The National Telecommunications Program (Pronatel), an entity attached to the Ministry of Transport and Communications of Peru (MTC), took over the administration and operation of the National Fiber Optic Dorsal Network, a network of wholesale telecommunications services of national size in that country, which until a few days ago had the company in concession Aztec Communications, in turn, a Peruvian subsidiary of Grupo Salinas de México.
The takeover of the Red Dorsal by the Peruvian State, through Pronatel, resulted from an expiration of the legal period of six months that was set between the authority and the concessionaire company, so that the latter abandoned the operation of that infrastructure because it did not make more sense to its business plan.
The intervention of Pronatel In this story, he emerged as a sort of controller whose job it would be to find a new concessionaire that would maintain the operation of the company. Red Dorsal and the name of the consortium made up of the companies Gilat Y Optical Networks, which have built fiber optic networks throughout the metropolitan area of the city of Lima, sounded in the Peruvian industry as the successor of Aztec Communications.
But this week the Pronatel accepted resolution 689-2021 MTC/01 of the MTC that deals with the expiration of the concession contract of the Red Dorsal in favor of the company Azteca Communications Peru SAC and unilaterally and provisionally decided to take control of that infrastructure.
Today the expiration of the concession contract for the National Fiber Optic Backbone Network signed between the MTC and the company Azteca Comunicaciones Perú SAC (…) As a result, the National Telecommunications Program has provisionally assumed the operation and maintenance of the RDNFO, in compliance with the provisions of said ministerial resolution, ratifying its commitment to guarantee the continuity of the operation and maintenance of the network”.
This determination of Pronatel and of MTC caused a stir in the Peruvian telecommunications industry, since that state entity does not have a concession that protects it in the operation of the Dorsal Network, and while Pronatel itself acknowledged that no agreement has been signed between the Peruvian government and Aztec Communications, regarding the reversal of all the assets of the Red Dorsal to the Peruvian State, so this last fact could encourage the Mexican group to take their case to the International Center for Settlement of Investment Disputes of the World Bank (ICSID).
In July 2021, the previous Peruvian government terminated the contract that enabled the concession of the National Fiber Optic Dorsal Network in favor of the company Azteca Comunicaciones Perú SAC, in force since 2014, and a period of six months was given to refine a smooth exit of Azteca Comunicaciones from said concession.
The determination of that authority was due to a matter of public interest of the Peruvian State to take better advantage of the nationwide infrastructure of said network, due to the fact that the Red Dorsal it faced problems from its origin to achieve profitability, because from its conception a fixed tariff policy was imposed that was not very attractive for potential clients.
Since March 2021, the Ministry of Transport and Communications had initiated a resolution procedure and public hearings to find out the positions of the government and the company regarding the future of the Dorsal Network.
The expiration of the concession began on July 14 and for a period of six calendar months, a period that Aztec Communications should have taken the opportunity to initiate and conclude, in favor of the State, the process of reversal of the assets that are part of the Dorsal Network, while the National Telecommunications Program (Pronatel) would be the entity that would later ensure the continuity of the service for current customers, with the search for a new dealer. The temporality that Pronatel can operate the Dorsal Network would be up to three years and could even subcontract a third party for that mission and until the government decides on the new operating model.
In one of the public hearings, the company Azteca Comunicaciones showed its disagreement with the resolution of the Ministry of Transport and Communications and announced that it would resort to international arbitration before the International Center for Settlement of Investment Disputes of the World Bank (ICSID), in this way Since then, it was warned that a new chapter would open for the troubled history of the Dorsal Network.
On March 16, 2021, the Peruvian government decided to accept a contract clause that ended the concession that allows Azteca Comunicaciones to exploit the National Fiber Optic Dorsal Network of Peru, a transport network infrastructure that was intended to connect that country to the Internet, but that until the last day of 2020 was only used in 3.2% of its total installed capacity. An official figure for the last day of 2021 is not yet known.
The determination of the Peruvian State, unilateral and for public interest, resulted then from not finding coincidences after a series of proposals and counterproposals with Aztec Communications, Peruvian subsidiary of Grupo Salinas, to make better use of the 13,500 kilometers of optical fiber of the Dorsal Network.
For the government of Peru, the Red Dorsal it means reimbursing nearly 5 million dollars each quarter to that concessionaire company for the administration, maintenance, expansion and operation of an infrastructure to which a dozen companies are now connected.
Now, Peru will write new rules to re-adjudicate the Red Dorsal to a new operator by mid-2022, which could be a public or private company, and even Azteca Comunicaciones itself, if it makes sense for this company to re-operate that network under other conditions and regulatory criteria.
Aztec Communications had already slipped at the beginning of 2020 its formal intention to abandon the exploitation of the Red Dorsal, whose contract was signed in 2014 with the government of that country to bring voice, data and video connectivity to the 180 most important Peruvian cities, this through the laying of a high-capacity wholesale network and financed with approximately 323 million of dollars from the Peruvian State.
The project, new in its type in 2011-2012 that was thought and for some equivalent to the ill-fated Mexico Trunk Network, faced obstacles to its growth, mainly due to a regulatory policy that forced its concessionaire, Aztec Communications, to establish a fixed rate up to three times more expensive than the competition for data transport throughout the network.
Another drawback was that the layout of the network was also conceived on places where other transport networks already existed or where third-party operators built their own infrastructures, a superposition of networks that then gave little support to the launch of the Dorsal Network. At the end of 2020, 60% of the installed infrastructure of the Dorsal Network coincided with the coverage of the networks built by third-party operators.
In the best of years Aztec Communications handled the Red Dorsal, the company managed to attract about 30 clients, including the Chilean Entel, but they barely filled 7.0% of the network with their traffic.
All these reasons also encouraged Azteca Comunicaciones to request the expiration of the exploitation contract from the Ministry of Transport and Communications in 2020. The agency responded in June of that year with a proposal that was unofficially presumed to allow the company to establish a tariff flexibility policy based on the volume of data transported and in very specific geographic and market regions; and it would also be allowed to manage the international traffic of Peru with Colombia, Ecuador, Chile, Brazil and Bolivia, through the nodes of the Dorsal Network that interconnect the country with its neighbors.
The new conditions would have given oxygen to the business of Aztec Communications to compete with larger tools in the Peruvian telecommunications sector, although this would have also meant that at some point the company would stop receiving the reimbursements that the State pays to the company and set at the signing of the original contract by the company’s administration. Red Dorsal, since Azteca Comunicaciones would then be able to gather resources through the customer base that it would eventually build.
As outlined since July 2021, the concessionaire Aztec Communications left the Dorsal Network in the week of January 16, 2022.