What if IFETEL Mexico unleashes the unseen power of free?

What if IFETEL Mexico unleashes the unseen power of free?

Photo credit: Technology is a given by Scott McLeod

It happened. MVS announced that, as from September 16, 2013, it would start broadcasting the free-to-air TV (FTA TV) channels to Dish subscribers. Televisa and TV Azteca shows have some of the biggest ratings among TV (and Cable) viewers. In some towns, people buy cable service just to watch FTA TV.

Under the Mexican Telecom Reform, must-carry and must-offer (MC/MO) is mandatory, finishing years of litigations between broadcasters and Dish. These are the terms of the Reform:

1. It would start as from integration of the Mexican telecom regulator IFETEL, that happened on September 10, 2013;
2. FTA TV broadcasters must allow mirror broadcasting of its signal to cable (CATV) and sattellite (S-CATV) companies, within the same coverage area. All of that free of charge;
3. The must-carriers cannot surcharge their users for the FTA TV channels;
4. S-CATV companies are only forced to must-carry signal from FTA TV that have a coverage of at least 51% within Mexican territory;
5. CATV and S-CATV must-carry Government TV channels;
6. Telecom or Broadcasting TV companies declared dominant or preponderant by IFETEL will not be eligible for free must-carry. They must agree tariffs and terms for the contents, but are not able to surcharge their users. IFETEL will decide any controversy. Dominant or preponderant operators could have their licenses cancelled if bypass the paid must-carry provisions through third parties.
7. If IFETEL makes a declaration of conditions for competition, MC/MO obligations will cease. Operators will agree tariffs based on costs, then.

Now, Televisa just asked IFETEL review the rules for MC/MO, as difers from Dish legal construction. Televisa argues that IFETEL must declare the starting date and applicability of MC/MO for Dish.

Right now, IFETEL has the chance to unleash the unseen power of free. Not only by deciding on the case at hand, but resolving on topics that lie beneath it.

1. If the signal of FTA TV is free of charge for viewers, and in some cases, for operators, can anyone opt-in for must-carry and make a business out of it? There are no technical issues for implementing a similar business to Aero or make mirror broadcasting over smart objects or the IP. Would companies such as Netflix, self-declared as a movies & TV Network, could opt-in too? Would it be allowed under net neutrality grounds? This suddenly has a deja-vu from the COFETEL (old telecom body) discussion on whether Skype should be or not considered a voice service.
2. Content has an indirect regulation within telecom, in particular in value added services and in antitrust analysis for M&As. As IFETEL now has authority for declaring essential resources, would content qualify for it, considering that high ranked FTA TV shows are important for competition in CATV and S-CATV? This is not a plain and simple answer, as FTA TV has an uneven coverage through the country for calculating dominance and predominance. Also, would this be applicable per show, channel or time? Big data analytics could play a good role on overseeing.
3. FTA broadcastes use third parties for mirror broadcasting. New ones could use them as well. Will all they must comply with MC/MO? Will they be considered essential resources or passive infrastructure of an extended network for FTA TV, even if they are outsourced?
4. There was a time during 2011, when IFETEL tried to pull the tender for the new TV network. Back then, there was a debate on what should be the content on the new network: culture or entertainment. Culture could be perceived as a higher good, as well as free by right. However, the right of the viewers to choose content should not be decided upfront and must be revisited. What is culture anyway? The definition and limits matter as current Telecom Law provides a special treatment for cutural TV and radio. Must they be covered under MC/MO as they do not participate in the advertising market? Should there be no damages for re-broadcasting these channels?
5. Yesterday, the new organizational for IFETEL was published. Value added services still on the roadmap of the telecom regulation. Will IFETEL have attribution for regulating services that carry on content over the internet such as social networks, SAAS, IAAS, and other? The hardware, software and internet businesses have converged for a very long time with telecom. As they former have succeeded in free business models (open hardware, open source, free internet services), would FTA TV still succeed free? Could new TV network bring on VOD and mixed models to the FTA TV market?

