Mexico's IFT: 'The market decides what it needs'

Tuesday, November 29, 2016

Three years since the landmark telecommunications reform was introduced in Mexico, penetration of telecom services has risen, prices have fallen and there are new competitors. October saw the launch of the first new public broadcaster in 20 years. 

Sector regulator IFT is gearing up to launch more TV licenses and clear additional spectrum for broadband. But there are other challenges on the horizon, such as how to regulate the new wave of connected devices that come with the internet of things.

BNamericas spoke to IFT president Gabriel Contreras Saldívar about how the watchdog will regulate new players and services.

BNamericas: Mexico recently saw the entrance of Grupo Imagen, the first free-to-air channel to be launched in 20 years. IFT plans to tender concessions for 148 commercial digital television channels. Is there sufficient demand for new TV channels?

Contreras: Yes. We will auction frequencies that were left without winning bids in the last tender. Our team has worked on an auction model that allows the market itself to decide whether there should be another national channel as well as local or regional channels. The auction will allow flexibility and the market will decide if there is interest or not.

If there is interest in having another national channel, the bidder has to go for the same 123 coverage zones as Imagen TV. Alternatively, there may be interest only in regional channels.

BNamericas: How competitive is the open TV market? You have two huge players in Televisa and TV Azteca. However, the IFT resolved last year that Televisa is not dominant and does not merit asymmetric regulation.

Contreras: During the last auction for TV spectrum, the IFT said that the TV market is a difficult place to compete. However, it's our obligation to put the spectrum at the market's disposal and let the market decide if there is space for one or two more competitors.

Is it possible that there will be no bidders? Of course. Is it possible that there may be a lot of demand for one band or another? Yes. But that's the process of competition, where the market decides what it needs.

BNamericas: With the growing popularity of non-linear video content consumption, is traditional TV viewing on the decline in Mexico?

Contreras: This year we published the results of a survey that showed that Mexicans have a strong preference for open TV content and even watch open TV content via their pay TV subscriptions, which has been facilitated by the must-carry, must-offer regulations introduced as part of the telecom reform. Eight in 10 interviewees said they watch open TV. The most-watched channels on pay TV subscriptions are open TV channels. Only 26% of interviewees said they watch TV content via the internet. This shows there is still a strong preference for open TV content and TV content in general.

BNamericas: The internet of things presents new challenges and potential modifications to existing regulations regarding the use of networks. What is your opinion?

Contreras: IoT will require having a lot of bandwidth available for many connections at the same time. This will mean taking decisions regarding numbering and migration to IPv6 so that all devices can be connected and to have infrastructure that can support this level or traffic.

So we will have to have public policies for network deployments at the municipal, state and federal levels, and have spectrum available for all of these services.

Globally we have to identify what spectrum will be used in order to develop standards and achieve economies of scale and sufficient bandwidth in order to have the desired level of accuracy from these connected devices. The accuracy and latency needed for a driverless car is considerable. And for 100 autonomous cars connecting at the same time, you'll need a very robust network and appropriate spectrum. Mexico has identified spectrum for IoT. But it is a challenge for all.

BNamericas: Mexico has said it is looking at clearing and then auctioning the 600MHz band.

Contreras: We are looking at the 600MHz band as the second digital dividend. The first was 700MHz. We are checking who is using the bands below 700MHz with the intention of clearing them in the medium, not the short term. It's a work in progress.

BNamericas: Mexico's telecom reform has been in place for over three years. In your opinion, has it achieved what it sought out to do?

Contreras: The telecom reform changed the Mexico's telecommunications structure and institutions at their root. Every structural reform has a long term vision. The telecom reform has had a significant positive impact in the short term.

In 2012, broadband penetration was 17%. Today it is 57%. This demonstrates the huge growth the sector has experienced. Calling rates have fallen 42%. The sector has grown at four times the rate of the economy. All the sector indicators are growing and prices keep falling. In terms of inflation, of the 283 products and services measured by the authorities that which saw the biggest fall in prices was in the last year was  mobile telephony. The impact of the reform in creating the competitive conditions to allow this fall in prices, this improvement in quality and the variety of services is clear. The challenge is to ensure that the competitive market conditions remain in place so that the benefits we see become permanent.