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October 26, 1995 INTERNATIONAL BUREAU ISSUES SPECIAL REPORT ON MEXICO The International Bureau today released a Special Report on Mexico: 1995 Federal Telecommunications Law and Reorganization of Secretaria de Comunicaciones y Transportes (SCT). The Report analyses the reorganization of SCT, the Mexican Telecom regulator, and the new Mexican telecommunications law. It was prepared by the International Bureau's Planning and Negotiations Division. The Report is the first of a series intended to help guide Commission policy, and to assist U.S industry and consumers. This is the first time the Commission has issued an analysis of foreign law for use by industry and consumers. The analysis is based both on the text of the statute and discussion with Mexican officials. Mexico is the second most important trading partner of the U.S. Mexico is now undergoing significant legal and regulatory changes preparing for increased liberalization of the communications industry. Understanding these changes is critical for the Commission in the negotiation of border frequency sharing arrangements as well as in the development of international policies that affect both countries. Knowledge of the changing Mexican legal and regulatory regime also is criticial to U.S. industry which does or wishes to do business there. Some of the more important features of the new Mexican legal framework noted in the Special Report include: 1) amendment of Article 28 of the Mexican Constitution to permit privatization of, and encourage competition in, the Mexican satellite industry; 2) increase of foreign ownership limits to 49% for most services; 3) establishment of new spectrum use categories and specification of corresponding spectrum authorization requirements (e.g., "concessions" required for public telecommunications networks and spectrum use, "permits" generally required for resale services and transmitting earth stations, and "registration" required for value added services); 4) elimination of restrictions on services that can be provided by competitive public telecommunications networks including provision of long distance services after August 10, 1996; 5) authority for use of auctions to grant concessions for any non-governmental frequency use; 6) deregulation of receive-only earth stations; 7) adoption of open architecture principles for network interconnection; and 8) establishment of non-discriminatory tariffing principles. The new telecom law also provides that a new regulatory authority, independent from the SCT, shall be created by presidential decree no later than August 10, 1996. The Special Report also identifies the current structure of the reorganized SCT, which now includes the Subsecretaria de Comunicaciones y Desarrollo Tecnologico (SCDT) (Subsecretary of Communications and Technological Development) headed by Carlos Casasus. SCDT is divided into four General Directorates: 1) Networks and Radiocommunications, 2) Broadcasting Systems, 3) Telecommunications Policy and International Negotiations, and 4) Spectrum Administration. There is also a separate office for International Relations Coordination. The Bureau's Special Report on Mexico will be followed in the near future by a series of additional reports on a variety of emerging international issues. Inquiries concerning the Report may be directed to Aileen A. Pisciotta, Chief, Planning & Negotiations Division at (202) 418-2150. -- FCC --
INTERNATIONAL BUREAU PLANNING STAFF __________________________ SPECIAL REPORT MEXICO 1995 Federal Telecommunications Law and Reorganization of Secretar¡a de Comunicaciones y Transportes (SCT) Scott Blake Harris Chief, International Bureau Aileen A. Pisciotta Chief, Planning & Negotiations Division Prepared by Joslyn Read October 1995
PREFACE The Planning and Negotiations Division of the International Bureau is responsible, among other things, for conducting technical negotiations with Mexico on a broad range of issues. In the course of these activities, we maintain daily contact with Mexican regulatory officials in the Secretar¡a de Comunicaciones y Transportes (SCT). Our frequent contacts have given us unusual opportunities to obtain information about recent important changes in the telecommunications law and regulatory framework in Mexico. We are issuing this Special Report to make this information more broadly available. In particular, we have obtained and reviewed the new Mexican Telecommunications Law, which was enacted in May 1995 and came into force in June 1995. The attached report provides a quick summary of some of the more important provisions of this new law, which introduces significant liberalization into the Mexican telecommunication legal framework. Copies of the new law, in Spanish or English, are available on request. We also have closely followed significant internal reorganizations within SCT. The attached report reviews the main features of this reorganization and the redistribution of responsibilities among four new general directorates: 1) Networks and Radiocommunications, 2) Broadcasting Systems, 3) Telecommunications Policy and International Negotiations and 4) Spectrum Administration. Direct contact information for the officials named is also available on request. This report was prepared by Joslyn Read who, at the time of writing the report, was Chief of the Division's Negotiations Branch. Please feel free to direct any inquiries on this material to me at 418-2150. Aileen A. Pisciotta Chief, Planning & Negotiations Division
MEXICO 1995 TELECOMMUNICATIONS LAW AND SCT REORGANIZATION
