Legal Certainty Needed to Foster Telecoms Growth

The deployment of mobile telecommunications networks is expensive and certainly time-consuming. Most costs and expenses are related to the procurement of highly sophisticated electronic hardware, cables and wires, software licenses, upgrades, updates, and patches, building and maintenance costs, radio spectrum fees, ground lease rentals, marketing expenses, and to some extent, users’ terminal equipment. Costs and expenses related to the local access network, which connects end-users to national and international networks, as well as the switching function of the network, are the main cost elements. Some studies suggest such access and switching costs amount to almost 60 to 70 percent of the total cost structure. Evidently, there are significant differences between the cost structures of mobile and fixed network operators, the main difference being the access network. With mobile networks, an increase in traffic would require further investment in the access network. That would not be the case for fixed networks where the access network is almost entirely driven by the number of subscribers.

In any case, either with a mobile or a fixed network, the traffic, either voice or data, generated by end users must be conducted from the end user’s device to the closest termination point of the network and then to the destination point, which may be either within the originating end-user’s network (on-net) or to another network (off-net) to which the destination end user or application is connected.

Telecommunications networks are a combination of wired and/or wireless circuits, trunks, and lines that are deployed along geographical areas that must meet certain technical and commercial requirements and conditions. In a mobile setup, the antennas and related telecommunications equipment receive and send traffic to and from end users’ mobile devices connected to the mobile network. Such antennas and related telecommunications equipment are installed on telecommunications towers, buildings, dwellings, fields or utility poles, located on either private or public property. Telecommunications towers and utility poles are generally owned either by the mobile network operator itself or by a third party, who may be either a private or public individual or entity, such as a power utility company in the latter case.

One of the most essential pre-conditions to deploy such infrastructure is to have legal certainty about the temporary right to use, occupy, and enjoy the property where such infrastructure will be located and for the longest time possible. Such legal certainty generally comes from publicly available information on the requirements that must be met to attain such rights, transparent market conditions to determine the appropriate corresponding consideration to be paid in exchange for using, occupying, and enjoying the related property, and a well-established dispute resolution mechanism to settle any disputes that may arise among the different market players.

The most cost-effective way to deploy telecommunications infrastructure is to do it over existing infrastructure, which usually lays over rights of way on public property, such as the electric power distribution network and utility poles or highways and roads. In a cross-border scenario, existing infrastructure generally comprises international border crossing bridges, but other existing infrastructure could also serve the same purpose, such as cross-border power transmission lines and natural gas pipelines.

In Mexico, telecommunications network operators generally prefer to deploy their infrastructure over existing power utility infrastructure because the requirements to access it are publicly available and set in advance by the Federal Electricity Commission (CFE), the government’s wholly-owned power utility company. Additionally, such requirements are assessed and ruled upon in advance by the telecommunications and broadcasting regulator, the Federal Institute of Telecommunications, which has exclusive antitrust authority in the telecommunications and broadcasting sector. The timing to access such infrastructure and the fees that must be paid are also known, which provides certainty for all market players. The only reasonable constraint is the implicitly limited capacity of such existing infrastructure.

Another example could be the rights of way associated with highways and roads. In such instances, current regulation leaves to the interested parties the burden of agreeing on the terms and conditions to access the existing rights of way, including the consideration to be paid. Clearly, time and price are not transparent, which does not provide certainty.

Another alternative could be found in natural gas or oil networks. Presumably, this alternative is generally discarded due to non-existent or very restricted publicly available information on the geographic areas of coverage of such networks. Also, as in the case of highways and roads, the regulation is not up to the task of laying down the framework to foster market development.

There is much work that both the Executive and Legislative branches of the government should do to promote and ensure the sharing of existing infrastructure to deploy telecommunications infrastructure. Ensuring that all market players have the same information on the requirements, time, and expenses to access existing infrastructure will foster the sharing of such infrastructure and hopefully, the associated savings could be passed on to end users.

(Written with Octavio Lecona)