Telecoms & Media

Last verified on Thursday 5th July 2018

Mexico

Ricardo Ríos Ferrer, Maria Fernanda Palacios Medina, Ana Flores Rejón and David Guillén-Llarena
Rios Ferrer, Guillen-Llarena, Treviño y Rivera, SC

    General

  1. 1.

    Provide a general overview of the telecoms regulatory and licensing scheme.

  2. Since the enforcement of the reform to the Mexican Constitution in relation to telecommunications and economic competition matters (the Reform), on 11 June 2013, the main characteristics of the regulatory and licensing scheme of the broadcasting and telecommunications services, are the following:

    • broadcasting and telecommunication services are classified as public services of general interest, and the state shall guarantee its access (fundamental rights) to all population, under competitive and quality conditions, promoting universal coverage, interconnection and convergence of services;
    • direct foreign participation is authorised: up to 100 per cent for telecommunications and satellite communications and up to 49 per cent for broadcasting services;
    • creation of two new independent agencies in charge of telecommunication and economic competition matters;
    • the broadcasting or telecommunication concessions are subject to a new regime:
      • Concessions are “all inclusive”, which means concessionaires may provide all kinds of services through their network, as long as they comply with their obligations and fee payment; and
      • Concession over the spectrum or orbital positions are granted by public bid, with the exception of those granted for social or public services.
    • creation of specialised tribunals or judges for the resolution of telecom or economic competition matters.  
    • elimination of all administrative appeals, leaving the amparo indirecto as the sole mean of defence against the regulator’s resolutions.
    • obliges the recording of all concessions before the Public Registry of Telecommunications;
    • obliges the regulator to determine the existence of a “leading economic agent” (with market participation above 50 per cent in both the broadcasting and telecommunications sector to whom asymmetric regulation will be applied), and currently there are two “leading economic agents” in Mexico: America Móvil for the telecommunications sector, and Televisa for the broadcasting sector.

    The Reform brought substantial modifications to the telecom regulatory scheme, which are reflected in the new Federal Law of Telecommunications and Broadcasting (FLTB) published on 14 July 2014, in the Official Gazette and came into force on 13 August 2014. 

    As established in the Reform, the FLTB aims to regulate in a convergent manner the use of radio-electric spectrum, telecommunication networks and the provision of broadcasting and telecommunication services. Some of the main highlights of the FLTB are:

    • determines the powers and authority of the Federal Institute of Telecommunications as (FIT, or Institute) as an independent regulator created by virtue of the Reform) and the Ministry of Communications and Transportation;
    • inclusion of a new concession regime (all-inclusive concession, for spectrum and orbital positions) and granting of authorisations to commercialise telecom services;
    • procedure to determine the “leading economic agent" and the applicable measures or regulation, for future declarations.
    • regulation of infrastructure sharing and use of state’s assets for the deploy of telecom infrastructure;
    • must offer or must carry regulation;
    • broadcasting users’ and audiences’ rights;
    • Concessionaires’ obligation to collaborate with the justice system: geo-location of equipment, call intervention, signal blocking, etc; and
    • regulation over broadcasting content and publicity. 

    As regards the licensing scheme, according to the Reform, the FLTB distinguishes two types of concessions:

    • “all-inclusive” concessions, which authorise concessionaires to provide all sort of telecommunication or broadcasting services through their network and that according to its use may be classified as commercial, public, social or private; and
    • concessions to use radio-electric spectrum or orbital resources. 

    Regulatory treatment of telecoms providers may differ depending on the type of service provided, in accordance with the applicable regulations (to be issued by FIT) and the specific conditions established in the concession or authorisation granted.

    Concessionaires that operate a public telecommunications network have to comply with specific obligations related to the network’s interconnection and interoperability; whereas a concessionaire that occupies an orbital position to provide satellite capacity will be subject of specific obligations related to the control centres and operation of the satellites.

    Pursuant to the Reform and the FLTB, the FIT issued the General Rules for the granting of all-inclusive concessions, which were published on 24 July 2016 in the Official Gazette and came into force the following day. Those Rules set forth the terms and conditions to apply for an all-inclusive concession as well as the terms and conditions to go through a traditional concession or permission for an all-inclusive concession. 

    Finally, on 23 April 2018, the Official Gazette published the Rules issued by the FIT for the allocation of secondary-use frequencies, that can be used for the provision of radio communication services, in special events or by unattended industries where no communication services are offered.

  3. 2.

    What are the regulatory authorities, agencies and departments that oversee telecommunication licensing, transactions and telecoms activities and what are their general responsibilities? Does regulatory treatment of telecoms services providers differ depending on the type of service?

  4. The Reform provided the creation of a new independent agency in charge of the telecommunication sector, the above-mentioned FIT, which has full autonomy in relation to its operation and resolutions and since 10 September 2013 (when all the commissioners that will make up the board were duly appointed) became the sole and primary authority in this sector.

    The FIT emerges as a new telecom regulator with broader powers and authority, including acting as the main and sole authority for any economic competition matter related to the broadcasting and telecommunications sector. Some of its mains powers and faculties are:

    • regulate, promote and supervise the use of the radio-electric spectrum, telecommunication networks and provision of telecommunication and broadcasting services;
    • grant, revoke or authorise the assignment of all concessions and authorisations related to telecommunication or broadcasting services, previous notice to the sector’s Ministry, which may issue a technical opinion;
    • determine the consideration amount to be paid when granting a concession, previous opinion from the tax authority, which will not be binding;
    • exclusively exercise all powers and authority granted by the Constitution and the applicable laws to the Federal Commission of Economic Competition (FCEC) in relation to broadcasting and telecommunication sector agents;
    • determine the existence of the leading economic agent or agents with substantial power and impose the corresponding measures or asymmetric regulation, in order to eliminate barriers to competition and free trade;
    • determine the existence of the leading economic agent or agents with substantial power and impose the corresponding measures or asymmetric regulation;  
    • enforce limits to national or regional concentration of frequencies, the concession granting or cross-property that controls several communication means that provide services to the same market or geographic area; order the divestiture of assets, rights or any parts necessary to ensure the compliance of such limits;
    • issue administrative regulations, technical plans, procedures, programmes and guidelines required for the compliance with the law;
    • elaborate and update the National Chart of Frequency Allocations and collaborate with the Ministry in the coordination procedures of orbital resources;
    • supervise concessionaires and impose sanctions in case of infractions to the law, regulations or its concession title; and
    • interpret the FLTB, among others.  

    It is important to mention, that according to a resolution of the Supreme Court, the FIT – as an independent agency – has the faculty to issue general regulations regarding the telecommunication and broadcasting sectors, in spite of the lack of express faculty granted by the FLTB.

    The FIT is structured in such a manner that different units and departments work together in order to comply with the different functions assigned by the FLTB to the Institute. The units established by the Organic Statute of the FIT are: regulatory politics; radio spectrum; concessions and services; broadcasting media and content; compliance; antitrust; legal affairs; administration. Given that the FIT is the authority on antitrust matters related to the telecom sector, the FIT has also an investigating authority in charge of conducting the investigation of anticompetitive practices in this sector.

    Despite the Reform granting full autonomy to FIT in telecom matters, the FLTB left certain powers with the Ministry of Communications and Transportation, such as:

    • issuing its technical opinion (not binding) to the FIT, regarding the granting, renewal, revocation or assignment of concessions;
    • planning and conducting the social and universal coverage programmes;
    • elaborating the telecom and broadcasting policy for the federal government;
    • establishing programmes for broadband access in public sites in order to achieve universal coverage;
    • performing, in coordination with the FIT, all required procedures before the competent international bodies in order to obtain orbital resources in favour of the Mexican state, as well as all coordination procedures;
    • managing the efficient use of satellite capacity and establishing policies that promote the availability of capacity for national security networks, social services or other purposes of the federal government;
    • participate, with FIT’s support, in the negotiation of international treaties regarding telecom and broadcasting services;
    • acquiring, establishing and operating infrastructure, telecommunication networks or satellite systems for the provision of services;
    • installation of the shared public network for telecom services, which would be operated by a third party independent of all the telecom operators that offer services to the general public. The operator of this shared public network will just offer services to marketing companies or network operators. Currently, the federal government is in the process of allocating this shared public network.

