$10 Billion USD Broadband Network To Boost Mexico’s Wireless Competition

Telcel owned by Mexican billionaire Carlos Slim to get competition from new $10 billion open network. The new network would be run as an independent “carrier of carriers,” and would be available to any interested mobile-service provider at regulated and non-discriminatory costs. According to the government, this will translate in lower mobile-service prices for consumers, and encourage providers to enter the market offering phone, Internet and data services on mobile devices.

The project is a key part of President Peña’s campaign to boost competition in Mexico’s wireless market, where América Móvil SAB unit Telcel holds a 70% share. As there are some complex regulations involved, some industry analysts remain skeptical of his plan, which according to them is the first of its kind.

The network could potentially be used by hundreds of mobile-service providers, but its operator would be barred from providing service directly to consumers to avoid any conflict of interest. The process is to tender a high-quality slot of radio waves that would be exclusively used by the new mobile network. The new open network will benefit operators that don’t have their own network but want to provide mobile services, according to experts. But it could also be used by current operators that own their networks to gain more spectrums and offer a better service to their clients.

The program is expected to kick off in December. The government plans to take bids to build the network in February, with the winner to be announced by August, and it is planning for the new network to be deployed by the end of the current administration in 2018.

According to industry insiders, Nokia, Alcatel-Lucent SA, Huawei Technologies Co. and Motorola Mobility have shown interest in providing equipment and have participated in field tests to evaluate the project. The government also has to select an operator for the network, which analysts say could be a large global telecommunications company.

The new infrastructure also opens options for Mexican media companies. Grupo Televisa , the country’s biggest TV broadcaster and pay television provider, is also looking for options for offer mobile service to its 9 million TV subscribers after selling its 50% stake in Iusacell.

Mexico has suffered for decades from a highly concentrated telecommunications market, resulting in higher prices, saturated networks, and the lowest investment per capita. Mexico also has the lowest mobile broadband penetration rate in the OECD, with around 14 subscriptions per 100 inhabitants at the end of 2013, according to data compiled by the OECD. That’s below Chile, which had 36, and the average of 72 for the group.

Market regulation could also be problematic. Regulated rates would be imposed in order to offer competitive costs for mobile providers interested in using the network, squeezing profit margins for the operator. Another concern is that the network could end up costing the government billions of pesos a year in subsidies. Since the operator will be forced to cover almost 100% of the country’s territory, even remote rural areas, it will be state-owned firm Telecomunicaciones de México that will provide the mobile service in areas where there is no interest from private firms.

Whatever the future may hold, it will be for the good for the nation.

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