires that were part of the agreement will transit to the “unique concession” as provided in the constitutional reform - in order to provide advanced mobile telecommunications services, particularly mobile broadband. This must occur before the end of 2016, once the concessionaires comply with the requirements to be ruled and pay the consideration to be established by the IFETEL, otherwise the concessions will expire and the 60 MHz shall return to the State.
It is unclear if the recovered 130 MHz of the 2.5 Band are going to be auctioned by IFETEL or if they will be used to increase the capacity of the proposed governmental wireless wholesale company. Although it appears that such capacity will be auctioned, it is convenient to give certainty to the industry and to issue as soon as possible the new law that will regulate the auction process. In addition, Televisa has initiated legal actions against the referred agreement and therefore the authorities need to solve such proceedings as well.
IFETEL must act promptly in order to define the following actions to actually be able to properly use the 2.5 Band in order to meet the goals and objectives in terms of infrastructure, accessibility and connectivity, information technology and communication and digital society recently set forth in the Constitution