Mexico weighs massive regulatory changes for TV market

Gabriel Miramar-Garcia | 18-03-2013
A new bill proposed by Mexican President Enrique Pena Nieto would radically reshape the nature of TV and communications competition south of the border by hamstringing some of the market clout that mega-corporations like Grupo Televisa and Carlos Slim's America Movil have in that country.
First and foremost the bill would introduce a new regulatory body for telecom and television into the mix: the Federal Telecommunications Institute. If approved, it would effectively remove the antitrust agency –– the Federal Competition Commission –– by allocating its responsibilities to the FTI, while also replacing Cofetel (Comisión Federal de Telecomunicaciones). The idea is to give the government a better, centralised instrument for regulation that can have a cohesive set of powers, thus removing undue influence by top players in the space who often play two sides against the middle in regulatory lobbying.

"The main objective of introducing this bill is to bring greater uniformity and transparency in the sector and to curb the concentration of power lying with predominant players who dictate market behaviour," Zacks Equity Research said in a blog.
To that end, the bill also offers several amendments, including one barring operators from pushing regulatory rulings through injunctions during court appeals. Further, the bill imposes stringent action for unfair trade practice through stiffer penalties and may require fragmenting a company to promote fair competition.
The rule has also cast the cable company Televisa under examination as it controls over 73% of the market share in the television business. The proposal includes the creation of two new digital broadcast networks that would compete with Televisa and TV Azteca.
In addition, it highlights creation of a non-profit television company that would provide cable services across the country. Further, these companies would be prohibited from participating in any Government-related spectrum auction in the future to expand national television networks.
"This is not the first time that the company has been hit by regulatory interventions," Zacks pointed out. "Earlier, in 2010, Televisa abandoned its wireless venture with Nextel de Mexico, a subsidiary of NII Holdings Inc, due to prolonged legal battles."
The rule also implies that market-makers players who control the majority of the market share (as in the case of America Movil) will have to pay higher mobile termination rates (MTRs) to smaller peers while receiving less from them for network interconnection, Zacks noted. Through Telcel and Telmex, America Movil commands about 70% market share, while the Spanish wireless operator Telefonica SA controls nearly 22% of the Mexican market share.
Unsurprisingly, the proposal has struck a discordant note on the Mexican telecom and television industry as it unfavourably targets giant corporations, and stresses an implementation of asymmetric regulations — but it remains to be seen how much effect that protest will have.
"Given the nature of the Mexican telecom and television market characterized by extreme level of competition and quasi-monopolistic practices, the proposed reform comes as no surprise," Zacks noted. "The bill, if approved, would mark a pivotal role in shaping the telecom industry in Mexico and decide the prospects for these carriers in Mexico who have so far reaped large profits and grown as market leaders throughout Latin America."