On 10 June 2013, after a fast-track approval, the decree to reform the Mexican Constitution (the “Reform”), mainly in telecommunications matters, was enacted by President Enrique Peña Nieto. The Reform recognized as human rights the access to: (i) information and communications technology, and (ii) broadcasting and telecommunications services, including broadband and the Internet. Following the Reform, the Federal Telecommunications and Broadcasting Law (the “Law”) was published on 14 July and will enter into effect on 13 August 2014.
The Reform creates the Federal Institute of Telecommunications (“IFT”), a new regulatory agency that enjoys constitutional autonomy in charge of regulating all broadcasting and telecommunications matters, including all economic competition matters related to both sectors. The IFT replaced the former Federal Telecommunications Commission created in 1996, as a subordinated governmental body.
Among other tasks, the IFT is in charge of the regulation, promotion and supervision of: (i) the radio spectrum; (ii) networks; (iii) provision of broadcasting and telecommunications services, and (iv) access to active and passive infrastructure and other essential facilities.
With respect to telecommunications and broadcasting concessions, IFT will be the sole authority in charge of determining: (i) granting; (ii) revocation; (iii) assignments, and (iv) the compensation of its granting, as well as the authorization of the corresponding services, prior opinion of the tax authority. The Reform also provided the creation of specialized judges and courts in broadcasting, telecommunications and economic competition matters, that is expected to bring more certainty in this highly litigated field.
The Reform provides for the implementation of numerous actions within certain timeframes, such as:
direct foreign investment was permitted as of June 12, 2013 up to: (a) 100% in telecommunications and satellite communications, and (b) 49% in the broadcasting sector subject to reciprocity from the country of the ultimate investor;
the publication of a new convergent law to jointly regulate the telecommunications and broadcasting sectors on or before December 9, 2013;
once the IFT is created, Must Offer and Must Carry obligations will be valid, except in certain cases;
on or before March 8, 2014, the Institute should have: (a) published the bidding rules for the tender of two new television channels with national coverage, and (b) declared the existence of “preponderant economic agents” (see below) and imposed on them measures in order to avoid adverse effects on competition;
the State will ensure the installation (between 2014 and 2018) of a shared public telecommunications network of wholesale wireless services by mainly using the 700 MHz band, and
the transition to digital terrestrial television (“DTT”) must end on or before December 31, 2015.
Implementation of the Reform
In August last year, the specialized judges and courts were created and in September the Institute was duly created and published its new organic statute.
In 2014 the Institute began to implement the Reform as follows: (i) it published (prior to a public consultation) the general guidelines to regulate the Must Offer and Must Carry obligations (February); (ii) it declared as preponderant agents and imposed different measures on: (a) Telcel and Telmex in the telecommunications sector, and (b) Televisa in the broadcasting sector, and (iii) it published (prior to a public consultation) the call for a public bidding in order to create two new national television networks in Mexico (March).
Although according to the Reform the convergent law should have been published on or before December 9, 2013, it was not until March 24, 2014 when the President submitted the bill before the Senate.
The new Federal Telecommunications and Broadcasting Law (the “Law”) was published on July 14 and will enter into force as of 13 August 2014. The Law will repeal the Federal Telecommunications Law and the Federal Radio and Television Law.
The new Law
The Law sets forth a new regulatory regime for the telecommunications and broadcasting sectors based on the principles and guidelines of the Reform. Some of the main provisions of the Law are the following:
- Telecommunications and broadcasting services are considered as public services of general interest and any discrimination in its provision is forbidden.
- The IFT is granted with new powers, functions and institutional design, including specific rules of transparency and contact with the regulated industry.
- There is a new concessions regime (not involving spectrum or orbital resources) called “unique concession” that allows the provision of all telecommunications services and is granted through a special procedure, prior request, considering a specific term of 60 calendar days and if the IFT fails to resolve the request, it shall be understood that the concession should be granted. A unique concession can only be granted to Mexican individuals or entities, but there is no limitation with respect to foreign investment for telecommunications services.
- The spectrum and orbital concessions are granted through a public bid, but the economic factor (consideration) will not be the sole element to determine the winner of the bid.
- Concessionaires may lease only frequency bands that were granted in concession for commercial or private use, private communication purposes, and prior approval of the IFT.
- An authorization granted by the IFT is required to: (i) establish a reseller of telecommunications services without being a concessionaire; (ii) install earth stations to transmit satellite signals; (iii) install telecommunications equipment and transmission media that cross the borders of the country, and (iv) exploit emission allowances and receive signals and frequency bands associated with foreign satellite systems providing services on the country. The requests for authorization are resolved within 30 business days of their submission. After this period without being resolved, it shall be deemed granted.
- The Law provides a new kind of public/private network structure, called “public telecommunication networks with public participation.” The concessions for commercial use to public bodies under a public-private partnership scheme have the character of “shared network of wholesaler telecommunications services.” Such networks cannot provide services to final users.
- The Law contemplates and regulates the following matters: network neutrality; numbering; access and interconnection services; the use of State goods for the deployment of telecommunications infrastructure; satellite communications; Must Offer and Must Carry obligations; broadcasting services, and pay television/audio services.
- The IFT will be in charge of the Public Registry of Telecommunications, composed by the Public Registry of Concessions and the National Information System of Infrastructure.
- The Law includes different obligations for regulated agents in security and justice matters, such as the obligation to give a geographic location in real time of mobile devices as provided in the corresponding laws, among other obligations.
- The final users of telecommunications and broadcasting services will have rights provided in the Law. All telecommunications concessionaires shall observe the federal consumer protection law. There are new and specific rights regarding disabled users.
- The Law provides the right of freedom of information, expression and of receiving content through the public broadcasting service and pay television/audio, which shall not be not subject to censorship or limitation.
- The Law provides two main figures which trigger asymmetrical regulation: (i) in the case of preponderant agents, and (ii) in the existence of dominant agents.
- Preponderant agents are those who hold a national participation in the telecom or broadcasting sectors that exceeds 50% of users, subscribers, audience, traffic on its networks or used capacity thereof and are declared by the IFT following a specific procedure and implementing measures provided in the Law.
- The IFT is authorized to determine the existence of agents with substantial market power in any of the telecom and broadcasting markets under the Federal Competition Economic Law in which case the IFT is allowed to impose specific obligations in certain matters.
- The telecommunications products, equipment, devices or gadgets that can be connected to a telecommunications network or use radio spectrum frequencies, should be approved according with the applicable norms.
- The Law provides a new set of rules to limit the cross ownership of telecom and broadcasting concessionaires and other restrictions in the acquisition of spectrum for broadcasting services, so that in certain market or coverage areas there is no restricted or limited access to plural information.
- The IFT is in charge of the verification and supervision of the fulfillment of the Law, and the obligations established in the concessions and authorizations.
- The IFT is in charge of the application of sanctions provided in the Law following the procedure set forth in the Federal Law of Administrative Procedure, except in the following matters: (a) protection of consumers (Federal Consumer Protection Agency), and (b) content and publicity (Ministry of Interior).
- The Law introduces a new scheme of sanctions based on percentages of income of the offender.
- The general norms, acts or omissions from the IFT can be appealed only with a constitutional trial (amparo indirecto) and there is no injunction. Such trials will be held before the specialized judges and courts.
With thanks to the authors: Federico Hernandez Arroyo, Bernardo Herrerias Franco and Juan Francisco Torres Landa of the Mexican law firm Barrerra Siqueiros Torres Landa which combined with Hogan Lovells on 1 August 2014.