High rate, low reach: the price of spectrum affects your connectivity

The government proposal, issued through the Ministry of Economy (SE), implies that the bands that are suitable for 5G and even to increase 4G coverage, maintain the rates of the last three years without an inflationary update, translating into effects on the quality of the connectivity service and even price increases for consumers, experts warned.

Telecommunications operators in Mexico such as Telcel and AT&T They pay up to 88% more for the total cost of the bands and for the right to the radio spectrum, compared to nations such as Germany, Greece, the Netherlands and others in Continental Europe (such as Switzerland, Sweden, Austria and Denmark), according to data of the Federal Telecommunications Institute.

This situation means that Telcel and AT&T have to disburse between 7% and 20.4% of their annual income, respectively, to pay for spectrum bands, an input that is the backbone of operators to provide connectivity services and increase its presence in the country.

For example, only the annual payment for the rights to use the 600 MHz band amounts to 26,997 million pesos, while for the 800 MHz band it has a cost of 54,087 million pesos, in accordance with the quotas of the Federal Law. of Rights 2023.

For Ramiro Tovar, professor at ITAM and specialist in economic competition and telecommunications, the SE proposal is insufficient for an industry that has seen its finances pressured by the costs involved in allocating bands, and even more so at a time when operators require of new spectrum to develop the fifth generation of networks in order to satisfy the demand for connectivity, but also to give way to new business models.

“The government faces a fiscal deficit and in the face of this situation there was less possibility of lowering spectrum costs, so it chose to continue freezing the price of the bands, but this might not be good news for companies that have said they will not tender any more. spectrum as long as high rates are maintained,” Tovar said.

Expansión sought out AT&T to request a position on the Economy proposal regarding the spectrum, but it was not available; However, the company chaired by Mónica Aspe has been emphatic in ruling out its participation in a spectrum auction with the current prices. Telcel, for its part, told this medium that it will not comment.

In the country, Telefónica was the first company to give up its entire radio spectrum to avoid economic problems; it now operates under the AT&T network. While the latter is one of the firms that has had to give up spectrum bands such as 800 MHz.

This has resulted in the State failing to collect approximately 13,471 million pesos from 2020 to date and, as there are no new allocations of radio spectrum, it will not have greater collection in the coming years, according to IFT data.

Lower quality for connectivity services?

For the specialist, the return of the spectrum as well as the failure to acquire more bands is bad news for consumers. This would imply that companies do not increase their coverage of telecommunications networks, bringing with it impacts on the quality of the connectivity service.

Altán, for example, by hosting the traffic of several Virtual Mobile Operators (OMV), has seen its infrastructure ‘collapse’. The only way to solve the problem is to increase its network, but the company itself has recognized that since it is an expensive input, it could not meet that expense.

While large operators cannot reach more parts of the country, meaning that consumers in some areas do not have good reception to make calls or send messages.

“The industry is at a complex point because there are only two scenarios and both are not positive. On the one hand, if operators tender for more spectrum, companies could transfer part of the cost of the bands to connectivity prices, or not enter into any tender, but this would imply having degradations in services,” Tovar warned.

The GSMA has highlighted that if the cost of spectrum in Mexico were aligned with the global average, another five million Mexicans could be connected in Mexico, in addition to improving the connectivity service.

But the telecommunications industry is far from this scenario, and instead is expected to enter an environment of uncertainty with the almost imminent disappearance of the IFT and with it the spectrum auctions.

“If the regulator disappears, the bidding for 5G bands will be up in the air because now it is not known who will be in charge of this issue. In addition, there is the Altán factor, which, since it is practically a state-owned company, could have unequal treatment compared to other operators to obtain spectrum,” said Tovar.