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Zero Rate: An issue to be resolved in Mexico’s Supreme Court of Justice

In the next weeks, the Second Chamber of Mexico’s Supreme Court of Justice…

(Suprema Corte de Justicia de la Nación – “SCJN”) will analyze, discuss and resolve on the various writs of amparo promoted by America Movil, against the prohibition to charge other telecommunications service providers for terminating calls on its network, also known as zero rate.

Zero rate is regulated in section a) of article 131 of the Federal Telecommunications and Broadcasting Law (Ley Federal de Telecomunicaciones y Radiodifusión – “LFTR”) that established the following:

Article 131. When the Institute considers that there are effective competition conditions in the telecommunications sector, it shall determinate the criteria according to which concessionaires of fixed and mobile public telecommunications networks shall enter into, as mandatory, agreements for the reciprocal compensation of traffic, without any charges for termination, including calls and short messages.

During the time when it exists a predominant economic agent in the telecommunications sector or an economic agent that has direct or indirect national participation of more than 50% in the telecommunication sector, measured this percentage, either by the number of user, subscribers, traffic in its networks or its used capacity according to the data available to the Institute, the fixed and mobile traffic termination rates, including calls and short messages, will be asymmetric according to following:

a) Agents referred to in the previous paragraphs, will not charge the other concessionaires for the traffic that terminates in its network, and

b)…

In this case, America Movil, as a preponderant economic agent, cannot charge concessionaires that provide similar services for using its infrastructure for the termination of calls on its network.

One of the main objectives of the writs of amparo promoted is to declare the unconstitutionality of the aforementioned precept, as America Movil considers that Congress invaded the Federal Institute of Telecommunications (Instituto Federal de Telecomunicaciones – “IFT”) powers to regulate the telecommunication services rates.

This issue is of absolute importance in the light of the telecommunications constitutional reform because, if the unconstitutionality of section a) of article 131 of the LFTR is declared, America Movil may, among other things, request the payment of what it ceased to receive for said prohibition and it will be able to charge from now for the termination of traffic on its network.

There are opinions that consider a resolution in this regard as a serious blow against the telecommunications reform and its effects, having serious consequences for competitors and users, and reversing the price reduction for telecommunication services, as well as the preponderant economic agent’s possibility to increase its power in the market by displacing other telecommunications service concessionaires.

On the other hand, some parties consider that the telecommunications market would not be affected, since it opens the competitor’s possibility for investing in telecommunications infrastructure development, as well as considering IFT would regain power on its constitutional autonomy, which should impose the zero rate to the said preponderant economic agent and no the Mexico’s Congress through the LFTR.

Some legislators who participated in the telecommunications constitutional reform implementation have come to defense of the same arguing that Mexico’s Congress acted within its powers to issue laws on general channels of communication, information and communication technologies, broadcasting, telecommunications, including broadband and Internet, among others, in terms of the section XVII of the article 73 of the Political Constitution of the United States of Mexico, it has even been argued that such zero rate does not have the nature of a rate to be imposed by IFT, but is an express prohibition in the LFTR as part of a public policy in the telecommunication sector.

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