Sheinbaum Cancels IFT Spectrum Auction Amid Regulatory Overhaul

On Dec. 27, 2024, President Claudia Sheinbaum announced the cancellation of the Federal Telecommunications Institute’s (IFT) auction for 2,223 blocks of radio spectrum. This decision follows the dissolution of autonomous bodies, including the IFT, as part of the broader governmental restructuring aimed at consolidating power under the Executive Branch.

According to the Official Gazette of the Federation (DOF), the autonomous bodies dissolution became official. The extinction of the IFT, with the entry into force of the decree, also marked the transfer of the Telecommunications Investment Promotion Agency (Promtel), to the Ministry of Infrastructure, Communications, and Transportation (SICT). Despite the cancellation, the titles granted by the IFT for spectrum will remain valid, although the Federal Executive may impose new obligations on licensees.

The spectrum in question includes different frequency bands for uses such as broadcasting and connectivity. The IFT was responsible for overseeing competition in the telecommunications market, as well as granting licenses for spectrum allocation. A day before the autonomous bodies termination announcement, the IFT had moved forward with the tender No. IFT-12, an auction aimed at assigning these 2,223 blocks of spectrum to increase wireless access services across various frequency bands. These included the 600 MHz, L Band, 800 MHz, AWS, and PCS bands. The auction was structured with three rounds, each increasing the limits of spectrum accumulation to prevent monopolistic behavior, promote market entry, and enhance competition.

José Antonio Peña, Head, Digital Transformation and Telecommunications Agency, addressed during a morning press conference the legal uncertainty surrounding the auction in light of the extinction of the autonomous regulatory bodies. He explained that while the IFT had initiated the process, the auction would now proceed under the new regulatory framework being established by the government, which could potentially affect the auction’s validity.

The cancellation of the tender was confirmed by Sheinbaum, who expressed concerns that the IFT’s actions had overstepped its current authority, attempting to auction off a significant portion of the remaining spectrum on the eve of its dissolution. She criticized the move as an attempt to make a last-minute decision contrary to the will of the Mexican state, emphasizing that the government would take all necessary legal steps to block the auction and restart the process under the new regulatory framework. 

Considering the changes, there is growing debate regarding the future of Mexico’s telecommunications regulation. “Although these bodies were not perfect, they played a critical role in ensuring a better understanding and control of strategic resources like the radio spectrum,” says Arturo Ballesteros, Partner, Gurría y Asociados to MBN. He argues that eliminating these bodies could slow down progress and hinder the country’s ability to manage its telecommunications infrastructure effectively.

Ballesteros emphasizes that the IFT’s dissolution, particularly in the context of the spectrum auction, has sparked suspicion about the motives behind such actions. “This decision could create significant delays and further centralize power, potentially leading to inefficiencies in managing Mexico’s telecommunications and technological development.”

The elimination of the IFT also risks violating international agreements, particularly USMCA, as reported previously by MBN. According to the USMCA’s telecommunications chapter (Art. 18.17), regulatory bodies in the sector must remain independent from service providers to ensure impartiality and fairness. The dissolution of the IFT could be seen as a violation of this provision, leading to legal challenges from both within Mexico and its international partners.

Art. 21.1 of the competition policy chapter stresses the need for cooperation between relevant national authorities on competition matters, something that could be hindered by centralizing regulatory power under a single entity. Ballesteros warns that Mexico must be careful not to undermine its international commitments or breach constitutional principles related to market competition.

The situation surrounding the IFT auction cancellation and the broader shift in regulatory control raises important questions about Mexico’s telecommunications future. While the government argues that consolidating regulatory bodies will streamline decision-making and reduce market concentration, Ballesteros fears that the elimination of these bodies could stifle innovation, diminish competition, and jeopardize the country’s compliance with international trade agreements. 

“What this creates is uncertainty. First, what guarantees do you have that you can recover your investment based on the market vision you have? Second, it does not provide legal certainty, because tomorrow they could take away your concessions. Third, you do not know if you will end up competing with the government, which will always have more of an advantage than you because it controls your prices, your access to the market, etc. So, what can the private sector expect? Uncertainty. I believe these issues need to be handled with great caution by those who want to invest in this,” states Ballesteros.