Mexico Economic Transformation Presents Ideal Opportunity for California

Mexico Economic Transformation Presents Ideal Opportunity for California

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The economic transformation brought on by President Enrique Peña Nieto’s energy reforms are expected to impact more than Mexico itself. Different countries, including the United States, welcomed the changes, especially as they allow foreign investment in energy sectors after more than seven decades of nationalization. However, while opening many doors to Mexico’s northern neighbor, California especially believes that it will benefit the most from Mexico’s unique opportunity due to its location and commercial ties.

In August, the Mexican President and California’s Governor Jerry Brown shared the stage to discuss different aspects, mainly business opportunities. Peña Nieto’s visit was expected after Brown traveled south on a trade mission in July, accompanied by many business representatives and lobbyists who eagerly paid to tag along. State energy officials are quite optimistic about these visits, especially after the president signed legislation to facilitate investment and development in both the electricity and oil and gas industries, and considering the high energy potential of the country. “These energy reforms significantly alter the structure of Mexico’s energy industry,” they said. “California’s innovative policies send a clear signal, provide incentives and generate market demand.”

California Energy Commission (CEC) Chairman Robert Weisenmiller and the California Governor’s senior adviser Michael Rossi believe that California has many companies which can help Mexico effectively carry out its reforms while reducing emissions and promoting the use of renewable energy sources. “By doing so, California and U.S. energy companies will create more jobs and tax revenue on both sides of the border and build an even stronger economic partnership,” Weisenmiller and Rossi said. Mexico has made a plan to reach 35% of electric generation with clean energy by 2024, and so opportunities abound for developers and technology companies.

Having strong ties with Mexico is also important for California due to trade. The Latin American country is the state’s largest export market. In addition, two-way trade between both reached more than $60.1 billion in 2013, a number which Weisenmiller and Rossi believe would grow now that both regions are closer than ever.  “The energy reforms in Mexico allow for this collaboration to continue and result in greater economic growth and the achievement of climate and clean energy goals on both sides of the border.”

Energy and trade relations aside, the electronics industry at both ends is bound to expand in the future. While Californian companies build the components of cellphones, computers and other electronics, it is actually Mexican factories that assemble the final products. International trade advisor Jock O’Connell from Beacon Economics pointed out, “Largely because of the very high cost of doing business in California, we don’t make an awful lot of consumer goods. It tends to be stuff that goes into stuff, the components that go into more complex products.” This expansion is inevitable as Mexico’s workforce has grown more skilled. In addition, after recent Chinese government crackdowns on American companies, many are expecting California to limit its focus on trade with China to concentrate on its new Mexican ties.

Though California seems to be the most eager for ties with Mexico, the United States as a whole would benefit from its southern neighbor. Despite dealing with migration and drug issues, the U.S. cannot deny that Mexico is the world’s eighth largest producer of automobiles and fourth largest IT exporter. It is also growing into a world-class aerospace and electronics manufacturer, a feat possible due to the United States’ support and exports.

With so much to offer, California and other states are bound to update their views of Mexico. The Golden State has already taken a positive step during Brown’s trade mission by striking an educational exchange agreement, which is a first of its kind between the Mexican government and an individual U.S. state. However, this is just one step in a longer journey that would result in stronger ties between the neighbors now that Mexico has evolved into a willing and able economic partner.

Last visit of Eric Garcetti, LA Mayor brought a share of the new Mexico City airport (US$9 bn) to Parsons Corporation, one of the LA Firms that came with economic mission. So, the question is how far California and Mexico want to be integrated.

California Green Road Sign and Airplane Above with Dramatic Blue Sky and Clouds by Andy Dean Photography

#HackTelecomMexico Telecom Antitrust: The devil is in the due process

#HackTelecomMexico Telecom Antitrust: The devil is in the due process

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Photo credit: Infinitum box by Alberto Esenaro


#HackTelecomMexico is a series of posts exploring the new Telecom Bill, in discussion at the Mexican Congress. Follow the series here

“In Law, deadlines are fatal”, you learn that in Law School. No matter what type of process, they are fatal. Here is another one. “Due process of law”. Any act of authority has to follow rules according to statutes.

I do not have big data validation to back this up, but due process of law is the first cause of rants for non-lawyers in Mexican telecom industry.

