Red Compartida — ready for business
Mexico is in the middle of rolling out Red Compartida, one of the world’s most ambitious mobile broadband network projects.
In 2013, Mexico, faced with a very non-competitive telecommunications sector, took the extraordinary step of amending its constitution to include a measure that would ensure true independent competition would be brought to the country. That a nation would need to go so far as to implement constitutional change to improve telecommunications gives a clear indication of what the situation was like.
Thus was born Red Compartida, a national 4G-LTE network that would be operated on a public–private partnership basis, with a completely independent wholesale operator charged with ensuring the provision of telecommunications services that would progress the public interest. Importantly, the aim is to provide mobile broadband services to almost the entire country, including smaller and rural communities that had been overlooked by the incumbent providers.
Red Compartida is seen as being more than just another mobile phone network — it is a piece of national infrastructure that is vital to the nation’s economic and social development.
To find out more about Red Compartida, its status and how it will work, we spoke with Isabel Prieto, Corporate Director (in charge of institutional relations, regulatory affairs and legal strategy) at ALTÁN Redes, the network’s wholesale operator.
Why was there a need for a new network such as Red Compartida?
Today, Mexico has over 40 million people with no access to broadband internet services, which represents approximately one-third of the Mexican population. The government identified the need to break the duality, which on the one hand is a modern country of ‘the connected’ — with access to quality broadband services primarily in urban and suburban centres — and on the other hand, a country with limited or non-existent broadband services, particularly in communities with fewer than 10,000 inhabitants. This digital gap between Mexicans limits the digital capabilities and inclusion (financial, social, educational, health) within the society. Red Compartida intends to increase access to and penetration of broadband services.
Furthermore, Mexico has a predominant mobile operator that controls nearly 70% of the mobile market, so there is a strong need to promote competitiveness in the market to accelerate the trend of providing better services and prices for the end users through a neutral, wholesale, shared network. This new entity would benefit both existing operators by reducing the capital expenditure requirements to cope with the exponential growth in data consumption, as well as incentivising new entrants such as MVNOs or existing cable and internet providers to provide and bundle mobile services.
Can you describe the public–private partnership?
The public–private partnership agreement (PPP agreement) contemplates the design, deployment, operation and maintenance of a wholesale mobile network by the developer, which in this case is ALTÁN Redes (ALTÁN). ALTÁN was awarded the PPP agreement in November of 2016 (and eventually signed in January of 2017), since it was the only bidder that met both the technical and financial requirements set forth in the tender and offered a coverage of 92.2% of the population (well above the 85% minimum required). The company is composed of leading international institutional investors, international and local pension funds, international and local investors, and leading Mexican cable operators. The PPP agreement was awarded through an international public tender organised and led by the Ministry of Communications and Transport.
The PPP agreement includes the exclusive use of the full 90 MHz of the 700 MHz spectrum (Band 28) and approximately 25,000 km of a pair of optical fibre lines of a nationwide backbone network from the state-owned electricity company (CFE). Supervision and oversight of the Red Compartida project is the responsibility of Promtel, which is a decentralised government entity. For the fibre optic lease, TELECOMM, which also is a decentralised government agency, is responsible for its oversight.
How is the project being financed?
The project is fully funded with US$750 million in committed equity and approximately US$1.5 billion in committed debt. ALTÁN’s financing received several awards from recognised institutions as it represents one of the most important infrastructure projects in progress worldwide.
ALTÁN’s technological partners (Huawei and Nokia) provided US$800 million in long-term financing, and CAF, a multilateral development bank for Latin America, provided a further US$50 million in long-term financing.
Finally, the Mexican Development Banks, which include Banobras, Nafinsa and Bancomext, provided a stapled long-term financing package of MXN13 billion, in addition to a liquidity line of up to MXN4.75 billion.
How will the wholesale nature of the system operate?
Capacity is sold to customers under non-discriminatory conditions. The PPP agreement outlines the requirements for ALTÁN, which include: (i) the coverage milestones that need to be met by set dates and reaching 92.2% by 2024, (ii) the guarantee of a minimum quality (assured up-link and down-link at peak traffic hours at cell edge outdoors), (iii) a non-discriminatory commercial reference offer and (iv) 4G-LTE Advanced continuity in all of the network’s footprint. We are not permitted to sell directly to the end user, but rather through our over 30 customers to date. This guarantees that we are a truly neutral and non-discriminatory wholesale network that only seeks its clients’ success (we always say that their success is our own).
The wholesale products and services available are offered through an approved commercial Reference Offer that is contracted under non-discriminatory policies — all clients have the same prices and conditions; any modifications are communicated to all equally.
We have created tailored solutions for better integration with our clients, which include wholesale packages for home broadband (HBB) services that have been very successful as it is a plug-and-play solution for high-speed wireless internet for homes and small businesses; and wholesale data plans for mobile services for MVNOs and new convergent offerings (quadruple play). We constantly say that we aim to produce the most efficient GB in the market.
Which factors were vital in helping ALTÁN Redes secure the contract?