IFETEL is starting engines. There are too many questions on how IFETEL will take over antitrust authority and proceedings rules. For now, interested parties in the sector must follow the developments, as they are coming faster last quarter of the year.

However, IFETEL has the unique opportunity to set the scope of its authority. Would it choose telecom only or technology and media?

5 challenges for the new Mexican telecom commissioners

5 challenges for the new Mexican telecom commissioners

Photo credit: ~86 TVs by Kevan Davis

Last Tuesday, Mexican Senate confirmed appointment of the 7 commissioners for IFETEL, the new telecom authority in Mexico replacing the COFETEL. Now that the IFETEL has been officially integrated as an autonomous regulator, it is time to catch up with major challenges that have been somehow left behind. Here are some of them.

1. For years, value added services have been sub-regulated, as traditional voice and data transport services have been on the spotlight of the Regulator. However, as internet services, apps and social networks are merging voice, data and video services, it is necessary to deregulate them enough to make them grow, but regulate them to avoid illegal activities, like abuse of dominant position and by-pass.
2. TV and Radio Law and Regulations were originally published on 1960, and many of their provisions got stuck in time despite the several amendments that have suffered, as well as vast case law from the Supreme Court and Federal Courts. With the recent Telecom Reform, foreign investment can have a participation up to 49%. This percentage could become handy for the upcoming tenders for Free-to-Air Digital TV and the radio frequencies. However, regulation needs to be designed for convergence and cross-ownership provisions with Congress collaboration.
3. Before 1991, telecommunication services were provided by the Government, mostly. Then, the industry was ruled by the Law of General Ways of Communications and the Regulations of Telecom. Thereafter, Telmex was fully privatised, and in 1995 the new Telecom Law was issued. However, the Regulations kept in force. On the text of the 2009 Telecom Reform, COFETEL was forced to draft new Regulations by August of that year. It has not happened yet and Regulations are very inconsistent with the new telecom services.
4. The 2013 Telecom Reform transfers telecom antitrust authority from COFECO (antitrust body) to IFETEL. Before that, the antitrust authority was shared. As COFECO was the leader of this partnership with knowledge, authority and specialists, COFETEL followed and executed such lead under the extent of the Law. However, as IFETEL is now the sole telecom antitrust authority, it will require to catch up, and avoid that operators challenges their resolutions in court.
5. Telmex is currently regulated by its Amended Concession Title. It contains several obligations for Telmex, as dominant player, as well as the prohibition to render TV services. Granting permission to Telmex for entering the TV industry would have a big impact on the service. Should it be granted? It depends whether the impact is good or not for the market. Should it be discussed? It must be.

Now that IFETEL is getting a fresh start with autonomy for redesigning the market, it is time to push forward the market. This time, let´s not forget that telecom remains a lawyers game.

The Sweet Spot of the Mexican Telecom Reform (Part 2/3)

The Sweet Spot of the Mexican Telecom Reform (Part 2/3)

Photo credit: Hacking Circuits, Digital DNA, City of Palo Alto, Art in Public Places, 9.01.05, California, USA by Wonderlane

I hope you have read the First Part of this Post. If not, feel free to catch up here. This is part 2 of 3-part post on the recently published Mexican Telecom Reform. Follow me to explore the great opportunities to come.

It´s STEM People time.

The debate of immigration across the US is being fueled by the lack of STEM professionals (science, technology, engineering and math). The scarcity of STEM people in Silicon Valley has forced the tech community to push US Congress for a flexible immigration bill that can attract foreign tech startups and talent, as Toronto and other places are doing.

Mexico has a base of 400,000 software engineers and 65,000 graduating every year that could fill-in the needs for tech people in the Mexican telecom industry. With the right infrastructure, a successful outsourcing service can be set up to serve the US and the world. Even more, such services are eligible for IMMEX export incentives in Mexico.

Mexico also has the advantage of having a flexible immigration policy for qualified technicians/professionals and businessmen, as well as great conditions for startups. The opportunity and the challenge will be for schools and human resources. They need to create better models for attracting and keeping up the best. Companies could expand work-from-home policies, a very limited spread in Mexico.

