Foreign investors eligible to participate in upcoming auctions.

[Blogmeister’s Introduction: We welcome a new guest contributor, Mario Piana, an attorney with the Mexican firm of López Velarde, Heftye y Soria, S.C. Mario is familiar with Mexico’s regulatory activities vis-à-vis its telecommunications industries. He has provided us with the following recap of recent announcements from Ifetel, Mexico’s new telecommunications regulatory body. As outlined below, those announcements signal upcoming opportunities – for both Mexican citizens and foreign investors – to participate in Mexico’s telecom industries

Two opportunities for acquiring communications interests in Mexico have recently been announced, one involving nationwide digital broadcast television networks, the other involving commercial satellite services.

Digital TV Networks

On December 20, 2013, the Instituto Federal de Telecomunicaciones (also known as Ifetel) – created by a law enacted last year – formally announced the bidding process to be used for the awarding of licenses for the operation of two national digital broadcasting television networks through auctions. [Blogmeister’s note: Licenses are referred to as “concession titles” in Mexico.] The process is set out in a Program of Bidding Processes to Grant Licenses of Frequencies for Digital Broadcasting Television (the “TV Bidding Process Program”) published in the Diario Oficial de la Federación [i.e., the Mexican equivalent of the Federal Register].

This begins the implementation of a new regulatory framework arising from recent fundamental reforms to the regulation of Mexico’s telecommunications industries. According to the Federal Constitution, the bidding processes for the two national digital broadcasting networks shall be called no later than March 10, 2014.

The recent constitutional amendments recognize as fundamental human rights the rights to information, freedom of expression and access to information and communication technologies. According to the amendments, in order to fully protect those rights the government must afford the public with multiple different sources of information while encouraging the maximum dissemination of information (as long as the transmitted information does not adversely affect third parties’ interests or rights). Consistent with these principles, through the upcoming auction process Ifetel will allocate new frequencies and thereby increase access to additional information resources, new voices and a plurality of opinions.

The reforms are designed to encourage the entrance of new competitors into the marketplace by opening new allocations, protecting new investments, and reducing market concentration. According to the TV Bidding Process Program, the process will be carried out under a safe, transparent and fair environment for every interested bidder, and will be subject to the following conditions and considerations:

Foreign Investment Allowed. Direct foreign investment in the broadcasting industry is allowed up to 49% of the bidder’s corporate capital, but that limit may be subject to lower limits depending on the percentage level of investments permitted to be made by Mexican nationals in the investor’s home country.

Channels & Coverage.The national digital television networks to be auctioned are currently designed each to consist of 246 digital television channels operating from 123 different locations (but serving at least 234 cities and communities). The goal is that the new networks will have the same reach as the current licensed TV operators.

The coverage radius of each channel will be between 15 km-100 km. Channels 7-13 will be subject to minimum (f(50,90)) field strength of 43 dBu; Channels 14-51 will be subject to minimum field strength of 48 dB. However, once the digital television transition is completed, Ifetel may reorganize the spectrum frequencies to increase competition. Specific regulations allowing digital television stations to offer multiplex, high definition and mobile television may also be adopted to permit optimal use of digital channels.

The TV Bidding Process Program lists the frequencies and coverage areas which Ifetel has identified for auction. However, interested parties may request the inclusion of additional and/or modified frequencies or coverage areas. Such requests must be submitted by January 19, 2014. Changes that may result from such requests will be published in an amendment to the TV Bidding Process Program.

The digital television transition in México is expected to be completed by December 31, 2015, as set forth in the Federal Constitution.

Elimination of Market Barriers. Lack of access to spectrum has represented a major barrier to the entry of new competitors in the TV industry. To help remove that market barrier, the TV Bidding Process Program prohibits companies currently holding broadcasting licenses for 12 MHz or more from participating in the bidding processes for the two new national TV networks. 

Commercial Satellite Services

On December 30, 2013, Ifetel announced the approval of the Bidding Program of Geostationary Orbital Positions for Commercial Use (the “Satellite Services Bidding Program”). This will make available for auction the Geostationary Orbital Positions 113° West and 116.8° West, and their associated C and Ku extended bands.

The Satellite Services Bidding Program is intended to encourage private investment, increase employment and provide a wider offer of telecommunications services by opening the market to new competitors.

The specific terms and conditions governing the bidding process have not yet been established. In general terms, though, that process will be subject to the following general principles:

Foreign Investment Allowed. Foreign investors can participate directly up to 100%, with no restrictions.

Multiple Services. The licenses to be granted will allow the provision of fixed satellite service (FSS), including intra-corporate communications, data communications, and Direct-to-Home (DTH) satellite television, among others.

National and International Coverage. The current service coverage area is the Mexican national territory. However, through satisfactory completion of appropriate coordination proceedings established by the International Telecommunications Union, the coverage area might be extended to the whole American continent.

Telephone Services. According to the Cuadro Nacional de Atribución de Frecuencias (National Schedule of Frequency Bands Allocation), the extended C band in the space-Earth segment can also be used for the provision of fixed and mobile telephone services. Therefore, Ifetel must make sure that any necessary coordination measures are taken in order to avoid harmful interference with previously licensed fixed network carriers currently operating in the same band.

[Blogmeister’s End-note: Should you have any questions regarding Mexico’s new telecommunications reforms, you may contact our blogger, Mario Piana, or FHH’s own Francisco Montero.]