Ending the Mexican Standoff: lessons for South Africa

On March 11, 2013 Mexico’s new President announced a fundamental and sweeping set of reforms in the telecommunications and broadcasting sectors. These reforms are aimed at transforming the dynamics of and introducing effective competition into these key sectors of the economy.

Until now these markets have been dominated, despite formal liberalization, by a combination of a quasi-monopoly and a duopoly.

These reforms would not be possible without strong leadership from the President and broad agreement among all major political parties on the imperative for transformation.

The proposed reforms are impressive in terms of their breadth and depth and the comprehensiveness and interlocking nature of the measures that are proposed.

They provide an example of the kinds of changes and the types of cooperation at the political level that are required to have an impact on powerful entrenched interests likely to be motivated to protect and perpetuate the status quo.

The reforms include:

  • A strong industry regulator will be created (the Instituto Federal de Telecomunicaciones (IFT) or Federal Institute of Telecommunications) replacing the current Cofetel (Comisión Federal de Comunicaciones)
  • Increased powers will be given to a new Comisión Federal de Competencia Económica (CFCE or Federal Commission for Economic Competition)
  • New entrants will be facilitated through the creation of two new free-to-air television channels that neither member of the current duopoly in broadcasting – Televisa (70% market share of free-to-air broadcasting) or TV Azteca (30% market share) – can acquire.
  • More broadly competition between three largely separate businesses (América Móvil the quasi-monopoly in telecommunications, and the two broadcasters) on the other’s home turfs should become more intense (e.g. the way will be opened for Televisa and TV Azteca to grow the current small share (5%) of their jointly owned company Iusacell in the mobile market and for América Móvil to offer video programming over its access networks)
  • Limits on foreign ownership of broadcasting companies will be increased to 49 per cent, and in the case of telecommunications, including satellite, to 100 per cent.
  • In addition passage of a Bill is being speeded up to make it impossible for companies holding public concessions – such as América Móvil – to delay regulations and fines by using standard legal processes and procedures such as seeking court injunctions (amparos).
  • A new wholesale-only network will be put in place by 2018 by the state-owned Telecommunicaciones de México building on the physical infrastructure (e.g. fibre optic links etc.) installed by the state-owned electric utility Comisión Federal de Electricidad (Federal Electricity Commission), and eventually exploiting the 700 MHz “digital dividend” spectrum.

Many specific conditions of the Mexican market and economy, and institutional traditions and culture are very different from South Africa. Nevertheless the core challenge faced by the two countries is similar in both the telecommunications and broadcasting markets.

In telecommunications, how to inject a new dynamic into their broadband and related markets on the supply side to overcome the high prices, poorer service and uncompetitive performance of the services available to their residents, business and institutions compared to their peers and in the context of the needs inherent in their national, regional and even global economic and social aspirations.

In broadcasting, how to reduce the price of content, increase choice for consumers in their bouquets, increase South African-specific content, and more fairly allocate the rights to content such as premium entertainment and sport content.

South Africa would do well to take some carefully selected leaves out of the book of initiatives and processes now launched in Mexico in terms of building stakeholder support against powerful entrenched resistance to change, and of understanding the scope and content of the measures that are required to make a real impact.

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Ending the Mexican Standoff: lessons for South Africa