In my recent post “Mexican Telecom Reform: The Rise of the STEM Lawyers”, I discussed that this Reform will be taken at court very often. Incumbents will play defending tower, and entrants will try to siege the market. STEM lawyers will play an essential role on arguing complicated concepts like dominant player, relevant and related markets, essential facilities and substitutes with the variables of regulation for each service. These are concepts taken from economic theories inserted into the Law, but lawyers will be in charge to enforce them.

Now, you may add that telecom courts will have a learning curve, and the scarcity of STEM lawyers in Mexico will not make an even battlefield for the parties. Also, technology is ever changing and converging. All these changes are the cue for the legal industry worldwide to develop business in a non-liberalised legal market.

Broadband Internet Access.

The Reform granted all Mexican citizens and residents the constitutional right to broadband and Internet. This acknowledged right has effects on the business environment.

First, no authority, of any level, can unreasonable obstruct telecom infrastructure.

Second, any Project pitched to the Government under the Public Private Associations with the label “broadband” increases its chances to get public funding.

Third, the term “essential facilities” will be key for telecom and IT businesses, as convergence makes it difficult to unbundle essential from accessory facilities. Again, court will decide.

Fourth, long-term growing and sustainability will require open and collaborative models, as restrictions could be declared unconstitutional.

Fifth, universal broadband service is still in discussion as to the speed, if it will apply for corporations or how to enforce it and up to what extend.

Sixth, Supreme Court has just started its electronic signature and file program. The intention of the Court is that all federal proceedings would be electronic. A major overhaul in firms and courts will be needed to migrate from paper to electronic, as major part of commercial proceedings are in written.

Seventh, MVS won a constitutional writ to recover part of the 2.5 GHz band. There is a possibility to keep enough bandwidth to implement his broadband-for-everyone Plan with Intel and Clearwire.

Bonus life, Gartner calculated that during 2011, there was a spending of $74 US Billions in video games. Mexico spent $1.2 US Billion in video games that year, with the growing annual tendency of 25%. Microsoft has already announced that “Xbox-One” (due by December 2013), will require always-online. Adding up the trend of free-to-play, VOD, paid content/subscriptions, mobile and social gaming, this represents a heavy amount of GBs that will be demanded in the mid-term. Even PROMEXICO (Mexican Promotion Agency) has placed a bet on video game production in Mexico.

Third and last instalment is coming in a couple of days …

The Sweet Spot of the Mexican Telecom Reform (Part 1/3)

The Sweet Spot of the Mexican Telecom Reform (Part 1/3)

Photo credit: EPROM CLCC-44 Devices by yellowcloud

This is part 1 of 3-part post on the recently published Mexican Telecom Reform. Follow me to explore the great opportunities to come.

What ever happened to the Telecom Market.

Mexican Telecom Reform is now on effects. It is the end of the industry, as we all knew it. Frankly, I feel fine and exited about the new regulation.

We need to double-check landmark case law on interconnection, spectrum assignment and antitrust to connect the dots backwards. All those years in court made telecom law history, though.

This Reform offers a fresh start for entrants and opens a wide range of opportunities, as now investors have less barriers for mobile, data and TV.

Telecom regulation is moving in gigaflops. Just now, COFETEL (telecom body) has concentrated all operators annual report formats into one single document. Also, has reduced the local service areas from 397 to 172. Satellite services, fixed-mobile cost models, standards for DTV decoders (NOM-192) and mobile antennas installation are under review. Other issues like passive infrastructure interconnection and white spaces are between the lines on the debate.

Now, foreign companies and individuals can invest in telecom companies up to 100%, and 49% in TV/radio companies (the latter subject to country reciprocity to Mexicans in those sectors). Previously, some investors invested only in no-voting shares with the obvious consequences.

From recent data of COFETEL, telecom services increased an aggregate of 12.5% during first quarter of 2013, comprising broadband connections up to 12 million, CATV up to 13 million, DTH up to 7 million, mobile users up to 101 million and fixed lines up to 20 million. Satellite and trunking decreased.