International Bureau Planning & Negotiations Division October 1995 Since January 1995, Mexico has taken a number of significant steps towards increasing competition in its domestic telecommunications market. Fundamental to these steps is Mexico's decision that individual and corporate initiatives and investments are critical for national development, and for the country to keep pace with the global economy. Starting in mid-January 1995, the Mexican Congress agreed to President Ernesto Zedillo's proposals to amend Article 28 of the Mexican Constitution in order to remove satellite communications from the list of strategic areas in which the Mexican Government is required to hold a monopoly, and thereby facilitate the privatization of Telecomunicaciones de Mexico, the national satellite carrier, in the future. In May 1995, the Mexican Congress passed a dramatic new telecommunications law which introduced broad opportunities for competition and new entry (domestic and foreign) into the domestic telecommunications market. To further cement the changes, in June 1995, a full reorganization of the Mexican Secretar¡a de Comunicaciones y Transportes (SCT), the Mexican telecommunication regulatory agency, was approved by President Zedillo and implemented. The highlights of each of these legislative actions are described below. 1995 Satellite De-Monopolization In 1983, satellite communications was incorporated into the Mexican Constitution as a "strategic area" to be developed and controlled exclusively by the Mexican Government (both space and ground segments). In 1989, this broad-based responsibility was redefined to encompass only the installation, operation, control and exploitation of the space segment, while private investors were permitted to establish and operate related terrestrial infrastructure, except for international links. By late 1994, with the growth in demand for domestic satellite capacity, the imminent launch of the new Morelos satellite series, and expectations of moving the nation quickly into the high technology world, the Mexican Government decided to open investment and operational opportunities in Mexican space segment facilities to private investors. The President's amendment to Article 28 of the Mexican Constitution was passed by the Congress on January 16, 1995, and entered into force on March 2, 1995. In essence, the amendment converts satellite communications from being a "strategic" activity reserved exclusively for the State to a "priority" activity where private investors may participate and compete. The following principles were also outlined: (1) The Mexican Government will maintain leadership in satellite communications with the objective of safeguarding, at all times, the security and sovereignty interests of Mexico; (2) Individuals may participate in the "establishment, operation, and exploitation" of satellites, through concessions which are granted by the Federal Government, with the understanding that the orbital positions and corresponding frequencies will stay under the control of the State; (3) The development of satellite communications will take place in an orderly manner, in accordance with the corresponding international laws and treaties. The provision of efficient and accessible services should be fostered at the same time; (4) At all times, competition in the sector should be encouraged, avoiding practices which restrict access to those services or that are discriminatory, against the interests of consumers; (5) The content of satellite transmissions should contribute to the strengthening of cultural values and to the symbols of Mexico's national identity; and (6) The availability of satellite capacity will be maintained for networks of national security and the provision of services of a social character, such as rural telephony and distance education. 1995 Mexican Telecommunications Legislation This law was passed by the Congress in May 1995, and formally entered into force on June 7, 1995. The SCT is required to follow up with a full set of rules, regulations and procedures for implementing and enforcing the principles of this legislation. The key elements of the new law include: * Foreign Ownership. The new telecommunication law permits up to 49% foreign investment (ownership of capital stock) for all services except for cellular telephone which may exceed 49% (unspecified limit), subject to specific permission by the National Commission of Foreign Investment. * Stronger Competitive Forces. The new law emphasizes a solid commitment to fair and strong competition between telecommunication service providers with protection for competitors against monopolistic market behavior. * Increased Regulatory Transparency. The new law introduces greater transparency in Mexico's developing telecommunication regulatory process, and imposes response times for the government to process service and other applications. Information about all holders of concessions and permits will be available to the public. * New Spectrum Use Classifications. Five types of spectrum use were defined in the new law: (1) Spectrum for Free Use. Frequency bands which can be used by the public without the need for a concession, permit, or registration; (2) Spectrum for Specified Uses. Frequency bands which can be used subject to grant by means of a concession; (3) Spectrum for Official Use. Frequency bands designated for the exclusive use of the federal, state and city governments, which will be authorized by direct assignment; (4) Spectrum for Experimental Use. Frequency bands which may be used under grant of a direct and non-transferrable concession to verify the technical and economic viability of technologies under development both in Mexico and in foreign countries, for scientific purposes or temporary equipment tests; and (5) Reserved Spectrum. Frequency bands not assigned. * New Service Authorization Requirements. Three types of authorizations were defined in the June 1995 legislation: (1) Concessions are required to use or "exploit" frequency bands in national territory (except those designated as "free use" or "official use"); to install, operate and exploit public telecommunications networks; to occupy geostationary orbital positions and satellite orbits assigned to Mexico, and to exploit their respective frequency bands; and to exploit the transmission and reception rights in frequency bands associated with foreign satellite systems which cover and can provide services in Mexico. Concessions will be awarded for spectrum frequency bands for specified uses. Concessions generally will be granted by means of public bids, except that for experimental