‘Essential’ Mobile Resource Too Expensive in Mexico?

Mobile telecommunication networks require one essential resource to carry voice and data to and from your mobile phone to the closest network base station: radio frequencies. Such radio frequencies are part of the radio electric spectrum, which in turn is part of the electromagnetic spectrum.  The latter includes radio waves, microwaves, infrared, visible light, ultraviolet, X-rays, and Gamma Rays. It is the range of all types of electromagnetic radiation, which is energy emitted in the form of waves or particles (photons) that travel and spread out as they go.  Such electromagnetic radiation travels in a wave-like pattern at the speed of light.  Any visible light from street lamps or radio waves from any radio station are two examples of electromagnetic radiation.

The radio electric spectrum is a portion of the electromagnetic spectrum, ranging from 3 Hz to under 3,000 GHz. Such radio electric waves vary in many aspects, including wavelength (measured in meters), frequency (measured in cycles per second or Hertz (Hz)), and energy (measured in electron volts). The combination of these characteristics determine their transmission capabilities. For instance, the wavelength of radio waves can reach up to the size of a building, while the wavelength of infrared is approximately the size of a honeybee. Similarly, the frequency of a radio wave is considerably lower than the frequency of ultraviolet, X-rays or Gamma Rays. Accordingly, radio waves can travel further than infrared (your television remote control or night-vision goggles).

Also, these characteristics are co-related to each other in a mathematical way: The shorter the wavelength, the higher the frequency, the higher the energy emitted. Conversely, the longer the wavelength, the lower the frequency, the lower the energy. An example of the former are Gamma Rays. An example of the latter are radio waves.

According to Articles 2, 4 and 54 of the Federal Telecommunications and Broadcasting Law, the radio electric spectrum is a national asset and a general means of communications. Such spectrum is conventionally divided into several radio frequency bands allocated for one or more specific radiocommunication services. Pursuant to Article 3 of the law, radiocommunication services are all those that imply the transmission, emission or reception of radio electric waves.

The Mexican Federal Telecommunications Institute manages and periodically updates the National Table of Frequency Allocations. The table must be consistent with the international arrangements agreed upon by the member countries of the International Telecommunication Union (ITU), i.e., the Radio Regulations. Such regulations are aimed to coordinate the use and allocation of radio frequencies worldwide. The Radio Regulations expressly provide that radio frequencies are limited natural resources and, therefore, must be used rationally, efficiently, and economically.

Such coordination is required to facilitate equitable access to and rational use of radio frequencies, ensure availability and protection from harmful interference of frequencies provided for distress and safety purposes, assist in the prevention and resolution of cases of harmful interference between radio services, and to facilitate the efficient and effective operation of radio communication technology.

Radiocommunication services include fixed services, mobile services, broadcasting services, radiodetermination services, radionavigation services, and radiolocation services, among others.  There is land mobile service, land mobile-satellite service, maritime mobile service, and aeronautical mobile service, among others. Land mobile services are those between base stations and land mobile stations, or between land mobile stations. Land mobile-satellite services are those in which mobile Earth stations are located on land.

Pursuant to Article 2, Section XIII and Article 75 of the Mexican Federal Telecommunications and Broadcasting Law a concession is required to use, enjoy, and exploit radio frequency bands of the radio electric spectrum. In the event such radio frequency is intended for commercial exploitation, such concession shall be granted solely by means of a competitive public auction (Article 76, Section I and Article 78 thereof). In order to offer and provide telecommunication services, such as mobile services, to the general public, a master concession for commercial purposes is required (Articles 66 and 67, Section I, and Article 72 thereof). This latter concession is generally granted together with the radio frequency bands concession awarded by public auction.

Article 78 of the Mexican Federal Telecommunications and Broadcasting Law provides that the winner of such a public auction is required to make an initial down payment (aprovechamiento) to the Mexican government. Additionally, Article 101 thereof provides that an annual recurring payment of government fees (derechos) shall be required for the term of the concession, which amount to almost 85 percent of the total cost.  Such government fees are determined annually by the Mexican Congress on a discretionary basis.

Mobile network operators have carried out and made public international benchmark analyses to show the Mexican government that in the aggregate the consideration they have to pay in exchange for the use, enjoyment, and exploitation of radio frequency bands is considerably much higher than that which is paid in other countries, either more developed or comparable to Mexico. Likewise, international associations have produced similar studies showing the same result.  One such recent study from the GSM Association, shows that the cost of radio frequency bands in Mexico is more than double compared to the average in Latin America and could triple in the near future if the trend remains the same. According to this study, the aggregate consideration Mexican mobile network operators have to pay amounts to 12 percent of their recurring income, while the average in the Latin American region is only 5percent.

The Mexican Federal Telecommunications Institute has also been very vocal about the need to reduce these government fees but neither the administration nor the Mexican Congress have been sensitive to the fact that as such studies show, because of the higher the cost of the radio spectrum, the deployment of next generation networks slows down and quality of service diminishes. We could say that the cost of the radio spectrum is co-related to the improvement and enhancement of mobile connectivity.

(In collaboration with Octavio Lecona, Partner atHolland & Knight)