August, 2014
Federal Law on Telecommunications and Broadcasting
On July 14, 2014, the decree by virtue of which the Federal Law on Telecommunications and Broadcasting, and the Law of the Public System of Mexican Broadcasting, as well as other amendments, supplements and repeals to other related telecommunications and broadcasting legal provisions were enacted (the “Decree”), was published in the Official Gazette of the Federation (the “DOF” for its acronym in Spanish). The Decree will become effective 30 calendar days after its publication, this is, on August 13, 2014.
Below please find some references to the most relevant provisions of the Federal Law on Telecommunications and Broadcasting (the “FLTB”), which purpose, among others, is to regulate telecommunications and broadcasting services, and the processes of free competition in the aforementioned sectors sectors.
Authorities.
The FLTB regulates, among others, the following authorities for the enforcement of the FTLB:
Federal Telecommunications Institute (Instituto Federal de Telecomunicaciones, “IFT”, for its acronym in Spanish).
The IFT is in charge of regulating, promoting and supervising the use, development and exploitation of the radio spectrum, the orbital resources, the satellite services, and public telecommunications networks, and the provision of telecommunications and broadcasting services, as well as the access to active and passive infrastructure and other essential assets for the provision of such services. Likewise, IFT has authorities on economic competition matters related to the telecommunications and broadcasting sectors.
Ministry of Communications and Transportation (Secretaría de Comunicaciones y Transportes, "SCT", for its acronym in Spanish).
Among its most relevant authorities, we can mention the following: (i) the issuance of nonbinding opinions to the IFT regarding the granting, renewal and revocation of concessions, as well as for the granting of authorizations for the assignment and change to corporate control; (ii) the planning, establishing, development, and implementation of policies and programs regarding universal and social coverage; (iii) the performance of actions to ensure the access to broadband Internet in public buildings and facilities, and the development of programs to enable access to the Internet in public places; and (iv) the acquisition, establishment and operation, as the case may be, whether directly or through third parties, of telecommunications infrastructure networks and satellite systems for the provision of telecommunications and broadcasting services.
IFT Operation.
The FLTB sets forth the authorities of the IFT. Within such authorities, we can mention the following as the most relevant: (i) the granting of concession titles according to the FLBT; (ii) the implementation of procurement processes as well as the allocation of frequency bands of the radio spectrum; (iii) the establishment of the amount to be paid by concessionaires as compensation to the Mexican State for the granting of concessions; and (iv) the determination of economic agents with dominant power in relevant markets and preponderant economic agents in the telecommunications and broadcasting sectors.
In regard to the operation of the IFT, within the obligations and authorities of its commissioners, it is provided that the commissioners may not abstain from voting unless they have a legal impediment to do so. In the event of a justified absence, he/she has to issue his/her vote in writing prior his/her absence. Furthermore, it is worth mentioning that in order for the commissioners to discuss any matter within their authorities, they have to do so through an interview and only with the people that represent the interests of the agents regulated by IFT. Such interviews shall be registered and there should be a record of the date, place, start time and end time, and the full name of the people who were present in such interview as well as the topics discussed therein.
Radio Spectrum and Orbital Resources.
The radio spectrum is a public good, which administration corresponds to the IFT. In accordance with its use, the radio spectrum shall be classified as follows: (i) determined; (ii) free; (iv) protected; and (v) reserved.
Concessions’ regime.
The FLTB regulates a new type of concession, named the Sole Concession. This Sole Concession can be granted to provide all kind of telecommunications and broadcasting services (convergent services). The IFT shall grant the Sole Concession for a term of up to 30 years, which may be renewed. Depending on its purposes, the Sole Concession may be classified as follows: (i) commercial; (ii) public; (iii) private; and (iv) social.
The Sole Concession can only be granted to Mexican individuals or companies incorporated in accordance with Mexican laws, taking in consideration the applicable foreign investment regime (up to 100% in telecommunications sector and up to 49% in the broadcasting sector, subject to reciprocity in the broadcasting sector).
