Mexican Spectrum Re-farming - A Menu of Indigestion?

(Sep 4 2012) 4G , 700 MHz , Mobile Broadband , Spectrum

1. Mexico’s federal telecommunications regulator COFETEL recently announced plans for re-farming 2.5 GHz, the majority of which is currently allocated to Mexican media company MVS Comunicaciones (MVS).  COFETEL will not renew 2.5 GHz licenses and instead will auction them for 4G services.  The move has sparked a firestorm of controversy.

   Of the spectrum affected by the re-farming, MVS holds 190 MHz or 42 of the 68 licenses allocated.  The remaining spectrum has been licensed to Ultravision and ten other companies.  MVS was originally assigned the 2.5 GHz allocations several years ago for the purposes of delivering television programming using multichannel multipoint distribution services (MMDS). 

   MVS’s competitor Grupo Televisa SAB, along with industry critics say that MVS has made little use of the spectrum since it was allocated and that the media company has also underpaid for the licenses.   They further argue that the 190 MHz it was assigned represents more than twice the spectrum that any Mexican mobile operator has today.

   The characteristics of propagation in the 2.5/2.6 GHz band are ideally suited for mobile broadband and in most countries it is a viable option for 4G services.  But up until now regulations in Mexico restricted the band to fixed and nomadic use only.  Mobile operation is not currently permitted and that has been a factor in how MVS could leverage the spectrum.

   Back in 2009 MVS joined with Intel, Clearwire and Mexican wireline operator Alestra to form a consortium to deliver high-speed wireless internet “last-mile” services using WiMAX technology.  In March 2011 the partnership announced that they had selected TD-LTE as their go forward technology in a plan called "Mobile Broadband For Everyone.”

   All of this depended, of course, on continued access to MVS’s 2.5 GHz allocations and more specifically, successful negotiations with the Mexican government to allow the business to carry on.

   In November 2011 MVS began efforts in what ultimately proved to be an unsuccessful bid to hold on to the 140 MHz of their original 190 MHz of allocations.  MVS proposed a payment equivalent to  $340 million USD to retain use of the spectrum for a ten-year period.  By March 2012 it was clear that Mexico’s Secretario de Comunicaciones y Transportes (SCT) would not accept the offer, opting instead to reclaim the spectrum for a 4G auction.  It has been suggested that SCT had sought fees of $1.2 billion USD from MVS for continued use of its licenses.

   After months of uncertainty, the consortium ultimately decided to suspend further investment in the project citing the cost of license fees being proposed.  The suspension caused the lay-off of 450 employees and terminated service for about 200,000 already deployed customers.  All told the partners had invested over $80 million USD combined. 

   While the business conclusion would seem complete for now, the fallout from it has been anything but that.  The outcome provides Televisa, along with TV Azteca, MVS’s primary competitors, opportunity to become the next entrants in Mexico’s mobile broadband market. MVS has launched a media campaign with full-page newspaper ads that attack Televisa, suggesting that it has had interests, a role and influence in the regulator’s decision to not renew licenses.

   Current operators in the 2.5 GHz spectrum may opt to wage court battles that challenge COFETEL’s decision to recall the 2.5 GHz spectrum.  MVS has a number of appeals in front of the courts related to expired licenses that the has regulator refused to renew.  The legal process will undoubtedly delay any auction process COFTEL has planned, likely for years.

   In September 2010, Mexico’s President Filipe Calderon provided an update, in the form of a decree, to plans for digital terrestrial television (DTT) migration for the country.  The decree proposed freeing the 700 MHz band from analog television by 2012 thus allowing COFETEL to proceed with a spectrum auction. COFETEL details at the time reflected that there were 13 analog television broadcasters occupying 700 MHz in Mexico with almost all of them located along the country’s northern border. 

   Calderon stated that his plan would allow Mexico to "offer more and better services, because (700 MHz) is a band apt for 4G mobile and Internet.”  The update would see full DTT conversion completed by 2015, six years sooner than was initially anticipated when the original plan was announced in 2004. 

   The Supreme Court ultimately suspended Calderon’s decree, even after appeal.  And for now, COFETEL’s plans to auction blocks of 15 MHz for three operators in the 700 MHz band during 2012, the final year of Calderon’s administration, would seem to be stalled.

   By: Andy Mitchell, Editor, 4G Trends

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