    This shared network started its operations on 21 March 2018, and includes the use of at least 90MHz of the spectrum liberated from the Digital Terrestrial TV transition (on the 700MHz band), the resources of the optical fibre backbone from the Federal Commission of Electricity (CFE) and any other public asset that may be used for the installation and operation of this network. It is expected that the shared network will provide telecommunications services to 92.5 per cent of the Mexican population by 2024.

    Some other powers were also left by the FLTB to the Ministry of the Interior regarding supervision of broadcasting contents, and the Ministry of Health, regarding publicity.

    The FLTB distinguishes two types of concessions:

    • “all inclusive” concessions that authorise concessionaires to provide all sort of telecommunication or broadcasting services through their network and that according to its use may be classified as commercial, public, social or private; and
    • concessions to use the radio-electric spectrum or orbital resources. 

    Regulatory treatment of telecoms providers may differ depending on the type of service provided, in accordance with the applicable regulations (to be issued by IFT) and the specific conditions established in the concession or authorisation granted.

    Concessionaires that operate a public telecommunications network have to comply with specific obligations related to the network’s interconnection and interoperability; whereas a concessionaire that occupies an orbital position to provide satellite capacity will be subject to specific obligations related to the control centres and operation of satellites.

  5. 3.

    Describe the main issues related to dispute resolution in the telecoms industry and how disputes with a regulator would be generally resolved.

  6. The main disputes that have arose during recent years between telecoms operators are related to interconnection disagreements, particularly the applicable interconnection tariffs. Such disputes will now be resolved by FIT in accordance with the procedure established in the FLTB and the applicable Interconnection Plan.

    It is important to note that the FLTB only establishes a dispute resolution proceeding for matters related to interconnection disputes, which is also applicable in cases of disputes derived from infrastructure sharing and fixed public telecommunications networks agreements.

    In case of a dispute, operators may file a complaint before the regulator, which will determine the interconnection conditions that will rule between those operators, for the required period.

    In cases of disputes with the regulator, the Reform eliminates the administrative appeal, and ordinary trials, all resolutions (act or omissions) or general norms issued by the FIT may only be challenged through the amparo indirecto and the challenged act may not be suspended. The amparo indirecto trial is resolved by a district judge and its purpose is to revise the constitutionality of the FIT’s acts, but actually, because of the lack of any other appeal this judge also revises the legality of the FIT’s actions.

    As for litigation, one of the main issues we have observed during a trial is that judges ignore technical and economical matters that may be relevant in telecoms litigation, and resolve upon merely legal aspects. In this regard, it is important to note that the Reform provides the creation of specialised tribunals or judges for the resolution of telecom, broadcasting and economic competition matters.

    The Supreme Court shall hear and rule, in accordance to the terms established by the applicable law, all matters between two constitutional autonomous entities (such as FIT or FCEC) or any of them and the Executive Power or the Congress, in relation to the constitutionality of its acts.

    Although there are some other issues in telecom and broadcasting industry, such as: the audience rights and the allocation of broadcasting frequencies, the main issues are related to interconnection disputes.  Last year the Supreme Court declared the unconstitutionality of the zero termination tariff set forth by the FLTB to the “leading economic agent” for mobile services (Telcel) and to our best of our knowledge the Supreme Court is about to resolve in the same way the constitutionality of the zero termination tariff, to Telmex-Telnor (the leading economic agent on fixed services).

    Considering the above mentioned, FIT set up the new tariff applicable for interconnection services provided by Telcel, based on a public Long Run Incremental Cost methodology. 

  7. 4.

    Do you expect any significant changes in the near future in the legislative or licensing scheme or in the governing authorities?

  8. The main changes were made in 2013 and 2014, when the FLTB entered into effect, since that date the FIT has continued working issuing several regulations, technical plans and guidelines related to the provision of satellite, telecommunication and broadcasting services, such as: the general dispositions and regulations for granting concessions and authorisations; portability regulations; leading economic agents reference offers, among others.

    There are still some regulatory provisions pending to be issued by the FIT, which have some importance owing to current market conditions, such as:

    • the review of the reference offers for the commercialisation or resale of the service provided by virtual mobile operators;  
    • criteria for defining markets and assessing conditions of effective competition;  
    • General Guidelines on the Surveillance of the Maximum Times of Quantifiable Advertising;  
    • a new Satellite Communication Regulation; and  

    The proposals of the new President (Andrés Manuel Lopez Obrador) in relation to the telecom sector, are focused on reducing the digital divide. He has announced the creation of a new fund to achieve that purpose.

  9. 5.

    What significant telecom-specific international treaties is your country party to? Has your country made any commitments under the GATS/GATT regarding telecommunications or adopted the WTO Basic Telecommunications Agreement?

  10. Mexico has been a member of the International Telecommunications Union (ITU) since 1934, and executed the amendments to the Constitution and Convention of the ITU (including the Radiocommunication Regulations) in 1992, valid and effective since June 1994. Since then, it has adopted several ITU Plenipotentiary Conferences Final Acts and MOUs.

    Regarding the World Trade Organization (WTO), Mexico executed the General Agreement on Trade in Services in 1995. The country is party to the WTO Basic Telecommunications Agreement and has executed the Schedules of Specific Commitments regarding telecommunications GATS/SC/56, dated 15 April 15 1994 and GATS/SC/56/ Suppl.2, dated 11 April 1997.

    Mexico has executed several free trade agreements, which contain specific obligations regarding telecommunications, the most significant are:

    • the North American Free Trade Agreement (1994);
    • group of Three (Mexico–Colombia–Venezuela) Free Trade Agreement (1995); and
    • the free Trade Agreement between the European Union and Mexico (2000).

    As for bilateral treaties, Mexico has executed important agreements with the United States of America such as the Agreement Concerning the Transmission and Reception of Satellite Signals for the Provision of Satellite Services and its respective protocols regarding SMS, BSS and DTH services. Also, several protocols have been executed regarding the use of specific bands for terrestrial or mobile services within the common border.

    Currently, Mexico is about to be part of the Trans-Pacific Partnership.

  11. 6.

    What trends were noticeable in the market in 2017? What trends do you expect to see in the next 12 months?

  12. In February 2018, the FIT allocated 10MHz of the 440–450MHz band, for the commercial use of ultra-high frequencies, for the provision of capacity to provide private radiocommunication services.

    Also in February 2018, the FIT published the call for bid, for the allocation of 120MHz in the 2.5GHz. Currently, the FIT is carrying out the bidding process, and has announced the participation of two interested parties.

    On 23 April 2018, the Official Gazette published the Rules issued by the FIT for the allocation of secondary use frequencies, that can be used for the provision of radio communication services, in special events or by unattended industries where nobody offers communication services.

    On 19 March 2018, the FIT announced the relocation of 48 TV channels that operated between 614MHz and 698MHz. This implies the liberation of the 600MHz band that will be used to offer fifth-generation broadband mobile services (5G).

    In June 2018, the Ministry of Communications and Transports launched a bidding process for the backbone network. The winner will have to invest more than US$200 million for a 30-year contract. The project will be structured under a PPP agreement and Telecomm, a governmental operator, will provide the right to explore two pairs of optical fibre threads for around 25,000 kilometres, as well as the right to install fibre optic cable over the networks of CFE (Federal Commission of Electricity). The coverage should be achieved in a maximum term of 54 months and the network will operate only as a wholesaler. This “backbone network” will complement the “shared network”, so this is one of the most important projects of the year.