Concessions of Radio Spectrum and Orbital Resources.
The concessions granted to use, develop and exploit frequency bands from the radio spectrum for determined use and to occupy and exploit orbital resources, are granted by IFT through a public procurement process, for a term of up to 20 years which may be renewed.
The FLTB provides that simultaneously with the granting of a radio spectrum concession, and in the event that the services to be provided under the aforementioned concession require a Sole Concession, the Sole Concession may be granted in the same administrative act. For concessions for broadcasting services, in the event that the applicant concessionaire has foreign investment, the prior favorable opinion from the National Commission of Foreign Investments is required.
Radio spectrum for social use.
Regarding this type of concessions, it is important to mention that the concessions for social community use can only be requested by nonprofit civil associations, subject to the fulfillment of the requirements established by the FLTB, and in accordance with the regulations that are to be issued by the IFT.
Concession of future orbital resources.
This is a new legal figure, and refers to the possibility for any person to express to the IFT his/her/its interest in order for the Federal Government to obtain orbital resources in favor of the Mexican State.
In order to do so, the interested party shall, among others, provide all documentation to evidence his/her/its technical, financial, legal and administrative capacity, and execute a letter which will establish his/her/its commitment to participate along with the Federal Government in all the required procedures and requirements for the coordination and allocation of the orbital resources in favor of the Mexican State. The interested party shall pay, without reimbursement, all expenses which will be incurred before the International Telecommunications Union (“ITU”), which is the authority in charge of the managing of the orbital resources around the world.
In this procedure, SCT has the authority to determine the admissibility of the application. In the event that an application is admitted, SCT will notify the IFT the amount of the bond or of the letter of credit to be delivered by the interested party, in order to guarantee its commitment.
In the event that the orbital resources are allocated to the Mexican State, the IFT shall grant to the interested party the right to exploit such orbital resources through a direct award of the respective concession.
Leasing of Radio Spectrum.
This legal instrument is aimed to encourage and promote the secondary market for the radio spectrum. This figure applies only for commercial or private frequency bands. In order to lease radio spectrum, concessionaires must comply with the following:
a) That the lessee has a Sole Concession, or that such Sole Concession has already been requested to the IFT.
b) That the lessee becomes joint obligor of the concessionaire.
c) That the continuity of the services is not affected.
d) That it does not generate concentrations or cross-ownership.
Assignment of Rights.
The FLTB provides that the concessions for commercial or private use may be assigned, with the prior authorization of the IFT. The aforementioned authorization may only be granted by the IFT after three months from the date on which the concession was granted.
If the assignment results from a merger, spin off or corporate restructure, provided such acts are performed within the same group or economic agent, no prior authorization is required. In such event, the only requirement would be to notify the assignment to the IFT.
If due to an assignment, a concessionaire transfers rights and obligations to another concessionaire who is providing similar services in the same geographic location, IFT would only grant the corresponding authorization after having analyzed the competitive effects that such assignment would have.
Shareholders Information.
Article 112 of the FLBT provides the obligation for concessionaires to file to the IFT no later than June 30, on a yearly basis, information regarding their corporate capital, including a list of their shareholders or partners that hold 5% or more of their corporate capital, as well as a list of the individuals who participate directly or indirectly, in 10% or more of their corporate capital.
The provisions of article 112 of the FLBT must be expressly included in the by-laws of the concessionaires, as well as in the share certificates and partnership interest certificates issued by each concessionaire.
Networks and Telecommunications Services.
The FLTB provides a series of specific obligations to concessionaries that operate Public Telecommunications Networks.
Service of “Visiting” User.
The FLTB regulates a legal instrument called “Visiting” User. Such instrument helps to guarantee the continuity of mobile services provided to end users, when they are outside the coverage area of their mobile network.
