Convergencia Research, Consultoría especializada en Latinoamérica y Caribe
Tuesday, January 24, 2023

Interview with Alejandro Navarrete, head of Radioelectric Spectrum Unit of the Federal Telecommunications Institute

"I see it feasible for IFT-12 to be held in second half of the year"

Navarrete told Convergencialatina that there will be some 330 MHz on offer in low and medium bands and that the objective is to increase the number of players in the local market. To this end, the IFT will continue trying to convince both Mexican Executive Branch and Congress to reduce the annual fee for the use of the spectrum. The Mexican treasury lost US$225 million annually due to the return of spectrum by operators.

<strong>Convergencialatina: What is your reading of AT&T's recent decision to return spectrum?

Alejandro Navarrete (AN): It is not the first time it has done it, nor is it the only operator who has done it. AT&T returned a part of the spectrum it had in 2019, the last mile. This time it has not been a very large amount of spectrum, they are small portions. But the fact that it returns spectrum -both the previous time and now- implies that it is sending a signal: the costs of the spectrum are representing too great a burden for the operation of this company, as also happened when Telefónica Movistar returned to the Mexican State all the spectrum of its access network. These returns of spectrum are related to the high value of the annual fee that companies have to pay for the use of the spectrum.

In Mexico there is a payment in the spectrum tender for the concession title and then there are annual payments that are made throughout the entire term of the concession, generally 20 years.

We have commented on multiple occasions to the Ministry of Finance and Public Credit that this fee is too high. We want to find a mechanism to lower this annual payment. We can only send an opinion to the Treasury since it is the one that sends the economic package to the Congress of the Union every year and that includes the Federal Rights Law, where each of these bands are valued. Unfortunately, we have not been successful in convincing the authorities of the Treasury and the National Congress that these high costs are representing an entry barrier for new medium and small operators and that they are also affecting the finances of operators as large as AT&T or Telefónica.

The three main mobile service operators are still interested in operating in Mexico, but the situation is complicated by high spectrum costs.

Convergencialatina: What does the Federal Rights Law say for 2023?

AN: Taking our proposals into consideration, the Ministry of Finance sent a proposal to Congress and it was approved, for which the amount charged in 2022 will not increase. The fee is not reduced, but neither is it increased as it happened year after year. Finally, the cost of inflation did not impact the new law.

The problem is that the amount of the annual fee in some bands is higher than the international median for the cost of spectrum based on a study in more than 40 countries that we conducted and sent to the Ministry of Finance and Public Credit.

We have all the technical evidence that the spectrum in Mexico is expensive and this is a problem because it becomes a disincentive to participate in future auctions and causes the spectrum to be returned.

The federal Executive also loses because tax revenues are reduced. The return of spectrum by Telefónica Movistar meant a decrease in the income of the federal treasury of 4.5 billion pesos per year (US$225 million).

Convergencialatina: The IFT is on track to hold a spectrum auction for this year. What can you expect from it?

AN: In the next tender, IFT 12, we plan to include medium and low bands. We are talking in total of more than 330 MHz. The 600 MHz band has been allocated for 5G services by both the United States and Canada. We have the same spectrum availability as those two countries and that helps us coordinate interference at the border.

We also plan to include segments in the 800 and 850 MHz band, in different regions of the country and that can be used for 5G services or any other mobile technology.

In medium bands, we plan to include blocks in the L band (1,427 MHz to 1,518 MHz), also a portion in the 2.6 GHz band, with about 40 MHz available; also in the 3.3 GHz band, there we have 50 MHz available.

In medium bands there is also a significant amount of spectrum in PCS, due to what was returned by Telefónica Movistar and what we had available, and a small portion in the AWS band.

Convergencialatina: Have you already rearranged the spectrum of the medium and low bands to be tendered?

AN: We took on the task of rearranging the 600 MHz band a few years ago and we finished freeing it up even before the United States and that is our second digital dividend. We were very careful in this process of rearrangement of the previous spectrum before offering it to the market. We are aware of unfortunate experiences where the spectrum was tendered and later an attempt was made to release it, but those who were there sued their situation and the process stopped.

