Bill of Constitutional Reform in Telecommunications

On March 11, 2013, was presented a Bill of Decree, to reform and add diverse provisions of the Political Constitution of the Mexican United States in telecommunications and economic competition matters.

Due to its importance and transcendence, below we present a summary of the most important aspects of the Bill, which will be discussed by the Congress within following the days.

The most important changes proposed on the Bill to the constitutional text, are the following:

1. It is enshrined as a human right the access to the Information and Communication Technologies (“ICT”), as well as broadcasting and telecommunications services, including the broadband.

2. The obligation of the State to grant to the population its integration to the Information and Communication Society (“ICS”).

3. Telecommunications and broadcasting services are considered as public of general interest.

4. It is proposed the creation of the Federal Institute of Telecommunications (“IFETEL”) as an autonomous entity, with legal existence and own patrimony.

 5. IFETEL will be on charge of the regulation, promotion and supervision of: (i) the radio spectrum; (ii) networks; (iii) provision of broadcasting and telecommunications services, and (iv) access to active and passive infrastructure and other essential facilities.

6. IFETEL will be the authority in charge of: (i) grant; (ii) revoke; (iii) authorize of assignments or changes of the share control, ownership and operation of corporations related with broadcasting and telecommunications concessions; (iv) the public registry of concessions; (v) secure that the Federal Government have the concessions necessary to execute its functions, and (vi) exclusively execute powers in economic competition in the broadcasting and telecommunications sectors.

7. The Federal Competition Commission (“COFECO”) is granted a constitutional level, as an autonomous entity, with legal existence and own patrimony.

8. IFETEL and COFECO will: (i) independently issue its resolutions; (ii) independently execute its budget; (iii) promulgate its own organic statute; (iv) issue general administrative provisions; (v) make public and collegiate deliberations and resolve by majority; (vi) its acts could only be appealed via indirect amparo action and would not be subject of injunction; (vii) annually inform to the Executive Power and the Congress; (viii) inform to the public prosecutor of facts when probably existence of a crime, and (ix) its government bodies will be integrated by 7 commissionaires, including its president,  which will be designed by on a staggered basis as proposed by the Executive Power with the Senate’s approval, and will be in charge for 9 years without the possibility of reelection.

9. IFETEL and COFECO commissionaires should: (i) be Mexicans from birth; (ii) be in plenty enjoyment of its civil and political rights; (iii) be older that 35 years; (iv) have good reputation and not been condemned for a crime that merit a imprisonment for more than a year (except by robbery, fraud, falsification, breach of trust or any other that affects the good fame); (v) accredit technical knowledge for the execution of its charge as a commissionaire; (vi) have not been State Secretary, Mexico’s Attorney General, senator, federal or local congressman, Governor, or Mexico’s City Mayor, in the last 5 years; (vii) have not had an employment, charge or direction in companies in the last 5 years that have been: (a) subjected to sanction procedures (in the case of the COFECO), or (b) are commercial or private concessionaires, (in the case of IFETEL); (viii) not have any other work, employment or commission with exception of educational activities; (ix) do not to participate in matters related directly or indirectly; (x) do not have contact with the subjects of regulation, with exception of public audiences, with other commissionaires or during a procedure, and (xi) prove compliance of the requirements before an Evaluation Commission integrated by the head in charge of: (a) Banco de México (also known as “Banxico”); (b) Instituto Nacional de Evaluación de la Educación (also known as “INEE”), and (c) Instituto Nacional de Estadística y Geografía (also known as “INEGI”).

10. Creation of judges and Courts specialized in broadcasting, telecommunications and economic competition, appointed by the Federal Judiciary Council.

The mentioned Bill has seventeen transition provisions that order the implementation of different actions in telecommunications matters that would be implemented in different dates (after the reform come into effect), where the most remarkable are:

A. Mexican Federal Congress will make the corresponding changes to the regulatory framework according to the reform (180 calendar days) and should (in other aspects): (i) establish special criminal conducts that severely punish monopolistic practices and economic concentrations; (ii) homologate broadcasting permits and concessions so that only exist, either commercial, public, social or private; (iii) ensure the promotion of independent national production; (iv) prohibit cross-subsidy or preferential treatment and establish a public register of minimum rates; (v) plan the access to multiprogramming taking into account the concentration of frequencies and payment of compensations; (vi) create an Advisory Council of IFETEL, and (vii) issue a sole framework that regulates telecommunications, broadcasting and convergent service provision.

B. As the reform comes into effect, the foreign direct investment up to 100% in telecommunications and satellite communications, and up to 49% in broadcasting.

C. Ratify that the culmination of the transition to digital terrestrial television ("DTT") must finish on December 31, 2015 and provide for the granting of the necessary budget for this purpose.

D. Once IFETEL has been constituted (among other things): (i) open broadcasters must, free and non-discriminatory, permit private television broadcasters to retransmit its signal (“Must Offer”); (ii) private television broadcasters must retransmit to final users, in a free and non-discriminatory way, the open television broadcasting signal (“Must Carry”); (iii) Must Carry and Must Offer do not apply to: (a) concessionaires with substantial power in any telecommunications or broadcasting market, and (b) when IFETEL determine that conditions for competition in broadcasting and telecommunications markets do exist; (iv) issue into 120 calendar days, bases and calls for tender for two new television channels with national coverage. Economic agents who accumulate 12 MHz for broadcasting services cannot participate in such tender, and (v) determine the existence of prevailing economic agents (those who have a portion greater than 50% of users, traffic or installed capacity) in order to: (a) impose measures to avoid affecting free competition (including the unbundling of its essential elements); (b) issue general guidelines to allow the provision of additional services, and (c) issue measures that enables the effective unbundling of the local network the dominant agent owns.

E. The Comisión Federal de Electricidad (also known as “CFE”) will totally assign to Telecommunications of Mexico its concession to install, operate and exploit a public telecommunications network, as well as transfer all of the resources and necessary equipment for the operation and exploitation of such concession, with the exception of the optical fiber, rights-of-way, towers, posts, buildings and facilities.

F. The Executive Power will install a shared telecommunications network of wholesale services to promote the effective access of the population to broadband communications and telecommunications services, considering, at least (among other issues): (i) that the installation should start before the end of 2014 and operations should start no latter than the end of 2018, and (ii) that 90 MHz of the 700 MHz band, the fiber optic backbone of CFE and any other asset of the State.

G. The National Development Plan and the sectorial, institutional and special plans should provide: (i) the growth of the fiber optic backbone of the CFE; (ii) a broadband program for public places; (iii) a study of federal places, ducts, posts and right–of-way usable for the sector; (iv) a work program for DTT; (v) a National Plan of Radio Spectrum that provides a work program to (a) ensure the optimal use of the band 700 MHz and 2.5 GHz, and (b) decrease the separation between radio and television stations.