    The Shared Network (allocated on 2016 through a public private partnership) initiated operations in December 2017. In this first stage, the Shared Network aims to cover 32.2 per cent of the population, equivalent to 30 million Mexicans. Within the next six years, the Shared Network is expected to cover 92.2 per cent of the national territory.

    Pursuant to the Reform, in 2014, the FIT declared America Movil and Televisa as the “leading economic agents” in the telecommunication and broadcasting sectors respectively. As a result of this declaration, asymmetric regulations were imposed on these entities to obtain effective competition in the telecom industry.

    During 2017, the FIT set up an agreement to verify the compliance of the asymmetric regulation to the “leading economic agent” in the telecommunication and broadcasting sectors, for the 2018 period. During 2018, the FIT has approved several rules regarding functional separation of Telmex-Telnor, as well as the by-laws of the new company (to be incorporated in compliance with the FIT ruling), which will offer major services in non-discriminatory conditions to the other carries.

    In relation to cybersecurity, although it is not a competence of the FIT, it is important to mention that in spite of the recent cyberattacks that affected some banks operating in Mexico, there has been no deployment of a solid campaign or sufficient measures to counteract the potential damages that are the consequence of a poor cybersecurity policy. The FIT has been called by the federal government to share its expert opinion on cybersecurity, in order to develop a public policy.

    Finally, the Supreme Court is about to rule on the legality of the allocation of broadcasting frequencies, and declare the unconstitutionality of the zero termination tariff set forth by the FLTB to the leading economic agent (America Movil).

  13. 7.

    Is there a "national broadband strategy" or strategy for public internet or Wi-F access? Are there regulatory policies designed to bypass landline technology and promote wireless? Or to promote "fibre to the home"? Are there policies intended to support or subsidise broadband access to underserved or unserved areas?

  14. In 2011 the federal government issued a report called “Actions for strengthening the broadband and TICs”, which included an analysis of the current situation in Mexico, actions already implemented and actions to be implemented in the future, which included: leasing additional dark fibre capacity from the CFE, using passive infrastructure from the state to deploy telecommunications infrastructure, liberating spectrum for its use by public telecommunication networks, identifying additional spectrum for its use by broadband services, auction of the digital dividend band, strengthening the legal framework, establishing an internet exchange point IXP and elaboration of a digital agenda. In this regard, it must be pointed out that one of the Reform’s objectives is to guarantee access to broadcasting and telecommunication services (including broadband services), which are now classified as general interest public services and shall be provided under competitive and quality conditions, promoting universal coverage, interconnection and convergence of services. For such purposes, the Reform established the Federal Executive through the Ministry of Communications and Transportation shall:

    • be in charge of the “universal digital inclusion policy”, which according to the FLTB are programmes and strategies with the objective of providing access to information technologies and communications, including broadband internet for the entire population, in order to close the digital gap between individuals, households, businesses and geographic areas of different socioeconomic levels. To achieve the above, FIT has the obligation to perform the necessary actions to contribute, within their competence;
    • perform all required actions to install a shared network of wholesale telecommunication services that promotes the effective access of the population to broadband communications and telecommunication services; and
    • include in the National Development Plan a social coverage programme and a broadband programme for connectivity at public locations, a detailed analysis of the public locations that may be used by concessionaires to install their networks, a work programme to achieve the transition of the digital TV and a national programme of radio-electric spectrum (to guarantee the use of 700MHz and 2.5GHz bands).

    In February 2017, the Ministry of Communications and Transportation issued the Digital Connectivity Program, such document recalls all the achievements made since the publication of the Reform, as well as all the challenges and pending matters in the telecommunications and broadcasting field. Such programme states that since the Reform was published, there have been high growth rates in the use of broadband services, both fixed and mobile.

    With the aim of achieving a higher penetration of a broadband access to the population, particularly in rural and unserved areas, the Mexican government, through the Ministry of Communications and Transportation, has launched two projects that intent to give internet and broadband access to such communities. These programmes are: México Conectado and Puntos México Conectado, with the objective of deploying telecommunications networks for the provision of internet in public spaces, such as schools, health centres, libraries, community centres or parks, in the three government spheres: federal, state and municipal; and in some specific locations teach people how to use internet and other technology resources.

    According to the statistics published by México Conectado between 2010 and 2016, Mexico incremented public spaces for free internet (acquired by the Ministry of Communication and Transportation) from 10,000 to more than 100,000 public spaces. 

    Licensing and other regulation

  15. 8.

    How are wireline or wireless telecoms services licensed, and how is radio-frequency spectrum allocated and made available to applicants (eg, service providers)? In particular, describe the licensing regime in your jurisdiction, including the procedures for a company to obtain licences to provide wireline or wireless telecoms services, or for use of radio-frequency spectrum. May licences be traded or sub-licensed and if yes, under what conditions? Are there any direct or indirect foreign ownership limitations?

  16. Under the new regime derived from the Reform, concessions are granted directly by the FIT (the Ministry may issue a technical opinion not binding). The FLTB distinguishes two type of concessions: (i) “all-inclusive” concessions, which authorise concessionaires to provide all sort of telecommunication or broadcasting services through their network and (ii) concessions to use/exploit spectrum or orbital resources, all of which may be classified depending on its use as commercial, public, social or private.

    Concessions for the use of spectrum and orbital resources (for commercial or private use) will be only granted to Mexican entities or individuals, through a public bidding process, except for social or public use concessions, which may be directly assigned.

    The main factors taken into consideration by FIT during a bidding process to grant a concession are: (i) the economic proposal, (ii) enhancement of reduced prices for services for the final users, (iii) prevention of concentrations that could affect the public interest, (iv) possible entry of new competitors and (v) consistency with the concession programme. Pursuant to the FLTB, regarding broadcasting concessions, the FIT would also consider: the list of programmes and the inclusion of national, regional or local contents.

    The rights and obligations established in a concession for private or commercial use may be assigned to another party with the prior approval of the FIT and as long as the assignee compromises to comply with the obligations of the former concessionaire and assumes all the conditions imposed by the FIT. For transfers to another party that provides similar services in the same geographic zone, an additional analysis will be required from the FIT in relation to economic competition matters. In no case may a concession be assigned to a foreign government.

    Under the FLTB concessionaires may lease frequency bands granted for private or commercial use to other concessionaires, with prior approval from the FIT and provided that the lessee will constitute a joint obligor with the concessionaire in relation to the obligations derived from the spectrum concession and that continuity of services is not affected or concentrations or crossed property phenomena are generated. 

  17. 9.

    What types of duties, royalties and taxes must be paid by an operator to obtain and maintain telecoms licences? Are there universal service contribution requirements (or equivalent) to help fund or subsidise the provision of telecoms services to underserved, remote or high-cost areas?

  18. The Federal Law on Governmental Fees establishes the governmental fees that concessionaires or permit holders must pay in order to submit any application before the corresponding authorities (eg, modification or renewal of a concession) and the governmental fees that must be paid on a monthly, semi-annual or annual basis for the provision of specific telecommunication services. Additionally, the provision of certain telecoms services (specifically those that use a public telecommunications network) is subject to the special tax on products or services (3 per cent).

    The taxes and governmental fees referred to in the paragraph above are independent from the considerations the federal government may receive for granting a concession (particularly in case of a public bid related to frequency bands or orbital positions) and the consideration that may be established in a concession title or permit. For example, DTH services providers are obliged to pay 3.5 per cent of the monthly income received by the concessionaire for the provision of service in Mexico.

    In this regard, the Reform and the FLTB authorises the FIT to determine a consideration for the concession granting or renewal and for the authorisation of the services related to a spectrum concession, previous opinion (not binding) from the tax authorities.

    The FLTB establishes that no bid is required in order to authorise the use of frequency bands to those concessionaires that request them for a social purpose, as in such case the frequencies will be directly assigned. The concessions for social use may be classified as pure, communitarian or for indigenous communities. All of them have in common a non-lucrative nature and the objective of transmitting cultural, educational, scientific or communitarian content. However, both communitarian or indigenous concessions need to have a direct bond with the community in which the programmes will be transmitted. Since the Reform intends to guarantee the fundamental right to telecommunications services, the FLTB obliges the federal entities to reserve one percent of its budget to finance all of the communitarian and indigenous broadcasting concessionaires in the country. The states and the local councils may reserve up to 1 per cent of their budget to help finance these broadcasting concessionaires in their area.

