Breathe
By Barbara Anderson
In the 10 years that the Federal Telecommunications Institute (IFT) has just completed, it has never achieved one of the most recurrent claims of the sector: that the cost of the radio electric spectrum - essential input for mobile telephone operators - be brought down to international values. Today, the fees paid by both América Móvil for Telcel and AT&T Mexico are 60% higher than the global average.
The overpricing of these frequencies lacks any economic logic: if in 10 years, telephone prices have been reduced by 48.7% and general inflation has increased by 56.9%, why should radio frequencies, which are the input to produce Internet, cost twice as much as any other country in the world?
By law, each year the Ministry of Finance and Public Credit, before preparing the Federal Expenditure Budget (PEF), the IFT must make its recommendations on the costs of the services it regulates.
In a recommendation sent to this portfolio, the Institute again warns that the prices paid by operators in our country are more than double what is paid in the rest of the world and for the first time seeks that the largest tax contribution comes from the operator that obtains more income for the spectrum frequencies it uses (aka, América Móvil). Not only does it say what it considers should be the cost of the spectrum that companies should pay each year, but it also makes the Treasury do the job of dragging the pencil and delivered a series of formulas on how to compensate in tax collection the cut it recommends to the federal government.
What does the IFT propose? That article 244 of the Federal Law of Rights be modified for the PEF 2024 and that the annual costs for spectrum use rights be reduced in 51.6% in the case of the company founded by Slim and in 56.4% to the one directed by Mónica Aspe. At present, each company has a fixed annual cost which is the payment of rights for the assigned spectrum (which is equivalent to 90% of the cost of the spectrum they use). To compensate the more than 50% that the Treasury would not collect, the Institute proposes an extra contribution for three years, where both mobile telephony companies would pay the equivalent of 1% of their annual income.
The IFT's formula for the Treasury, although it means in the short term a lower collection of spectrum rights (5,000 million pesos less per year) with lower fixed costs, operators could increase their coverage and serve almost 5 million new users who are currently without service. This would help, compensating with the collection of additional taxes (VAT and ISR) that would add up to 4,000 million pesos.
This is the proposal sent to the SHCP:
Deaf talk
For the past four years (2020, 2021, 2022), the Institute has been alerting the SHCP in 'potential' mode about the weight of spectrum costs on the deployment of new technologies, greater geographic coverage and more users, which results in social inclusion, as well as opening the door to -now yes?- greater competition in a sector that is still captured by a preponderant player such as Telcel.
"Maintaining a regime with a high cost of spectrum in Mexico with respect to the international context has negative impacts on the connectivity of companies and individuals,the country's competitiveness and the welfare of the population, discourages investment and participation in future bidding processes; concentrates the market, could increase the asymmetric position of the preponderant economic agent (i.e. América Móvil) and limits the possibilities of offering next generation services (5G) in Mexico and, furthermore, does not guarantee that the State will receive higher revenues from royalties derived from the lack of interest in new spectrum bids and the possible return of greater amounts of spectrum by operators". This is a paragraph within this letter/recommendation that summarizes the intention sent to the Treasury by Javier Juarez Mójica from the IFT.
Why does this communiqué include adjectives such as "unsustainable prices" or "scenario of irreversible damage in the short term"?
It would seem that as in the story of Peter the shepherd boy, after four years of crying "Here comes the wolf!" the regulatory body has run out of sheep: Movistar gave up all its frequencies to become a virtual operator, AT&T Mexico continues to return spectrum due to its high cost, market concentration is increasing and several spectrum bids have already been abandoned due to the unsustainable financial situation of the Mexican market. This without forgetting the ineffectiveness of the current spectrum policy in terms of revenue collection, since the departure of the Spanish company reduced revenues in this area by 4,500 million pesos per year, half of what Telcel currently spends for the same service (one third of the revenues that the federal government had for this use). According to an estimate by the Institute, from 2019 to 2023, the federal government's revenue from spectrum usage fees fell 19%, from 20,032 million pesos per year in 2019 to 16,232 million pesos in the current cycle.
Once again, on September 8, the Secretary of Finance, Rogelio Ramirez de la O has in his hands the future of telecommunications and the possibility of fulfilling one of the great pending promises of President Lopez Obrador: Internet for all, really.
The opinions expressed are the responsibility of the authors and are absolutely independent of the position and editorial line of Opinion 51.
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