InterAm Database

National Law Center for Inter-American Free Trade

September 29, 1995

The Federal Telecommunications Act of 1995

SANCHEZ MEJORADA VELASCO Y VALENCIA
ABOGADOS
PASEO DE LA REFORMA 450
LOMAS DE CHAPULTEPEC
11000 MEXICO D.F.
TEL (5) 202-07-77
FAX (5) 202-82-22

CARLOS SANCHEZ MEJORADA J. (t 1903) JUSTO SIERRA NO 103 Y
CARLOS SANCHEZ MEJORADA D (t 1952) SALVADOR ALVARADO GUSTAVO R. VELASCO (t 1982) COLONIA PITIC

CARLOS SANCHEZ MEJORADA R. 83150 HERMOSILLO, SONORA
RODRIGO SANCHEZ MEJORADA V. TEL (62) 15-99-40
CARLOS R. VALENCIA BARRERA FAX (62) 15-99-40
DAVID HURTADO BADIOLA OTILIA RUIZ LOPEZ
ADRIANA LABARDINI DE MADRAZO
EDUARDO RIBE MARTINEZ DE VELASCO
OLIVIA RAYA MEDINA

September 29 1995

THE FEDERAL TELECOMMUNICATIONS ACT OF 1995.

Carlos R. Valencia Barrera

Adriana Labardini de Madrazo

I. Regulatory background.

1. Privatization of Telmex: towards the opening of competition in 1996.

2. Telecommunications Regulations of 1990 deregulating and privatizing certain services.

3. NAFTA: concentrates on VAS deregulation and standard related measures.

4. Privatization of satellite communications.

5. The telecommunications market in Mcxico.

II. The Federal Telecommunications Act.

GENERAL PURPOSE

Development of telecommunications; promote fair competition to the benefit of users; preserve Nation's sovereignty; promote universal service ("social telephony").

DEFINITION OF GENERAL MEANS OF COMMUNICATION.

All spectrum, telecommunications networks and satellite communication systems.

All of them subject to federal jurisdiction.

CONTROVERSIES; COMPETENT COURTS.

Federal courts, but parties may subject dispute to arbitration.

FOREIGN INVESTMENT PARTICIPATION.

Cellular: up to 49%; and up to 100% with prior Foreign lnvestment Commission approval.

Satellite, spectrum and telecommunication concessions: Mexican corporations may have up to a 49% foreign share

Rcsellers, Value Added Services and others not requiring a concession: May have 100% foreign investment.

CONCESSIONS, PERMITS AND RETGISTRATION (IN GENERAL).

Concessions for:

-Spectrum. (wireless services and even private networks using frequencies).

-Telecommunication networks.

-Satellite orbit slots.

-Down and /up -links from/to foreign satellites when providing services in Mexico

Permits for:

-Resellers. (provided they do not own any transmission means).

-Establishlment, operations of up-link earth stations .

Registration:

-VANs.

Deregulated:

Private networks are not subject to concession, permit or registration, provided they do not lease or otherwise market any services.

Auction process (requiring payment of consideration to government) for spectrum and satellite telecommunication concessions. But note that the current statutory provision enabling SCT to share in the revenues of a carrier is not being repealed.

Conccssions will likely contain "social telephony'' commitments. No universal service contribution shall be levied through an interconnection surcharge.

SPECTRUM CONCESSIONS.

-SCT, from time to time, determines frequency bands to be auctioned off.

"Use it or lose it" approach.

-Concession will indicate authorized use(s) and territory.

-Term: up to 20 years, renewable if carrier is in good standing and new SCT conditions are accepted.

-SCT may change or take a frequency or a band of frequencies under certain public interest considerations, relocating the affected carrier if possible.

Concessionaires with previously allocated frequencies for specific services may only broaden scope of services with SCT authorization. SCT may require payment in consideration for the broadening of the scope of services.

-The SCT will resolve pursuant to the provisions of the new law any application by a current holder of frequency bands to provide services not authorized by its concession or permit.

NETWORK CONCESSIONS.

Not subject to auction process.

Applicant must prove its financial, technical and administrative expertise, to SCT 's satisfaction.

SCT must act on petition within 120 days.

Term: up to 30 years, renewable if carrier is in good standing and new SCT conditions are accepted.

Private networks which desire to scll services to third parties will be requircd to apply for a concession, thus becoming a public telecommunication network.

Wording suggests concession will be comprehensive as to scope of services.

No legal definition of local loop and long distance services.

SATELLITE TELECOMMUNICATIONS CONCESSIONS.

Concessions are granted via auction to use and exploit geostationary orbital positions and other satellite orbits assigned to Mexico, with their corresponding frequency bands and rights to transmit and receive signals. Subject to specific treaties and reciprocity, SCT may grant concessions to receive or transmit radio signals in from Mexico fiom/to foreign satellites .

SCT is reviewing different formulas of privatization of the current Morelos and Solidaridad satellite systems.

ASSIGNMENT OF RlGHTS.