    It is important to mention that the Mexican framework does not consider any subsidy for the governmental fees related the use of spectrum, so it is expensive to maintain those type of concessions.

    Finally, as mentioned above, the President of Mexico elected, has mentioned it is focused on reduce the digital divide, and during its campaign announced the creation of a new funds to achieve that purpose.

  19. 10.

    What are the principal requirements to land a submarine telecoms cable, to traverse territorial waters in your jurisdiction?

  20. In order to land a submarine telecoms cable to traverse Mexican territorial waters, it is necessary to obtain a licence from the Ports Authority (dependant of the Ministry), which will authorise the landing within a determined area and will establish certain conditions to the licensee, such as: complying with the installation programme and calendar issued by the Ports Authority, install maritime signals as needed, adopt the corresponding measures to guarantee the installations’ security, issue a security bond and pay the applicable governmental fees, among others. The interested party must file an application before the Ports Authority and accredit that it has all the financial, material and human resources needed to execute the project. Moreover, an authorisation regarding environmental impact must be obtained from the National Institute of Ecology and submitted with the application.

  21. 11.

    Are data centres, data transmission and associated privacy considerations subject to special regulation?

  22. No, in fact the FLTB does not regulate any more the value added services, such as remote data processing, electronic data exchange or remote consultation to data bases. However, the provision of telecommunication services will be subject to a concession. 

  23. 12.

    Describe the general licensing and regulatory requirements for satellites in the telecoms industry. Are there any direct or indirect foreign ownership limitations? Are there separate or specific licensing or regulatory requirements for foreign satellite system operators to provide services in your country?

  24. Concessions to occupy and exploit an orbital resource (geostationary orbital positions assigned to the country), are granted through a public bidding process, in which the federal government has the right to receive an economic consideration as determined by the FIT. Under this type of concession at least the main telemetry, tracking and control earth station must be located in national territory and operated mainly by Mexicans; moreover, concessionaires may only provide services to other concessionaires or authorisation holders not to the final users, and the concessionaire is obliged to reserve and provide (gratuitously) to the government a certain amount of capacity, additional to the governmental fees paid for capacity commercialised in Mexico.

    On the other hand, authorisations to exploit frequency bands associated with a foreign satellite system are granted through a simple application. Parties interested in obtaining this authorisation must file an application for the approval by the FIT. Once all the technical, financial and legal requirements are complied with to the Commission's satisfaction, the concession will be granted. Only foreign satellite systems from countries with which Mexico has signed a treaty that contemplates satellite reciprocity will be authorised. In this case, satellites may be operated from abroad but the foreign satellite operator must promise the Mexican government it will comply with its instructions and provide all the information that may be requested.

    There are no foreign ownership limitations on the telecommunications sector; as a result of the Reform 100 per cent direct foreign investment is authorised for satellite communications. 

  25. 13.

    Has number portability been a concern in your jurisdiction? Has it had any effect on competition? How are numbers allocated?

  26. Although it was established in the Federal Law of Telecommunications in 1995, number portability was not implemented until 2008. Number portability has had a positive effect on competition, particularly in the fixed telephony market. However, the effect on the mobile telephony sector has not been as expected: only 4.6 per cent of users have used this service since its implementation and it seems the party that has benefited most has been the main operator due to the asymmetrical pricing scheme.

    The FIT is the entity in charge of allocating the numbers and networks identifying codes. On 12 November 2014, the Official Gazette published the Number Portability Rules approved by the FIT, with the objective of establishing processes for users to choose their telecommunications service provider without changing their telephone number, in order to encourage a healthy competition between telecommunications service providers.

    Number portability is available for mobile and fixed services, but the change can only be made to the same type of services (from mobile to mobile or from fixed to fixed).

    According to the Number Portability Rules as of 10 February 2015, users can easily begin the number portability procedure and within 24 hours of the submission of the application, the change will be made. To achieve the above, the user must comply with the following:

    • post-paid user (monthly payment): The user must submit a copy of his or her ID and fill in the portability application form before the new telephone company chosen by the user.
    • pre-paid user (top up): The user must submit a copy of his or her ID and fill the portability application form, providing the NIP number (generated when the change is requested from the new telephone company).

    Note that the FLTB establishes portability as an obligation not only for concessionaries but also for entities that commercialise telecommunication services (ie, MVNO). 

  27. 14.

    Are mobile virtual network operators (MVNOs) allowed or common? Are there any impediments, restrictions or special regulations affecting MVNOs?

  28. Yes, since the Reform MVNOs are allowed in Mexico and may provide services throughout an authorisation to commercialise telecoms services and the obtaining of a concession to provide telecommunication services, pursuant the Rules issued by the FIT, regarding mobile services provided by MVNOs.

    The Reform aimed to promote the growth of MVNOs in Mexico, with the creation of a shared network of wholesale telecommunication services, which once established will become an additional option of network infrastructure for the MVNOs. New MVNOs have appeared since late 2014, but we expect to see even more once the shared network starts operation. 

    Another condition which favour the entrance of MVOs, are the new conditions set forth to the “leading economic agent” in the asymmetric regulation imposed by the FIT, specially the publication of tariffs, to provide this service to the MVOs.

  29. 15.

    Is network-to-network interconnection and access mandatory? What is the pricing scheme? Are there certain criteria for qualifying?

  30. Yes, concessionaires that operate a public telecommunications network must adopt an open network architecture that allows interconnection and interoperability of their networks and interconnect with any concessionaire that requests it.

    For such purpose, on 31 December 2014, the FIT issued the minimal technical conditions for interconnection between public telecommunication network concessionaries, these conditions will allow concessionaries to obtain the basic interconnection requirements without having to participate in long negotiations to define the technical conditions under which the service will be provided, and consequently discriminatory practices will be reduced.

    In order to determine the applicable interconnection fee, on 18 December 2014, the FIT published the methodology to be used by such regulator in order to determine the interconnection costs, which is the “long run average incremental cost”. Concessionaires must execute the interconnection agreements, in accordance with the FLTB regulations, fundamental technical plans and other applicable standards and methodologies issued by FIT. Any interconnection dispute will be resolved by FIT, which will determine those conditions that the concessionaires were unable to convene (including the interconnection fees), in accordance to the process established in the FLTB.

    If there is a “leading economic agent” (agent that has a greater than 50 per cent participation in the telecommunications sector), the termination rates for fixed and mobile traffic, including calls and text messages, will be asymmetric. On 2 November 2017, the IFT approved the interconnection fees that will be applied during 2018 when solving any interconnection dispute.

    Competition and merger control

  31. 16.

    What is the current state of telecoms competition in your jurisdiction? Is the telecoms market dominated by a limited number of participants or is market-share more equally dispersed? Is there a policy to require a minimum number of national wireline and wireless operators to ensure competition? Do you foresee contraction or consolidation in the industry in the near future due to the entry of additional operators?

  32. Competition within the telecom industry has moved into an advance stage of development, yet it has not yet attained a truly competitive environment. Particularly in the broadcasting and telephony sector, the market is dominated by one or two participants; such is the case of the fixed telephony service where Telmex has a participation of 80 per cent of the market, and the mobile telephony service where one operator (Telcel) provides services to more than 60 per cent of the users. As for broadcasting services, Grupo Televisa provides 67 per cent of such services to end users.   

    There is no policy to require a minimum number of operators; however, one of the main objectives of the Reform is to promote an effective competition in the telecom industry, for which it authorised the FIT to establish asymmetric regulation to those concessionaires with substantial market power or declared as the “leading economic agent”.

