Photo credit: Wataniya Telecom Antenna by Shafiu Hussain
According to the Mexican Telecom Reform, by December 10, the Congress will enact a law to uniform the current telecom concessions and permits, which could be commercial, public, private and social use. Furthermore, those concessions could be used for rendering any type of service (universal telecom license or “UTL”).
Currently, there is a mosaic of telecom concession titles, according to the date of granting. During last decade, Ministry of Communications (SCT) used renewals of titles for standarizing them into a uniform and convergent title. This UTL was originally pointed out by the 2012 OECD “Review of Telecommunication Policy and Regulation in Mexico”, to remove entry barriers.
As we speak, the Congress is working on the provisions of the Telecom Law to land the concept of the UTL. I hope that some of these questions arise on the Congress, as they arise everyday to the people of the industry.
1. Severability. It is customary in Mexican telecom market that operators have concessions for commercial use and permits for non-profit use. As early telecom law regulated technology, not services, many long-time operators have diverse type of licenses with diverse obligations. This landscape forces the Congress providing for severability on events of default and partial revocation, specially for companies who own licenses associated to spectrum.
2. Cross-ownership. As IFETEL inherited antitrust authority for telecom matters, regulation on cross-ownership becomes relevant tool, and provisions for a License Registry will be crucial. “Groups of interest” might not seem relevant issue for telecom law, but for antitrust telecom will be essential. Will IFETEL implement cross-default on affiliates? It makes sense considering the operation of converging technologies and the blind spot of the authority while verifying on-net breaches to law. Under antitrust logics, one of the relevant markets is broadcasting was advertising. Would this market be inherited to IFETEL for analysing concentrations?
3. Private Use Licenses. It comes to my attention that the Reform mentions that IFETEL will uniform licenses for private use. Will private networks be forced to apply for a license to operate as such? Why? There is no public interest in them if they are not available to the general public. This is an issue that needs to be followed-up on.
While these issues are quite challenging for the Congress and exceptionally challenging for IFETEL to implement, the biggest issue on the Mexican Telecom Reform remains this: Would Telmex get a UTL that includes CATV and/or broadcasting TV?
Photo credit: Ambience: Watcha Watchin? by Dennis Hamilton
MVS, one of the relevant telecom players in Mexico, has just won an spectrum license back in Court. MVS, formerly owned 90% of the 2.5 GHz Band, and used it for cable and other satellite services. MVS has settled with MInistry of Communications (SCT) for keeping 30% of this Band. Rest of the Band will be auctioned during 2014, even though a small part of it is still in dispute between SCT and operators.
Most probably, the next settlements will be in charge of the IFETEL, who recently received from SCT over 2,000 files of pending proceedings related to operators (current and applicants). MVS is technically ready for deploying internet broadband on the 2.5 GHz, ahead of everybody else, who will have to wait for the auctions.
Will MVS seek their old time partners Intel and Clearwire for their long-awaited broadband project? or Will MVS choose to sell spectrum to operators? or will go further and sell minutes to virtual operators. Under the new Telecom Reform, all free-to-air TV broadcasters must make available its signal for free to cable companies, and cable companies must carry that signal in full for free. However, satellite cable are only forced to must-carry signal that have a coverage of at least 51% within Mexican territory, and Televisa believe MVS should not must-carry.
This week, MVS had a meeting with IFETEL, the new telecom regulator, to discuss the rules for the “must-carry/must-offer”, in apparent willing absence of Televisa and TV Azteca. MVS seems very optimistic about getting a resolution in its favour. Cable companies have an annual growth in Mexico of 13.6%. So, whether “must-carry/must-offer” passes in favour of MVS, it could increase the value of the content, as the broadcast of episodes/shows will reach a bigger market to all other eligible cable companies, and advertising value could too.