After the transition, the new IFETEL (succeeding to COFETEL) will review and simplify telecom licenses in one single type, and hopefully will reduce red tape to obtain it.

While the reforms encourage and support free competition on these telecom services, it is also true that incumbents have been preparing for this face-off for years. Yes, it is great for telecom lawyers, but paradise for antitrust telecom lawyers.

However, the less explored side of the Reforms is niches, trends and side markets that could generate businesses while the telecom industry grows in the years to come. Also, the Public Private Associations Law grants rights to private companies or individuals to pitch projects on all levels of Government, so the sky is the limit.

A sweet spot is in cameo here. The Reform is a game changer and abilities of the entrants and possibilities created could generate business, and hopefully profit will come along. Where to start digging?

Project Finance, Convertible Debentures, Secured Loans and other Financial Operations.

Telecom is a money consuming business with small incremental profits. It requires big amounts to acquire infrastructure and clients, as well as to run and expand the business. Now that foreign investment caps have disappeared for telecom and have risen for TV/radio, loans secured with shares can be fully executed in an event of default, as transfer of property is no longer restricted to Mexicans-only. Also, foreign VCs can acquire voting shares without restrictions on caps (except TV/radio).

TelecomMexico will become a market incubator.

Telecommuncaciones de México (TelecomMexico), is a state-owned company operates satellite services, money wires and telegraphy in Mexico. Along with the Telecom Reform, TelecomMexico is in the process of getting a telecom license for SMS, voice and data, fixed and mobile through cellular technology and satellite backbone. TelecomMexico will target low-income communities to reduce the digital divide. This strategy is expected to be in the digital agenda, which could include universal broadband. As TelecomMexico is paying for sunk costs of bringing on telecom services to low-income users, operators could ask for interconnection whether for transporting throughout that area or providing low-income niches services.

Second installment is coming in a couple of days …

Mexican Telecom Reform: The Rise of the STEM Lawyers

Mexican Telecom Reform: The Rise of the STEM Lawyers

Photo credit: Dell Tech Camp 2013 by Dell Inc.

The Reform started effects on June 12, 2013. As from this moment, several deadlines were triggered that will define the new telecom and antitrust landscapes:

  • Since June 12, 2013, foreign companies and individuals can invest in telecom companies up to 100%, and 49% in TV/Radio companies (the latter subject to country reciprocity to Mexicans in those sectors).
  • Since June 12, 2013, the only recourse against acts of New Telecom Regulator (IFETEL) and the New Antitrust Regulator (CFCE) will be Indirect “Amparo” (constitutional writ), repealing administrative recourses. This “Amparo” does not grant injunctions against regulators anymore.
  • By August 10, 2013, the Federal Judicial Council (administrative officers of Judicial Branch) will set the telecom and the antitrust courts with exclusive jurisdiction on those matters.
  • By September 1, 2013, the process for selecting IFETEL and CFCE Commissioners will be finished.
  • By December 31, 2015, migration to digital TV will be completed. Before that date, IFETEL would start a tender process for 1 or 2 national Digital TV networks.

Last Tuesday, the Calling for Aspirants to Commissioners of IFETEL and CFCE was issued with requirements for being eligible. If you read between the lines of the Reform and Calling, you may conclude that:

  • Regulators will be autonomous from Government and their decisions will have real impact on telecom and other markets, including power for functional and technical separation, ability to declare essential facilities and dominant players, and grant telecom licenses (IFETEL), among others.
  • Mexico is leaving administrative review tradition set by Telecom Law (1995) and Antitrust Law (1992) for the newly reformed “Amparo” proceeding.
  • The profile and eligibility requirements for Commissioners favors telecom and antitrust lawyers, but are inclusive with economists and engineers.
  • Secondary regulation will create a legal turmoil of interpretation and integration. Expect landmark cases and battles.
  • Legal analysis and litigation will be on the rise. This represents a great opportunity for the global legal market that has suffered from liberalization of the profession and the world crisis.

Now, the real question is: Would courts and lawyers be able to argument with STEM knowledge (science, technology, engineering and mathematics) and apply it to law? That is quite a challenge and yes, some will succeed.

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