Monocolumn

A daily bulletin of news & opinion

12 March 2014

Things are about to be shaken up in Mexico’s telecom and television industries. For decades, said businesses have been in a state of perpetual monopoly governed by two major entities: America Móvil and Grupo Televisa. They possess such strong muscle that experts estimate that they cost the country $25bn (€18bn) a year in lost innovation, lack of competition and ludicrous rates.

That’s all set to change – in theory. Last Friday, in a long overdue ruling, newly founded government regulator IFT declared each player to be “overly dominant” in its field. Following president Enrique Peña Nieto’s reform of the grindingly backward state-owned oil monopoly Pemex, the groups now have to share their infrastructure and networks with competitors, regulate their exorbitant prices and allow public auctions to introduce additional digital broadcasting networks.

In the 1990s, when the Soviet Union was busy selling off its state industries on the cheap, Carlos Slim was otherwise occupied buying up the Mexican government’s phone monopoly. Rivals simply couldn’t match the scale of his investments. Now, through his telecom giant America Móvil, Slim controls about 80 per cent of Mexico’s fixed landlines and 70 per cent of the mobile market through subsidiaries Telmex and Telcel. America Móvil is the largest company in Mexico by revenue and is the major supplier throughout Latin America.

Meanwhile, media mogul Emilio Azcárraga controls over two thirds of the country’s free-to-air TV audience with his family’s broadcasting company Grupo Televisa, the largest media company in the Spanish-speaking world.

It will be interesting to watch how this power redistribution plays out. The new restrictive measures go further than anything similar attempted in the past and it seems that the government is finally ready to unseat the entrenched billionaires. However, it’s going to be difficult for policy to become reality. Mexico’s monopolies are known for slyly reappearing under different guises; rumours have already linked Slim to a new company, Dish, that could benefit from Televisa’s free services.

Slim has also been eyeing the domestic television market, from which he was previously barred. This could wind up presenting the moguls with an opportunity to extend their empires; instead, let’s hope that it pits the two groups against each other in the name of some long overdue competition.

Questions remain as to the identity of any fresh players on the scene and whether any new incumbents would have the business nous and funds, especially in the rural parts of the country where investment is most urgently needed. One thing is certain: Mexico’s rising classes are demanding better quality communications for less. For a country with one of the lowest internet subscription rates in the OECD, these reforms are a crucial step in levelling the playing field and stimulating further development. They must not be ignored.

Alexa Firmenich is a researcher for Monocle 24.

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