Federico Hernández
Hogan Lovells
Expert Contributor

5G in Mexico: When, How and Who?

By Federico Hernández Arroyo | Thu, 11/12/2020 - 13:40

There is a lot of discussion about 5G. It is been rolling out in different countries such as Australia, China, Germany, India, Slovenia, South Korea, the UK, the US, … and plenty of stories appear in the headlines every day. But ¿where does Mexico stands? In this article, we will identify the current status and expectations of 5G in Mexico from different perspectives.

First things first. What is 5G? Put simply, is the fifth generation technology of wireless connectivity that will bring higher speeds, lower latency, more capacity and reliability, best quality and additional new services to our mobile devices and generally within an Internet of Things (IoT) or even an Internet of Everything (IoE) environment. For example, imaging a multiplayer cloud game using virtual reality or a shopping experience with interactive augmented reality. Plus, consider living in a smart city with a connected and autonomous vehicle where you can identify in real time available parking slots, traffic, live subway/bus status, air quality, efficient street lighting, … And the list of cases goes on and are just around the corner.

The existing situation of the mobile market in Mexico is summarized in the following facts. According to the telecom regulator (Federal Institute of Telecommunications, IFT), by December 2019, 20.9 percent of the mobile data was transmitted through 3G technology, whereas 78.9 percent was transmitted under 4G technology. Based on the latest survey (2019) performed by the National Institute of Statistic and Geography (INEGI), around 29 percent of Mexican population lacks any kind of internet access and 90 percent of mobile users use a smartphone. Finally, a study from the Competitive Intelligence Unit shows that by Q2 2020, there were 94 mobile lines per 100 inhabitants, whereby the market share by operator was as follows: 63.3 per cent by Telcel (America Movil), 19.9 percent by Telefonica Movistar, 15.1 percent by AT&T and 1.7 percent by all MVNOs. 

Now, what is needed for the deployment of 5G? Generally speaking, the following components: more spectrum (high, medium and low frequency bands), new equipment and networks (wireless and fiber optic), devices and technologies. That is, more investment but that will bring more employment, consolidate digital transformation, reactivate the economy, foster new businesses and growth along different sectors (all of which is even more required due to the current pandemic). However, the foregoing is impacted, for good or bad, by public policies and regulation. 

For example, the government of New Zealand decided to cancel a planned auction for the 3.5 GHz band (mid-band) for 5G services and instead offered a direct allocation of the spectrum to three local carriers. In Mexico, the IFT has considered that it is possible to make available up to 11,190 MHz of radio spectrum for 5G (both allocated and to be allocated in the future) and to such end is planning to auction 50 MHz nationwide in 2021 in the 3.4 GHz band (mid-band). Notwithstanding the foregoing, on the other hand, Telefonica Movistar and AT&T are returning spectrum due to the very high fees currently in place in different bands in Mexico (the highest among the Latam region). Moreover and paradoxically, the Government and the Congress have approved for 2021 an even greater increase on the fees for the use of spectrum of some relevant bands for 5G. The foregoing revenue collection vision that will negatively affect the development of 5G in Mexico.

All mobile companies agree on the need for 5G, but there is no certainty when it will be a reality in Mexico. Telcel is promoting that it has launched a 4.5G network in different cities around the country, with higher speed, coverage, quality and more devices connected for IoT. Although it is not clear when it will launch 5G services, it appears that Telcel is moving towards that direction. In mid-2020, Telcel acquired 50 MHz of the 3.5 GHz band from Axtel, which is expected to be used for deployment of 5G. On the other hand, AT&T has been the company that has invested more in infrastructure in the last 5 years to consolidate its 4G network, but there are no clear plans towards the transition to 5G (as it is has been the case of AT&T US), even though they have been testing the 3.5 GHz band with 5G technology in Mexico City. In November 2019, Telefonica executed a RAN (Radio Access Network) sharing agreement with AT&T, whereby the latter grants under no discriminatory basis the last mile wireless access to the former. Such agreement provides that AT&T shall notify Telefonica of any technological upgrades to be implemented by AT&T (such as 5G) so can Telefonica make the corresponding investments. In other words, the possibility for Telefonica to provide 5G services will depend on AT&T’s plans. Finally, the wholesale Shared Network of Altan Redes, is deploying a 4.5G network, but it first need to complete its national coverage commitments before investing of a 5G network. 

In any case, the deployment of antennas, sites and fiber optic in urban and rural areas is problematic. Each municipality has its own local rules, fees and permits; although there have been some efforts to standardize the procedures and costs, it continue to be one of the most challenging issues that carriers shall cope with. Local authorities need to understand that more telecommunications infrastructure would lead to more progress and growth and should ease the way for clear and expedite procedures.

On the other hand, carriers need to select vendors for the installation of its 5G networks. Huawei has been an indisputable leader in developing 5G equipment, technologies and devices and is used by all carriers in Mexico. However, the US led by the Trump administration and other countries such as Australia, New Zealand and other European countries, have been banning Huawei as a network supplier for 5G due to privacy and security issues. Those types of decisions have not yet been directly considered by the Mexican Government, but we understand that some carriers have been taking some actions and it is unclear if this Government will take a position, if any. Of course, there are other suppliers of technology in the market with strong presence in Mexico.

The IFT has been active in order to promote 5G in Mexico but it seems that the Federal Government and Congress are looking in a different direction. There is no clear guidance and leadership in the administration of Mr. Lopez Obrador towards a digital strategy in general, including 5G. They have created a new public entity called “Internet for Everyone”, but there is no certainty about its business plan. The IFT should continue promoting policies and initiatives to foster the adoption of 5G technologies and any new regulation should be cautious in creating new barriers. The ITU highlights for collaborative regulation between stakeholders as a critical tool to create the right environment to boost information and communications technologies.

Certainly, Mexico faces a lot of challenges to make 5G connectivity a reality. It cannot be a goal to be taken solely by the mobile industry but by different actors at all levels and sectors (including consultancy services, digital education and appropriation, among others). There are new opportunities for many players which will require taking the right decision at the right time. 

There is no doubt that there has been significant developments in the telecommunications sector since the major reform in 2013, but the technology advances never stop and the relevant parties should work together and focus on how to deliver 5G services within Mexico sooner than later in order to avoid lag behind other countries. Just think that the government of South Korea is planning a project for 6G in 2026!