Chapter 4. Policy and Regulation in Telecommunication And

4. POLICY AND REGULATION IN TELECOMMUNICATION AND BROADCASTING IN MEXICO – 149 Chapter 4. Policy and regulation in telecommunication and broadcasting in Mexico This chapter examines the design of regulation and policies of the telecommunication and broadcasting sectors in Mexico, most of which have been introduced since the 2013 reform, based on the changes to the legal framework discussed in Chapter 3. It covers issues such as wholesale and retail regulation, digital inclusion strategies, competition aspects and enforcement as well as consumer protection and empowerment. It also reviews the second round of asymmetric measures imposed on the preponderant agents announced by the Federal Telecommunications Institute (Instituto Federal de Telecomunicaciones, IFT) in March 2017. OECD TELECOMMUNICATION AND BROADCASTING REVIEW OF MEXICO 2017 © OECD 2017 150 – 4. POLICY AND REGULATION IN TELECOMMUNICATION AND BROADCASTING IN MEXICO Wholesale regulation The regulatory framework in Mexico has undergone a substantial transformation since the 2012 OECD Review of Telecommunication Policy and Regulation in Mexico. It distinguishes preponderant agents and agents with substantial market power (SMP) from other operators, such as concessionaires or entities, which have been authorised to provide telecommunication services (e.g. mobile virtual network operators, MVNOs). Since the reform, the Federal Telecommunications Institute (Instituto Federal de Telecomunicaciones, IFT) has declared América Móvil in telecommunication services and the Televisa Group in broadcasting as preponderant and has imposed asymmetric measures upon them. In February 2017, the IFT further determined that the Televisa Group also had SMP in telecommunication services due to its position in pay TV, which is considered part of the telecommunication market. However, thus far, the IFT has not imposed asymmetric measures on Televisa for pay TV. Asymmetric measures, imposed on the preponderant players through either legal or regulatory instruments, encompass measures such as zero interconnection rates for traffic terminating in the preponderant telecommunication operator’s network, or the compulsory unbundling of Telmex’s and Telnor’s local loop. The mandatory sharing of passive infrastructure and the ability of concessionaires to request access to the preponderant agent’s network to co-locate equipment are other measures which may be applied asymmetrically. Critically, the compulsory publication of reference offers in regards to wholesale services helps to provide legal certainty and transparency to operators that request such access. Since the reform, the IFT is able to regulate ex ante wholesale prices under cost-based methodologies. These wholesale prices concern services such as interconnection, the sharing of passive infrastructure and the leasing of dedicated links. The new preponderance measures establish that the public offerings must contain the applicable tariffs, with the exception of the reference offer for infrastructure sharing for mobile services. In this regard, the registration of contracts for the provision of wholesale services concluded between concessionaires and the public nature of the prices stipulated therein is a positive development. In addition, the IFT may impose accounting, functional and structural separations, which are crucial tools for fostering greater competition and improving market access in the telecommunication sector. In 2017, the IFT introduced accounting disaggregation for Telcel, Telmex and Telnor and functional separation for Telmex and Telnor. In addition, changes to the rules on rights of way aim to enable concessionaires and other economic agents to access key infrastructure elements and facilities. This will hopefully accelerate further investment to provide consumers with broader access to telecommunication services at a reasonable price through the more efficient use of existing assets. Finally, once initiatives such as the Red Compartida and the use of the Federal Electricity Commission’s (Comisión Federal de Electricidad, CFE) dark fibre capacity by Telecomunicaciones de México are up and running on a widespread basis, existing and new service providers will gain access to extremely valuable network facilities. This can be used to expand their businesses and thus contribute to attaining the universal and social coverage objectives enshrined in the 2013 Decree amending the Constitution on Telecommunications and the Federal Telecommunications and Broadcasting Law (Ley Federal de Telecomunicaciones y Radiodifusión, LFTR). Notwithstanding significant progress and the adoption of good practices consistent with other OECD countries, some substantial challenges remain concerning the practical implementation of these measures. As the IFT has acknowledged, information asymmetries OECD TELECOMMUNICATION AND BROADCASTING REVIEW OF MEXICO 2017 © OECD 2017 4. POLICY AND REGULATION IN TELECOMMUNICATION AND BROADCASTING IN MEXICO – 151 still persist between the preponderant agent in telecommunication services and its competitors (e.g. access seekers wishing to use unbundled local loops). This is due in part to delays in implementing the Electronic Management System (EMS) by the preponderant operator.1 Delays stemmed from the slow progress made in the committee that the IFT presides over on the one hand and from deadlines not met by the preponderant agent, sometimes due to meeting additional requests from the IFT, on the other hand.2 This tool is meant to provide concessionaires and other players with complete and updated information on the preponderant’s network and those facilities subject to shared access or co-location. The industry has, however, been highly critical of the length of time the preponderant agent was permitted to disclose the required information to the market (IFT, 2016a).3 Due to the lack of an informative and functional EMS, market players have underscored the impossibility to map where the preponderant agent’s services are available and to know at which level of quality these services are provided. In addition, competitors have highlighted that it is not possible for the IFT to ensure that a preponderant agent effectively complies with its obligations, or to enforce these obligations as required. Such obligations include that a preponderant agent must not discriminate, in terms of contractual conditions and quality standards, between access seekers and its own operations, including its subsidiaries, affiliates and companies belonging to its economic interest group. In this regard, the limited use and adoption of services derived from the reference offers suggest that the preponderant agent has not responded adequately to the needs of telecommunication service providers as potential customers (IFT, 2016a). For its part, América Móvil rejects such claims and uses its commercial agreement with Telefónica for national mobile roaming as an example. While it was required to reach such an agreement, the company nevertheless points out that the terms were agreed via commercial negotiations. This must, however, be assessed against the slow progress of key elements for effective competition, such as the lack of an operational and effective EMS and whether the current regulatory conditions enable the effective enforcement of obligations and provide the right incentives. It must be highlighted that compliance in theory is not equivalent to compliance in practice, especially if the absence of an effective EMS makes it impossible to monitor if a preponderant agent is meeting its obligations. This element is critical to making further progress and was central to considerations by the IFT in its 2017 preponderance review and the subsequent decisions that were taken. Besides the purported ineffectiveness of the reference offers, some market players have reproved other measures adopted by the IFT (e.g. the creation of an Unbundling Technical Committee). Also, there have been unnecessary delays in the publication of said offers; the initial unbundling reference offer was only approved in December 2015 and required to be revised almost a year later. As such, many participants in the telecommunication sector have questioned some of the IFT’s determinations leading up to the 2017 preponderance review. They claim that the measures taken have not effectively addressed the regulatory asymmetry that should exist between the preponderant agent and access seekers (IFT, 2016a). The determinations criticised include: the methodology adopted by the regulator to establish default rates for wholesale services such as call termination;4 the inclusion of interconnection services that go beyond the scope of what the LFTR considers must be provided by non-preponderant operators in the Agreement on Minimum Technical Conditions for Interconnection (e.g. co-location); and the application of the same accounting separation requirements for all operators (Telefónica, 2016a). In their view, access seekers should not be subject to ex ante regulation, and the cost methodologies OECD TELECOMMUNICATION AND BROADCASTING REVIEW OF MEXICO 2017 © OECD 2017 152 – 4. POLICY AND REGULATION IN TELECOMMUNICATION AND BROADCASTING IN MEXICO employed by the IFT to calculate interconnection rates should be reviewed to ensure that they effectively cover their costs and recoup their investments (CANIETI, 2016). Although many objections have been put forward by telecommunication service providers, the aforementioned points may serve as a useful starting point for the analysis

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