Pacto por Mexico – Telecom Reform Passed

On Monday, July 14, President Enrique Peña Nieto (EPN) signed the much-delayed telecom reform into law (full text of the reform here, in Spanish).

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EPN’s administration is fond of using infographics to communicate, and the telecom reform was no exception. The first of these infographics explained the ABCs of the reform: Assuring universal access to television, voice, and data throughout the country; Buenos precios (good prices); and Calidad de servicio y contenido (quality of service and content).

EPN’s next infographic describes the six pillars of the telecom reform:

  1. Strengthening fundamental rights – by protecting free speech and expanding access to information
  2. Upgrade the legal framework for the telecom industry
  3. Strengthen the institutional framework – through creation of Federal Telecommunications Institute (IFETEL) and Federal Competition Comission (COFECE)
  4. Promote competition
  5. Push for improved infrastructure
  6. Establishment of a Policy of Universal Digital Inclusion and a National Digital Agenda – so that 70 percent of all locations and 85 percent of all SMEs have access to high-speed internet

Another infographic described the main benefits to individual consumers provided by the telecom reform:

  • No more long distance charges starting January 1, 2015
  • The ability to change mobile providers for free, with no conditions, and within 24 hours
  • If a mobile service provider does not deliver quality service, consumers are entitled to bonuses and discounts
  • Free internet hot spots in 250K parks and public spaces
  • Ability to consult one’s cell phone balance at no cost
  • More competition in the telecom sector to generate more options and better prices
  • Prepaid cell phone cards will no longer expire in 2 months, and will last at least one year
  • Pay TV subscribers are entitled to watch open TV channels at no extra cost
  • No more phone calls from telecom providers promoting services, absent consent
  • Strong sanctions for businesses that obstruct competition

Some additional major changes:

  • Free speech – no blocking of content for national security reasons (except for in prisons)
  • Big brother – telecom service providers must provide authorities access to private user communications in order to ensure compliance with the law, including real-time geolocation data
  • Data retention – telecom operators must retain user data for 24 months, including name, communication type, origin and destination of communication, date, geographic location, etc.
  • Dominators – the law permits one dominant player in broadcast and another in telecom (i.e., cannot be the same firm).
  • IP protection – adds protection to retransmission of TV broadcasts
  • Increased penalties – from 6 to 10 percent of the bad actor’s revenue, with option of doubling the fine for repeat offenders; 5 percent penalty for content violations
  • America Movil broken up – the reforms indirectly caused Carlos Slim – owner of America Movil – to decide to sell off portions of his holdings, resulting in a split of his wired telecom provider (Telmex) and wireless provider (Telcel). This was the issue that garnered the most attention in the US and UK press, including allegations that IFETEL did not take a similarly tough stance against Televisa, whish is dominant in the broadcast sector
  • Videogame ratings – videogames may now receive a content-based rating like movies

Wins and Losses for Civil Society

The elimination of content blocking on ‘national security’ grounds was a major victory for civil society groups, but even more impressive are the final law’s provisions on net neutrality. Previously, the proposed reform allowed for content-based ‘fast lanes’ on the internet, which could allow service providers to ‘prioritize’ content for reasons contrary to their users’ interests (e.g., speeding up sites of affiliates or companies that purchase marketing packages).

Mexican civil society organizations flooded the Mexican Senate with letters opposing the ‘closed internet’ provisions in the former draft of the reform. The result of this effort is Chapter VI (Articles 145-146) of the final law, which explicitly addresses net neutrality. In short, this section clearly prohibits service providers from content-based ‘filtering’. It does, however, permit providers to take measures to administer their network traffic, but these measures will need to comply with ‘authorized policies’ of IFETEL and can only be aimed at ensuring the quality or speed of service for the user. Also, Art. 146 makes clear that providers are allowed to offer users different tiers of internet speeds (e.g., pay more for higher speeds), but these offers may not be content-based.

The provisions on monitoring and data retention were fought by civil society and privacy advocates, but ultimately remained in the final law. These organizations are now calling on the Federal Institute on Access to Information and Data Protection (IFAI) to intervene and challenge the monitoring and data retention provisions in court.

The organizations may have a point, although the obligation to cooperate with investigating authorities is probably less significant than it seems – I doubt any provider would refuse to cooperate with a lawful investigation under the preexisting legal framework. But the retention requirements in Art. 190 are quite broad and onerous. Providers need to construct a digital database to hold the retained data for 12 months “in systems that allow for real-time consultation and delivery to authorities.” After the 12 months have passed, the provider must retain the data for an additional 12 months “in a system of electronic storage … [permitting] the delivery of requested information to the authorities within 48 hours.”

The data that must be retained:

  • Name/business name and address of subscriber
  • Type of communication (voice, vmail, data, etc.) or other services (MMS, call forwarding, etc.)
  • Data necessary to trace and identify the source and destination of telephone communications (dialed number, number of lines on account)
  • Data necessary to identify the date, time, and duration of communication, messaging, data transfer, etc.
  • Date and time of the initial activation of service and the location ID where service was initiated
  • If applicable, identification and technical characteristics of the devices, e.g., international manufacturing codes, subscriber equipment
  • The geolocation data for all telephone lines

It is hard to imagine that any provider will be able to just manually drop all these data points into an Excel spreadsheet, and thus a semi- or fully automated system is necessary. Perhaps most service providers already collect this data and it’s just a matter of reorganizing it. More likely, it is going to be a big financial and logistical mess for them.

Also concerning is the retention obligation’s duration, which at 730 days is quite long and similar to the highly-controversial European Union Data Retention Directive (DRD), which the European Court of Justice overturned in April precisely because of the long retention period. In contrast, U.S. law only requires 180 days of retention, and only upon government request (i.e., no default duty to retain). The volume and duration of data retained, plus the urgency with which providers must respond to government requests, make it more concerning that the final law does not contain any judicial procedures for challenging government requests and no notification provisions for users. It will be interesting to see how IFAI reacts to the retention/cooperation provisions.

Takeaway for Foreign Providers

The telecom reform – like much of Pacto por México – is intended to stimulate foreign direct investment into industries that have been lagging behind due to insufficient competition and underdeveloped infrastructure. Although the oil industry is unique, all Mexicans with whom I speak perceive the quality and speed of telecom services up in the United States as better than those in Mexico and at a fraction of the cost.

One example: I purchased a simple local cell phone and a pay-as-you-go SIM card – nobody but family members know my number, and yet I receive around 10-15 unsolicited texts per day offering services I don’t want (even if I did want them, the text tells me to click ‘OK’ to purchase, but this is impossible because there’s no account to be charged on a prepaid plan). I am hopeful that harassing texts will be included in the prohibition on unwanted marketing by providers.

The reform is also significant because it is already proving effective at breaking up one of the biggest market players, which is arguably responsible for the lack of competition over price and quality. No U.S. or European company is interested in entering a market with such stacked odds – but the telecom reform appears to be leveling the playing field.

Additional Resources:

A lot of the Mexican news sites have compiled useful pages (in Spanish) about the telecom reform. I recommend:

 

 

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One Response to Pacto por Mexico – Telecom Reform Passed

  1. Pingback: What’s Wrong with Mexico’s Economy – Informality | The Mexico Monitor

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