Now, the proposed telecom law is in debate at the Congress, and there should be also a debate on the process itself. Here is why:

1. According to the new telecom law, any legal gap in process would be fulfilled by the following laws: General Ways of Communications Law, Administrative Proceeding Law, Code of Commerce, Federal Civil Code, Federal Code of Proceedings, in that particular order.
2. On the other hand, the authority and proceedings for telecom antitrust are relied on the recently published Competition Law (to be in force next July 7, 2014).
3. Then, the new Competition Law, fulfills its legal gaps on the Federal Code of Civil Proceedings. The Administrative Proceeding Law expressly excludes antitrust matters from applicability.
4. To add elements, the IFT is the exclusive telecom regulator and telecom antitrust body. Cofece, as transversal antitrust body, constructs the antitrust regulation, except for telecom. However, at some point, its construction will still influence construction of IFT on telecom antitrust. Litigators will sure invoke that.
5. It also means that IFT cannot accumulate cases that have regulation and antitrust components so easily. Such accumulation would require neurosurgeon precision for following due process of law for both.
6. Now, courts specialised in telecom and antitrust are constructing law and could decide up to what extent IFT has to follow Cofeco criteria and resolutions. Case law will increase at fast pace.
7. Finally, new competition law provides for a mechanism to define jurisdiction on matters that could fall into telecom or general antitrust, i.e. Media and other tech convergent industries. In this age, most businesses are tech convergent. Controversies between those bodies are ultimately decided by specialised courts.

Are you following this maze?

Now imagine issuing an antitrust opinion for participation in tenders (TV tender dates were revised today), which would follow antitrust proceeding, and the granting of the respective title, which would follow telecom regulation proceeding.

Then, add up the construction for determining and applying preponderant, dominance, essential inputs and entry barriers regulations to the tender. This is not an easy ride.

Maybe is time for STEM lawyers to step up. Trust me, it will be fun and there will be profit.

Mexico Consumer Entertainment Spend Grows Rapidly; Now at 4.5 Billion USD

Mexico Consumer Entertainment Spend Grows Rapidly; Now at 4.5 Billion USD

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Television Face Close-up by Martin Howard

According to research from Futuresource Consulting, consumer spending on video and TV entertainment in Mexico reached USD 4.2 billion in 2013, recording a 9% growth. The company is also optimistic and expects more growth this year, enabling the market to reach USD 4.5 billion in 2014.

The company’s senior market analyst Joanna Wright commented, “2013 was an extremely strong year for pay-TV in Mexico – growing by almost two million subscribers (+14%), with consumer spend reaching USD 2.9 billion and a further 10% growth expected in 2014.” She later added, “This has been driven by an increase across all platforms, as digital cable grew by 790,000, satellite homes 630,000 and IPTV 60,000.”

The Mexican government takes pride in its creative industries as they contribute to the country’s economic development, producing over 500 billion USD annually. The industries also provide numerous job opportunities while making use of state-of-the-art technology before introducing them to parallel industries.

A 2011 ProMexico report called the Roadmap for the Creative Industries predicted this growth earlier. According to the document, the film subsector will grow due to the increase and implementation of 3D titles whereas online and mobile device games will display the highest growth. Meanwhile, the music market will improve due to more digital distribution. Combined, this subsector was expected to grow at 4% between 2009 and 2013.

As for television, TV advertising was expected to be slow since it is recovering and adapting to the new, very young consumers. Despite falling at a rate of 11.9% by 2009, the subsector was expected to recover by 2013. On the other hand, the internet was expected to thrive thanks to higher download speeds, richer content, and better upload speeds. As a result, the subsector’s global market forecasts predicted a growth of 9.2% until 2013.

Unfortunately, while the packaged video market is a significant Mexican sector that has held up well so far, it’s starting to suffer. It recorded its first two-digit decline last year. One of the reasons behind this is Blu-ray’s enhanced performance, which led to a 15% growth rate by 2013 and the title of the fifth largest market globally.

Digital video also performed extremely well in the past year, growing by 91% to USD 86 million. Come 2018, the industry is expected to double its worth to reach USD 360 million, especially due to the high demand for subscription video on demand services (SVOD).

Wright says, “SVOD accounted for 66% of overall digital spend in 2013 and with 70% growth expected in 2014. Key drivers of this growth were the introduction of Netflix in 2011 and new entrants to the market in 2013 helping further raise awareness of the service. As the broadband infrastructure improves, SVoD services have the potential to generate significant consumer spend in Mexico.”

The predicted numbers can either go higher or down depending on the changes the Mexican telecom reforms will create. However, even then, due to the increased competitiveness in the market, the creative industries will thrive.

#HackTelecomMexico Never mind the mobiles: Why Virgin Mexico matters?