uses they will be awarded directly by SCT. (2) Permits are required in order to establish, operate or exploit the commercialization of telecommunications services that do not constitute a public telecommunications network; and to install, operate or exploit transmitting earth stations. (3) Registration is required for the selling of value added services. * Flexible Service Provision Rules. Public Telecommunications Networks (PTNs) will be able to offer all types of services over their networks (unrestricted). Private telecommunication networks generally do not need authorization to operate, but will require a concession if they use radio spectrum or are used to provide commercial services. In general, new PTN concessions may not begin sale of basic long distance telephone service until after 10 August 1996. * Auctions Feasible. The new law gives the Secretary of Communications the authority to publicly bid all concessions, which may be granted for any non-governmental use of the frequency spectrum (including for satellite orbital positions and orbits, but excluding traditional radio and television). * Satellite Service Provision. Concessions may be granted to individuals or firms constituted under Mexican law for the right to transmit and receive signals associated with foreign satellite systems which cover and can provide services in Mexico to businesses organized under Mexican law, as long as (1) there are treaties on the subject with the country which has licensed the satellite, and (2) the administration of the country of the foreign satellite system contemplates reciprocity for Mexican satellites. International satellites established through multilateral treaties can also operate in Mexico. Domestic Mexican concession holders may sell satellite services in other countries in accordance with relevant laws of recipient countries. * Intellectual Property Rights (IPR). Concession holders which distribute signals in Mexico must respect the intellectual property rights of the programs they transmit. Holders of concessions to transmit/receive foreign satellite signals must ensure the same legal respect for intellectual and industry property rights. * Earth Station Operation. Permits are required for transmitting earth stations. No permit is required for the installation or operation of receive-only earth stations. * Value-Added Services. Value-added service provision only requires registration with the Secretary of Communications. * Interconnection. PTNs are required to adopt designs of open network architecture. Interconnection must: (1) be offered through disaggregated (unbundled) and non-discriminatory tariffs, (2) be available to all members of the public as defined in the concession, (3) be available at every switching point or other points where technically feasible, (4) permit resale, (5) provide all necessary billing information to users and resellers, (6) enable telephone number portability, and (7) permit the connection of terminal equipment, inside wiring, and private user networks. Interconnection networks must maintain separate accounting for services with disaggregated tariffs starting January 1, 1996. * Tariffing. Proposed tariffs, including those for interconnection, must be registered with the Secretary of Communications for public review. No discriminatory practices in tariffing will be accepted. Tariffs should seek to recover at least long-term average incremental cost. Interconnection tariffs must be registered and applied for beginning September 1, 1995. * New Independent Regulatory Organization. No later than 10 August 1996, the Federal Government must create an independent organization with procedures and operations which are autonomous from the Secretary of Communications and Transportation, and with the organization and facilities necessary to regulate and promote the efficient development of telecommunications in the country. The new regulatory entity will be created by presidential decree, and details on its design, jurisdiction and procedures are just now being developed. Reorganization of Mexico's SCT and SCDT The Mexican Secretar¡a de Comunicaciones y Transportes (SCT) is a broad ministry encompassing not only telecommunications, but also highways, railways, aviation, ports, and the national merchant marine. Within the SCT is the Subsecretar¡a de Comunicaciones y Desarrollo Tecnol¢gico (SCDT) under which telecommunications are regulated and controlled. The law authorizing SCT's reorganization entered into force on June 21, 1995. The following description of the reorganization and attached organizational chart are current as of October 1995. SCDT Undersecretary. Starting in late 1994, Carlos Casasus was appointed to the post of Undersecretary of SCDT. During the first half of 1995, he appointed four Director Generals in anticipation of the establishment of four General Directorates under the new law. Director General - Networks and Radiocommunications. Luis Miguel Alvarez. Responsibilities include to: ... Implement policies and licensing for, and oversee the provision of all radiocommunications and telephone network services - both private and public. ... Develop tariffing rules and procedures for radiocommunications and telephone networks, and register, modify or cancel tariffs, in coordination with the DG Telecommunication Policy. ... Integrate programs for domestic telecommunications development. ... Collect fees and control the rights relating to radiocommunications and telephone networks. ... Monitor the observance of the State's exclusivity in the provision of telegraph, post and satellite services. ... Foster development of rural telephone services. ... Implement reclamations, seizures, expirations, revocations, and abandonments related to telephone, radiocommunications, and other services. ... Inspect the provision of postal services. Director General - Broadcasting Systems. Starting in July 1995, Federico Gonzalez Luna. Responsibilities include to: ... Apply and monitor regulatory compliance for radio and television stations, as well as for cable television (CATV), "restricted" (or "limited") television and