Recent Developments

On March 11, 2013, Mexican President Enrique Peña Nieto submitted  a draft bill to amend the Mexican Constitution, which could result in an important and structural reform to the Mexican telecommunications and broadcasting legal framework.

The draft bill has been sent to the Communications Commission at the Chamber of Representatives, which shall in turn review, vote and send for final vote by the Mexican Senate.

Statements made publicly by House Representatives would indicate that there is a majority in favor of the bill at the Chamber of Representatives and that could result in the expectation for the Senate to follow in similar vote. Further statements have indicated that the review of the draft will be accelerated and that no substantial time will be spent in public consultation, which could result in a reform being voted in the short term, even within the next days.

The draft bill presents a historic reform in Mexico's telecommunication and broadcasting sectors and could result in a new landscape for operators, resellers and users.

Liberalization of foreign investment

Under the draft bill, direct foreign investment in telecommunications and satellite companies would go from the current limitation of 49% to a fully liberalized 100%. Radio and television broadcasting would go from the current restriction of 0% to a limit of 49% of voting stock, potentially allowing for additional economic participation through limited voting stock.

These changes would be an important opportunity for new market entrants and for market consolidation.

Pro-competition measures and potential incumbent divestitures

Other very relevant aspects of the drat bill are that it lays the ground work for asymmetric regulation to apply to dominant operators and that it, transfers telecoms and broadcasting-related anti-trust regulating power to the telecommunications regulator. The bill notably includes the possibility for the regulator to mandate divestitures as well as the unbundling of networks of dominant market players concentrating over 50% of a relevant market.

Other competition-related measures included in the bill are the implementation of must offer and must carry of open-air television content, mandating that such content must be offered to subscription-based television users, which are also required in turn to offer such content at no additional cost.

Upcoming spectrum bids

The draft bill reinforces the existing policies to accelerate spectrum bids in the next months to create at least two additional nation-wide television chains, as part of the digitalization of radio and television in the country. This opportunity could present the unprecedented possibility for foreign investment to participate in broadcasting spectrum bids with a limit of 49% voting ownership. Importantly, incumbent broadcasters already holding over 12 MHz of spectrum would be barred from participating in the upcoming bids.

Specialized courts and limitations to amparo constitutional appeals

Another important achievement of the draft bill would be the creation of specialized telecommunications and anti-trust courts. The bill further reinforces a recent reform of the amparo constitutional appeal regime, which would dramatically limit the possibility to obtain preliminary injunctive relief by telecommunications and broadcasting operators.

New regulator created

The draft bill would also create the Federal Telecommunications Institute, which would replace the existing Federal Telecommunications Commission, where the resulting entity would also undertake certain anti-trust authority and would be lead by 7 freshly-appointed commissioners.  

Opportunities and challenges

The reform is not perfect. Some of other important ailments in the industry, such as the duality of regulatory authority from the Ministry of Communications and the Telecommunications Commission (commonly called the "double window"), the lack of sufficient authority and independence by the regulator to impose penalties, the absence of clear regulations for mobile virtual network operators as well as inconsistencies in the drafting of the reform, such as the need to publicly auction fixed-network licenses, seem like such will have to be resolved at another time, however, the proposed bill certainly presents very relevant business opportunities as well as risks to certain market players, especially those with an existing dominant position.