Thus, the spectrum that we are thinking of bidding for is already available and free, except for a small block of 50 MHz in the 3.3 GHz band for which we are working with the Ministry of Infrastructure, Communications and Transportation. There is already an agreement and it is a matter of being materialized.

Convergencialatina: What do you expect to receive from the open public consultation for the IFT 12?

AN: We don't want it to be a tender in which the only participants are large companies. We want to widen the range of possible participants as much as possible, so one of the questions is related to the size of the spectrum blocks. If they are too big, they can be very expensive for small and medium operators, and the same with geographic regions: if we auction spectrum only at the national level, the only ones who could afford it would be the big companies.

Our view is that an adequate combination must be made between national blocks and smaller blocks, which are the 65 basic service areas into which we divide the national territory. This could satisfy the requirements of both large companies and smaller operators, with the aim of new entrants coming into the market.

Convergencialatina: Is there interest in entering the Mexican market?

AN: Yes, we have received inquiries from wireless Internet providers (WISPs) that use unlicensed spectrum bands and some have expressed their desire to obtain spectrum allocated on a primary basis in order to offer more and better services.

But we've been told that the spectrum costs are prohibitive and if the blocks are too large regions, they don't have the capacity to be able to offer services.

Convergencialatina: How do you anticipate that tender could be? Would they follow the model of Brazil?

AN: The Brazilian model is very interesting, we have had meetings with the Brazilian regulator about it. The problem is that, even if we put the starting value of some bands at zero pesos and we didn't even ask for coverage commitment, the annual fee payment is too high. We are looking for all the alternatives, within the powers that the IFT has, to make the tender as attractive as possible so that many economic agents can participate, regardless of the amount of the annual fee because we have no control over it.

The amounts of the canon are already established for 2023. If we are lucky enough to convince the Treasury authorities and the Union Congress itself to reduce these annual canons at least for certain bands, that would only take effect in 2024.

Convergencialatina: Is there a tentative date for IFT 12?

AN: There is no hard date. Based on the comments we may receive, we will have to model the proposal for the bidding phases. Afterwards, the project of bidding specifications must be submitted to public consultation, which will surely be in the second quarter of this year. I see it as difficult for the tender to start in the first half of this year, I think it is more feasible for it to start in the second half of 2023.

Last news and analysis

Estados Unidos · Software and Applications

27/03/2024

25% of advertisers' budget invested in social networks and the Internet

Uruguay · Pay TV · Internet & OTT · Operators

27/03/2024

Through agreements with Claro and Movistar, cable operators expand their Internet offer

These are agreements of different types, which include leaving the last mile for the cable operator or contracts for available bandwidth. Antel could join with infrastructure leasing. Some cable operators are already building their own networks.

Uruguay · Pay TV · Internet & OTT · Operators

27/03/2024

Through agreements with Claro and Movistar, cable operators expand their Internet offer

These are agreements of different types, which include leaving the last mile for the cable operator or contracts for available bandwidth. Antel could join with infrastructure leasing. Some cable operators are already building their own networks.

Paraguay · Operators

26/03/2024

Government analyzes partial privatization of Copaco

The state operator is going through a delicate moment. Its income does not cover operating expenses and it must fulfil a debt obligation of US$110 million. Furthermore, the lack of investments led to the obsolescence of its infrastructure. Oscar Stark, president of the firm, states that alternatives are being evaluated to obtain the necessary funds, including the possibility of adding private partners. And he believes that in 18 months "the situation will be resolved."

América Latina · Equipment Providers and Network Solutions

25/03/2024

Andina Link 2024: Padtec targets small and medium-sized ISPs in Colombia

The Brazilian supplier Padtec participated in Andina Link 2024. From the fair, Hernán Yepes, CALA Norte Regional Manager, told Convergencialatina about the plans with the Colombian market, shaken by 5G deployment.

Search news