Two weeks ago I had to the opportunity to attend some interesting presentations at 4G World in Chicago. One of the things that caught my attention from the "WiMAX in the Americas" session was the very unfavorable climate that Mexico is facing in terms of telecom regulation. As in many other Latin American countries, Mexico has experienced serious delays to deploying successful WiMAX networks. This is mainly because of delayed auctions, the fact that mobility is not yet allowed in the 2.5 GHz band, and because various license holders are just sitting on their spectrum.

The 2.5 GHz band was initially allocated in 1990; those licenses were renewed ten years later. Another group of licenses was allocated in this band in 1995, and these should have been renewed in 2005, but were not. Renewal involves allowing mobility for data services, television, transport systems, and for all services previously authorized under the use of this band, except for telephony.

There are 10 license holders in this band, but Multivision (MVS) and Ultravision are the first and second largest spectrum holders, covering 76% and 16% of the MHz POP of the country respectively. MVS and Ultravision have been waiting for the government to make a decision regarding the renewal process. The Secretaría de Comunicaciones y Transportes (SCT), which is the organism in charge of this decision, has kept it on hold for the last 4 years.

MVS is currently offering pre-WiMAX services, using a solution from Motorola. MVS intends to replace all its pre-WiMAX equipment with certified 802.16e-2005 equipment, which is likely to be supplied by Samsung.

Ultravision obtained a license in the 2.5 GHz band, and began offering services in 1990, starting with analog television. Since that time, Ultravision has launched a commercial WiMAX network using equipment from Cisco (for both the core and the access network), based on the 802.16e-2005 standard, providing nomadic services. Today the operator has over 100,000 WiMAX subscribers on its network.

We can expect that once the renewal of the 2.5 GHz band occurs, both Multivision and Ultravision will offer mobile services by increasing the amount of cells installed.

One of the speakers at 4GWorld, Alejandro Mayagoitia, shareholder of MVS Mexico, and President of Sinapsis Global, commented:

"This is a very complex situation. We have been waiting for the SCT to make a decision for 4 years on the renewal of 2.5 GHz. In August of this year, the SCT announced that no later than September 15th there would be a resolution; we are now by the end of September and nothing has happened. Now the resolution is supposed to take place on October 15th, 2009. It is very difficult to predict when the renewal process can occur. There are various demands in place, and the SCT is in a position to remove the 2.5 GHz spectrum from current license holders.”

He continued:

“We should have been working in this band for the past 3-4 years by now. If the government initiates a process to remove the spectrum from MVS, it will be so long, and the delay in the development of telecommunications in Mexico such that, by the time it is completed, there will no longer be any interested investors! The telecommunications industry is advancing fast, and if we stay seated, Mexico is going to be very behind and stagnant in terms of its telecommunications. By the time other innovative technologies come to market, such as LTE or superior, there won't be proper infrastructure installed, there won't be fiber optic, there won't be successful players, and Mexico could become deserted.”

The 3.5 GHz band is also facing serious issues. There are 300 MHz of spectrum, of which 150 MHz have been assigned to 3 companies: Axtel, Nextel and Telmex, (each with 50 MHz, but Axtel is the only one company that is using this band). The Comisión Federal de Telecomunicaciones (COFETEL) plans to auction the remaining 150 MHz available. One of the concerns here is that the Secretaría de Competencia (Secretary of Competence) is impeding the companies who already have spectrum (Axtel, Nextel and Telmex) from participating in the auction, in order to promote the participation of new entrants and players.

Regarding this, Mayagoitia commented:

“In the case of Telmex, the problem is not that they acquire additional
50 MHz, the problem is that they are not using this spectrum, when another party could better use it. In the case of Axtel, however, the company already has 50 MHz of spectrum that are in use. In my opinion the regulator should allocate Axtel another 50 MHz, for a total of 100 MHz, then remove the unused spectrum from Telmex and Nextel and assign 2 other licenses of 100 MHz each to other new players. In this way, there would be 3 competitors with enough spectrum. In the meantime, there is not enough available spectrum to interest potential bidders. Those measures that the Secretary of Competence is taking, far from being beneficial to promote competition, are creating the reverse.”

Earlier this year, Maravedis was told by a spokesman at Telmex Mexico that the company’s strategy was to use WiMAX as a complement to its current service offering of cable and DSL, in areas where those wireline technologies could not be implemented (using equipment mostly from Alvarion and Motorola). At that time, Telmex reported 20,000 WiMAX subscribers, claiming to be able to reach 100,000 by the year’s end. However, COFETEL hasn't taken the measures needed to enforce its requirements for 3.5 GHz, and seems to be overlooking the fact that coverage requisites haven't been met in operations in this frequency band.

Is it possible for a Mexican operator to deploy a successful nationwide WiMAX network in the coming years? According to Mayagoitia, “MVS could launch a mobile WiMAX network today. The problem is that since the Mexican regulator does not support any mobile broadband wireless project in this band, international investors won't be willing to risk getting involved. Intel already has an agreement signed with MVS for US$100 million to install a citywide WiMAX network in Mexico City. Intel has even committed to an additional US$500 million to complete the project. But no money has yet changed hands, because the government has been unwilling to start the 2.5 GHz renewal process.”

There are many issues that remain to be resolved: first of all to remove spectrum from the hands of operators who aren't using it, and to reassign it to new players who are committed to deploy; second, to make available the spectrum that is currently in the hands of the government that hasn't been auctioned; and third, to complete the pending 2.5 GHz license renewals that have been delayed for years, and to permit mobility in this band.

A number various factors are contributing to the stagnation of the telecom sector in Mexico, but the future situation in the country is today in the hands of its government.

For more information you can contact the author at cintia@maravedis-bwa.com

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