Mexico’s Ministry of Communications and Transportation has designated spectrum in the 3.4 GHz to 3.7 GHz band for wireless local loop services, to be auctioned after the auction of personal communications services later this year, according to a report from the U.S. Embassy in Mexico City.
Licenses for wireless local loop will be awarded for 62 basic service areas (ABSs). Within each ABS, there is a set of towns or cities that are linked economically or that have similar topography, said the U.S. Embassy. Clusters of the ABSs correspond with Mexico’s nine cellular service regions created in 1989.
Wireless local loop technology is expected to generate the most demand in small towns, which have no phone service today, said J.J. Gullish, telecommunications analyst with International Technology Consultants Inc., Bethesda, Md. In these areas, WLL offers faster and more cost-effective installation than wireline infrastructure.
Ed Czarnecki, head of the international division at BIA Consulting, said demand for basic phone service exists in both the business and residential sectors. However, the cost for basic landline phone service and interconnection is not that high in Mexico, which will pose competitive challenges for WLL operators.
Czarnecki expects long-distance carriers to participate in or support wireless local loop services through alliances with competitive access providers if those providers can offer lower interconnection rates than Telefonos de Mexico. Also, long-distance carriers can increase traffic on their own networks by extending their access into the basic phone service market.
However, “It is going to be a challenge for competitive access providers to enter the Mexican market,” noted Czarnecki, because Telmex’ landline service and interconnection charges are not that high.
“The cost of spectrum is a factor in determining the viability in the competitive access model,” said Czarnecki, as wireless local loop generates “a much more constrained revenue stream” than premium, value-added services like cellular and PCS. However, “if it’s possible to develop that model in the U.S., it should be viable to set up such a model in Mexico.
“It may make sense for competitive access providers to get into value-added services,” added Czarnecki.
The Mexican government is following a rough timetable for auctioning a host of wireless services, said Gullish. The MMDS auctions, which will license spectrum in the AM frequency for pay television services and other limited data services, are about a month behind schedule. As such, MMDS auctions were combined with auctions for point-to-point and point-to-multipoint microwave services. WLL auctions will follow the PCS auctions.
Previously, spectrum often was assigned on an ad hoc basis, said Gullish, so various isolated networks have had to interconnect to Telmex. Through auctions, the government not only opens markets, but interconnection and spectrum issues will be solved to attract bidders.
About six months ago a federal commission for telecommunications, COFOTEL, was created under the Ministry of Communication and Transportation to regulate telecommunications more autonomously. Gradually, the ministry has been transferring power to COFOTEL, though it remains involved in issues from a “macro” perspective, said Gullish.
But the new “structure itself is ultimately subject to abuse,” said Gullish. COFOTEL is comprised of just four commissioners including its president, Carlos Casasus, and as such is greatly understaffed.
When commissioners vote on an issue that results in a tie, the matter is resolved by weighing Casasus’ vote more heavily. COFOTEL also is underfunded, said Gullish.
While the new agency is set up to be independent, ties to top government are very close. Casasus reports to the minister of communications, who reports to Mexico’s president. “There’s no balance of power,” said Gullish. “There are no assigned terms” for the minister or COFOTEL president.
Gullish noted that spectrum auctions were passed into law by the Mexican Congress.
