Rafael del Villar

8/7/2019 Rafael del Villar

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Competition in theTelecommunications Sector in Mexico

April 2008


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Coverage of Telecommunications services have still not reached

its full potential. This Administration is promoting measures to

increase penetration of telecommunications services.

Fixed Telephony, 2006

(Lines / 100 inhabitants)

Mobile Telephony, 2006

(Subscribers / 100

inhabitants)

Broadband, 2006

(Subscribers / 100

inhabitants)

Switzerland 69.4 UK 116.4 Korea 29.3

Germany 65.5 Spain 106.4 Switzerland 26.5

Canada 64.1 Switzerland 102.1 Canada 23.6

UK 57.6 Germany 101.9 UK 21.7

US 57.2 France 85.1 France 20.9

France 55.8 Korea 83.8 US 19.3

Korea 56.0 US 77.4 Germany 18.1

Spain 42.4 Chile 75.6 Spain 15.4

Brazil 20.5 Brazil 52.9 Chile 5.9

Chile 20.2 Mexico 52.6 Mexico 3.4

Mexico 18.3 Canada 52.5 Brazil 3.1

Fuente: Unin Internacional de Telecomunicaciones


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Over the last year, there has been a dramatic fall in prices of close

to 30% in mobile telephony, due mainly to an increase in

competitive pressures. In other services more competition and

faster reduction in rates are needed, particularly in Internet access.

0200

400

600

800

1000

1200

Denmark

eden

Finland

Nor

ay

Luxemburg

Netherland

Germany

Island

SwitzerlandUk

elgium

Canada

Portugal

US

Austria

OECD

Irland

Poland

New

Korea

Hungary

Italy

France

Australia

Slovaq

Spain

Turkey

Greece

Czeck

Mexico

Japan

High Medium Low$USD, PPP

Source: OECD, Communications Outlook 2007.

OECD Basket of Mobile Telecommunications,October 2006


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Household Expenditure in Telecommunications Services as

percentage of Total Expenditure, by Population Deciles

I II III IV V VI VII VIII IX X

Total Comm unications 4.8 2.9 3.2 3.5 3.9 4.3 4.7 4.7 5.6 5.7 5.0

Local Service2/ 1.7 1.3 1.4 1.5 1.6 1.8 2.1 2.0 2.1 2.0 1.4

Long Distance Service 0.6 0.3 0.4 0.5 0.5 0.5 0.5 0.6 0.7 0.8 0.7

Mobile Telephony/3 1.9 0.8 1.0 1.0 1.3 1.5 1.5 1.7 2.3 2.4 2.3

Internet Service 0.3 0.1 0.1 0.2 0.1 0.2 0.2 0.2 0.3 0.4 0.5

TotalHousehold Deciles1/

1/ Accordin to its monetary income

2/ Includes telephone installation and local calls.

3/ Includes initial payment, equipment acquisition, prepaid cards and mobile telephony service payment.

Total communications expenditure includes public telephony and other services such as mail, tele raph,

public fax, beeper and others not specified.

Source:Own estimates based on Household Income and Expenditures National Survey 2006.

ICTs have an important share in households expenditure,

regardless of their income level.


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In order to reduce the income gap it is necessary that

Telecommunications Services reach the entire population.

0

10

20

30

40

50

6070

80

90

1 2 3 4 5 6 7 8 9 10 Tot

Decile

%

Telephony

MobileTelephony

Internet ess

Penetration of Telecommunications Services in

Mexico, by Population Decile

Source: INEGI, Household Income nd E penditure N tional Survey, 2006.


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Spectrum Auction ProgramFrequency

Band (MHz)

Total

BandwidthBlocks Geographic Area

1850-1910/

1930-199030 MHz

3 blocks of 10

MHzCellular Regions

1710-1770/

2110-217090 MHz

5 blocks of 10MHz

2 blocks of 20

MHz

Cellular Regions and

Basic Service Areas

3400-3700 150 MHz

2 blocks of 25

MHz

2 blocks of50

MHz

Cellular Regions andMunicipalities / Groups

of municipalities

71000-76000/

81000-86000

10,000

MHz

1 block Basic Service Areas

Competition will be fostered by making more spectrum

available.


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Auction Programs since 1996Program Year Service MHz Availability

1 1996 Mobile 3 Country wide

2 1997

Pay TV* 118 53% of the country

Fixed 200 Country wide

Links 6,270 Country wide

Mobile 120 Country wide

3 1998


Pay TV * 180 50% of the country

Mobile 7 Country wide

4 2000 Mobile 0.025 Country wide

5 2004 Mobile

20 30% del pas**

30 22% del pas**

40 Country wide

6 2008


Fixed *** 150 Country wide

Mobile90 Country wide

30 88% of the country

Usos

Program 1 Program 2 Program3 Program 4 Program 5 Program 6

1996 1997 1998 1998 2004 2008

Links 0 6,270 2,271 0 0 10,000

Fixed 3 200 0 0 0 150***

Mobile 0 120 62 0.025 90** 120

Other No Yes* Yes* No No No

* Pay TV auctions** obile service auctions which

include 30% of the country.***The inmediate use is fixed service,

however no restrictions existe forldeliverin mobile services in the

future..

