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The Mexican Federal Judicial Power confirmed both the legality and constitutionality of the public bid process known as “Red Compartida”

Authors: Rafael Tena y Alfonso Pagaza

As a result of a constitutional amendment, published on June 2013, the Ministry of Communications and Transports of the Mexican Government had the obligation to ensure the implementation of a Public Shared Network (“Red Compartida”) that uses the spectrum released by the transition to digital television.

Acedo Santamarina, S.C., was hired to provide its advice on the public bid process that awarded the Public Private Partnership contract to operate this network. The bid process ended with the signature of the Public Private Partnership contract on January 2017.

After more than three years of litigation, on June 28th, 2020, the Second Collegiate Court on Administrative Matters, Specialized in Antitrust, Broadcasting and Telecommunications, with residence in Mexico City and jurisdiction throughout the Republic, confirmed both the legality and constitutionality of the public bid process.

The judges decided unanimously that the Ministry of Communications and Transports of the Mexican Government acted in a legal and constitutional way during the public bid process that awarded the Public Private Partnership contract to operate this network to Altán Redes.

It is worth noting that in the case at hand the First Chamber of the Mexican Supreme Court of Justice denied the constitutional protection (“juicio de amparo”) against Articles 51, 52 y 53 of the Law of Public Private Partnership, as well as Article 84, Section I of its Regulations.

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Possible reforms related to streaming services

On September 12, 2019, Senator Ricardo Monreal Ávila, a member of the MORENA parliamentary group, filed before the Senate an initiative to reform the Law on Value Added Tax and the Federal Telecommunications and Broadcasting Law.

Regarding the Law on Value Added Tax, the initiative aims to tax users of streaming platforms with Value Added Tax.

Regarding the Federal Telecommunications Law, the initiative has two purposes: i) include as a requirement for the provision of restricted television and audio services over the Internet, from the national territory or from abroad, authorization by of the Federal Telecommunications Institute; and ii) that the streaming services guarantee that at least 30% of its catalog is made up of national production.

On March 18th, 2020, the initiative was approved by the Senate Finance and Public Credit and Legislative Studies commissions, and yesterday was listed for approval in plenary of the Senate. However, the Senators decided not to vote the initiative during this session, so it will be passed for discussion and approval in September, with the beginning of a new ordinary period of sessions.

We will continue to monitor the progress of this initiative and we will keep you informed. At Acedo Santamarina we have a consolidated telecommunications practice, and we are ready to provide our clients with solutions adapted to their needs.

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Publication of the Provisions to allow Telecommunications Service Providers access to facilities and rights of way of the National Electric System

On October 29, 2018, the General Administrative Provisions were published in the Mexican Official Gazette to allow Telecommunications Industry Service Providers access to facilities and rights of way of the National Electric System (“Provisions”).

The objective of these Provisions is for Telecommunications Service Providers (“PST”) to have access to more than 11 million Federal Electricity Commission (“CFE”) poles and National Electric System (“SEN”) rights-of-way, which will stimulate competition, modernize and encourage the use of new technologies.

This will be possible because the CFE has a supporting infrastructure in urban and rural areas of the country, which are able to reach 98% of the population. As a result, the coverage of telecommunications services will be extended through the CFE’s electricity distribution network (“Network”).

The area of opportunity of these Provisions is to improve infrastructure sharing practices, since it reduces development costs and leads to a better price for end consumers.

In order to grant access to the facilities and rights of way of the SEN, the Access Providers (“Provider”) shall process the requests through the order of priority with which they were received through the Electronic Management System (“SEG”), an electronic platform developed by each Provider in which it will receive, process, register and respond to the requests for access to the facilities and rights of way of the SEN. In the event that there is insufficient access capacity for applicants, the Provider shall give alternatives such as building additional infrastructure or conducting an auction-type award mechanism. Therefore, these new provisions allow PSTs to enter into a contract directly with Providers and the current procedure based on the un-objective and functional guidelines developed by the CFE is eliminated. This means that the requirements, rights and obligations are clearer and provide greater legal certainty for PSTs.

The PST that have a contract in force at the entry into force of these Provisions and have infrastructure installed in the Network, shall cover an annual economic remuneration to the Provider of $100.84 MX per post, as long as the infrastructure used for the provision of the service exceeds the weight limit established corresponding to 250 kg/km. In addition, they may retain the additional weight for a period of up to 10 years.

As for the calculation of the fair remuneration for the deployment of infrastructure and equipment according to the Provisions for the PST, this will be $6.544 MX per kilogram. These calculations are based on mathematical formulas, also, it will be necessary to pay the cost of the access study, which will be $100.02 MX per post for each PST and is charged for one time. This encourages companies to adopt lighter technologies, because the lighter the infrastructure, the less they pay.

As established in the Fifth Agreement of the Provisions, they will enter into force on January 1, 2019.

Source consulted: Energy Regulatory Commission

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