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Mexico’s Major Telecom Overhaul Passes, Confronts the Oligopoly

By: Adriana Peralta - @AdriPeraltaM - Jul 11, 2014, 10:32 am

EspañolAfter three months of debate, and having been previously approved by the Senate, Mexico’s Chamber of Deputies passed a new telecommunications bill late on Tuesday night. Broad support saw 340 votes in favor, 129 votes against, and one abstention.

Mexico Chamber of Deputies
Chamber of Deputies. (Wikipedia)

Representatives of the Green Party of Mexico, the Institutional Revolutionary Party (PRI), the National Action Party (PAN), and the New Alliance Party approved the long-awaited reform after debating for five hours and reviewing 549 articles. The bill received similar support in the Senate, passing initially with 80 votes in favor and 37 against. Secondary amendments also passed with 72 versus 25 votes.

Those opposed included the Democratic Revolution (PDR), Citizens Movement, and Labor parties. Their contention has been that it is not in keeping with the intent of the constitutional reform approved in June 2013, which prohibited telecommunications monopolies and required those in government to ensure access.

Héctor Gutiérrez de la Garza, head of the chamber’s Communication Committee, said this new law is meant to “help eliminate economic inequalities, transform competition in the telecommunications sector, and improve the quality of services.”

“Number portability will be free and should be completed within 24 hours; the leading provider must supply his competitor’s costumers with free roaming, and more domestic [media] content shall be promoted,” Gutiérrez added.

What’s In the Telecommunications Law?

El IFT es el organismo encargado de regular, promover y supervisar los servicios asociados a la radiodifusión y las telecomunicaciones en México. (IFT)
IFT is in charge of regulation, promoting, and supervising services related to radio systems and telecommunications. (IFT)

On Saturday, the Chamber of Deputies finished deliberation on the secondary laws to make up part of the reform. Under the new regulations, companies will be defined as the dominant agent over other companies if they exceed 50 percent of the national market share for an overall sector and not for a specific service. The deputies also established a deadline for companies to make the transition from analog to digital television and established certain price controls over telephone services.

The overarching reform includes two new laws: the Federal Telecommunications and Radio System Law and Mexico’s Public Radio System Law. It modifies 10 existing laws, including one that regulates foreign investments, copyrights, and employees in the executive branch.

The Federal Telecommunications Law determined that the Federal Telecommunications Institute (IFT) under the new regulations, companies will be defined as the dominant agent over other companies if they exceed 50 percent of the national market share for an overall sector (TV, radio, internet), and not for a specific service (landline phones, cellphones, open TV, pay-per-view channels, mobile internet, residential internet, business internet).

Raúl Trejo Delarbre, a professor from the National Autonomous University of Mexico, said a dominant agent is defined as “a corporation that dominates more than half of the market share.”

Televisa se vería afectada por la nueva ley. (Wikipedia)
Televisa logo. (Wikipedia)

Critics have argued that the new rules do not sufficiently prevent corporations from establishing a monopoly and appear to be designed to favor Televisa, the nation’s leading open television company. PAN Senator Javier Corral said, “The majority of the measures taken to limit a leading company are irrelevant.” Televisa controls more than half of the television market.

Senators who did support the legislation accused the opposition of making the debate about the “monopoly” issue and not about the legislation.

PAN Senator José Rosas Aisputo said, “There is no perfect reform. There will always be unfinished business, but we have no doubt this reform will bring the people many benefits.”

As stated under the new legislation, television networks have until December 31, 2015, to make the transition to digital television. Furthermore, as of January 1, users will not be charged additionally for checking their balance or for making phone calls from a landline to a mobile phone.

In addition, the Chamber of Deputies said they will also approve measures that benefit persons with disabilities. Television networks, for example, will have to provide subtitles and sign language translations in their main newscasts.

Victor Becerra, coordinator of Mexico’s Friedrich Naumman Foundation for Liberty, spoke to the PanAm Post about the advantages and disadvantages of the new telecom law.

Telmex
Telmex logo. (Wikipedia)

“On one hand, the new telecommunications [law] will most definitely have many benefits: it encourages competition, lower prices, improved telephonic services, and better coverage. It also eliminates additional charges for roaming and long distance calls. It is a law that has embarked on the right path,  creating a more competitive market and offering users many new benefits.”

“On the other hand, it does have some detriments. Television companies, for example, will be able to have a bigger influence on the telephone market. Televisa will also be able to maintain it’s monopoly in the television market. However, Telmex could potentially enter the radio market, but they will have to wait a few more years. At a first glance, the reform laws do have a few elements that safeguard Telmex’s monopoly,” added Becerra.

“Even though the new law will increase competition in telephone services and will have important benefits for economic liberty and consumers’ pockets, one is left with the impression that the Mexican executive and the PRI were timid when it came to television. They preferred not to break their alliance with the television monopolies and assured them certain advantages,” conlcuded Becerra.

Threats to Civil Liberties

Ciudadanos protestan ante la Ley de Telecomunicaciones. (Clacpi)
Citizens protest Mexico’s Telecommunications Law. (Clacpi)

Becerra also believes that the new telecom law does present a risk to civil liberties, even though some provisions were made to try and limit the scope of the legislation.

“Even though the possibility already existed, [this law] makes it easier for operators and dealers to surrender all types information to authorities — emails, text messages, and phone calls. The ability to block signals was taken out because of public safety. However, they did leave in real-time geolocation without the need for a court order.”

Becerra believes there is a possibility that government may use telecommunication services against users themselves, under the pretext of public safety. “Authorities do not use their resources effectively because they are corrupt and indolent. In this way, they promote impunity,” said Becerra.

The End of Mexico’s Monopolies?

El magnate de las comunicaciones, Carlos Slim ha decidido dividir su empresa. (Wikipedia)
Carlos Slim. (Wikipedia)

Responses to the new reforms were almost immediate. América Móvil, which controls 70 percent of the mobile phones market, announced they have decided to sell a large part of their assets to avoid being considered a “leading and dominant agent” in the telecommunications business.

To avoid regulations, Carlos Slim’s company decided to reduce by half their participation in the internet, landline telephone, and cell phone services market.

América Móvil released a statement saying they have decided to sell certain assets to another independent business with prior experience in this arena, and with the economic and technical capacity to participate in the market.

According to the statement, América Móvil has also decided against the purchase of a 51 percent stake in Dish, a television company that competes with Televisa and controls 70 percent of the market.

Translated by Anneke Ball.

Adriana Peralta Adriana Peralta

Adriana Peralta is a freedom advocate from El Salvador and a @CREO_org board member. She is a PanAm Post reporter and blogger, a 2005 Ruta Quetzal scholar, a trained engineer, and an SMC University masters student in political economy. She is also a Pink Floyd fan. Follow @AdriPeraltaM.