Press Release

Mexico: IFT approved modification to methodologies and conditions to conduct economic replicability tests of Preponderant Economic Agent in Telecommunications

Bnamericas Published: Friday, October 21, 2022

This is an automated translation of the original IFT release published in Spanish

The Plenary of the Federal Institute of Telecommunications (IFT) approved in its XIX and XX Ordinary Sessions, to modify the methodologies, terms and conditions to carry out the economic replicability tests applicable to the rates of the Preponderant Economic Agent in Telecommunications (AEPT), so that they have an effective design that allows achieving the regulatory objective of preventing the narrowing of margins, given the changes that have occurred in such a dynamic sector and in regulation.

The narrowing of margins consists of reducing the existing margin between the price of access to an essential input provided by one or several economic agents and the price of the good or service offered to the final consumer by those same economic agents, using the same input for its production.

In order to avoid the narrowing of margins in the retail services offered by the AEPT to its users, given the rates of regulated wholesale services, the Institute uses as a regulatory mechanism the economic replicability tests applicable [1] to the retail services provided by the AEPT.

The issuance of the methodologies, terms and conditions under which the first economic replicability tests were implemented [2] was carried out in 2017, for which it was considered necessary to review them, given the various changes in the sector and in the regulation, such as the issuance of the second biennial review of the asymmetric measures, the implementation of the functional separation, the implementation of the accounting separation methodology, adjustments in the provision of wholesale services, the tariff freedom of unbundling services in 52 municipalities, among others.

The modifications were based on an exhaustive analysis that considered the findings and learning from the implementation of the first economic replicability tests in Mexico, the international references and the statements made in the public integration consultation carried out by the Institute.

In this sense, the main elements of the agreements approved by the Plenary as part of this modification consider the following:

  • Mobile services: The efficiency approach to downstream costs (those of activities or network elements that are not part of regulated wholesale services) was modified to go from a Similarly Efficient Operator to an Equally Efficient Operator, taking into account the delimitation of the trading suspension mechanism and the relatively low impact that the efficiency adjustment has on downstream costs. This, keeping in mind the scale and actual traffic of the MVNOs that make use of the AEPT's wholesale services for determining wholesale prices.
  • Fixed broadband:

o The efficiency approach was modified to consider the Equally Efficient Operator given the changes in market conditions (development of a higher degree of competition in various geographical areas of the country).

o It was established that the tests will be carried out considering both rates of the reference offers and those determined in the municipalities of rate freedom for the SAIB.

o It was established that promotions of a temporary nature will be evaluated ex post, however, when the ex post test is not accredited considering all the promotions marketed, the promotions will be evaluated ex ante.

  • Dedicated links: It was determined that the tests will be applied, on the one hand, to local links and, on the other hand, to inter-local and international links as a whole. Likewise, for each of these groups, tests will be applied that will consider separately the links with traditional technology and those with new generation technology.
  • Fixed telephony (single play ): The application of the test for unbundled telephony offers was suppressed, maintaining the application of the tests for bundled telephony offers with broadband, given the maturity observed in this service and its complementarity with the services of broadband, based on the identified data, such as the fact that at the end of 2021, 21% of AEPT users had a single play telephony offer, while the remaining 79% accessed this service through a double play offer that bundles fixed broadband with fixed telephony.
  • Suspension of tariff marketing: For both mobile and fixed broadband services, the terms were established to suspend the marketing of AEPT retail offers, either due to a non-replicable result in the tests, or due to inconsistencies or omissions. of information needed to determine a result.
  • Replicability tests for non-standardized business offers: The possibility was established for the IFT to carry out replicability tests for non-standardized business offers that consider the service of dedicated links and/or fixed broadband.

With all these modifications, the IFT continues its work to promote conditions of effective competition in the telecommunications sector, establishing guidelines to avoid possible narrowing of margins in the provision of services to the end user, given the wholesale rates , which in turn will contribute to the efficient development of the telecommunications sector in its fixed segment, to the benefit of end users.

[1] Models that identify the margin of the AEPT offers to the end user, taking into account the wholesale rates of the inputs it controls. [2] Issued through Agreements P/IFT/120917/548 and P/IFT/120917/549.

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