MDC Newsroom
If you use social media you have probably come across the latest trend of the season, the “10 Year Challenge”, which involves people posting their then-and-now profile pictures to highlight all the changes they’ve experienced in the past decade.
In that spirit, here at MDC we have created a timeline that highlights Mexico’s significant digital transformation over the past decade ( including its rise to becoming the 10th largest country worldwide based on the number of internet users) that focuses in three major subjects: important reforms, Internet exchange and peering trends, and the growth of Over-the-top (OTT) services in the country.
Reforms
The last decade was a dizzying episode for telecommunications in Mexico. During this period we saw the transition between two administrations and witnessed one of the most impactful changes in power in the country’s history.
2014, Enrique Peña Nieta announces the Telecommunications Reform
In 2012, as the decade began, former President Enrique Peña Nieto took possession of the country and signed the so-called Pact for Mexico, which included the Telecommunications and Broadcasting Reform that aimed to improve competitiveness in the sector, reduce costs, and improve the quality of telecommunications services in Mexico.
For wholesale business, the most important aspect of this reform involved the “Shared Network” and the “Backbone Network” – two different but complementary initiatives.
Don’t forget to read: What President Enrique Peña Nieto leaves to Telecoms
2016, Altan Networks wins the “Shared Network” bid
Mexico’s “Shared Network” initiative was a commitment to deploy a wireless and mobile telecommunications service. The project was granted to Altan Networks based on a public-private partnership with the Mexican government.
Some important facts about the “Shared Network”:
- The “Shared Network” is expected to cover at least 92.2% of the population by January 2024 (+ 100 million users)
- In 2017, through a statement Altan Networks announced that Nokia and Huawei were the companies chosen to design and build the infrastructure.
- It is said that it will be the first network in the country designed since its inception to operate under the newly introduced 5G standard.
- As a technology partner, Huawei will be in charge of deploying in the central and southern part of the country, particularly for telecommunications regions 6 to 9 and in the backbone network.
- Meanwhile, Nokia will be responsible for deploying its technology in the north of the country, that is, from regions 1 to 5. It will also be responsible for the construction of the core of the network, which includes the Network Operations Center (NOC) and the Network Security Center (SOC).
We recommend you read: Analysis: The telecom sector in Mexico four years after the reform
2018, bids open to establish the bases for the “Backbone Network” operated by Mexico’s “TELECOMM-Telégrafos” agency
The “Backbone Network” project was assigned to the government agency “TELECOMM-Telégrafos”
(that controls and operates telegraph, satellite, radio-maritime and basic financial services) after the Telecommunications and Broadcasting Reform in order to bring internet connectivity to more end users and increase fiber coverage in the country.
When Peña Nieto’s administration led the project, the “Shared Network” was based on the enormous capacity of the Federal Electricity Commission’s (CFE) infrastructure and the acquisition of two pairs of fiber optic routes estimated to be 25,600 kilometers long.
You may be interested: The Troncal Network: Another telecommunications project in Mexico
“TELECOMM-Telégrafos” was tasked with the responsibility to plan, design and execute the construction as well as the growth of a national network of high capacity fiber optic cables. To accomplish this the agency launched two unsuccessful bids.
On August 14, 2019, the Ministry of Communications and Transportation (SCT) chaired by a new government administration suspended the last bid arguing that the project needed to be reconsidered to better align with the objectives of the National Development Plan of 2019- 2024.
2019, CFE the new internet provider offered by the Mexican market
With the change of administrations, the future of the “Backbone Network” took a turn. President Andrés Manuel López Obrador launched the ‘CFE Telecommunications and Internet for All’ project. It created a new internet provider by the federal government with its own legal entity and assets.
This project completely replaced the “Backbone Network” that Enrique Peña Nieto had introduced. Now the electrical networks of the Federal Electricity Commission (CFE) will be the conduit of the fiber optic lines with the aim to provide 95% of the Mexican population with internet services. “It has already been approved by the board of directors of the CFE, and the application is already being made to have the concession and to be able to provide the non-profit service to all those who live in the most remote communities of the country” stated López Obrador, President of Mexico.
The federal administration will use the fifty thousand kilometers of fiber optic from the National Fiber Optic Network, also known as the CFE Backbone Network, and plans to start activities by 2020, but the exact day and operational detail of the project has yet to be announced.
Do not miss: CFE, the new telecom player in Mexico
Peering
Despite the tremendous digital transformation Mexico has undergone these past 10 years, traffic exchange is one of the areas the country continues to struggle with. Back in 2012, as the decade was getting started, the Organisation for Economic Co-operation and Development (OECD) produced a Review of Telecommunication Policy and Regulation in Mexico that identified the country’s need to establish internet exchanges in order to improve overall efficiency, keep data local, and ultimately reduce costs. At that time, the OECD also identified Mexico as the only member state that did not have an internet exchange point.
Mexico’s first IXP
In the following years, a six-member association founded the Internet Traffic Exchange Consortium (CITI) and established the first IXP in Mexico that was hosted by KIO Networks. The founding members included:
- CUDI
- Kio Networks
- Megacable
- Nextel
- Redit
- Transtelco
This development marked a new era for traffic exchange in Mexico, or at least it was supposed to. By 2017 the OECD revisited the subject in its Telecommunication and Broadcasting Review of Mexico.
This new report, which acknowledges the many advancements and reforms that occurred in the country in the subsequent years since its 2012 study, bemoaned the little progress that was made in the internet exchange front. Despite establishing an IXP in Mexico City, traffic exchange remained very low in the country.
