In accordance with the recently enacted Federal Telecommunications and Broadcasting Law, in September 2014 the Federal Telecommunications Institute (FTI) initiated an investigation of the telecommunications and broadcasting sectors to determine whether a dominant economic agent existed in any of the relevant markets within each sector, with the intention of imposing asymmetric regulation if necessary.
In March 2015 the FTI Investigative Authority issued a preliminary resolution affirming that Televisa was dominant in the pay television service in 2,124 municipalities across the country (equivalent to 86% of the total national market). The preliminary resolution established as follows:
- The geographical dimension of the relevant markets was local.
- Televisa had two technological platforms through which it offered the widest range of options (in terms of the amount of content and price range), which allowed it to reach a larger number of consumers than its competitors.
- Televisa's profit margins were greater than those of its competitors.
- Televisa's two main competitors put no significant pressure on Televisa.
- Significant barriers to entry existed in the pay television market.
- Televisa held an additional advantage in the relevant market because of its vertical integration.(1)
Nevertheless, on October 2 2015 the plenum of the FTI issued a resolution finding that Televisa was not a dominant agent in any of the relevant pay television markets.(2) According to the resolution – adopted with two of the seven commissioners dissenting – Televisa held 62.2% of the national market. The second largest competitor, Dish, held only 16%, followed by Megacable with 15.1%. However, the FTI noted that Televisa's market share fell by 1.9% from 2013 to 2015, while Dish's and Megacable's respectively rose by 1.7% and 0.2% during the same period. The plenum accordingly concluded that Televisa's competitors did "not face restrictions to expand their operations given possible unilateral actions by Televisa to fix prices or restrict outputs in the provision of services"; therefore, Televisa lacked dominance in the pay television service. The FTI thus had no need to impose asymmetric regulation on Televisa to prevent abuse of dominance or adverse effects on market competition.
The resolution has generated much controversy among industry participants and academics – in particular, for the following reasons:
- The plenum considered only national market share in finding that Televisa was not dominant in the pay television service.
- While market share was the only evidence taken into account by the plenum, Televisa nonetheless held more than 60% of the national market based on subscriber numbers.
- Televisa's profit margins were much higher than those of its competitors, which could indicate an absence of competitive pressure.
- Had market share growth been examined on the basis of income, Televisa would have increased its market share.
- Growth trends are usually analysed over long periods, rather than a few months.
- Although the plenum upheld the preliminary resolution against Televisa, the final resolution did not address all of the evidence raised in it.
- The FTI's national market share calculations did not account for Televisa's recent acquisition of Telecable.
- Markets with a local geographical dimension are usually assessed in light of local – rather than national – market share.
The resolution is susceptible to challenge through amparo trial (ie, on constitutional grounds).
The resolution constitutes a significant precedent that could dramatically affect the pay television market, as it precludes the FTI from both imposing asymmetric regulation on Televisa and penalising it for relative monopolistic practices in the market.
For further information on this topic please contact Lucia Ojeda Cardenas at SAI Consultores SC by telephone (+52 55 59 85 6618) or email (firstname.lastname@example.org). The SAI Consultores website can be accessed at www.sai.com.mx.
(2) Resolution available in Spanish at http://www.ift.org.mx/sites/default/files/conocenos/pleno/sesiones/acuerdoliga/versionpublicadc0120141_1.pdf
This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.