Mexican telecom reform is breaking historic entry barriers, allowing mid-size companies like MVS to capitalize many years of work into the industry. Likewise, new entrants will have a fresh start capitalizing the Reform too. However, all these new entrants do not have the scars of the veteran, and that is certainly an edge for MVS: A seasoned telecom team.
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.
Photo credit: Amazon Android1 by melenita2012
I am recovering a July post from Homo Zapping, an independent news blog in Mexico, which reported that President Peña Nieto is trying to set up a big data project that would bring together information from government files and social networks. This project could be in charge of Google, Inc., EMC Computer Systems and Kio Networks with an annual cost of 100 million USD.
On the other side, Amazon announced today that Kindle Store will be available to Mexico. In fact, Amazon has been selling Kindle ebooks since the beginning to Mexico, but they localised the costumer experience.
In addition, announced that it has a deal with Ministry of Education to host content in indigenous languages like Nahuatl and Mixteco.
Amazon is also negotiating contents with major local publishers like Fondo de Cultura Economia (a Government funded book-house), Porrua (the major and oldest publisher of legal textbooks and many classics) and Ediciones Era (a publisher of many big name Mexican writers).
And finally, Amazon declared to be open to sell other “categories”. Mexico’s installed capacity for manufacturing would allow Amazon integrating one North America retail operation under NAFTA. Under recent Telecom Reform, Amazon could also render cloud services, as law allows 100% of foreign investment in telecom licenses, and have a cross-border Ad platform.
Just to add on the landscape here, Mexico has 47 M internet users, 4 M internet mobile users, 33.5 M registered taxpayers and 40 M social network users. That is big time big data to have it analysed and a critical mass for launching an e-commerce platform.
Forbes calculates a potential market of e-commerce in Mexico of 1 B USD. Somebody has to awake this market from its slow growth and certainly you can trust credentials of Jeff Bezos.
This Administration is updating the National Digital Agenda focusing on deploying a better and more efficient eGovernment infrastructure and reducing the digital divide. So far, the agenda still in discussion in the Congress and diverse fora, but always on the line of defining an open public policy for using ICTs.
However, the fine line of success for internet services and e-commerce is to grow trust into users. The users are those who impulse the internet with their purchases and interactions. They are the ultimate creators of jobs. The secret to bloom is updating commercial laws in parallel with public policies. It is urgent to simplify registrations of internet services companies and to provide for a detailed regulation on social media and data mining. After all, trust is the foundation of the internet and users perceive otherwise.
Finally, there are no coincidences in the world of the internet companies. They step on each other´s backyards all the time. So, whether Google and Amazon dream of Mexican market or just electric sheep, it is pretty clear there is going to be big business.
Photo credit: datenfluss by Willi Heidelbach
I hope you have read the First and Second Parts of this Post. If not, feel free to catch up here and here. This is part 3 of 3-part post on the recently published Mexican Telecom Reform. Follow me to explore the great opportunities to come.
Content is King.
After the Reform, all CATV/FTA telecom operators have the obligations of must-carry/must-offer (MC/MO). This part of the Reform is not trivial, as FTA channels are widely accepted in Mexico. This provision ends up with several legal battles between CATVs and FTAs. Mexico has a 94.7% of coverage of FTA and a 26.7% of CATV, with average annual growing of 16% (Cable/DTH). MC/MO has increased the value of content displayed on FTA, as coverage will be extended to CATVs. In turn, CATVs can acquire clients, as in many parts of Mexico highest rating channels/shows are FTA-only and do not cover all the country.
It is expected that during 2014, IFETEL will publish the tender for a national network of free-to-air Digital TV, which will increase the need for content. Market will decide whether this bidding is worth the money.
Plus, VOD in Mexico is growing. Xbox and Claro Video (Telmex) have just agreed to distribute content through XBox Live. Cinepolis, biggest cinema chain of Mexico has launched VOD with parallel release dates for theaters and VOD. The list of competitors is growing to join Blockbuster (not yet launched in Mexico), Vudu and Netflix.