SCT may authorize, subjcct to a 3 year freeze, the assignment of rights or obligations contained in the concessions/permits if assignee agrees to SCT's assignment terms.

If assignment entails opcration of a telccommunication system to a competitor, the assignment will be the subject of antitrust scrutiny.

Foreign governments may not be assignees, pledges or mortgagees of concessions or its assets.

TERMINATION AND REVOCATION OF CONCESSIONS/PERMITS.

Concessions and permits may be "revoked " by the government if carrier consistently fails to meet obligations.

Concessions and permits may be revoked immediately if carrier (among other considerations):

-Assigns or encumbers the concession or its assets without SCT approval.

-Fails to pay to the government the agreed upon consideration.

Govermnent may also rescue a concession or permit for public interest considerations.

Rescue entails a taking. The government would be required to indemnify the carrier, and the amount would bc determined by certified appraisers.

Upon the expiration of a concession the frequency bands and satellite orbits will revert to the government. The government will have the right of first refusal to purchase assets employed for these purposes.

OPERATION AND INTERCONNECTION

-Concessionaires shall adopt open network architecture designs.

-SCT will prepare and administer the basic technical plans in renumbering, switching signaling, transmission, tarirf planning and synchronization.

-Carriers shall enter into interconnection agreements within 60 days from request; SCT will bave 60 days to rule on terms and conditions parties cannot agree to.

Service to begin on 1.1.97.

-Interconnection principles:

-Unbundled.services charges.

-Separate accounting by each service.

-Non discriminatory.

-No volume discount.

-Reciprocity.

-Full call identification.

-Provide tariff services.

-Provide invoice and collection information.

-Full connectivity with end users.

SCT will promote international agreements providing for reciprocity for national carriers desiring to provide scrvices abroad and to promote competition on ILD.

ILD interconnection agreements must be approved by SCT prior to their formalization. SCT may incorporate terms and conditions of proportionality and reciprocity regarding the services subject matter of agreement.

RIGHTS OF WAY.

ROWs may not be subject of exclusivity agreements. Whenever ROW, poles, ducts or other installations are made available to one carrier, said ROW and other installations shall be made available to all other carriers in non discriminatory terms, if technically feasible.

SOCIAL TELEPHONY.

SCT will prepare social telephony programs, ''which may he undertaken by any concessionaire".

A carrier may not discontinue services to a locality if it is the only one providing said services, except if SCT approvcs it. SCT may include geographic commitments in concession title.

TARIFFS.

Dominant carrier may be subjeet to SCT imposed tariffs, quality and information requirements.

Dominant carrier tariffs will permit to recoup as a minimum the average long term incremental cost for each service, capacity or functionality, including interconnection.

Carriers may not provide (to themselves or their affiliates) cross subsidies to competing services.

Tariffs shall be applied in a non discriminatory fashion.

All other tariffs are deregulated and must be filed of record (not approved) before SCT before they become effective.

TELECOMMUNICATIONS REGISTRY.

Shall be open for public consultation, except where information is deemed to be confidential (via SCT ruling).

GOVERNMENT REQUISITION.

-ln case of:

-National disasters.

-War.

-Public revolt.

-Imminent danger to national security.

-Government takes over control, operation, assets, etc.

-Government may also use carrier's personnel to operate services.

-Requisition will continue for as long as the conditions which gave rise to it subsist.

-Except in cases of war, the federal government will indemnify the affected carriers via appraisal of damages based on "actual real value"(loss of profit based on average revenues of preceding year, absent agreement.

INFORMATION AND INSPECTION.

Carriers shall be required to permit on-site inspections and information verification by SCT.

Carriers will pay corresponding inspection fees.

Carriers will provide SCT with accounting information, by service, region, function and network components, periodically according to the methodology mandated by SCT, including such information which will provide SCT information concerning the operation and exploitation of the various telecommunication services provided by the carrier.

PENALTIES.

SCT is entitled to impose penalties ranging from (US$(6,000 to US$600,000) (at N$6 to US$1).

In those cases where telecommunication services are provided without concession or permit, the corresponding installations and equipment will be confiscated.

REGULATION OF OUTSTANDING CONCESSIONS AND PERMITS.

The terms and conditions of outstanding concessions and permits shall be "respected" .by their respective terms.

-Telmex's concession refers to future legislation as being applicable, thus embracing the new statute.

-Cellular's do not.

INTERCONNECTION TRANSITIONAL PROVlSlONS.

Current concessionaires must register and apply interconnection tariffs to their own services, beginning 9.1.95.

Separate accounting by services applying unbundled tariffs shall be kept beginning 1.1.96.

OPERATION OF INTERCONNECTION AGREEEMENTS OF NEW ENTRANTS

MANDATORY INTERCONNECTION OF NEW ENTRANTS BY TELMEX

Beginning on 9.1.95 "concessionaires in operation" may initiate interconnection negotiations.

New entrants may initiate interconnection operations on 1.1.1997.

INDEPENDENT REGULATORY AGENCY.

By 8.10.96 the government must incorporate a technically and operationally independent regulatory body. In the meantime the SCT will act as the regulator.