Peering with Mexico
In 2018, a new viable solution for peering with Mexican networks entered the market. MDC Data Centers, with headquarters in McAllen, TX (one of the key crossing points where Mexican carriers gather to interconnect to Tier-1 networks and content providers), launched the MEX-IX in partnership with Asteroid to improve cross-border interconnection. This MEX-IX’s membership includes:
- Axtel
- Bestel
- Akamai
- Cloudflare
As we move into the next decade, the MEX-IX remains the only IXP in the United States focused on peering with Mexico.
Be sure to read: The Mexican market and peering networks, a data-based analysis
OTT (Video, Music, Gaming)
Without a doubt, one of the most impactful changes Mexico has experienced in that past decade was the rise of over-the-top media services (OTT) like Spotify and Netflix that have effectively revolutionized the internet landscape. As of 2019, OTT TV and video revenue in Mexico reached 1.6 billion (USD). Mexico is expected to surpass Brazil as the largest OTT market in Latin America by 2022.
Video Streaming
In 2009, over-the-top video revenue in Mexico was estimated at 9 million (USD) and by 2019 that figure has dramatically grown to 1.6 billion (USD). This is a direct reflection of the growing numbers of video streaming that increased by 61% from 2013 to 2019.
Netflix made its debut in Mexico back in 2011 in direct competition with Blockbuster, SKY cable tv, Cablevisión, Totalplay, and Apple’s iTunes. While video streaming was still considered a niche market, by 2014 video streaming made up 70% of all internet traffic in Mexico. The surge in demand initiated what is now dubbed the “streaming wars” with a clear winner emerging.
With 68% of the market share, Netflix began its reign as the video streaming king in Mexico. In comparison, Claro Video, a subsidiary of América Móvil and the second-largest video streaming service in terms of market share, only held 10% of the market at the time.
For Netflix, Mexico became one of its most important markets. Since its debut in Mexico, the company focused heavily on migrating 90% of its content catalog from its original market and began investing heavily in original Mexican content like the 2015 comedy series, “Golazo!”, directed by Gaz Alazraki. By 2018, the video streaming giant cemented its position as the reigning music service by reaching more than 80% of the market with more than 8.3 million subscribers.
We recommend you read: What has been the route of OTT in Mexico
Music Streaming
In 2013, the Swedish music streaming service, Spotify, began its expansion into the Latin American market making its debut in Mexico. At the time, Mexico held the 16th largest digital music market in the world and the second largest in Latin America. In the following years Mexico rapidly evolved from first to fastest-growing, with Mexico City now considered the “World’s Music Streaming Mecca”.
Before Spotify’s arrival to Mexico, the music streaming market was just beginning to develop. Apple’s iTunes had officially become available in the country as of 2009, but despite its first-mover advantage it never experienced the level of growth in the coming years that Spotify did.
In 2012, while Spotify remained unavailable in the country, Deezer, the French music streaming company, attempted to swoop and win over the Mexican market but due to its limited music library it was quickly dubbed an inferior alternative to Spotify.
As of 2017, Mexico is now the country with the highest share of internet users who use audio streaming service, even surpassing Brazil and the United States with Spotify reigning supreme with 89.1% of the music streaming market in Mexico with iTunes trailing far behind with 5.8% and Google Play at 2%.
Digital Gaming
Back in 2013, Brazil dominated the gaming market in Latin America but this next decade belongs to Mexico. At the beginning of the 2010s the video game market in Mexico was valued at a little over 11 billion (MXN), but by 2018 Mexico‘s 55.8 million players spent over 27 billion (MXN) making Mexico the 12th largest digital gaming market in the world and the leading market in Latin America.
According to a PayPal study on the purchase trends of Mexicans, women in Mexico play more actively than men but men are the ones who spend more on video games (with an average monthly spend between 1,000 and 1,500 pesos).
Don’t forget to read: Mexico leads the Gaming market in Latin America
Mexican Market breakdown:
- More than 12.4 billion pesos came directly from game sales
- About 10.8 billion pesos came from the sales of consoles
- The average gamer is 38 years old
- 77% of paying gamers spent on in-game items
Mexico not only leads the gaming market Latin America in console and game sales but also with in-game sales. 77% of all of Mexico’s gamers reported that they make or have made in-game purchases with an average monthly spend of 1,000 to 1,500 pesos.
In the coming years, mobile gaming sales will continue to expand the Mexican gaming market driven by games like Fortnite which can be played universally among consoles and mobile devices.
Remember to read: Why has Gaming seized the entertainment market?
Heading into the 2020s
Without a doubt this has been a memorable decade for Mexico and we are sure that what we have seen so far is only the beginning of its evolution. To better illustrate Mexico’s evolution in the last 10 years we’d like to highlight some key data points:
- Over-the-top (OTT) video platforms increased at an annual rate of 17.9%
- The OTT market value is expected to climb to 1.3 billion dollars by 2023.
- Estimates also predict that video streaming traffic in Mexico will reach 2.2 Exabytes each month by 2021
More significantly, Mexico has earned the crown as the most profitable digital gaming market in Latin America and now ranks 12th worldwide, even surpassing Brazil, which has opened the path for new market segments like cloud gaming.
On behalf of the MDC Marketing team we hope you find this summary of the decade as insightful and enjoyable as we did. As we move towards 2020, we wish you a decade full of growth and transformation that allows us to better connect to the world.
See you in 2020!