    According to the Reform, a concessionaire will be considered a leading economic agent based on its participation on the provision of telecom or broadcasting services in national territory; any direct or indirect participation greater than 50 per cent, whether for the number of users, the network traffic or the capacity used, will be considered a leading economic agent. 

    In this regard, in March 2014, America Movil was appointed by the IFT as the leading economic agent for the telecom sector, and Grupo Televisa for the broadcasting sector. Asymmetric regulation has recently been imposed to both operators, thus it is expected this will allow the growth of current operators and promote the entrance of additional competitors which results in a direct benefit for the customers with more options and reduced prices.

    After a long litigation, in February 2017, Grupo Televisa was finally appointed by the FIT as operator with substantial power in the pay television market; which would then result on FIT imposing asymmetric rules to such entity. However, in February 2018, the Supreme Court of Justice resolved that that the FIT’s resolution regarding the substantial power of Televisa had no effects, therefore Televisa is no longer considered an operator with substantial power, on the pay television market.

  33. 17.

    Are competition rules relevant for the telecoms industry in your jurisdiction? Describe any antitrust approvals or other competition law requirements that may apply in connection with telecoms investment.

  34. Yes, all telecoms providers are currently subject to the antitrust law and regulation, the purpose of which is to avoid anticompetitive acts, eliminate monopolies and guarantee the competition process and free market participation. However, specific competition rules and requirements apply to the telecoms industry in Mexico:

    • the FIT will exercise exclusively all powers and authority granted by the Constitution and the applicable laws to the Antitrust Commission in relation to the agents in the broadcasting and telecommunication sector;
    • in order to ensure fair and effective competition, the FLTB authorises the FIT to establish an asymmetric regulation to those concessionaires (broadcasting and telecommunications sectors) that are declared by the FIT as “leading economic agents” or as having significant market power. Therefore, FIT may impose specific measures and obligations (related to tariffs, service quality and information) to achieve the desegregation of such telecoms providers;
    • the FIT may asymmetrically regulate all agents in the telecommunications market to eliminate barriers to the competition and free trade;
    • the FIT will enforce limits on the national or regional concentration of frequencies, the concession granting, and cross-ownership that controls multiple media, when telecommunications and broadcasting concessionaries provide services to the same market or geographic area, restricting  or limititing the access of plural information in those markets or areas; and
    • the FIT may order the divestiture of assets, rights or any parts necessary to ensure the compliance of such limits.
  35. 18.

    Are there any rules specific to the telecoms industry for effecting mergers and acquisitions?

  36. Yes, any disposal or allocation of shares that represent more than 10 per cent of the capital stock of a concessionaire must be previously notified to FIT, which will have 15 working days to object, with justified cause, the operation in question; this provided that the obligation to notify the transaction as established in the Federal Law of Economic Competition is not updated. It will not be necessary to submit the notification, mentioned above , when the operation refers to shares or partnership interests representing neutral investment in terms of the Foreign Investment Law or in the case of capital increases approved by the same shareholders, as long as the participation of each one of them in the capital stock is not modified. Also, it would not be necessary to submit this notification in case of mergers, demergers and corporate restructuring, as long as the changes in the corporate structure are within the same control group or within the same operator. For this purpose, transactions should be notified to FIT within 30 calendar days of the date of its execution.

    The FLTB determines that as long as there is a declared “leading economic agent” in the telecommunications and/or broadcasting sector, no authorisation from the FIT will be required for concentrations between concessionaires, assignment of concessions or corporate changes, provided that the following requirement are fulfilled: 

    • generate a reduction (per sector) from the Dominance Index, as long as the Hirschman-Herfindahl index does not increase by more than 200 points; 
    • that the leading economic agent has a participation percentage (in the sector) below the 20 per cent; 
    • that the concentration involves no participation of the leading economic agent declared in the sector where the concentration is being performed; and 
    • that operation's effect does not imply any decrease, harm or inhibits the free competition and participation in the market within the corresponding sector. 

    It is important to mention that pursuant to asymmetric regulation imposed on agents declared as “leading economic agents”, America Móvil cannot participate in the capital stock of Televisa; nor can Televisa participate in the capital stock of America Móvil.

    Telecoms markets and consumers

  37. 19.

    Are prices for telecoms services regulated, or is it purely market-driven? Are there any differences between prices for consumers and businesses? Are retail or wholesale price controls imposed on any operator? Does any regulation of pricing differ depending on the type of service?

  38. Concessionaires and authorisation holders may establish the telecoms services’ fees freely (market-driven); however, the application for the register of such tariffs must be submitted at FIT before entering into effect. In case of satellite capacity provision services, the registered tariffs are the maximum tariffs applicable, and the concessionaire or permit holder may apply discounts at its sole discretion.

    For those telecommunication services offered to the public, charged in terms of the duration of the communication, concessionaries and authorisation holders must include in their commercial offer, plans and tariffs the charge determined by second, without prejudice or other plans charged by event, capacity or any other modality.

    When concessionaires are declared “leading economic agents” or with substantial market power, the above-mentioned rule will not apply, as in such case concessionaires must comply with the specific regulation issued by the FIT. 

  39. 20.

    Describe recent efforts to expand the telecoms infrastructure in your jurisdiction. How have they been funded (public, private, public-private partnerships, etc)? Have you noted any trends or any notable issues in connection with expansion?

  40. The Reform provided that the Federal Executive shall install a shared network of wholesale telecommunication services that promotes the effective access of the population to broadband communications and telecommunication services. Such network will use at least 90MHz of the released spectrum from the analogue blackout (700MHz), fibre optic from the CFE and any other asset from the state that may be used in the installation or operation of such network; and may be funded publicly or privately. For such purposes, the new FLTB establishes that a concession for commercial use will be granted to a public entity (or through a scheme of public-private partnership), which may not under any circumstances provide services to final users.

    Currently, the shared network is undergoing a bidding procedure that was concluded in September 2016 and the network shall begin operating before the end of 2018. It is expected that this newly available infrastructure will facilitate the entry of new competitors and the growth of small operators. 

    As previously mentioned, the new asymmetric regulation imposed on the “leading economic agents” in both sectors favours the sharing of the passive and active infrastructure of America Movil and Televisa.

  41. 21.

    Have telecoms operators in your jurisdiction adopted "convergence" in respect of their market offerings? If yes, what is the current state of play in the market? Are cable TV operators offering telephony services or internet streaming services? Has network partnering been adopted by any operators in the market to increase their viability?

  42. Yes, telecom operators in Mexico have adopted "convergence" thanks to the support of the federal government, which in 2006 issued a Convergence Agreement that authorised concessionaires of determined frequency bands (providers of fixed telephony or restricted TV services) to provide additional services throughout a simplified process (no bidding). Cable TV operators have formed strategic alliances between them or with telephone operators in order to offer triple play packages (TV, telephony and internet access), which has contributed to the penetration of these services in Mexico and reduced prices for users.

    The new concession regime adopted by the FLTB encourages convergence as concessions will be “all inclusive” for all the services that the technology may support (except spectrum and orbital resources), and therefore different services may be integrated in a sole concession.  

  43. 22.

    Are there any issues regarding availability of suitable radio-frequency spectrum for wireless broadband and other emerging uses? Are there any upcoming auctions or modifications to existing radio-frequency spectrum use allocations to encourage the expansion of emerging wireless communications services? Are there radio-frequency spectrum caps in operation? If so, what effect are these having on the market?

  44. One of the main purposes of the Reform was to redistribute the radio-frequency spectrum, to change the public view that the radiofrequency spectrum was not well distributed in Mexico; therefore, since its creation the FIT has been carrying out different activities to reorganise the spectrum, with the main purpose of including new technologies and generating greater participation between telecommunications competitors, as well as the inclusion of new ones. 

