This Is What Happens When a Government Runs a Cellular Network

Red Compartida was part of the Mexican government's 2014 telecom industry overhaul and was intended to end the monopoly enjoyed by Mexican tycoon Carlos Slim's América Móvil

• It has required taxpayer bailouts just to stay afloat and is a cautionary tale for advocates of nationalized or government-run networks worldwide.
• The telecom infrastructure industry is capital intensive by nature. A wholesale network that can only lease service and spectrum to external operators can't adjust its business plans to create sufficient commercial incentive for those operators to invest in coverage for remote or sparsely-populated areas.
  1. A wholesale network that can only lease service and spectrum to external operators can’t adjust its business plans to create sufficient commercial incentive for those operators to invest in coverage for remote or sparsely-populated areas — a key project goal.
  2. It did so even after receiving substantial subsidies from Mexican taxpayers and $50 million in additional credit from shareholders, with Altán Redes’s CEO citing liquidity shortages and an inability to continue the project without renegotiating company debts.
  3. From Declan Ganley to Eric Schmidt to Newt Gingrich, the proponents of this type of government-driven model consistently have little to no experience building networks, yet they promise a “quick fix” without a proper understanding of the complexities, technical challenges, and maintenance demands of mobile infrastructure.
  4. Mexican telecom regulator Instituto Federal de Telecomunicaciones (IFT) would contract for the creation of a state-of-the-art wholesale-only wireless mobile network backed by government subsidy.
  5. Clemson University spectrum expert Thomas Hazlett notes that external operator TelCel’s revenue share increased from 2017 to 2020 after its rivals Telefónica and AT&T were blocked from bidding for Red Compartida spectrum.
  6. In June 2022, Mexico agreed to bail out Altán Redes, turning the government into the company’s majority stakeholder in a “public-private partnership” that converts company debts into new state-owned shares.
  7. Mexico’s attempt at a government-run wholesale wireless communications network is the latest in a string of costly, inefficient, and ultimately disastrous government-driven communications infrastructure projects worldwide.
  8. U.S. policymakers in particular should take these lessons to heart, as a similar wholesale open-access model has been proposed by special interests with close ties to government officials in recent years.
  9. Private company Altán Redes was awarded the contract by the IFT in 2016 after a process mired by allegations from its rival, Rivada, that it had engaged in “improper and perhaps criminal” actions.
  10. Although the first part of the network went live in March 2018, deployment screeched to a halt by February 2022 after Altán Redes declared insolvency.
  11. Red Compartida was part of the Mexican government’s 2014 telecom industry overhaul and was intended to end the monopoly enjoyed by Mexican tycoon Carlos Slim’s América Móvil.
  12. The financing structure includes a $161 million injection from the Mexican development bank, $166.6 million from company suppliers, $10 million from clients, and $50.5 million from shareholders.

https://spectator.org/this-is-what-happens-when-a-government-runs-a-cellular-network/