USMCA: an important agreement for Mexico 5G network.

USMCA an important agreement for Mexico 5G network.

On July 1, 2020, the US-Mexico-Canada Agreement (USMCA), a trade deal that replaces the North American Free Trade Agreement NAFTA, comes into force. This agreement is crucial for the Mexican Telecom sector as it paves the way for Mexico to accelerate the deployment of the 5G network.

The US and Canada have been working on the deployment of the fifth-generation network. However, Mexico remains behind as it hopes to deploy its first 5G networks at the end of 2020. According to the Law firm CMS Law, the Mexican Federal Telecommunications Institute has planned to license 70 MHz of the 600 MHz band and 150 MHz of the 3.4 GHz band for fixed internet 5G deployment by the end of 2020. Moreover, Ericsson’s Mobility Report 2020 sates an estimated 50% coverage of the 5G network by 2025. Four major telecommunications operators- America Movil, Telefonica, AT&T, and Axtel- have shown interest in 5G deployment. Unfortunately, there are no public tenders for spectrum licenses in Mexico. An auction of 5G-ready 600 MHz was expected to take place in the second half of 2020. Mexican regulator IFT commissioner Arturo Robles said that the spectrum auctions do not take place during pandemics. Thus, the auction dates might be delayed, according to Developing Telecoms website.

The USMCA trade agreement includes three chapters – 18, 19, 20- related to Telecommunications, Digital Trade, and Intellectual Property respectively. The trade will secure telecom integration between the three signatories’ countries. According to the Mexico Telecom operators Country Intelligence report published by “Research and Markets” in September 2019, 5G is expected to be commercially available by 2021. The report also states that the mobile revenue will account for 45.5% of total telecom revenues in 2024. Jorge Fernando Negrete, president of the Digital Policy & Law Group and a member of Mexican Telecom regulator IFT’s advisory board said “With the trade agreement with the US and Canada, Mexico will join the most competitive area of the telecommunications sector in the world”, states BNamericas.

Chapter 18 of the USMCA aims to ensure competition between telecom providers, which will improve quality, and lower prices for the users. On the other hand, in light of economic growth, and the importance of digital trade, regulatory frameworks that improve consumer confidence in the sector are crucial. In addition, Chapter 19 sheds light on the importance of the creation of a telecoms committee to implement these regulations. Moreover, Chapter 20 comes to promote technological innovation and creativity, facilitate the diffusion of information, foster competition, and ensure an open and efficient market.

However, Chapter 18 contradicts the legislation proposed by Mexico’s senate majority leader Ricardo Monreal, states BnAmericas. In fact, Mexico aims to collect USD 4.3 bn from digital companies. Multimedia downloads, broker or intermediate services, online clubs and dating apps, and online education and testing are the four categories that have been added to Mexico’s tax framework.

Mexico has a low broadband and mobile penetration but the telecom sector has the potential for growth. According to Statista, the Mexican telecommunication sector is expected to generate revenues of 517 billion Mexican Pesos in 2020. In 2019, Telmex owned by America Movil revenue has amounted to 26.19 billion Mexican pesos, the highest revenues in Mexico.  Daniel Hajj, Chief Executive Officer of the company expected capital expenditures of 8.5 billion for 2020, according to Reuters. This investment will be allocated to deploy fiber in many markets including Mexico.

Regulations are crucial for 5G deployment. The USCMA is an important move for Mexico’s telecoms sector.