SENATE PASSES CONTROVERSIAL BROADCASTING AND TELECOM

UNCLAS SECTION 01 OF 02 MEXICO 001716 SIPDIS SENSITIVE SIPDIS STATE FOR WHA/MEX, WHA/EPSC, EB/CIP STATE PASS USAID FOR LAC:MARK CARRATO TREASURY FOR IA MEXICO DESK: JASPER HOEK COMMERCE FOR ITA/MAC/NAFTA: ANDREW RUDMAN, NTIA FCC FOR EMILY TALAGA STATE PASS USTR FOR JONATHAN MELLE E.O. 12958: N/A TAGS: ECON ECPS EINV PGOV MX SUBJECT: SENATE PASSES CONTROVERSIAL BROADCASTING AND TELECOM REFORMS Ref: MEXICO 01080 -------------- SUMMARY -------------- ¶1. (SBU) On March 30, with 81 votes in favor, 40 against, and 4 abstentions, the Mexican Senate approved controversial reforms to Broadcasting and Telecommunications Laws. Previously, on December 1, 2005, the Chamber of Deputies had unanimously passed the bill. It has now been sent to President Fox who is expected to approve it in no more than ten days. The bill will eliminate the Communications and Transportation Minister's current discretionary power to grant or revoke concessions by introducing a transparent bidding process. Opponents of the bill allege that it encourages media concentration by the two broadcasting giants, Televisa and TV Azteca. While supporters of the law say it promotes technological convergence and represents a significant advance from the original circa-1960 broadcasting law, they also acknowledge it still has some gaps that should be improved in the future. End Summary. -------------- THE "TELEVISA LAW" -------------- ¶2. (SBU) Opponents, including legislators from the Party of the Democratic Revolution (PRD) and some Institutional Revolutionary Party (PRI) and National Action Party (PAN) Senators, have accused the PRI and PAN of having sold their votes in favor of what has been called "the Televisa bill" in exchange for Televisa's support for their presidential candidates' campaigns in the media. Allegedly, broadcasting giant (and near monopoly) Televisa drafted the controversial bill to protect itself from future arbitrary decisions made by the incoming president, tacitly referring to current poll- leader Andres Manuel Lopez Obrador (AMLO). -------------- COFETEL'S AUTONOMY -------------- ¶3. (SBU) Critics say the bill fails to provide true autonomy to Mexico's telecommunications regulator, COFETEL. For opponents, the new selection process for commissioners was tailored to favor the existing dominant players by failing to restrict any person with close ties to any telecom or broadcasting company from becoming a COFETEL commissioner. Thus, it will not be surprising to see executives from Televisa, Telmex, and TV Azteca as incoming commissioners. According to the reforms, the President has 30 days after the law is published - and before the July presidential elections - to designate the five commissioners. None of the current commissioners will be allowed to remain. ¶4. (SBU) The bill theoretically encourages a long-term vision and continuity by selecting commissionaires for an 8-year tenure, which can be renewed for a second term. With the amendments, COFETEL will regulate and administer the radio electric spectrum and promote the efficient use of it. However, no significant changes were made to provide more autonomy to COFETEL as its decisions and opinions will still be subject to review by the Ministry of Communications and Transportation (SCT). Although concessions will be granted through public tenders, the final decision will still be made by SCT and not COFETEL. -------------- CONCESSIONS AND LICENSES -------------- ¶5. (SBU) One of the most significant changes in the bill is that concessions will be granted through a bidding process. Supporters of the bill say the new law will foment competition by making more spectrum available and by ending the practice of the government handing out concessions by decree. Televisa and TV Azteca could also participate in those tenders. Critics of the bill say that it will not encourage competition as legislators failed to oblige bidders to obtain a favorable opinion from Mexico's anti-trust authority, the Federal Competition Commission, before submitting their bids in order MEXICO 00001716 002 OF 002 to prevent media concentration. Given this, and the prohibition on foreign investment, dominant companies will have a distinct advantage in winning tenders. ¶6. (SBU) Another concern is that, under the new law, the two big broadcasters would receive free digital spectrum to cover their existing analog frequencies, while potential newcomers to the market would have to pay for additional spectrum that is put out for bidding. After the digitalization process, broadcasting companies will easily keep the freed spectrum for convergence simply by requesting it from SCT and by making a payment in exchange. Since no clear criteria about the payment have been defined in the law, critics believe that the State wouldn't recover the spectrum nor would receive any payment. -------------- COMMENT -------------- ¶7. (SBU) Given that Mexico's national elections are fast approaching, many observers here believe that legislators should have waited until after the elections to pass such a controversial reform so that all interested parties' views are considered. Although the law may represent an advance for the sector compared to the obsolete law of 1960, some critics believe it would have been better to pass a more comprehensive reform that would not have so blatantly benefited the handful of big broadcasters that already dominate Mexican media. However, now that the step towards a new broadcasting and telecommunications law has been taken, we hope that improvements are passed in the near future that will indeed strengthen COFETEL and help the sector become more competitive. We will report separately on the views of Embassy contacts in government and the telecom industry after President Fox has signed the bill. GARZA