Critical factors were the establishment of the proper legal framework and political support for Red Compartida. In 2013, the federal government, with the support of all the main political parties, enacted constitutional reform including wide-reaching changes to the Mexican telecom landscape. The Red Compartida project was included in the Mexican constitution and explicitly denied the participation of existing mobile network operators in Mexico from having a significant influence in its board. It enjoyed the support of all major political parties given the social impact of the project, as well as the need to modernise and incentivise the Mexican telecom sector.
Additionally, the tender required a population coverage commitment of at least 85%. This meant that the extensive expertise of our investors and managing team was needed, so an important consideration was the analysis and work performed by ALTÁN’s strategic partner, Multitel, a Spanish investor group responsible for the development of ONO, the successful broadband company that was eventually sold to Vodafone; and the strength of the shareholders — Morgan Stanley Infrastructure, International Finance Corporation (the private sector arm of the World Bank), the China-Mexico Fund, international and Mexican pension funds, Mexican cable operators and private investors. It also required ALTÁN to secure a US$50 million bid bond.
What is the status of the project, and what developments are expected for 2019?
We met and surpassed our first milestone obligation on 21 March 2018, covering 32.2% of the population and surpassing the 30% milestone (this represented 36 million people across 12 cities and over 1900 towns and villages). We presently cover over 40 million Mexicans. During the second half of 2019, we expect to reach the 50% population coverage milestone, reaching nearly 60 million people across 30 cities, with 14 million of those people living in communities with fewer than 10,000 people. The obligation set forth in the PPP agreement requires ALTÁN to reach the 50% milestone by January 2020. In addition, we are already designing the 70% milestone, which is due by January 2021.
Since March of 2018 when the commercial activities commenced, we have signed with over 35 clients. We have dynamised the competitive nature of the telecom sector with the development of product niches in the market such as HBB (an appealing product for cable companies to complement their existing offering) as well as new MVNOs for educational, security and social purposes. The strong interest of companies entering the telecom market is proven by the 156% increase of new permits granted since 2016.
What are the Pueblos Mágicos, and why are they important?
Pueblos Mágicos (or Magical Towns) is a program developed by the Tourism Ministry in 2001 with the support of other government agencies that recognises towns with fewer than 20,000 people that have protected cultural and historic traditions, indigenous past, colonial legacy, natural environment and biodiversity. There is currently a total of 122 Pueblos Mágicos across Mexico.
Although these Pueblos Mágicos receive thousands of tourists each year, and they are relevant economic drivers in their respective regions, they seriously lack telecommunications infrastructure and connectivity that can benefit their residents and their visitors.
In a recent study by Promtel on the positive effects detected from the launching of Red Compartida, it was confirmed that in seven of the current 33 Pueblos Mágicos covered by ALTÁN, ALTÁN’s LTE network is the only network serving them with high-speed connectivity (in most cases they only had 2G connectivity).
Who are the major technology suppliers?
We have two main technology providers responsible for the radio access network deployment: Nokia and Huawei. To comply with the milestones in such a short time span, we needed two vendors with proven experience and capacity. We gave each vendor a different mobile region — Mexico is divided into nine regions; Nokia has the north regions, Huawei has the centre and south regions — and elements of the network (core and NOC by Nokia). By doing so, we have created an optimal balance between both and no specific dependence. Both providers have fulfilled their tasks to date with satisfactory results.
Our network has deployed the latest LTE-Advanced version (Release 13), which already has some 5G capabilities, so we are ‘5G ready’. The network is completely virtualised (cloud-based) so client integration is simpler and faster, and we have the ability to migrate seamlessly to new technologies. The network is presently 85% connected through fibre optics, which is essential for the migration to a low-latency environment of 5G.
Will Mexican government agencies use Red Compartida?
Any agency (government, NGO, public entity), companies and even individuals (ie, app developers) can access Red Compartida through an existing client to deliver services to their current and potential end users, develop an MVNO or integrate through an MVNE (enablers) model that works as an intermediary/access entity to the network. There are real opportunities of growth in the virtual operator and enabler models as there is still immaturity in the market for these types of entities (there was no real driver of MVNE development before the creation of Red Compartida).
Will there be call priority and pre-emption capabilities?
Red Compartida has the right to market services, to critical sectors and vital industries, that imply prioritisation of the network (‘call priority’), as long as such services are commercialised in a non-discriminatory manner, through a public reference offer (like any other ALTÁN wholesale service), and in compliance with the criteria that, ultimately, the Mexican regulator, IFT, issues regarding the net neutrality. It is important to point out that Mexican legislation does not allow, under any circumstance, pre-emption capabilities.
Will Red Compartida work with the government’s IRIS Tetrapol system?
ALTÁN has met with the authorities and the people in charge of IRIS, as well as other providers of connectivity services to the security agencies. They are all interested in integrating with Red Compartida, as it has the latest 4.5G technology and is ready to migrate to 5G. In addition, no network provider today provides a nationwide LTE network, as will be the case with Red Compartida. The federal government strategy is to migrate to a completely digital IP network, compatible with the different networks currently in use since not all use the IRIS Tetrapol (some use P25, Harris, satellite).
What’s one thing we might not know about Red Compartida?
A curious fact for your readers: ALTÁN means “to communicate” in the Mayan language (a’al + t’aan), so we have the pride and mission for our country in our name.
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