It is important to point out that concessionaires that exploit a public telecommunications network that provides mobile services, may freely enter into agreements with other concessionaires to provide the service of “Visiting” User with other concessionaires. On the other hand, the economic agent declared preponderant, or dominant in a relevant market, will be obliged to provide the service of “Visiting” User on temporary basis and exclusively in the geographic locations where the other concessionaires do not have infrastructure or where they do not provide mobile services.
Access and Interconnection.
Concessionaires operating a public telecommunications network have the obligation to adopt open network architecture designs, in order to ensure interconnection and interoperability of their networks. For such purpose, concessionaries operating a public telecommunications network are bound to interconnect their networks with other concessionaires’ networks on a non-discriminatory basis, transparently, based on objective criteria, in compliance with the regulations of IFT, within a term no greater than 60 days.
Asymmetric obligations to the economic agents declared preponderant are established in regard to Access and Interconnection. One of such obligations establishes that the preponderant agent shall not charge to the other concessionaires for the ending traffic in its network.
Public Telecommunications Networks with Public Participation.
The Public Network of the State is regulated in the FLTB. Concessions for commercial use for public entities, even if they operate under a scheme of public-private partnerships, shall be considered as a Public Network of wholesale telecommunications services. This Public Network cannot provide services to end-users, unless such Public Network has specific coverage in a geographic zone where no other concessionaire provides services to end-users. Only in such cases, the public governmental entity “Telecomunicaciones de México”, will guarantee the provision of telecommunications services to the end users located in such geographic area until another concessionaire can provide such services.
For the operation and exploitation of the wholesale telecommunications network, the IFT will directly assign to the Mexican State 90MHz of the 700MHz Band. Through such network, the State will provide services under non-discriminatory basis and with competitive prices to the resellers and concessionaires of telecommunications services.
Net Neutrality.
Net Neutrality principles are included in the FLTB. Concessionaires and authorized companies or persons who provide Internet access services must comply with such principles. The IFT shall issue regulations in regard to the compliance of such principles.
Use of State owned property to develop Telecom Infrastructure.
The Executive Branch will establish technical, economical, safety and operational conditions to allow the State owned property, the right-of-way (derecho de vía) of communications means, the infrastructure of broadcasting stations, the electrical transmission towers, the poles and ducts, among other infrastructure, to be available for the use and exploitation of concessionaires under non-discriminatory basis and through the payment of the respective governmental duties, as set forth by the competent authorities from time to time.
Satellite Communications.
Concessionaires of orbital resources, with coverage in Mexico shall establish at least, one Satellite Operations Control Center in Mexican territory, unless a force majeure event occurs, in which case, the IFT may authorize the temporary use of a Satellite Operations Control Center abroad.
Retransmission.
Concessionaires providing terrestrial/over-the-air TV broadcasting services are obliged to allow to concessionaires of pay-TV the retransmission of their broadcasted channels. The retransmission shall be done simultaneously, free of charge, under non-discriminatory basis, within the same geographic coverage area, in full and without any modifications, including advertisement, and with the same quality than the broadcasted signal. This obligation is known as “must offer”.
Concessionaires of pay-TV services, are obliged to retransmit the terrestrial/over-the-air TV broadcasting channels, simultaneously, free of charge, under non-discriminatory basis, within the same geographic coverage area in full and without modifications, including advertisements and with the same quality than the original broadcasted signal, and to include it free of charge in their pay-TV programming. This obligation is known as “must carry”.
Authorizations.
An Authorization is needed in order to perform any of the following activities; it is granted for a term of up to 10 years, renewable for equal periods, without limiting the times it may be renewed.
I. To operate and exploit the resale of telecommunications services, but without being considered a concessionaire.
II. To install, operate and exploit transmitting satellite earth stations.
III. To install telecommunications equipment and transmission means, that cross the borders of the Mexican Republic.
IV. To exploit the rights to transmit and to receive signals and frequency bands associated to satellite constellations with coverage within the Mexican Republic, and which are capable of providing services in the Mexican Republic.