    Two of the most important projects to reorganise spectrum that have been taken place recently are: the transition from analogue television to digital terrestrial television, which aims to liberalise a digital dividend in the frequency bands 698–806MHz (700MHz band), which is planned to be used for the provision of mobile services. Another important project is the liberalisation of the frequency bands 2,500–2,690MHz (2.5GHz band), which will recover such frequency bands to be used for provision of services with new technology, such as mobile broadband services. As mentioned above:

    • In February 2018, the FIT published the call for bid, for the allocation of 120MHz in the 2.5GHz. Currently, the FIT is carrying out the public bid process, and has announced the participation of two interested parties; and
    • Due to the relocation of 48 TV channels, the FIT announced on March 2018 that the band of 600MHz will be liberated in order to deploy the 5G service of mobile broadband.

    Also, since the Reform, three major auctions have taken place:

    • the public tender of frequencies for broadcast TV services (246 channels), in order to create two new TV stations with national coverage. From the total number of channels only 128 were granted to Cadena Tres (part of Grupo Imagen) March 2015;  

    Last August, FIT allocated 32 channels of spectrum for broadcasting services in 29 locations of 17 different entities, achieving a coverage of 45 per cent of the total population.

    This auction is a result of the available channels, after to the disqualification of Grupo Radio Centro, at the auction developed in 2014.

    • the public tender of AM and FM frequencies for public radio broadcasting services, which resulted on a controversy, since "Tecnoradio" the winning agent for 37 stations, was disqualified for not paying the due consideration and for not delivering requested information; and  
    • the public tender to use 80MHz in the AWS band in the range in of 1,770–1,780MHz /2170–2,180MHz, for the provision of mobile broadband services, which was won by AT&T and Telcel on 29 February 2016.
  45. 23.

    Are significant portions of your jurisdiction underserved? If so, is there a focus on rural expansion? Are there mandatory requirements for rural or universal service (including contributions to fund or subsidise the cost of expanding telecoms services to remote, underserved or high-cost areas)?

  46. Yes, significant portions of the Mexican territory (mainly rural areas) are underserved or do not have access to basic telecommunication services. See tables 1 and 2 below to know more about the penetration of telecommunication services in Mexico.

    In this regard, the National Development Plan (issued by the Executive Branch for the period 2013–2018) established as a priority for this administration to secure universal access to television, radio and telephony services to all the country; suitable prices for telecommunication services, so everyone could access them, and quality in the services and the content so that services can be more rapid, reliable and diverse.

    The FLTB establishes that the Ministry of Communications and Transportation is responsible for planning and conducting all policies and programmes related to universal and social coverage; and that in order to achieve universal coverage it shall set up a public site connectivity programme and social coverage programme on an annual basis, the main purpose of which will be to increase the penetration of telecom services on underserved areas identified by the Ministry.

    In this regard, the FLTB also establishes that the FIT shall guarantee the availability of frequency bands or network capacity for the government's needs regarding social coverage and public site connectivity. For such purposes it shall grant concessions for “public use” as necessary. 

    TABLE 1

    Demand

    Offer

    Number of localities

    Type

    Population (millions)

    Home penetration %

    Localities with at least two operators (%)

         

    Mobile telephony

    Fixed telephony

    Computer

    Internet

     

    60

    Urban

    70.2

    77

    55

    40

    30

    98

    1182

    Suburban

    9.7

    62

    32

    21

    13

    93

    1839

    Mixed

    6.3

    49

    28

    15

    7

    84

    15,186

    Rural – 500 to 2500 habitants

    15.4

    37%

    21

    8

    3

    59

    49,413

    Rural – 50 to 500 inhabitants

    9.3

    33

    10

    4

    2

    8

    129,994

    Rural – fewer than 50 inhabitants

    13

    7

    7

    5

    3

    0

       

    112.3

             

     

    Fixed non-residential  telecommunications

    Mobile telecommunications

    Penetration of telecommunication services for every 100 economic units

    Connection technologies of fixed non-residential broad band

    Teledensity of telecommunications services for every 100 inhabitants

    Fixed telephony

    Fixed broadband

    Restricted T.V.

    Coaxial cable

    DSL

    Optic fiber

    Other technologies

    Mobile telephony

    Mobile internet

    Mexico

    98

    42

    4

    16%

    59%

    22%

    4%

    91

    61

    Source: Ministry of Communications and Transportations based on 2010 INEGI census and concessionaire information

    Despite the lack of information from a more recent census, according to the National Survey regarding TICs at home in México (TICs National Survey 2015) (carried out last year by INEGI, the FIT, the Ministry of Communications and Transportation), 44.9 per cent of Mexican homes have access to a computer and 39.2 per cent of Mexican homes have access to the internet. There are 55.7 million computer users and 62.4 million internet users in Mexico.

    Furthermore, the FLTB determines that the FIT shall keep 10 per cent of the frequency band for broadcasting in FM (88 to 108MHz) exclusively for the FM stations for communitarian and indigenous use. The FLTB also established cooperation mechanisms between the FIT and the National Commission for the Development of Indigenous Communities in order to ease the concession of social indigenous use and guarantee the access to telecommunication services in underserved areas with the purpose of strengthening the communitarian bond and keeping the cultural and linguistic richness of the Mexican territory.

    As said before, there are several mechanisms for social communitarian and indigenous concessions to finance themselves. Among these mechanisms we can mention: donations, voluntary contributions from members of the community, and the contributions that federal governmental entities must make to social concessionaires as well the contributions destined by the municipal and state authorities. The FIT might also donate transmitting equipment, which has passed to be owned by the Mexican government, to social concessionaires.

  47. 24.

    Briefly describe the importance of social media in your jurisdiction? Has your jurisdiction addressed net neutrality?

  48. The number of Mexicans who use social media has noticeably increased in recent years. In accordance with the TICs National Survey 2015, there are 62.4 million internet users in Mexico, and according to the Mexican Internet Association: 92 per cent are Facebook users, 79 per cent are WhatsApp users, 66 per cent have YouTube registered accounts and 55 per cent have Twitter accounts. According to this research, Mexican internet users spend seven hours 14 minutes per day on the internet. Recently, Twitter has become a very useful resource for the government and politicians to transmit information, promote certain activities and to gain followers.

    It is important to note that even though the number of internet users in Mexico continues to increase, less than 40 per cent of the total population has access to internet, which reflects the needs in this sector.

    The Reform establishes that no authority may restrict the freedom of expression, dissemination or press, without any limit other than the moral, private life and third-party rights. 

    The FLTB includes a specific chapter regarding net neutrality, which includes a list of guidelines that the concessionaires or authorisation holders providing internet access shall comply with, such as: free election of content, no discrimination, privacy, transparency, information on services provided, traffic management and quality standards.  

  49. 25.

    Provide an overview of privacy protection, cybersecurity and liability for unauthorised or illegal activity online as applicable to common carriers, web hosts and end users.

  50. The Mexican Constitution provides that every person has the right for the protection of its personal data and that private communications shall not be violated except on a voluntary basis. In this regard, the Federal Law for the Protection of Personal Data establishes an exception for the observance of such right in cases related to the protection of national security, public order, public health and third-party rights.

    The FLTB does not include any provision on onlineunauthorised or illegal activities; however, it establishes that the concessionaires, authorisation holders (marketers of telecoms services) and providers of applications or content services are obliged to adhere to all requirements (in written and duly founded) from the competent authority.

    In particular, concessionaires of telecommunications services and authorisation holders must collaborate with the security or justice authorities in the geo-localisation in real time of mobile equipment, in accordance with the guidelines that the FIT will issue for such purposes.

    In addition, concessionaires must keep a registry and control of all the communications that pass through their network; such information shall be provided to the competent authority and the use of such information for any other purpose is prohibited and would be sanctioned by the criminal or administrative authorities.

  51. 26.

    Is there any domestic regulation or censorship of internet or other media content? Are there any privacy agencies or regulators or set procedures, or it is largely self-regulated? Are there particular laws that impose liability on operators, or conversely act as a "liability shield", for such operators?

