Antitrust Alert: Mexico to Set Telephone Spectrum Auction Rules to Encourage Competition
The Federal Competition Commission (Comisión Federal de Competencia) of Mexico has announced that in August 2009 it intends to determine rules to apply to the public auction of new concession titles to use the portion of the radio-electric spectrum set aside for mobile telephony in Mexico. The Mexican government's goal is to make way for new mobile communications entrants and foster the growth of established operators, which are expected to offer more competitive services in Mexico. The Competition Commission will attempt to balance this goal and the need to limit undue concentration among the incumbents. The Mexican Federal Telecommunications Law (Ley Federal de Telecomunicaciones) empowers the Competition Commission to give its opinion on how the public auction of spectrum frequencies should be organized. According to the Federal Competition Law, the Competition Commission must examine whether participants may acquire the market power to set prices unilaterally or displace other participants in the relevant market. The auction processes may not begin until the Competition Commission has provided its opinion on the bidding basis prepared by the Federal Telecommunications Commission of Mexico (Comisión Federal de Telecomunicaciones or "Cofetel").
The Mexican federal government intends to auction spectrum for wireless communication services in the 1.9 GHz and 1.7 GHz bands, which are particularly useful for third generation or 3G networks that enable network operators to offer users a wider range of more advanced services (high-speed transmission of voice, data, and video) while achieving greater network capacity.
The Competition Commission has stated that one of its goals is to promote free participation in all markets, so that consumers will have more options and better prices. The Telecommunications Law provides that the radio-electric spectrum in Mexican territory is the property of the Mexican nation, and the Competition Commission believes that a competitive mobile telephony market will have a positive effect on the competitiveness of the Mexican economy. The auction is designed to open the mobile telephony market to more competitors and reduce concentration in this industry. Cofetel has indicated that the auctions have been designed to incentivize entry by at least a new coast-to-coast competitor.
Mexico's telephone market currently is dominated by the Telmex a consortium headed by Mr. Carlos Slim. It is expected that the Competition Commission will, among other things, set limits for the range of this spectrum that participants may be awarded for mobile telephone services.
There are precedents for the Competition Commission to regulate the auction process to encourage competition. For example, in prior bidding processes for concession titles to use the radio-electric spectrum, in one case the Competition Commission determined to completely ban participation by a specific company, to prevent that company from acquiring a dominant position. In another case, the Competition Commission restricted the width of the spectrum that could be awarded to certain operators, to avoid undue concentration. The Competition Commission may continue to intervene in government regulation to encourage greater competition in the Mexican economy.
For more information, please contact your principal Jones Day representative or either of the lawyers listed below.
Javier Martínez del CampoMexico City
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