V. To temporarily use frequency bands for diplomatic visits.
Reselling of Telecommunications Services
Among the activities that a reseller of telecommunications services may carry out, the FLTB provides the following:
· Access wholesale services offered by concessionaires.
· Resale of services and capacity previously hired to a concessionaire of public telecommunications network (i.e. Mobile Virtual Network Operators).
· Have its own numbering resources or acquire them through concessionaires of public telecommunications networks.
The economic agents declared preponderant in the telecommunications sector, or any concessionaire part of the economic group of the preponderant, may not participate, directly or indirectly in the corporate capital of a company reseller of telecommunications services.
Public Registry of Telecommunications.
The operation of the Public Registry of Telecommunications is regulated in the FLTB. Such Registry shall be integrated by the Public Registry of Concessions and the National System of Infrastructure Information.
Collaboration with the Authorities.
Concessionaires and resellers of telecommunications services are bound to comply with any official request issued by a competent authority, within the scope of its authorities under applicable laws.
Regarding the obligation of concessionaires and resellers of telecommunications services to collaborate with authorities, the FLTB provides the following specific obligations:
· To collaborate with public security, law enforcement and administration of justice authorities, to geographically locate in real time, mobile communication equipment.
· To keep a record and control of the communications which are done, regardless of their type, using own or leased numbering resources.
· To deliver the information stored to the requesting authority, according to its authorities.
· To have a responsible area inside the company, which must be available 24x7x365 to attend any requirement of information or geographical location, and to tap private communications.
· To block mobile telecommunications lines which are reported by the clients.
Users.
Users’ Rights.
The FLTB provides that users shall have the rights established thereunder, under the Federal Law of Consumer Protection, and under any other applicable law. Article 191 of the FLTB establishes a series of rights regarding telecommunications and broadcasting services.
Tariffs Charged to Users
The FLTB establishes obligations to the preponderant economic agent in the telecommunications sector and to the economic agent declared dominant in the market of short message services and termination calls, among other obligations.
Universal Services
Universal Services refer to the possibility of the population in general to access the telecommunications services, which will be established by the SCT, under the conditions of availability, affordability and accessibility. To provide such Universal Services, the SCT will prepare, on an annual basis, a program of social coverage and a program of connectivity in public locations.
Audiovisual Content.
Under the FLTB a series of governmental authorities are in charge of regulating broadcasted content. These are the IFT, the Ministry of Interior (Secretaría de Gobernación), the Ministry of Public Education (Secretaría de Educación Pública), the Ministry of Health (Secretaría de Salud) and the National Electoral Institute (Instituto Nacional Electoral).
Audiovisual Content
The FLTB establishes the authority of the IFT to order a precautionary suspension of the transmissions which are violating the provisions of the FLTB regarding audiences’ rights and broadcastings aimed to children
Advertising.
The FLTB provides the ability of broadcasting concessionaires to freely establish the fees related to advertising services. Notwithstanding the foregoing, in doing so, said concessionaires must comply with the following:
· Advertising time of TV broadcasting concessionaires, shall not exceed eighteen percent of the total time of transmissions for each channel, and in radio stations, the advertising shall no exceed forty percent of the total time of transmissions for each radio station.
· Advertising time for Pay-TV and restricted audio concessionaires shall not exceed 6 minutes per each hour of transmission in each channel. The channels dedicated exclusively for the offering of products, are exempted from the aforementioned limits.
Audiences Rights
The FLTB provides that the public service of broadcasting shall be provided in conditions of competence and quality, in order to satisfy Audiences’ Rights. The FLTB further establishes a list of rights which are deemed to be considered Audiences’ Rights.
Asymmetric Regulation.
Preponderance.
The IFT is in charge of determining the economic agents that are preponderant in the sectors of telecommunications and broadcasting. The determination of the preponderant economic agents is based on having directly or indirectly more than fifty percent of national participation in the provision of broadcasting and telecommunications services. This percentage is measured by its number of users, subscribers, audience, traffic in its network or by the capacity used therein, based on the data and information that the IFT has.