#HackTelecomMexico Never mind the mobiles: Why Virgin Mexico matters?

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Photo credit: Richard Branson by D@lY3D Abdelmaksoud

#HackTelecomMexico is a series of posts exploring the new Telecom Bill, in discussion at the Mexican Congress. You may follow the series here

Virgin Mobile announced the launch of a MVNO in Mexico by Q2 2014 partnering I-New (“MVNO-in-a-Box”) and under the infrastructure of Telefonica, Recently, Virgin announced the appointment of Cecilia Vega as CEO, so the launch is pretty close.

Telefonica has been backing a few MVNOs like Maxcom and Coppel, but since December 2011, I have been following the launch of Virgin Mexico, which I consider a key metric of this market.

The arrival of a new mobile (even a MVNO) will put some pressure on quality and prices to current operators. Virgin Mexico could ignite a series of effects to the industry. These are some possibilities:

1. A British Invasion. Big telecom companies like BT and BBC have operations in Mexico. However, the successful landing of Virgin Mobile could validate the market for other UK telecom companies. Think Cable & Wireless, Easynet, Thus, Vodafone, Freeview, BSkyB or ITV. Virgin, BBC and BT could escalate business, too. After all, there are some tenders like TV and satellite, rulings and other conditions that could make Mexico attractive to them.
2. The Resellers Revamped. Resellers have been an on/off discussion for regulators and operators. A MVNO is a reseller of mobile minutes under its own brand. The authorisation of Virgin could force IFT to issue an upgraded regulation for resellers, and find an appropriate model. Resellers are pushed by operators, competitors and customers. They indirectly invest in active telecom infrastructure, and need to profit from the network under fair conditions. An ignition to the reseller market could happen if regulation learns to read the market.
3. The Talent is back. This phrase of Richard Branson could inspire this market: “Train people well enough so they can leave, treat them well enough so they don’t want to”. Before 1997, long distance service was exclusive to Telmex. Many companies invested into the market to get a juicy share. Not many survived the IP and P2P. Sunken investments did not stand a chance to get a ROI. Same happened in other services. That, combined with lack of competitive conditions and other factors led to M&As, bankruptcies and talent rotation. Some talent went indie or rogue. Training was left behind. Now, market is growing and law is opening opportunities, so things could change. A mix of veterans and rookies is a to-do for any company trying to grab the market.

These possibilities need big data validation. However, the sole fact of a major brand jumping into Mexican market, makes the investors wonder: Should this market be invested?

#HackTelecomMexico Telmex on TV: Damned if you do, damned if you don’t

#HackTelecomMexico Telmex on TV: Damned if you do, damned if you don’t

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Photo credit: Mr Carlos Slim Helu, Founder and President, Carlos Slim Foundation, speaking at Aldea Digital, Mexico City, Mexico by itupictures

#HackTelecomMexico is a series of posts exploring the new Telecom Bill, in discussion at the Mexican Congress. Follow the series here


For over 20 years, Telmex has been restricted from the TV services. During last 6 years, this debate grew in importance, but the dilemma remains intact: Should Telmex be allowed to enter TV market? If so, under which conditions?

During privatization, Telmex was granted with an “Amendment of Concession Title” setting special conditions to prevent monopolization of the legacy telecommunications market, some sort of asymmetric regulation for an uncontested market.

In specific, Clause of 1.9 of Amendment, prevented Telmex from broadcasting free-to-air TV signals, directly or indirectly in Mexico. Yes, this was way back before convergence or internet took off, so the lock was fair enough considering that Telmex had an exclusivity time-window. This restriction did not included CATV.

With the age of telecom convergence, Mexican Government issued a Decree, allowing telecom operators to provide triple-play. Telmex was left behind this Decree, as back then, authorities considered harmful for competition the entrance of Telmex into TV market (broadcasting and CATV), and arguing non-compliance to telecom regulations.

Even though, Telmex challenged resolutions in court. Ultimately, authorities handled the lawsuits and prevented Telmex from becoming a TV or CATV operator.

This loops us back to the same dilemma under a different technological era: Should Telmex be allowed to enter TV market? If so, under which conditions?

Transitory Article 9 of the Bill, provides that Telmex needs to comply with asymmetric regulation imposed by the IFT, and then apply for the universal telecom license. This could take over 2 years, considering verification of compliance and other regulatory and technical aspects.

