Mexico moves to open up telecom industry long dominated by monopolies

The world's richest man, Carlos Slim, made his money in telecommunications.
The world's richest man, Carlos Slim, made his money in telecommunications. MCT

Leaders of Mexico’s three major political parties launched a sweeping proposal Monday to break open the highly monopolistic telecommunications sector, calling for new laws that would create competition to the established companies that now control the nation’s broadcast and cable television, Internet access, and fixed line and cellular telephones.

The proposal would open the door to two new national television networks and set rules that would lower costs and broaden access to the Internet and telephones. It also would allow dramatically increased foreign investment in telecommunications.

In a ceremony filled with pomp, chiefs of political parties from the left, center and right cast the telecom reform as a watershed event that would shake off monopolistic private control that is almost without parallel elsewhere in the Western world.

President Enrique Pena Nieto, who just completed 100 days in office, said opening up the telecom sector to competition would invigorate the economy and lift Mexico globally.

“In the era of knowledge and information, it is a new form of illiteracy not to have access to them,” he said of modern digital platforms.

Neither Pena Nieto nor any of the political party leaders portrayed the proposed constitutional reform as targeted at the wealthy tycoons who keep a monopolistic grip on telecommunications. Yet the proposals are likely to vastly affect the interests of several of Mexico’s most powerful figures.

They include Carlos Slim, the world’s wealthiest man with a $71.5 billion fortune, whose wireless company, America Movil, controls roughly 70 percent of the cellular market in Mexico and whose fixed line company, Telefonos de Mexico, better known as TelMex, controls 80 percent of all fixed-line phones in the country.

High rates keep Mexicans from using cellular phones as much as residents of other Latin American countries.

Beside him in the billionaire’s pantheon is Emilio Azcarraga, controlling shareholder in Televisa, the world’s largest Spanish-language broadcaster and magazine publisher. Grupo Televisa controls 70 percent of the Mexican television market.

Following the ceremony, a tweet from Azcarraga’s Twitter account acknowledged the threshold of a new era: “Time of great challenges and also of opportunities. Competition welcome,” the tweet said.

Slim did not offer an immediate comment on the reform.

A third tycoon, Ricardo Salinas Pliego, and his Grupo Salinas, are controlling shareholders of TV Azteca, which commands most of the remaining 30 percent of the television market in Mexico not controlled by Televisa.

Before the constitutional amendments involved in the telecom reform become law, they must pass through both chambers of Mexico’s Congress and be approved by a majority of state legislatures.

If successful, it would mark the second major reform of Pena Nieto’s nascent administration. Within days of taking office Dec. 1, Pena Nieto’s Institutional Revolutionary Party, or PRI, formed an unprecedented political alliance with two other major parties, called Pact for Mexico, and announced broad objectives for reforming the state.

The parties quickly enacted an education reform that took away from a 1.5 million-member teachers union the power to hire and fire teachers. Further signaling an intent to shake up the field, prosecutors arrested powerful teachers union leader Elba Esther Gordillo on Feb. 26 and charged her with siphoning off hundreds of millions of dollars in union funds.

“The Pact for Mexico is not only alive, it is vigorous,” PRI national party chief Cesar Camacho Quiroz said at the ceremony, denying reports it may be faltering.

In some ways, the latest move marked the PRI’s continuing effort to raze some of the structures that it had erected to rule Mexico during its 71-year unbroken reign that ended in 2000. Past PRI governments looked at Televisa as a political tool to help it retain power, and TelMex and cellular service concessions were sold to businessmen the PRI saw as friendly.

In announcing the urgency of the telecom reform, Communications and Transport Secretary Gerardo Ruiz Esparza cited a study conducted in 2012 by the Paris-based Organization for Economic Cooperation and Development that said Mexico economic growth was 1.8 percent lower because of the estimated $129 billion in overcharges and lost economic opportunities wrought between 2005 and 2009 by telecommunications companies.

Among the measures included in the reform, Mexico would:

_ Allow foreign companies to increase from 49 percent to 100 percent their stake in most telecommunications operations in the country.

_ Give foreign companies the right to own as much as 49 percent of firms transmitting on radio waves in the nation; they currently are prohibited from owning any portion of such a company.

_ Require satellite and cable TV companies to retransmit broadcast television signals, unlike now when they can try to strangle competitors by keeping them off the air.

_ Set up a new regulatory body, the Federal Telecommunications Institute, which would have authority to break up telephone and TV companies with more than 50 percent of the domestic market. The new body also would be allowed to revoke broadcast licenses at will and write new regulations that would favor smaller companies over larger ones.

“With clear and open rules, with authorities who limit concentration, with very established obligations in quality, cost and continuity of service, the telecommunications area will better fulfill its role of invigorating the economy,” Ruiz Esparza said.

Jesus Zambrano, president of the left-wing Party of the Democratic Revolution, said the proposed new watchdog agency would have authority to ensure fair and unbiased use of the air waves, thus potentially keeping media giants from meddling in politics.

“No longer will we have on television, on the radio and on the Internet deceitful, lying, crooked publicity. There won’t be electoral propaganda disguised as information,” Zambrano said.

Other political leaders said that enshrining the new reforms in the country’s constitution would prevent companies from endless lawsuits to gain an upper hand.

“It is worth remembering that the Constitution brooks no lawsuit, trial or appeal. When the Constitution speaks, so speak the sovereign Mexican people,” said Luis Alberto Villarreal, chief of the center-right National Action Party bloc in the Senate.

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