The obligations of the preponderant economic agent, shall cease by an official declaration of the IFT issued in accordance to the FLTB, once there are conditions of effective competition in the relevant sector.
The FLTB in its articles 266 and 267 establishes a number of asymmetric obligations to the preponderant agents in the sectors of telecommunications and broadcasting.
Economic Agents with dominance in a relevant market.
The IFT, in accordance with the FLTB and the Federal Law on Economic Competence has also authorities to determine economic agents with dominance in a relevant market in the telecommunication and broadcasting sectors. IFT is further empowered to impose specific obligations to the dominant agents in a relevant market.
The preponderant agents in the telecommunications and broadcasting sectors may be declared dominant in a relevant market, and the IFT may impose additional and specific obligations in accordance with the FLTB.
Homologation Process.
The FLTB provides that any product, equipment or device which will be used for telecommunications or broadcasting purposes and which will be connected to a telecommunications network or that will be using radio spectrum, shall be homologated according to the applicable rules or technical standards according to the Federal Law on Metrology and Standardization (Ley Federal Sobre Metrología y Normalización).
Furthermore, it is provided that the IFT may recognize foreign homologations done to products, equipment or devices which have been evaluated as compliant by the respective country, provided that the Mexican Government has executed or signed an international treaty or agreement for such effects with such country, and that the applicant requesting the homologation procedure has a domicile in Mexico.
Verification Regime by IFT.
Public Telecommunications Network concessionaires are bound to deliver to IFT, all the information in regard to the architecture of their networks, including capacities, characteristics and location of the elements which comprise them, as well as any other information which would allow IFT to evaluate the operation and exploitation of the telecommunications and broadcasting services.
Penalties and Fines
Any breach to the provisions of the FLTB, to the administrative provisions and to the obligations contained in the concession and authorization titles, will be penalized by the IFT, and the application of the respective penalties will be carried out in accordance with the Federal Law on Administrative Procedures (Ley Federal de Procedimiento Administrativo).
Any breach to the Federal Law on Economic Competition, by any of the individuals and/or entities in the telecommunications and broadcasting sectors, will also be penalized by the IFT.
Any breach to the consumers’ rights under the FLTB, committed by any concessionaire or authorized individuals or entities, will be penalized by the Consumer Protection Agency (PROFECO for its acronym in Spanish).
The Ministry of the Interior will penalize any breach regarding contents and broadcasting of the State time according to the FLTB.
Any breach in the telecommunications and broadcasting sectors shall be penalized with fines that go from the equivalent of 0.01% to 10% of the revenues of the concessionaires or authorized persons or companies.
In the event of recidivism, the IFT may impose double the respective fine. The fines imposed by the IFT will be executed by the tax authority (SAT for its acronym in Spanish).
Furthermore, as a result of a breach, concession titles may be revoked. If this is the case, such concessionaire will be prohibited to obtain new concessions or authorizations for a term of 5 years.
Remedies.
IFT’s general rules, acts or omissions may only be challenged by an “amparo indirecto” process, and such process will not be subject to “suspension” (provisional measure).
The specialized courts of the Mexican Judicial Power will be the courts in charge of the processes in the telecommunications and broadcasting sectors.
In case you require additional information, please contact the partner responsible of your account or any of the following attorneys:
Mexico City office: Jorge León-Orantes B., jleon@s-s.mx (Partner)
Carlos Díaz, cdiaz@s-s.mx (Associate)
Phone: (52 55) 5279-5400
Monterrey office: Jorge Barrero S., jbarrero@s-s.mx (Partner)
Phone: (5281) 8133-6000
Tijuana office: Aarón Levet V., alevet@s-s.mx (Partner)
Phone: (52 664) 633-7070
Querétaro office: José Ramón Ayala A., jayala@s-s.mx (Partner)
Phone: (52 442) 290-0290