The initiative – which has been endorsed by the constitutional points commission of the Chamber of Deputies – seeks to elevate the internet to a constitutional level as it is a “strategic service for the State, like electricity to prevent a part of the population, for economic reasons, lacks this fundamental instrument for education.” But, to provide the service, the president seeks to CFE TEIT leaves its state status to become a public company.
Until now, CFE Telecomunicaciones e Internet para Todos is only allowed in its concession to operate and deploy infrastructure in places where operators such as Telcel, AT&T and Telefónica do not reach, whose restriction has been breached.
“The president has had disagreements about offering telecommunications packages in certain places where private operators are located, when the function should be to operate only in areas where large operators are not located and where internet service does not exist; However, now it seeks to change this situation,” said Lucía Ojeda, an expert in economic competition and partner at the Mexican firm SAI Derecho & Economía.
The Executive’s proposal – which has as its origin the Obrero principle of strengthening state companies such as CFE TEIT against private competitors – would grant the company the necessary powers to compete head-on and unequally in the telecommunications market.
Experts consulted by Expansión agree that converting CFE Telecomunicaciones into a public entity would imply that the company would no longer have the limitation of marketing telecommunications services where large operators operate and would even sell its products at more affordable prices, compared to market rates. , since they would be subsidized by the company itself, giving it an advantageous position.
But the project would shield this part, by pointing out that “the Internet service provided by the State will not be classified as a monopoly, it addresses the need to guarantee the right of people to access information and communication technologies, including broadband internet, without implying an economic benefit, but rather a State responsibility.”
Fernando Borjón, former commissioner of the Federal Telecommunications Institute (IFT), warned that granting greater power to CFE Telecomunicaciones will generate great distortions in the sector. The company, in addition to offering more affordable rates compared to private companies, could put itself at an advantage by accessing the radio spectrum ‘for free’, through its wholesale partner, Altán Redes, while other operators will continue to be forced to pay the high costs. which implies accessing this basic input for telecommunications networks.
“We are entering a spiral that benefits no one. The company will have advantages in wholesale and retail terms and here it can enter into a conflict not only in commercial terms but also with the world trade organization due to market distortion.”
This could become more palpable with the possible elimination of counterweights such as the telecommunications regulator, who until now is in charge of issuing the rules of the game to avoid market concentrations. But with its disappearance, the State would become a judge and part of the sector, leaving mobile telephone operators and fixed service operators defenseless.
More money and less transparency
The state telecommunications company this year received a budget of 13,553 million pesos, an increase of 24.2% compared to what the federal government assigned it to operate in 2023. CFE TEIT has received substantial increases in its spending since 2022 due to the acceleration of infrastructure deployment.
With the change in legal status, the budget could increase. Lucía Ojeda explained that converting CFE Telecomunicaciones into a public company implies that it receives greater resources from the public treasury and even more to make the telecommunications business profitable, but without the obligation to make financial information transparent.
Unlike state productive companies, their nature is to behave as economically self-sustaining and to make their finances transparent to avoid government subsidies, although the latter has not been possible due to the president’s policies.
So far CFE TEIT is not profitable. At the end of 2023, the company lost 8,931 million pesos and added 150,000 users with a goal of one million customers by 2025, according to data obtained via transparency. This has led the company to estimate that it will achieve business profitability in remote areas within 20 years, while in larger markets it would achieve it in a decade, revealed a source with knowledge of the matter but who asked not to be identified.
The main intention of the initiative is to modify the mode of operation of CFE Telecomunicaciones, but also to prevent it from being forced to make its finances of the connectivity project transparent. Until now the company has avoided sharing information with the regulator itself about the progress of its project, arguing that “it cannot be forced to deliver reports.” The only resource that has served to access the operational and financial details of the company is transparency, but it is also one of the autonomous entities that the president seeks to eliminate.
“The figure of public companies, before former President Enrique Peña Nieto changed them to the State productive regime, sought to privilege the political over the economic and I think that is one of the reasons for this reform,” said Ojeda.
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