The proposal would give broad new powers to regulators who have been frustrated in their attempts to reduce the market power of América Móvil, which is controlled by the billionaire Carlos Slim Helú.
Most important, it would allow regulators to require a company with control of a majority of the market to divest some assets or submit to special rules to prevent it from abusing its market dominance.
América Móvil controls about 80 percent of Mexico’s fixed lines, about 70 percent of its mobile lines and 74 percent of its fixed-line Internet connections, according to the Inter-American Development Bank. (Mr. Slim owns about 8 percent of The New York Times Company.)
A study released last year by the Organization for Economic Cooperation and Development estimated that the lack of competition in telecommunications costs the economy about $25 billion a year. The study noted that Mexico was at the bottom of the rankings among O.E.C.D. countries in penetration for fixed, mobile and broadband markets. Profit margins for América Móvil are much higher than the O.E.C.D. average, and the company invests less per person than companies in any other country.
“The government is sending a clear signal that its way of dealing with the sector is very different,” said Jana Palacios Prieto, a telecommunications expert at the Mexican Institute for Competitiveness.
Through a combination of legal challenges and lobbying, América Móvil’s lawyers have managed to block or delay regulation that might chip away at the company’s market share and its margins.
“We are two to three decades behind other countries,” said Ernesto Piedras, the director general of the Competitive Intelligence Unit, a telecommunications consulting firm. “We have a regulatory outlook that is so poorly enforced that practically any modification will leave us better off.”
The measures announced Monday also aim to curtail the market dominance of Mexico’s broadcast duopoly: Televisa, which is controlled by Emilio Azcárraga Jean, and TV Azteca, which between them control almost the entire television market. The proposal envisions auctioning off two new private television networks, a plan the broadcasters have fought for years.
Televisa said in a statement that it welcomed more competition, while América Móvil did not have an immediate comment.
The measures that were announced on Monday must still clear a series of legislative hurdles. The first step is for Congress and state assemblies to approve a constitutional reform. Because the changes were negotiated among Mr. Peña Nieto’s top aides and leaders of the three main political parties, they are expected to pass.
Then Congress must rewrite several laws to put those changes into effect. That, analysts say, is when the industry may find ways to water down some of the measures.
Among the proposals announced on Monday is one that would lift the limit on foreign investment in telecommunications to 100 percent from 49 percent. The law would give full autonomy to Mexico’s Federal Competition Commission, which has struggled to impose fines on América Móvil and tried unsuccessfully to force broadcasters to provide their free channels to pay TV competitors.
The changes would also create a new body over the next year with broad powers to regulate telecommunications companies, including the possibility of ordering them to divest assets to prevent them from exercising control over the market.
Article source: http://www.nytimes.com/2013/03/12/business/global/mexican-plan-would-rein-in-phone-and-tv-providers.html?partner=rss&emc=rss
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