A Failing Reform, but…
One of the principle objectives of the new legal framework in Mexico was to decrease the levels of excessive ownership concentration in the telecommunications and broadcasting sectors. By an agreement reached among the principle political actors in 2013, a constitutional reform in the broadcasting, telecommunications and competition sectors was made possible. However, the 2014 law that was supposed to actually implement the reform seems to fail to turn its intention into reality by promoting the democratization of the media system and by limiting media concentration.
Until now, evidence has shown that the provisions of the legal framework are insufficient in limiting the undue media concentration, as well as the so called “cross-ownership” in the free-to-air and pay-television, radio, printed press and the online media market. Up until now the measures implemented by the regulating authority have not managed to decrease the market control of major players; in some market segments, such as the pay-television, the media ownership concentration has even increased instead.
The Constitution stipulates ex ante – or preventive – instruments to be created to limit the media ownership concentration, by defining so called Agente Económico Preponderante or AEP (Spanish for: Dominant Economic Agent), which is the economic actor or economic group that participates with at least 50 percent in the national telecommunications and broadcasting market. The participation is determined according to the subscribers or the audience of the respective economic agent. The Constitution entitles the regulating authority to withdraw assets or shares or use any other measure to limit concentration in the telecommunications and broadcasting markets.
However, the 2014 Federal Law of Telecommunications and Broadcasting only considered the application of AEP by a wider sector (telecommunications and broadcasting) and not by market segment (radio, television, pay-television, telephone, Internet, etc.). This way it has been avoided that, for example, Televisa is declared a AEP in the pay-television segment, where it has increased its market dominance considerably, also since it is the dominant player in offering so-called triple-play products, that combine pay-television, Internet and landline telephone connections. In addition, this company is active in related sectors, such as: free-to-air television, radio, print magazines, audiovisual productions (the major content producer in Spanish language in the world), movies and football teams.
The regulatory measures imposed by the 2014 Federal Law of Telecommunications and Broadcasting were stricter for the telecommunications than for the broadcasting sector.
América Móvil (Grupo Carso), owned by the magnate Carlos Slim, has been declared as a AEP. It used to control a 80% share in the landline telephone market with the company Telmex and 70% in the mobile telephone market with the company Telcel. Besides that, it owns the major telecommunication infrastructure through several companies and subsidiaries.
The Example of América Móvil
Four years after América Móvil entered the landline telephone market, the share dropped to 64% ; 57% in fixed broadband and 64% in mobile telephone, according to the most recent data from the Federal Institute of Telecommunications.
Although América Móvil’s strong position in the telecommunication sector, it does not participate in other market segments outside of it, whereas Televisa participates in both sectors and in other related ones. Even though Carlos Slim wanted to enter the pay-television market, he was practically impeded to do so, showing that although the magnate has major economic power, Televisa is the one with the political power and had lobbied successfully towards the government not to allow Slim to enter the pay-television market and become its principle competitor. This however could change if Slim manages to technically share the services its Group offers with other companies and thus meet an important requirement set by the government, so he could then change its concession and start to offer pay-television services.
América Móvil has entered other sectors such as the advertisement market by purchasing a parts of Corporación Interamericana de Entretenimiento (Spanish for: Interamerican Entertainment Corporation), football teams, acquiring transmission rights of the Olympic games, production of channels such as Claro Sports, Uno TV and its OTT Claro Video, among other activities.
In 2017 the Federal Institute of Telecommunications decided that América Móvil should functionally separate the supply of its services allowing other providers to use its infrastructure; this is to be done by creating a new company which will in principle offer services related to access to the telecommunications network (Internet and mobile telephone) and to the passive infrastructure. In March 2018, the regulatory authority ordered the effective separation of service supply, but it did not set obligations for the new company about its coverage.
Televisa has been declared as AEP. From the 461 commercial stations given through concessions, 224 or 48% of the total are being operated by Grupo Televisa; it transmits its programs through additional 34 affiliated stations (7% of the total). Before the constitutional reform, Grupo Televisa controlled 56% of the concessions for free television, distributed through three national TV networks (channels 2, 5 and 9) and 20 local or regional channels, such as channel 4 in Mexico City.
The Example of Televisa
According to Ibope Nielsen, the 2014 decision of the Federal Institute of Telecommunications with which Televisa is declared as AEP is because Grupo Televisa had 67% of the audience for the free television concessions. More recent data is not available because the regulator has not issued them; and besides that, there are big obstacles in accessing the data on audience for the broadcasting sector.
After having been declared an AEP, Televisa cannot benefit from the rights of signal retransmission (must carry and must offer) which means it should allow the retransmission of its signal for free and without discrimination towards the pay TV concessionary companies. When it comes to the digital TV, Televisa has benefitted from the multi-programming by multiplying its signals in the country, some of them transmitting for 24 hours advertising or so called infomercials.
The counter-measures planned by the Federal Institute of Telecommunications include: the obligation to offer signal emission service; the impossibility to acquire exclusive rights for transmission of relevant audiovisual contents, unless it purchases sublicense with other operators; the duty to publish information about the terms and conditions under which it commercializes the advertisement; having separate accounting for different services and share its passive infrastructure.
These measures proved insufficient. For example, for the sharing of passive infrastructure, in two years there hasn’t been any agreement between Grupo Televisa and its competitors because of the obstacles posed by Televisa. Besides that, the regulating authority softened the provisions about the prohibition to acquire exclusive rights for relevant audiovisual contents with sublicense with other operators, since it could buy and then sell the exclusive rights to the competitors. This was done knowing the influence and the control that Televisa has in this market segment. There were only some advances in gaining major transparency for the advertisement packages.