other similar services. ... Establish the technical characteristics, equipment, and devices which may be applied to radio, television, CATV and restricted TV systems. ... Establish measures to prevent non-compliance with the legal, technical and administrative rules, to advise offenders, and to impose, reduce or cancel sanctions. ... Authorize modifications to the operational characteristics of radio stations, restricted television, and other services. ... Advise on the exportation of equipment, devices, and material used in radio, television, CATV, and restricted TV signals. ... Implement reclamations, seizures, expirations, revocations, and abandonments related to radio, television, CATV, restricted TV and other similar services. ... Define and apply specific tariff policies, in coordination with the DG Telecommunication Policy. ... Assist, through research, improvements in service quality. Director General - Telecommunications Policy and International Negotiations. Dr. Rafael del Villar Aldrich, PhD. Responsibilities include to: ... Develop and propose the policies for the establishment and use of telecommunications services, radio, television, CATV, restricted TV, and other services. ... Develop coordinated programs and projects to foster new telecommunications services. ... Participate in the definition of policies for post and telegraph services. ... Carry out coordinated studies on the development of new telecommunications services. ... Publish the laws relating to available frequencies and channels for telecommunications services, radio, TV, CATV, restricted TV and other services. ... Manage the applications for concessions, permits, and authorizations for installation, operation, and exploitation of telecommunications, radio, TV, CATV, and restricted TV systems and services. ... Design and prepare the basis for specific tariff policies for the different communications and postal services. ... Sanction or approve telecommunication networks interconnection agreements. ... Propose coordinated positions of the SCT at international meetings; oversee compliance with agreements reached at those meetings. ... Participate in the preparation of the annual program to release, retire, or substitute postal stamps and franked forms. ... Formulate policies and directives for the preparation of telecommunications statistics in coordination with other parts of the Government. ... Negotiate and authorize all the actions which modify the operational characteristics of radio stations, restricted TV, and other services. ... Promote new strategies for private investors to participate in communications development. ... Conduct studies on the development of the postal services and postal shipments other than mail. ... Establish the positions of the SCT and define delegations for fora and international organizations specialized in communications, through inter-agency coordination, and comments from industry, service providers, associations and professional colleges. ... Survey international telecommunications markets, new technologies, and regulatory trends in order to inform other agencies in the Government and national public and private institutions. ... Coordinate international communications matters and efforts with the Secretariat of Foreign Relations, Commerce and Industrial Development. ... Coordinate and apply the procedures for obtaining and coordinating orbital positions and satellites. Director General - Spectrum Administration. Starting in August 1995, Dr. Enrique Melrose. Responsibilities include to: ... Authorize the assigned frequencies which correspond to all applications for concessions and permits and authorizations recommended by the DG for Telecommunications Policy and International Negotiations. ... Coordinate the allocation of frequencies and the use of computerized frequency management systems with the SCT Centers. ... Regulate the functions, develop appropriate objectives and goals, and evaluate the operations of the SCT Centers and Monitoring Centers at a national level in coordination with the competent administrative departments. ... Participate in international meetings in order to oversee agreements on the use of the radioelectric spectrum. ... Conduct studies on the use and development of the radioelectric spectrum; plan, register and monitor the functioning of radio (and TV) broadcasting, CATV, restricted TV and other services. ... Prepare and maintain the Public Spectrum Register, and develop the means to make it available and accessible to users. ... Conduct technical inspections on telecommunications service systems or networks which are subject to concessions, permits, or registration. ... Develop computer communications with SCT Centers. ... Assess the competency of technical personnel providing services, design, installation, and construction of equipment or instruments for operation in telecommunications systems subject to concession or permits; grant certifications and maintain a registry of telecommunications experts. ... Design and install the SCDT telecommunications network at a national level. ... Approve certification entities, test laboratories and validation units; issue such certifications. ... Recommend procedures for exporting franchise machinery. ... Establish the specifications and characteristics under which all systems, services, apparatus, and devices shall be subjected. .. Initiate reclamations, seizures, expirations, revocations, and abandonments of frequency assignments. ... Define tariffs for those activities under its responsibility, in coordination with the DG Telecommunication Policy. General contact information for SCT is: Secretariat for Communications and Transports Subsecretariat of Communications and Technological Development Ave. Universidad y Ave. Xola Cuerpo 6, 1er Piso Colonia Narvarte 03028 Mexico, D.F. Tel: (52-5) 530-3060 Secretariat for Communications and Transports International Relations Coordination Avenida Eugenia No. 197 Col. Vertiz Narvarte Del. Benito Juarez 03600 Mexico, Mexico D.F. Tel: (52-5) 669-0561
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Last updated Dec 1, 1995.