This program is the most ambitious that has been published


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Indicators of tariffs, lines and traffic

999

i ed- o ile retail rate 2.5 2.5 2.5 2.5 2.5 2.5 2.25 2.03

Fixed-mobile 1.9 1.9 1.9 1.9 1.9 1.9 1.71 1.54

Mobile-mobile 1.9 1.9 1.9 1.9 1.9 1.9 1.71 1.54

Mobile-fixed 0.3 0.316 0.117 0.094 0.105 0.11 0.106 0.106

Mobile network2,5

7.7 14.1 21.8 25.9 30.1 38.5 45.1 56.4

Fixed network2,5

10.9 12.3 13.8 15 16.3 18.1 19.2 20.9

Mobile network3,5 5,152 10,975 15,919 19,990 26,386 38,188 50,236 73,000

Fixed network4,5

23,426 24,738 25,567 25,679 26,494 26,782 26,680 26,666

Number of lines

Network traffic

Interconnection rate1

1/Pesosper minute2/ Figures in millions of lines in service.3/ Millions of minutes.

4/ Millions de Telmex calls.5/ 2006 Figurescorrespond to estimatesupuntil December.

Source:Cofetel and Telmex

In order to effectively increase competition it is important to set

more efficient conditions in interconnection.


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0.20

0.270.340.440.51

0.5

7

0.5

9

0.65

0

.70

0

.70

0

.70

0

.71

0

.72

0

.72

0

.72

0.73

0.74

0.780.91

0.98 1.171.301.65

0.00

0.20

0.40

0.600.80

1.00

1.20

1.40

1.60

1.80

USUK r

D

rk y

r

y

r

c

rP

P

r

ry

(2001)

S

S r

s

A

sr c

z

ckR

.

S

v

R

.

Finland

Source: European Communities Commissions, European Electronic Communications Regulationand Markets 2006, march 2007. Peak-hour rates, adjusted by 85% factor (Exchange rate 1.3dollar/euro); FCC, Intercarrier Compensation and Retail Rate Regulation in the US; China andIndia: TRAI, Financial Analysis of Telecom Industry in India and China, june 2006.

Fixed Local Termination Rates in Selected Countries(US cents per minute)

Fixed local termination should be cost based and symmetric

for all carriers.


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Competition of backbone services has been enhanced by the

entrance ofElectric companies in the Market.

Count Utilit Compan Owne hipRelation with the a ent

Ele t icCompan

a k

Fibeit Fibe Collocation

Canada ENMAX Gove nment Ye (bu ine unit) Ye Ye Ye

Canada Telecom Ottawa Gove nment Ye ( ub idia ) Ye Ye YeCanada To onto H d o Telecom Gove nment Ye ( ub idia ) Ye Ye n.a.

US Edison Ca ie Solutions Private Yes (business unit) Yes Yes Yes

US FPL FiberNet Private Yes (subsidiary) Yes Yes Yes

Spain Ufinet Private Yes (subsidiary) Yes Yes Yes

France @rteria Government Yes (subsidiary) Yes Yes Yes

Irland ESB Telecoms Government Yes (subsidiary) Yes Yes Yes

Portugal RenTelecom Private Yes (subsidiary) Yes Yes Yes

South Africa Infraco (in project) Public-Private Non Yes Yes n.a.Central Ameri Newco (in project) Public-Private Non Yes Yes Yes

Spain Adif* Private Yes (business unit) Yes Yes Yes

Sweden Stokab* Government Non Yes Yes Yes

Telecommunications ServiceOfferings ofElectric

Companies in selected Countries

Source:Internet web-pages of the companies

*They are not related with electriccompanies, but with otherutilitycompaniessuch asrailwayin the

case of Adif and the local government in the case of Stokab.


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OECD basket of national leased line

charges 2 Mbps, August 2006

(000 USDPPP)

OECD basket of national leased line

charges 34 Mbps, August 2006

(000 USDPPP)

Fuente:OCDE, Communications Outlook 2007.

CFE entrance into the telecommunications market will lower

prices, particularly for internet access services.

0

10

20

30

40

5060

70

Czeck

ep

.

rea

olond

eic

o

Canada

ustralia

Japa

n

pain

Italy

OECK

France

ortuga

l

reece

elgiu

Turke

y

Irlan

d

er

an

y

Ne

Netherland

s

Austria

Lu

e

bur

g

Nora

y

Swede

n

en

ar

k

Islan

d-

50

100

150

200

250

300350

400

e

ic

o

Korea

Canada

Spain

Irland K

Italy

ortuga

l

Japan

France

OEC

Turkey S

Belgiu

reece

Austria

er

an

y

Den

ar

k

Lu

e

bur

g

Norwa

y

Island


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CFE entrance into the provision of Internet access will help to

lower the price disparity between rural and urban areas.

Leased Lines Prices for Internet Access (2 Mbps)

City Backbone Provider Monthly Rent

(MXN$)

Toluca, Edo. Mx. Bestel, Maxcom, Alestra $ 3,300

Len, Gto. Bestel, Maxcom, Alestra $ 3,300

Cd. Hidalgo, La Piedad,

Zitcuaro, Mich.

Telmex $ 6,000

Tenancingo, Edo. Mx. Telmex $ 6,000

Tapachula, Chis. Telmex $ 13,000

Salamanca, Gto. Telmex $ 18,200Cd. Altamirano, Gro. Telmex $ 20,971

Huetamo, Gro. Telmex $ 35,108

El Grullo, Sayula, Jal. Telmex $ 40,000

San Miguel de Allende, Gto. Telmex $ 58,650


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Local Call Revenue of the incumbent when its costumers make Long

Distance Calls and Calls to Mobiles

(Millions of Pesos per year, 2005 prices )

3 416

3 157

1 340

2 818 2 711

634

1 744

0

500

1 000

1 500

2 000

2 500

3 000

3 500

1

5

1

6

1

7

1

8

1 2000

2001

2002

2003

2004

2005

sta ce

a s t

M es

Source:Own estimates based on information reported by the Company.

mpet t w e a s mpacted y emp wer c sumers

Pract ces such as d u e sh u d e av ded.

Rafael del Villar

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