The transitory Article 9º from the Federal Law of Telecommunications and Broadcasting offers an opportunity for buying additional pay TV companies, an opportunity Televisa is very keen to take advantage of. With it, the Law effectively blocks the Federal Institute of Telecommunications to exercise its preventive faculties when it comes to authorization and analysis of convergences, in this way paving the way for exceptions for certain agents in certain sectors.
The next day after the Law entered into force Televisa announced the purchase of 100% of the company capital of Grupo Cable TV, operator of Cablecom. After the Law, Grupo Televisa went from 50% to 61% of market participation (through Sky with 38.4%, Cablemás 7.4%, Izzi 5.4%, Cablecom 4.6%, Cablevisión Red 2.7% and TVI 2.7%). According to the most recent data of the Federal Institute for Telecommunications from 2017, Grupo Televisa participates in the pay TV market with 56.8%, in the cable TV 47.3% and satellite TV 63.6%. Far below are its competitors: Dish-MVS with 21.2% in satellite TV and Megacable with 14.2% in cable TV.
The same transitory Article 9 gives the mandate to the Federal Institute of Telecommunications to start an investigation to determine if there is substantial power in the markets of the two sectors. Under these provisions the Investigating Unit of this regulating authority found that Grupo Televisa controls 2,124 pay-TV markets from the analyzed 2,436 markets; it controls relevant content and is one of the few providers present in 87% of the municipalities in the country. Besides these findings, with majority of the votes in favor, the Institute decided in two occasions (2015 and 2016) that there is no concentration of power in the market.
After a court decision that found this resolution of the Institute as illegal, the Institute was obliged to go through the process again and decide that Televisa has substantial power in the market. However, even after a year the Institute did not enforce any measures to stop Televisa abusing its dominant position. Meanwhile, Televisa filed a protective action (amparo) against the court’s decision and in February 2018 the Supreme Court of Justice canceled the court’s decision and ordered the Institute to issue a new one. According to field experts, the arguments given by the Supreme Court for this decision affect the real possibility to regulate the substantial power of Televisa in the pay-TV market. As a matter of fact, not even the Annual Work Plan of the Institute mentions any action related to this case among the listed total of 51 strategic projects.
A New Regulatory Authority
The constitutional reform establishes the Federal Institute for Telecommunications as an autonomous organ and endows it with powers to regulate audiovisual contents, administration of the radio frequencies, the competition in the telecommunications and broadcasting sector; control the participants in these sectors so it can efficiently eliminate the barriers to free competition; impose limits to the national and regional concentration of frequencies; control the cross-ownership of media that are concessionaires of broadcasting and telecommunication services and cover one geographical zone or serve one same market; order withdrawal of assets, rights or other inputs to insure the accomplishment of these limits.
However, the 2014 Federal Law limits these faculties. Some of the shortcomings of the Law include
- restricting the Institute in the determination of the service fees by limiting the possibility to conduct economic and regulatory analysis before the change of the fees (Articles 120, 131 and 272);
- the Law provides atypical mechanisms that do not represent limits in cross-ownership but have the opposite result;
- it deprives the Institute from its constitutionally established powers and from conducting proper case study analysis in order to implement the correct measures (Articles 285, 286 and 287);
- it limits the possibilities of the Institute to use digital TV multi-programming to promote plurality and competition, and with it, it restricts its faculties to define the obligations of the economically dominant agents or the ones with substantial market power, as well as to clarify the rules for cross-ownership (Article 158). All of it in addition to the provisions previously mentioned in the transitory Article 9.
Besides these circumstances, the court decisions have enforced the regulatory capacity of the Institute by attributing it quasi-legislative functions to regulate the sector. However, in effect this institution is lacking determination to make use of this judicial endorsement by imposing measures for incentivizing much more efficient competition.
OECD has also been criticizing the Institute for lack of transparency. Namely, it does not publish the terms or the conditions it sets to the parties that want to merge in order to acquire the approval for operating, when such mergers represent media concentration.
The absence of information is most obvious in the broadcasting sector. In the quarterly statistical reports of the Institute there is a lot of information about the relationship between the ownership concentration levels and the price index for the telecommunication services, which is not the case with the broadcasting sector. The official data for the use of the broadcasting services, advertising and investment in production are limited or nonexistent; no indicators exist to supervise the increase of the audience in the radio and free-to-air TV markets in Mexico, as it can be confirmed from the results of MOM Mexico.
The OECD also recommended that the Institute should widen its knowledge when it comes to plurality of content and explore better forms for evaluation to implement regulations that consider ownership diversity, as well as reconsider the role of the public broadcasting. OECD also found that pluralism, diversity, foreign ownership and media convergence in Mexico must be considered in investigations about cross-ownership, as well as in production and programming agreements between Mexican television companies and foreign companies, or between concessionaires for broadcasting and companies for printed media and video, sports clubs, stadiums etc.
Although there has been an increase in the number of public tenders for radio and free TV frequencies, it is also true that the majority is in the hands of the existing operators and to a lesser extent they go to new commercial players. These public tenders have been taking place in the past two years, so it is still too early to know if a real competition has been created in this sector.
It is undeniable that there have been advances in the sector compared to the situation before this new move from the judiciary. This is more visible in the telecommunications sector where there has been a decrease in the telephone fees, better transparency mechanisms, access of new actors especially from the social sector, better enforceability conditions, but which are still insufficient to structurally change a system with historical media ownership concentration, economically very powerful actors and a federal government tempted to control the rules of the game in order to favor their political alliances as was the case with Peña Nieto's government.
After decades, the change in the position of the judiciary, although with flaws and shortcomings, can represent a start to widen the deliberation capacity and strengthen the citizenry and the democracy. There is a necessity of more control from independent and civil society actors that can push for better performance and independence of the regulating authority, as well as legislative changes to put clear and transparent limits for the horizontal, vertical and cross-ownership of the media.