AT&T needs Telmex fiber optics to offer 5G in Mexico

AT&T urgently needs a fiber optic input to specify the 5G traffic which will soon generate its 21 million Mexican users, with its growing data consumption, and what consumers demand from other companies that also make use of its network.

It needs it clean, for the exclusive use of AT&T and its corporate clients, and one possibility of getting that fiber optic input lies in a spun off unit of Telmex, the dominant company in the fixed telecommunications segment in Mexico.

A report by the telecommunications equipment manufacturer Ericsson warns that by 2027, 60% of mobile traffic will originate from 5G networks and the remaining 40% will come from 4G-LTE. Ericsson believes that by 2027, 5G technology users will consume data equivalent to 41 Gigabytes per month, up from 11.4 gigabytes registered as a monthly average in 2021.

Analysys Mason, specialized in technology, media and telecommunications services (known by the acronym in English TMT), considers that 5G traffic will grow at a compound rate of 27% between 2021 and 2026 in America. In five years, there will be a greater need for ultra-fast mobile Internet for Internet of Things applications (IoT or Internet-connected things, such as self-driving cars) and augmented or virtual reality for mass and industrial consumption. This, calculates Analysys Mason, will be responsible for a growth in traffic.

That is why AT&T is interested in operating at least one pair of fiber optic wires. It needs to directly manage that infrastructure, according to its own business strategies and degree of investment, and not be subordinated to the parameters of a lessor that indicate how or when to light the so-called “dark fiber”.

Achieving this objective would be more viable since the existence of a wholesale company spun off from Telmex, say industry experts consulted for this article.

The AT&T’s Mexican operation suffers from this criterion, since even its ally Telefónica Movistar has a fiber optic infrastructure in Mexico, which it also leases to third parties through the High Quality Telecommunications Group (GTAC) that it formed with Televisa and Megacable a decade ago, and at that all these companies have invested 134 million dollars to make it attractive to third-party companies.

“Fiber is not important: fiber optics is essential. The large capacities that the 5G network allows will not be possible if the antennas are not connected to an optical fiber that has the same or greater capacity than the aerial section. Otherwise, a bottleneck would form between the antennas and the transportation network,” said Enrique Carrier, director of the consulting firm Carrier y Asociados.

The partition and sale of Telmex

AT&T sued the telecommunications regulator, the IFT (Federal Institute of Telecommunications) for the partition of its competitor Telmex, which offers telecommunications services in the fixed segment. AT&T proposed the division of that competitor into two different units and with different owners, to create a new company that exclusively serves end users, and another that is only dedicated to offering wholesale services to third-party companies.

In addition to AT&T, Izzi Telecom and Canieti, whose main affiliates are Totalplay and Megacable, also promote the idea of ​​breaking Telmex into two separate companies, as the only alternative to foster competition in the Mexican telecommunications market.

Unlike AT&T, Izzi Telecom and Canieti’s partners have a greater interest in the fixed market, because they compete directly against Telmex on a national scale in the segment, especially in the provision of broadband servicesand already own national fiber optic networks.

AT&T urgently needs its own fiber optic infrastructure and one way may be through a company spun off from Telmex that has that network.

A powerful argument to demand the spin-off is that América Móvil, Telmex’s parent company, pockets 70% of the mobile revenue received by the entire world every year. mobile segment, and that therefore the profitability for Telefónica Movistar and AT&T itself is reduced in the deployment of investments. In other words, this market concentration limits competition.

The networks of the future

5G technology will make everything faster, with greater precision and will enable the appearance of new services and products in various areas of life, but they will require too much support in fiber optic infrastructure and cellular antennas, hence 5G networks They will be the most wired in history and from now on demand notable investments in their deployment.

A report dated May 11 from the Federal Institute of Telecommunications states that Mexico needs 216,337 million pesos (12,000 million dollars) to complete the telecommunications infrastructure that the country needs as a minimum, mainly supported by fiber optics.

Telmex has 320,000 kilometers of recent generation fiber optic lines. In a simpler dimension, the Telmex fiber optic network is almost four times more extensive than the networks of Izzi Telecom and Megacable, and 2.4 times more extensive than that of Totalplay, data, all, as of March 2023. In the In the last ten years, Telmex has grown its fiber optic networks by almost 30,000 kilometers.

This infrastructure has allowed Telmex to maintain 21.5 million fixed broadband Internet and telephone accesses throughout Mexico, as of March of this year, and obtain quarterly revenues of 24,632 million pesos.

In April 2016, this outlet reported approaches between Axtel and AT&T to acquire or use Axtel’s fiber optic network by AT&T. Maxcom was also an option for AT&T. A few months after that date, Axtel entered a spiral of financial stumbling blocks and Maxcom was sold 96% to Transtelco of Texas. Between the two companies, they accumulated 45,000 kilometers of state-of-the-art fiber optics for that year, with which AT&T could not gain control.

“A network has the maximum capacity of its narrowest point. In this context, mobile operators have two paths: either deploy their own fiber to connect their antennas, which are multiplied in the case of 5G, or lease fiber from third parties,” said Carrier, from Carrier y Asociados.