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

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SUMMARY
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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.

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THE "TELEVISA LAW"
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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).

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COFETEL'S AUTONOMY
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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.

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CONCESSIONS AND LICENSES
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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.

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COMMENT
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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