Mexico’s elaborate open-access telecoms scheme struggles to take off
South Africa’s government thinks its own plan will avoid pitfalls
The Mexican government obtained a constitutional change in 2013 to enable it to promote competition in telecommunications. They proposed deploying a shared public network for broadband access and mobile telecommunication services.
It was originally planned that construction of this open access wholesale network (OAWN) would begin in 2014, with the network being fully operational by 2018. The network was expected to cover at least 85 percent of the population.
The OAWN would rely on 90 MHz of the 700 MHz band and use the electricity commission’s fibre-backbone network and any other government utilities required. It was expected that this government-initiated wholesale network would allow for more efficient access to uncovered rural areas by having lower costs than competing networks.
The regulatory reform bill stated that both public and private investment would be considered. Telecom service providers would be prohibited from owning a share or influencing the operation of the shared network. The OAWN would exist alongside private networks.
The OAWN would provide unbundled wholesale services only, with nondiscriminatory access and competitive pricing. If an existing operator bought wholesale services from it, the operator would only be allowed to resell them to third parties on the same conditions it enjoyed from the OAWN.
The OAWN would offer nondiscriminatory access and competitive pricing. But the dominant operator (Carlos Slim’s company América Móvil) could only access the shared network on terms approved by the telecoms regulator.
The regulator was created in 2013 to be independent from executive and legislature. (Applications for appointment to its controlling body are invited by open competition; universities and a technical evaluating committee would identify suitable candidates; the president selects nominees from their list; and the senate makes the final appointment.)
The regulator not only supervises the telecoms and broadcasting sectors but also oversees competition in the sectors. It has technological and engineering personnel with international experience.
The congressional declaration of purpose of the constitutional change stated that an OAWN would promote competition and investment in the telecoms sector and provide Mexicans with connectivity. The authorities believed that an OAWN was a reliable way to provide the needed capacity for the envisaged large increase in demand for 4G services.
The OAWN was expected to start a wholesale market by decreasing the risks and costs for new operators to enter the market and thereby dramatically increasing the number of mobile virtual network operators (MVNOs, who provide retail services on the back of a wholesaler’s network), and so make the retail market more competitive and lead to lower consumer prices.
Mexico intended to launch a public competition in 2016 for a licence to build and operate the network. The costs of the spectrum to the winner would be well below what was customary, the goal being to provide affordable broadband to as many users as possible.
The competition would allow total foreign ownership, provided a domestic company was established. The licence would be for 20 years with provision for renewal.
Existing Mexican operators could participate if they would not have a significant influence over its operation. Portion of the OAWN’s capacity would be set aside for MVNOs.
The planned scheme has not been without complexity.
A new agency would run the public competition, establish the contract with the winner, and monitor and enforce fulfilment of the contract.
The electricity commission’s fibre network would be transferred to Telecomm, which is another autonomous agency, that in turn would make the fibre network available to both the OAWN and to the electricity commission, for its functions.
The ministry promoted the project at events and dedicated roadshows in the US, Europe and Asia.
The request for proposals was published in January 2016. Hearings were conducted in February and March. It was said that most of the bidders struggled with the business case.
The regulator gave its competition opinion in May. Final bids were due in August.
In November 2017, it was announced that the successful bidder was the Altán Redes multinational consortium.
The network must begin commercial operations by March 2018. At launch it will cover 30 percent of the population. Its promised final population coverage, 92.2 percent by the seventh year, will exceed the 85 percent minimum stipulated in the request for proposals.
The only other bidder was disqualified for allegedly failing to provide necessary financial guarantees.
In March 2017, Altán Redes announced that it had awarded Nokia a turnkey contract to design, build and operate the network.
There had been multiple delays getting to this point. The original plan was that construction would begin three years earlier and be completed in 2018. Now, the project will only be complete seven years after commencement in 2017.
Despite being aware of what is occurring elsewhere, the South African government blithely presses on with its own preliminary planning for a government-sponsored, national wholesale 4G network similar to the one proposed in Mexico, and is apparently confident that it and its agencies can avoid the delays and pitfalls that have plagued government-initiated broadband projects in Russia, Kenya, Rwanda and Mexico.
A senior management and technology consultant has declared that conditions in South Africa are even less conducive to the successful introduction of an OAWN than Mexico’s.
The South African policy vacuum and the uncertainty about the respective roles of (and relationships between) the regulator Icasa, government departments, and the state’s own investments in network operators and facilities, are not as conducive to the creation of a potentially more fruitful environment as the Mexican climate and institutional arrangements in which the Mexican regulator has worked to launch an OAWN.
Several key decisions were taken in Mexico and their implementation (it was said) had been making progress, in contrast to the relative paralysis experienced in South Africa on the resolution of matters of critical importance, such as the release of new spectrum.
Ingenuity and creativity would unavoidably be needed, the consultant rightly concludes, to establish conditions in South Africa for a scenario in which an OAWN would have a reasonable chance of being a sustainable telecoms business.
If the delay-prone Mexican environment is seen to be superior to South Africa’s situation, it can confidently be predicted that the date of completion of a South African OAWN will be many years in the future.
Gary Moore is a South African lawyer and senior Free Market Foundation researcher
For case studies on WOANs in Kenya, Mexico, Russia and Rwanda: http://www.freemarketfoundation.com/Article-View/case-studies-on-wireless-open-access-networks-