Mexico is set to become the first country in the world to legally require smartphone manufacturers to activate the FM chips that are included in nearly all the devices available on the market, so that consumers can listen to FM radio on their phones. Last week, the country’s communications regulator, IFT, introduced a legal provision requiring manufacturers to activate smartphones’ FM radio chips with a view to “preserving the right to access information.” The IFT cited a report by the Mexican Chamber of Television and Radio Broadcasters indicating that only a few smartphones have the FM chip activated because operators “make significant amounts of money from the consumption of streaming data” and would “lose revenue if users had the ability to access the radio for free on their mobile devices.”

Tarifica’s Take

The built-in FM capability of most smartphones is a well-kept secret as far as consumers are concerned. While it might seem out of place to get excited about a type of “old technology” at a time when smart-device functionalities are growing by leaps and bounds, the Mexican government is taking a stand on the issue in the name of consumer rights and basic fairness. Forcing manufacturers that want to export to the Mexican market to activate the FM chips would enable Mexican users to receive radio broadcasts on their phones without using any mobile data, and with less depletion of battery power.

This is significant for mobile operators, because when those chips are activated, a free entertainment-content service can compete with the popular streaming entertainment content services that consume large amounts of mobile data, in particular 4G/LTE data. Not only does that stand to take revenue away from the MNOs due to reduced data consumption, but it would have an effect on the deals they have entered into with streaming entertainment services such as Spotify with the express purpose of attracting customers. For most device manufacturers, there would likely be no negative impact, but for Apple there easily could be, because FM radio via smartphone would be competing against iTunes and Apple Music.

The will to activate FM radio on smartphones could spread beyond Mexico. In the United States, FCC Chairman Ajit Pai, a regulator known for his pro-operator stances, has made some strong statements in favor of FM. This past February he said, “It seems odd that every day we hear about a new smartphone app that lets you do something innovative, yet these modern-day mobile miracles don’t enable a key function offered by a 1982 Sony Walkman.” He added that FM capability would be valuable from a safety perspective, too, because it would allow users to receive emergency broadcasts during catastrophic events if wireless networks stopped functioning. Nevertheless, Pai said that the FCC should not force device manufacturers to enable FM but instead leave the matter up to the market. The Mexican regulator takes a different view.

It should be noted that we have no idea to what extent FM radio would undercut streaming content. Obviously the selection of music on the radio at any given time is far smaller than what is available via the internet. At the very least, those users who consume data through streaming radio broadcasts could switch to FM transmission and save money. In general, we believe that while there would be an impact, it would not be very great, and for operators to be seen opposing the activation of FM chips would probably have a deleterious effect on their public image.