Mexico overhauls telecom regulator, continues ambitious reform
On June 10, 2013, the Mexican President, Enrique Peña Nieto, signed into law an amendment to the constitution that includes an overhaul of the telecommunication and broadcast industries and creates a new telecommunication regulatory body: IFETEL. IFETEL will replace COFETEL, the former regulatory body, and will have expanded licensing and anti-trust powers, including the ability to apply more restrictive regulations on dominant competitors and to force them to sell assets. Because IFETEL was created through a constitutional amendment, the agency is safeguarded from many legal challenges. Since June 12, 2013, the only recourse against actions taken by IFETEL can be made through a constitutional writ—no administrative recourse is possible, and constitutional writs cannot be used to apply for injunctions to halt agency actions.
The uncertainty will affect negotiations between the United States and Mexico on radiofrequency matters. Fortunately for operators based in the United States, the U.S. reached agreements with Canada in May 2013 on ten interim spectrum sharing arrangements for many key wireless bands, including Personal Communications Services (PCS) and Advanced Wireless Service (AWS). However, parallel agreements on wireless communications services in need of detailed coordination with Mexican authorities – including the 600 MHz spectrum slated for auction in 2014 – remain on hold pending the reorganization of the regulatory landscape in that country.
Over the longer term, the regulatory transition in Mexico holds some promise of reform. While COFETEL was a subordinate agency under the Mexican Ministry of Communications and Transportation, IFETEL will be an autonomous agency with the power to coordinate the telecommunication industry. In the past, the Ministry of Communications and Transportation granted and revoked licenses, but this power will be transferred to IFETEL, which will be required to create a unified licensing regime for telecommunications and broadcasting operators. Non-Mexican entities interested in investment in that country should take note: the reform bill eliminates the cap on foreign ownership of telecommunications entities, including satellite, which now can be wholly owned by foreign interests.
The reform bill that created IFETEL includes several other mandates, including the reorganization of the 700 MHz and 2.5 GHz bands, with at least 90 MHz of 700 MHz digital dividend spectrum to be assigned on a wholesale basis to a “carrier of carrier” entity. This open access network, which will be state-controlled and operated, has the goal of increasing affordable broadband penetration and could form Mexico’s largest telecommunications network. It also has the potential to cause technical challenges for U.S. coordination, as unlike the Canadian and American band plans, in Mexico the 700 MHz band will be solely for cellular use in two 45 MHz blocks for upload and download. Adding to the complexities, IFETEL will oversee the Mexican digital television transition, which is already underway but is not scheduled to be completed until the end of 2015.
Although the new IFETEL Commissioners were approved by Mexico’s Senate on September 10, 2013, the Mexican Congress was given six months—until December 2013—to enact and approve enabling legislation to transition from COFETEL to IFETEL. At present, COFETEL is still nominally the Mexican telecommunications regulatory body; however, with a series of daunting legislative and administrative hurdles ahead and considerable uncertainty regarding the final implementing regulations for IFETEL, the remainder of 2013 promises to be an unsettled time in the Mexican telecommunications market, and potentially a challenging time to conduct telecommunications negotiations with Mexico.