Mexico: Telecommunications reform by-laws aim to strengthen competition in the sector
July 9, 2014
The Mexican Congress approved the by-laws for the telecommunications reform in an extraordinary session held in July. This followed the approval of the secondary legislation (by-laws) pertaining to the political-electoral reform that was promulgated in February of this year. The approval of the political-electoral reform—six bills pertaining to voting procedures, institutions, political parties, methods for legally challenging electoral results, and the legal framework of the federal judiciary, among others—was opposition parties’ precondition to continue negotiating the telecommunications and energy reform by-laws.
The telecoms reform aims to strengthen competition and weaken the market dominance enjoyed by Televisa in the broadcasting sector and America Movil (Telmex and Telcel) in telecoms. It expands the potential for foreign investment in the industry and stiffens penalties for concessionaries who break the law. The final vote came after a few changes to the bill were made, including that two new television networks will use Televisa’s network infrastructure. Additionally, the regulator, the Federal Institute of Telecommunications (Ifetel), was stripped of its ability to authorize foreign concessions, which now require approval from the National Foreign Investment Commission (Comision Nacional de Inversiones Extranjeras). Moreover, the by-laws included a number of new extra provisions for mobile-phone tariffs, including the elimination of fees as well as national long-distance charges in 2015. The approval of the by-laws in Congress, however, was not well received by left-wing legislators. They complained that the new legal framework did not go far enough in fostering competition and that it mitigated the impact on the sector’s dominant players, while watering down the regulatory powers of the Ifetel.
The next key steps on the government’s reform agenda are to move forward with putting in place the secondary legislation for the energy reform to be fully approved. Most analysts now expect that the Mexican Congress will pass the energy by-laws in late July or the beginning of August.
With increasing signs that this year’s economic growth will be below the Finance Ministry’s forecast of 2.7%, President Enrique Pena Nieto’s administration is under pressure to prove that it can revive the economy before mid-term elections take place in June 2015.
Author: Ricardo Aceves, Senior Economist