Industries like animation and video home can find several channels of distribution. Independent producers can get into the market, as Mexico imports several contents (like Asian animation), but domestic industry is growing, and of course, there is the option for BTL marketing services in movies, which also may be eligible for tax-deduction. Content is accumulative and is adaptable to a wide range of distribution channels, so this is why content is king now.
Beware of the fine print of the Internet services.
Social networks are a great example of new complex services that require going further. However, Bitcoin is the perfect example: A decentralized currency challenging the policies and tradition of central banks around the world. For now, Mexico would regulate Bitcon like many countries, by Banco de Mexico (central bank), and by Banking Commission for payment processors. Physical currency would be prohibited. And of course, Tax Law would be updated for miners to accumulate income.
In the long term, Bitcoin could be the legacy technology for One-Net integrating financial services with retail, telecom, education and other services. Current regulation could give Bitcoin developers an advantage for exploring business possibilities on P2P. But it is time to think about a solution that includes the future of Internet services involving IFETEL.
Smart Objects, Naive Law.
Mexico is following the world legal trend for regulating the Internet of things: It has no regulation. If the machines would rise today, they would be put in stand-by until IFETEL updates regulation on homologation/certification of smart devices, telecom licenses sending data on public networks, resolve the dilemma on who is guilty when an illegal act takes place with a given IP address, and so on the list.
On the other side, data protection and privacy is the biggest problem to tackle, but the IFAI (personal information agency) is in charge. Coordination is a key. The opportunities are for manufacturers of electronic devices, as Mexico has a vast installed capacity and faces a good moment for manufacturing. Also, the opportunity is for privacy hardware and software companies, for manufacturing/developing in Mexico, as well as for selling to the inner market while demands for privacy and security increases.
Internet of things is a work in progress, and regulation has to remain as neutral as possible to promote growing of this technology, but what if the internet of things could detect and whistle-blow counterfeits? Could health IT use full potential for diagnosis? Could it be integrated into humans to create the internet of everything?
Infrastructure is everybody’s game.
Currently, telecom operators need to present a business plan and an investment commitment in order to get a license. One of the targets of the Reform is to remove such barriers, and give flexibility to operators to manage the license “under their own risk”. Investment minimum requirements could just remain to spectrum and satellite tenders, as they are linked to public assets. Report and other basic obligations sure will remain. The expected growth of the Reform will increase demand for infrastructure. Infrastructure used for telecom services does not necessarily mean acquiring and maintaining a license or become regulated by IFETEL.
Currently, active telecom infrastructure used by operators is regulated (by license, permits or registration), while passive has not regulation at all. Infrastructure owned by non-operators is not regulated by telecom law. The spirit of this Reform will merge all authorizations into one single type of telecom license, introducing the concept of essential facilities. Most probably, all telecom infrastructures of operators will be subject to interconnection under the essential facilities doctrine. However, it is not certain what will happen to infrastructure from non-operators. Probably will be subject to regular commercial law.
Also, while the Reform will increase data speed in Mexico, such speed will not go up instantly. In the meantime, there will be a need for infrastructure dedicated to transport, IXPs, local cloud servers, muxing, etc., as operators will not catch up so fast to follow the growing demand. Opportunities for lease, financial lease and lease-back are on the landscape.
In relation to telecom hotels, on March 2012, the Federal Government started a telecom-hotel program so operators can use federal buildings for installing infrastructure. Still, a lot of opportunities for constructors, security and encrypting services companies.
Does this Reform have what it takes to disrupt the status quo and create open markets?
Yes it has. The opportunities are growing, and could be exponential, as new technologies are being deployed into Mexico. It is a first-mover advantage. Followers will fight uphill.
It is not possible to learn in advance how the market will react, but this Reform combined with the growing number of users and volume of consumption of telecom services in Mexico, predicts that the table is set.
Now that I have shared my spots, it is your turn. What is your sweet spot of this Reform?