The Government of Claudia Sheinbaum, who will take over the presidency of Mexico in October, will seek to compete with telecommunications companies at a time when the sector is experiencing declines in income. According to José Merino, head of the digital public innovation agency of Mexico City and one of the closest figures to the president-elect, the new Administration will offer free internet as an “alternative” to private services and will seek to ensure that the private sector deploy greater infrastructure to expand coverage and increase quality.
“At the center of the agenda must be the provision of public internet,” Merino said at an event with representatives of the sector on Wednesday in Mexico City, “that implies that where the private sector cannot reach, the State must reach and that “Every Mexican must have a nearby, free, open and free connectivity alternative.” The official did not speak about a possible position within the future Federal Administration.
Merino took the stage in front of a packed room to talk with Gabriel Székely, general director of the National Telecommunications Association (Anatel), which brings together the main mobile telephone operators in Mexico. Székely expressed his concern about the cost of the radio spectrum, the basis of wireless communications, and which companies pay to the State to offer their services. Spectrum costs are the highest in Latin America, the business spokesperson complained, while the demand for telephone data increases at a difficult rate for companies. “We are worried because at the Latin American level we have already won first place (in spectrum cost) … we have the highest prices,” Székely said.
“There are some solutions, even regulatory ones, that could reduce the cost of spectrum. What I do not necessarily agree with is that the cost of spectrum is the main impediment to the deployment and provision of services,” Merino responded. “To dance tango it takes two: on our side we have to do the things that have to be done regulatory and on the other side there has to be a real commitment to deployment. There are examples of companies that have committed to deploying that have not done so,” he added.
The demand for data has increased 400% in recent years, while the income of telecommunications companies has been in free fall, according to Anatel. The consumer cost per 1GB in Mexico is the highest in the entire region, except for Guyana, according to data from the most recent report Worldwide Mobile Data Pricing. Dominated by América Móvil, the market remains reliant on low-value prepaid users and fixed broadband is growing amid low household penetration, according to a report by analysis firm Fitch Ratings published in December.
The sector has been in the crosshairs of investors for its poor performance at the regional level. Chilean WOM filed for bankruptcy in April when its profit margins fell to an unsustainable level. For its part, the Mexican Total Play has suffered a cut in its credit rating for refusing to pay part of its debt in dollars. The sector, as a whole, has deteriorated the credit profile of corporations in Latin America.
“There is a brutal upward curve of demand for data,” said Székely, “but income is going down. So how do you bridge that gap when the speed of technological change is so much greater than what we’ve known? You invest (in infrastructure) and when you are trying to recover the investment there are already other technologies.”
Merino’s position paints a line of continuity with what is proposed by the current president Andrés Manuel López Obrador. In November, the parastatal Federal Electricity Commission (CFE) entered the telephone business with the sale of SIM cards. Merino believed that the State should put a satellite into orbit that can be used for connectivity, as well as deploy more optical fiber in the country.
“The (radioelectric) spectrum is a public good that has to be allocated where it generates greater public returns, and the concept of public returns is different from the concept of a company,” Merino said. “This implies… that we have to jointly protect the private sector, academia, civil society and this government what is basic, which is: coverage and price and quality.”
“The business government in communications has been inefficient,” says Ernesto Piedras, sector analyst at the company The Competitive Intelligence Unit in Mexico, “from Correos de México, Telégrafos. The government must lay the foundations and not launch satellites or deploy fiber optics.”
His colleague in the same company, Samuel Bautista, added: “this is a policy that the current Administration already had… where I believe that there could be a problem with operators like CFE Telecom, since it provides services directly, it is not only competing in the market, but it is distorting it”, since the parastatal has the electricity infrastructure on which it can rely.
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