Mexico's ever-growing exposure to the international market has forced its historically rigid institutions to work alongside with the private sector in order to find new and more efficient ways to incentivize investment without failing to comply with the regulation in force. The Telecommunications sector is one clear example of the latter.
After the Mexican telecommunications regulator, the Federal Telecommunications Institute "IFT", resolved on 2016 to impose a nearly 5 and a half million-dollar fine to a well-known entertainment operator company for its Formula E event, it was clear that changes needed to be made. Such fine was imposed to private company "OCESA" after the IFT concluded that Mexican regulation on use of radio spectrum was breached. Mexico's Federal Telecommunications and Broadcasting Law establishes that any person who wishes to provide telecommunication services in Mexico and/or exploit radio spectrum frequency bands, compulsorily needs to obtain authorization for such use from the IFT. During the Formula E event in March 2016, several frequency bands were used by competitors for security purposes, without any prior application to the IFT by OCESA in order to obtain authorization for such use.
Later that year, the organizers of the Formula 1 race did not expose themselves to the consequences of bypassing the IFT. After an administrative proceeding, which is usually long and requires compliance of many requirements by the applicant, the IFT granted Fundación CIE a Social Use Concession. These Concession was exclusively to be used during the event, which lasted seven days.
Although this solution was the best at the time, it did not fully eliminate the complications set forth by Mexican regulation for the use of radio spectrum during a short period of time. Namely, any person who applies for a Social Use Concession must provide the IFT with information regarding the person who is applying, its shareholders in case the applicant is a legal entity, and their source of wealth. Additionally, the IFT requires that the entity's bylaws establish that the purpose of the entity is to provide public telecommunication and/or broadcasting services, as well as to include article 112 of the Federal Law, which establishes how the entity must carry out any alienation of shares, fully on such bylaws. All this red tape usually means unnecessary disbursements for the foreign or domestic investors who do not normally provide telecommunication services, but for a short period of time need to use radio spectrum.
It is important to mention that, although still a long and difficult process, the solution reached to by the IFT and Fundación CIE was already a great success for these specific events. Normally, radio spectrum use in Mexico is subject to a public procurement process or to a direct allocation made by the government. However, these processes only happen once a year and the frequencies to be allocated and the services authorized to be provided, must be established on the Yearly Frequency Bands' Use and Exploitation Program. Either a public procurement process or a direct allocation means an inversion of large amounts of money. Events such as Formula E, Formula 1, sports events or music festivals, amongst others, do not have as their prime purpose to provide telecommunication services. In that sense, a great inversion for the allocation of radio spectrum in order to carry out secondary activities, is not justified.
As this article posed at the beginning, Mexico's growing participation as a host of international public events finally led the IFT to issue, on April 23rd, 2018, the Guidelines to Grant an Authorization Certificate for use and exploitation of frequency bands of radio spectrum for secondary use. Such Guidelines foresee the incipient need to provide investors with a simple and economic way to use radio spectrum for specific activities, during a short period of time.
Secondary use of radio spectrum is contemplated by the International Telecommunication Union, as well as by the Mexican government. However, before April 23, there was no regulation in Mexico on how to be able to obtain allocation of such secondary-use spectrum. In that sense, an area of opportunity for the Mexican government to innovate its own regulation appeared.
According to the new Guidelines, and contrary to Concessionaires who have been authorized by the IFT to use and exploit spectrum on a primary basis, Authorization Certificate for secondary use of spectrum holders are not protected against harmful interferences. Furthermore, they must ensure that their use does not interfere with the services provided by other primary use Concessionaires. Also, the Authorization Certificate for secondary use of spectrum does not allow commercialization of telecommunication services, resale or lease of the frequency bands.
Despite of the limitations of an Authorization Certificate, its creation will signify a huge advantage to organizers of different public limited-duration specific events. There are less requirements for its obtention, and the fees for the study of the application of the IFT amount to approximately USD $720.00 dollars. The regulator is yet to establish a fixed fee for the use of Megahertz, with the non-binding help of the Mexican Ministry of Finance and Public Credit.
It is also important to take notice that the Guidelines establish another two ways to obtain secondary use of radio spectrum. The first is for premises in which commercial or industrial activities are carried out. In other words, companies that wish to establish a private radiocommunication network inside their own industrial premises, may apply for a secondary use of spectrum Authorization Certificate. On the other hand, short range radiocommunication devices may also obtain such Certificate when they are granted a Homologation Certificate in order to be able to operate inside of the Mexican Territory.
Although to this date no Authorization Certificates have been granted, it is foreseeable that many entities will benefit from this change in the regulation. With these changes, Mexico has shown that regulation can be complied with, whilst still providing favorable conditions for investment.
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