There have been important developments in Mexico but not the kind you would expect to hear on the evening news. Mexico has kept step with a telecom liberalization plan 15 years in the making. Although not perfect, the results of telecom reform are reflected in today’s accelerated growth in the telecommunications sector, such that some have called Mexico, “the next telecom frontier.” Here, we discuss Mexico’s current regulatory environment and what that means for the satellite and wireless industries.
The Regulatory Agencies
Mexico operates under a bifurcated telecommunications regulatory regime through which the Mexican Federal Communications Commission (Cofetel) reviews licenses and makes recommendations while the secretariat of Communications and Transportation (SCT) awards licenses in accordance with national telecommunications policy.
While the creation of the SCT dates back to 1891, Cofetel came into existence in 1996 by presidential decree, making this two-agency interplay a fairly recent development. In fact, this separation of powers of sorts was a subsequent move to the privatization of Telmex, which previously had a national telecommunications monopoly. Telmex, led by billionaire Carlos Slim, now is one of the largest private companies in the world.
Classification of Authorizations
Mexico issues three primary forms of licenses:
1. Concessionary: The broadest authorization available is the concessionary license, which is a facilities-based service provider that is authorized — and is expected — to invest in telecommunications infrastructure. For a concession to be granted, the applicant must demonstrate a commitment to invest several million dollars over the first five years of operation. The concession can either be local or national. National concessions, which would be the only kind pertinent to satellite service providers, give the concessionary the ability to act as an international telecommunications port of entry into the country. The average time for review and grant of a concessionary license application is 12 to 18 months.
2. Permissionary: A permissionary license is essentially an authorization to resell services by using a concessionary’s network. With a permissionary license, a service provider can install terminating equipment (e.g., customer Earth stations) but no access or transport equipment (e.g., a hub or teleport). Although there is no investment requirement per se with permissionary licenses, presenting a business plan with some capital commitment always is an important factor for obtaining a favorable opinion from Cofetel. The average time for review and grant of a permissionary license application is four to six months.
3. End-User: An end-user license is an authorization granted to the final consumer of telecommunications services to use a particular system. For instance, an oil and gas exploration company would need an end-user license to operate remote Earth stations. End-user licenses are the fastest to grant but at the same time restrict the applicant to the exact system parameters outlined in the license. If, at a later time, more power or a larger antenna is required, the end-user license must be modified. The average time for review and grant of a permissionary license application is three to six months.
Virtual Mobile Network Operators
Regarding wireless services, particularly in the 800 megahertz, 1.7 gigahertz, and 1.9 gigahertz bands, Cofetel recently allowed mobile virtual network operators (MVNOs) to offer services in Mexico. An MVNO essentially resells wireless services — under its own brand — from an existing concessionary. The concessionary maintains rights to the frequencies, but the MVNO operates under a permissionary license. This move by Cofetel is an attempt to make more efficient use of the wireless spectrum, given that there are only four wireless concessionaries. The allocation of frequencies to only four major players has caused some niche markets to go unattended. Mobile traffic has increased by 300 percent over the past five years with a current estimated 83.5 million users. This means that 75 percent of the Mexican population uses a mobile telephone. New players entering the mobile market over the next few years will be poised for exponential growth, given that there is currently only one licensed MVNO.
Raul Magallanes runs a Houston-based law firm focusing on telecommunications law.
He may be reached at +1 (281) 317-1397 or by email at raul@ rmtelecomlaw.com.