  52. The internet in Mexico is largely self-regulated; there is no domestic censorship or agency in charge of the media content, except for the Cybernetic Police Unit (from the Federal Preventive Police), which is in charge of investigating all crimes committed on the internet.

    Current laws do not impose any liability on operators for the content transmitted on their networks, or act as a liability shield. The Reform establishes that internet users must have access to any content, application or service offered by the concessionaires or authorised holders, without limit, degradation, discrimination or restriction to such access.

    Foreign participation

  53. 27.

    Who are the most significant foreign participants in your country in the telecoms sector?

  54. Some of the most significant foreign participants in the telecoms sector are Telefónica, SES, INTELSAT, EUTELSAT, Dish Network and AT&T. 

  55. 28.

    Describe any legal limitations on the types of companies that can enter into telecoms transactions or possess telecoms licences. Are there any local ownership requirements or restrictions on foreign investment in telecoms activities? Are there any significant regulations regarding domestic participation or labour laws relating to foreign workers?

  56. The Reform authorises 100 per cent of direct foreign investment in for telecommunication and satellites communications, and up to 49 per cent in case of broadcasting services.

     

  57. 29.

    Are there any limitations on direct or indirect foreign investment or ownership in the telecoms sector? Are there differing procedures for foreign investors or owners depending on the type of foreign owner or investor?

  58. Yes, according to the Reform, foreign investment on broadcasting services cannot exceed 49 per cent. Such limitation is the same for all type of foreign investors or owners. 

  59. 30.

    How are national concerns in the telecoms sector addressed? Are there restrictions on the nationality of equipment manufacturers or network systems providers?

  60. The federal government may confiscate (requisition) certain assets (radiofrequency spectrum, public telecommunications networks and satellite communication systems) if an imminent threat to the national security is expected.

    There are no restrictions on the nationality of equipment manufacturers, however all telecommunications equipment must be homologated (certified by the regulator) before operating in Mexico.

    In order to combat organised crime the FLTB obliges the concessionaires to: provide technical assistance to the authorities for blocking the telecoms signals at the correctional centres and prisons; collaborate with the authorities in the geographic location of mobile equipment; suspend the telephone service when requested by a competent authority; have the technology and equipment required to locate mobile equipment in real time; keep a registry and control of all the communications that take place using their network, among other things. 

    Financing and bankruptcy

  61. 31.

    What types of financial investors are most active in the telecoms market in your jurisdiction? Has there been a shift in the sources of funding over recent years due to economic uncertainty or otherwise? Where do you expect to see the bulk of financing come from in the next 12 months?

  62. The most active financial investor in the telecoms market in Mexico is private equity. We expect that the next three years will continue to see the bulk of financing in the telecoms sector through this type of investor.

  63. 32.

    Is there any public funding of infrastructure by local or foreign export credit agencies or development financing institutions? How does this mesh with private funding?

  64. Yes, BANOBRAS is the Mexican Development Bank in charge of promoting and financing infrastructure projects and public services in Mexico, which together with the National Infrastructure Fund offers financial schemes that assist public bidding participants get financing for the development of a specific projects. The fund is integrated with a contribution from the government (usually non-repayable) and a contribution from the client (its own resources and additional credits), secured by subordinated security rights.

  65. 33.

    Briefly describe any legal considerations of particular importance in your jurisdiction in connection with a cross-border financing of telecoms companies.

  66. Limits to foreign participation in the telecoms industry (up to 49 per cent for broadcasting services) and approvals of the regulator must be taken into consideration, particularly in the case of the incorporation of a pledge of shares or partnership interests, as concessions cannot be pledged. Regarding collateral securities, it is important to consider that under the current legislation there is no step-in right so it is necessary to go to court first and that for some assets the foreclosure will be limited to the regulator’s approval. Moreover, for some assets (such as warranty trusts and non-possessions transmission pledges) the applicable law establishes simpler and expeditious procedures for the execution of the collateral securities and new rules for the incorporation of such warranty trust, which consider as mandatory the registration with the Sole Registry for Guarantees to be valid before third parties.

    Since the financial reform's approval last year the securities regime has been modified to simplify its execution and give certainty to the creditors in the recovery of their resources.

  67. 34.

    What conditions precedent would you recommend a lender include in their loan documentation?

  68. It is recommended that a lender condition the loan on the approval of the regulator, particularly if the lender takes a collateral security over physical assets required for the provision of telecom services or any rights related to the concession. Most of the concession titles establish that any lien on the concession or the rights derived from the concession shall be registered before the FIT and expressly establish that the enforcement of such security will not grant the creditor the status of concessionaire. The creditor will not be recognised as a concessionaire unless approved by the regulator.

    Also, loan documentation may specify that any sales of assets or shares must be previously approved by the regulator and authorised by the lender and that foreign participation limits must be respected at all times.

  69. 35.

    What is the most common method for a lender to take collateral security in a telecoms acquisition or general-purpose financing? For example, are lenders able to establish a security interest in (or obtain a pledge of) licences or authorisations granted to a domestic telecoms system operator? Are there methods of granting security that are more beneficial?

  70. The most common method is the guaranty trust, which must be granted before a notary public and documented in a public deed it order to facilitate its enforcement through a foreclosure. According to the General Law for Credit and Financing Operations, the trust guaranty must be recorded in the Sole Registry of Guarantees to be valid before third parties.

    Some methods of granting security, such as the trust and pledge, are more beneficial as the law establishes expediting foreclosure processes. A trust versus a non-possessory pledge could be even more beneficial, as the assets would become property of the trust or financial institution and not of the debtor.

    However, in the telecom sector, according to the FTLB no guaranty can be granted over a concession or authorisation in favour of a foreign government. 

  71. 36.

    Describe any limits on, or requirements with respect to, a lender’s ability to take a valid and enforceable security interest in telecoms assets or licences. How would such liens be perfected (if at all) to ensure a lender’s priority with respect to those assets?

  72. It is very important to distinguish whether the security right will be created over the concessionaire’s shares, its assets or the concession rights.

    In the case of a pledge of shares, one must take into consideration the limits to foreign investment established in law (49 per cent for broadcasting services), statutory limitations, as well as the regulator’s approval, may be required in terms of the concession for any shares transfer.

    As for the concessionaire’s assets, it is important to note that the radio electric spectrum and the orbital positions are classified under Mexican law as public goods and cannot be given as a security, as this type of goods will revert to being the nation's property at the end of the concession. Securities over other concessionaire’s assets may be created; however, it must be taken into consideration that the federal government has a preferential right to acquire the facilities, installation, equipment and other assets used for the provision of services when the concession is terminated, thus using assets not directly related to the service provision may be recommended.

    Finally, securities over the concession itself or the concession rights must be registered before the FIT and expressly establish that the enforcement of such security will not grant the creditor the status of concessionaire.

  73. 37.

    Are there any significant restrictions that may impact the timing and value of enforcement with respect to security interests in telecoms assets or licences – such as a requirement for a public auction or the availability of court blocking procedures to other creditors or the company (or its trustee in bankruptcy) or additional regulatory approvals associated with enforcement?

  74. Except for the preferential right that the federal government has for the acquisition of any such asset related to the telecom services provision and the approval required by the regulator in case of concessions liens, enforcement of security interests (including security interests in telecoms assets) are subject to an specific order of preference established in law: a preferred creditor may block other creditors without such character. It would be necessary to attend the specific case to determine the preferential degree of each creditor.

    Currently, the law establishes a different order of preference for warranty trusts and non-transmission possession pledges, however the financial reform seeks to modify or even eliminate this scheme for other securities, which shall be taken into consideration in case of approved. In any case it is necessary to comply with the new rules of the General Law for Credit and Financing Operations for registering the guaranty trust in the Sole Registry of Guarantees. 

  75. 38.

    Are there any bankruptcy rules in your jurisdiction with respect to the redistribution and sale of telecoms assets and licences?

