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'The zero interconnection rate dispute will put the telecoms reform to the test'

BnAmericas By Wallace Porter
Friday, July 14, 201


After 22 years providing Mexican businesses with unified communications, C3ntro Telecom is considering entering the telephony market as a mobile virtual network operator (MVNO). BNamericas spoke to Simón Masri, the company's CEO, to find out more about the initiative and why C3ntro plans to use Mexico's wholesale network Red Compartida to launch its MVNO. Masri discussed his company's plans, as well as his view on the current state of telecom infrastructure in Mexico and the corresponding regulations.


BNamericas: You've said previously that Mexico has a deficit of telecoms infrastructure.


Masri: Companies are investing, but they could invest 10 times more. The country has some 40,000 base stations when it should have at least 200,000 given its population. Better-connected countries have millions of base stations.


In terms of fiber optic, companies invest in cities that are already well-served. However, they should invest in both metropolitan and long-distance fiber connections in cities that still lack this kind of access.


The country is short in these elements, as well as datacenters for medium and small-sized cities and internet exchange points, which have not reached their ideal point of maturity. 


BNamericas: How much do you expect the situation to change once the national backbone network goes online?


Masri: The backbone will be available for mobile and fixed operators, but we would still have to build the metropolitan rings needed to connect all the access points in [power utility] CFE's fiber network. In addition, this fiber network has three threads, whereas some countries have a couple of hundred threads per route.


The backbone will create new services for businesses and will also allow the connection of base stations belonging to mobile operators. It's a good network, but it doesn't have enough redundancy. It would have to be complemented not just with branches, but also with other redundancies to make it reliable.


BNamericas: Would the situation be better if the preponderant economic agent [PEA] shared its passive infrastructure as mandated?


Masri: Deploying telecom infrastructure requires time, as obtaining federal, state, and municipal permits isn't an easy process. The procedures aren't standardized across the different levels of government, so it also requires a lot of administrative work. Infrastructure also requires investments, which impacts timeframes.


The rule that calls for the PEA [América Móvil] to share its infrastructure at fair market prices is a good initiative. However, this player doesn't have an incentive to do so and it's not in its best interests. It offers the services to comply with an obligation, not to improve the country's telecom services.


We have to keep in mind that the regulation is rather new and the industry is still testing local-loop unbundling and the sharing of telecom infrastructure, ducts, poles and government sites.


Furthermore, technology evolves quickly. When these mechanisms where implemented in other parts of the world, the sector relied on copper wire, but now everything has moved to fiber optic. Therefore, the regulations should be adapted to the technology and the needs of the concessionaires that will use the passive infrastructure, and the PEA should comply with such a framework.


BNamericas: What would be the impact of the elimination of the zero interconnection rate on the telecom sector?


Masri: This dispute could put the telecoms reform to the test four years after its enactment. It could be a turning point for the telecom sector and the Mexican economy in general.    


The supreme court could rule in favor of Telcel, which would be a well-founded ruling, but that would leave end users unprotected from increases in the price of telecom services.


The situation has led national and foreign operators and investors to hit the pause button, as they want to see the outcome before defining their strategies.


AT&T and Telefónica are worried about the outcome because it could increase their network interconnection costs exponentially and they wouldn't be able to pass down the cost to their subscribers, as their service plans have already been launched. In turn, these operators' finances would be negatively affected to a large degree.


The court's resolution could change many things in the industry, especially the projects in which companies are currently investing, so it's a key matter for the sector's future.


BNamericas: What is prompting your company to launch an MVNO service?


Masri: Unified communications are our core business and we cater to medium-sized and large companies, a market that is quite neglected. Traditional operators serve the country's 500 largest companies, so there's an opportunity to add value through technologies such as the cloud and business models based on managed services.


Based on our experience in this market, we want to integrate mobile telephony services with the unified communications we already provide.


At the moment we're waiting to see Altán Redes' offer to determine the business model we'll use to launch our MVNO using the wholesale shared network Red Compartida.


We think there are many opportunities, even though few MVNOs have been successful in Mexico. The issue isn't related to technology or prices, since Mexico has some of the most competitive mobile prices in Latin America. A successful launch depends on the niche market and the business model.


BNamericas: Why did you decide to wait for Altán's offer instead of using a traditional operator's network?


Masri: It came down to coverage and competitiveness. Prices and the costs of unbundling a mobile network are still too high to launch a competitive offer.


Both Telefónica and Telcel have offers for MVNOs but these aren't flexible enough and don't allow the unbundling of many elements in the network. In addition, the continuous drop in the price of mobile services complicates most business models.


Given these factors, we're waiting for Altán to publish the commercial offer for the use of the Red Compartida so that we can assess them and prepare the necessary investments.