  76. The Commercial Bankruptcy Law does not include any rule with respect to redistribution and sale of telecoms assets and licences. Nonetheless, the FLTB dictates that a concession or permit will be terminated in the case of bankruptcy of the concessionaire or permit holder. In such case, the frequency bands and orbital resources through which the service was provided will revert to the nation. Likewise, the federal government has the preferential right to acquire the installations, equipment and other assets that were directly used for the provision of services.

Interested in contributing to Latin Lawyer Reference?


Questions

    General

  1. 1.

    Provide a general overview of the telecoms regulatory and licensing scheme.


  2. 2.

    What are the regulatory authorities, agencies and departments that oversee telecommunication licensing, transactions and telecoms activities and what are their general responsibilities? Does regulatory treatment of telecoms services providers differ depending on the type of service?


  3. 3.

    Describe the main issues related to dispute resolution in the telecoms industry and how disputes with a regulator would be generally resolved.


  4. 4.

    Do you expect any significant changes in the near future in the legislative or licensing scheme or in the governing authorities?


  5. 5.

    What significant telecom-specific international treaties is your country party to? Has your country made any commitments under the GATS/GATT regarding telecommunications or adopted the WTO Basic Telecommunications Agreement?


  6. 6.

    What trends were noticeable in the market in 2017? What trends do you expect to see in the next 12 months?


  7. 7.

    Is there a "national broadband strategy" or strategy for public internet or Wi-F access? Are there regulatory policies designed to bypass landline technology and promote wireless? Or to promote "fibre to the home"? Are there policies intended to support or subsidise broadband access to underserved or unserved areas?


  8. Licensing and other regulation

  9. 8.

    How are wireline or wireless telecoms services licensed, and how is radio-frequency spectrum allocated and made available to applicants (eg, service providers)? In particular, describe the licensing regime in your jurisdiction, including the procedures for a company to obtain licences to provide wireline or wireless telecoms services, or for use of radio-frequency spectrum. May licences be traded or sub-licensed and if yes, under what conditions? Are there any direct or indirect foreign ownership limitations?


  10. 9.

    What types of duties, royalties and taxes must be paid by an operator to obtain and maintain telecoms licences? Are there universal service contribution requirements (or equivalent) to help fund or subsidise the provision of telecoms services to underserved, remote or high-cost areas?


  11. 10.

    What are the principal requirements to land a submarine telecoms cable, to traverse territorial waters in your jurisdiction?


  12. 11.

    Are data centres, data transmission and associated privacy considerations subject to special regulation?


  13. 12.

    Describe the general licensing and regulatory requirements for satellites in the telecoms industry. Are there any direct or indirect foreign ownership limitations? Are there separate or specific licensing or regulatory requirements for foreign satellite system operators to provide services in your country?


  14. 13.

    Has number portability been a concern in your jurisdiction? Has it had any effect on competition? How are numbers allocated?


  15. 14.

    Are mobile virtual network operators (MVNOs) allowed or common? Are there any impediments, restrictions or special regulations affecting MVNOs?


  16. 15.

    Is network-to-network interconnection and access mandatory? What is the pricing scheme? Are there certain criteria for qualifying?


  17. Competition and merger control

  18. 16.

    What is the current state of telecoms competition in your jurisdiction? Is the telecoms market dominated by a limited number of participants or is market-share more equally dispersed? Is there a policy to require a minimum number of national wireline and wireless operators to ensure competition? Do you foresee contraction or consolidation in the industry in the near future due to the entry of additional operators?


  19. 17.

    Are competition rules relevant for the telecoms industry in your jurisdiction? Describe any antitrust approvals or other competition law requirements that may apply in connection with telecoms investment.


  20. 18.

    Are there any rules specific to the telecoms industry for effecting mergers and acquisitions?


  21. Telecoms markets and consumers

  22. 19.

    Are prices for telecoms services regulated, or is it purely market-driven? Are there any differences between prices for consumers and businesses? Are retail or wholesale price controls imposed on any operator? Does any regulation of pricing differ depending on the type of service?


  23. 20.

    Describe recent efforts to expand the telecoms infrastructure in your jurisdiction. How have they been funded (public, private, public-private partnerships, etc)? Have you noted any trends or any notable issues in connection with expansion?


  24. 21.

    Have telecoms operators in your jurisdiction adopted "convergence" in respect of their market offerings? If yes, what is the current state of play in the market? Are cable TV operators offering telephony services or internet streaming services? Has network partnering been adopted by any operators in the market to increase their viability?


  25. 22.

    Are there any issues regarding availability of suitable radio-frequency spectrum for wireless broadband and other emerging uses? Are there any upcoming auctions or modifications to existing radio-frequency spectrum use allocations to encourage the expansion of emerging wireless communications services? Are there radio-frequency spectrum caps in operation? If so, what effect are these having on the market?


  26. 23.

    Are significant portions of your jurisdiction underserved? If so, is there a focus on rural expansion? Are there mandatory requirements for rural or universal service (including contributions to fund or subsidise the cost of expanding telecoms services to remote, underserved or high-cost areas)?


  27. 24.

    Briefly describe the importance of social media in your jurisdiction? Has your jurisdiction addressed net neutrality?


  28. 25.

    Provide an overview of privacy protection, cybersecurity and liability for unauthorised or illegal activity online as applicable to common carriers, web hosts and end users.


  29. 26.

    Is there any domestic regulation or censorship of internet or other media content? Are there any privacy agencies or regulators or set procedures, or it is largely self-regulated? Are there particular laws that impose liability on operators, or conversely act as a "liability shield", for such operators?


  30. Foreign participation

  31. 27.

    Who are the most significant foreign participants in your country in the telecoms sector?


  32. 28.

    Describe any legal limitations on the types of companies that can enter into telecoms transactions or possess telecoms licences. Are there any local ownership requirements or restrictions on foreign investment in telecoms activities? Are there any significant regulations regarding domestic participation or labour laws relating to foreign workers?


  33. 29.

    Are there any limitations on direct or indirect foreign investment or ownership in the telecoms sector? Are there differing procedures for foreign investors or owners depending on the type of foreign owner or investor?


  34. 30.

    How are national concerns in the telecoms sector addressed? Are there restrictions on the nationality of equipment manufacturers or network systems providers?


  35. Financing and bankruptcy

  36. 31.

    What types of financial investors are most active in the telecoms market in your jurisdiction? Has there been a shift in the sources of funding over recent years due to economic uncertainty or otherwise? Where do you expect to see the bulk of financing come from in the next 12 months?


  37. 32.

    Is there any public funding of infrastructure by local or foreign export credit agencies or development financing institutions? How does this mesh with private funding?


  38. 33.

    Briefly describe any legal considerations of particular importance in your jurisdiction in connection with a cross-border financing of telecoms companies.


  39. 34.

    What conditions precedent would you recommend a lender include in their loan documentation?


  40. 35.

    What is the most common method for a lender to take collateral security in a telecoms acquisition or general-purpose financing? For example, are lenders able to establish a security interest in (or obtain a pledge of) licences or authorisations granted to a domestic telecoms system operator? Are there methods of granting security that are more beneficial?


  41. 36.

    Describe any limits on, or requirements with respect to, a lender’s ability to take a valid and enforceable security interest in telecoms assets or licences. How would such liens be perfected (if at all) to ensure a lender’s priority with respect to those assets?


  42. 37.

    Are there any significant restrictions that may impact the timing and value of enforcement with respect to security interests in telecoms assets or licences – such as a requirement for a public auction or the availability of court blocking procedures to other creditors or the company (or its trustee in bankruptcy) or additional regulatory approvals associated with enforcement?


  43. 38.

    Are there any bankruptcy rules in your jurisdiction with respect to the redistribution and sale of telecoms assets and licences?


Other chapters in Telecoms & Media

  • Mexico
    Rios Ferrer, Guillen-Llarena, Treviño y Rivera, SC
  • Paraguay
    Estudio Jurídico Parquet & Asociados (Parquet & Associates – Attorneys at Law)