Damned if you do: Telmex has been preparing for entering the TV/CATV industry by purchasing exclusive content like past Pan American Olympics, Sochi Winter Olympics, Rio Olympics, a couple of Soccer teams (and broadcasting rights thereof), a content syndication company, has partnered Larry King in Uno TV (internet-based news) and is experimenting in streaming live events and providing VOD through Claro Video. If Telmex gets TV, it will have a fair market share, but hardly actual substantial power, as Televisa´s brand and content have traction with advertisers and audience. It seems distant a case for additional asymmetric regulation. IFT, telecom watchdog, will have a real hard time overseeing asymmetric regulation for Telmex rendering TV services, and at the same time, watch Televisa in parallel. Small and regional independent CATVs could become casualties in a price war.

Damned if you don´t: TV Networks tender is a hard pitch for heavy weight investors, as you need to find companies integrated vertically into the business, with experience on producing attractive content to get advertisers. Nowadays, US broadcasters are trying to live by with advertising model, but Aero is getting into the way. Televisa, under must-offer/must-carry ruling, has to allow access competitors to its passive network. Telmex would deploy fast with current passive infrastructure and to advertise companies of its own group for fast cash-flow. Interested parties need to face Televisa, TV Azteca and the digital TV migration. Telmex is a heavy weight already here. If Telmex complies with all regulation, the Law should grant it a TV/CATV license, because rule of law must prevail.

To add a time constraint to this conundrum, IFT already called for the two TV networks tenders in June 2014. Hardly, there will be a third one any time soon. Maybe EPC model could become handy this time for faith-leapers.

CATV seems a good fit for Telmex, considering its vast network. CATV industry grew 16% during Q413, according to IFT. Telmex, has been acquiring billing experience from its Dish deal. Most probably, Telmex already ran some big data analytics tools on subscriber’s behaviour.

Any tender or regulation are pitches to the market, but need to follow rule of law. Now telecom law is being discussed, and therefore regulation could change accordingly. Will allowing Telmex to enter the TV market scare or attract investors?

Maybe it is time for changing the dilemma: Is Mexico ready for prime-time trade-off? If so, What risks are we ready to take? What benefit are expected?

Televisa and Telmex on two legs after Watchdog resolutions

Televisa and Telmex on two legs after Watchdog resolutions

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Photo credit: The power of television by Clemens v. Vogelsang

A couple of weeks ago, I wrote about the titanic tasks that the Mexican telecom regulator had to achieve according to the recent constitutional telecom reform. One of those tasks was to declare preponderant operators for telecom and broadcasting, and imposing asymmetric regulation or ordering separation and/or disinvesting. Despite the markets were nervous, the later did not happen. Televisa, Telmex, and many of their strategic partners, are on two legs, with regulation, but on two legs.

The asymmetric regulation cover many aspects in detail, so I plan to write about consequences and opportunities later in many posts. Nevertheless, here is a nutshell summary of what was resolved, and that took affects last March 21:

1. Televisa, some of its subsidiaries, re-broadcasters and partners, were declared preponderant, and subject to the regulation (jointly Televisa).
2. Televisa must have a public offer to allow broadcasters access to passive infrastructure under the principles of no discrimination and no exclusivity.
3. Public offer will cover every new civil construction.
4. Televisa cannot acquire relevant content on an exclusive basis. Televisa cannot join buyer´s clubs. IFT will determine what content must be considered relevant by May 31, 2014, and every two years thereafter.
5. Televisa must offers its channels to competitors of other technologies operators (CATV, VOD, etc.)
6. Televisa cannot invest on Telmex, or have shared directors or high executives.
7. IFT will review and revise the regulation every two years, and could apply, as necessary, functional or structural separation, disinvesting of assets.

1. Telmex and some of its subsidiaries and partners, were declared preponderant, and subject to the regulation (jointly Telmex).
2. In mobiles, Telmex is bound to interconnect, sell capacity and render transport and termination of calls, as well as co-location. This includes access to passive wholesale and MVNO.
3. In mobiles, Telmex is bound to provide tariff information to end-users, customer service, unblocking of phones and elimination of national roaming. Exclusive agreements for distributing mobile phones cannot be longer than 6 months.
4. In fixed service, Telmex is bound to render interconnection, allow passive infrastructure, co-location and transport. Telmex must guarantee minimum speeds and delivery times for T1s and other connections.
5. In mobiles and fixed service, Telmex must allow access to any content/service/app.
6. In mobiles and fixed service, must have a public offer to allow access to passive infrastructure under the principles of no discrimination and no exclusivity. Public offer will cover every new civil construction.
7. Telmex must unbundle its local loop.
8. Telmex cannot acquire relevant content on an exclusive basis. IFT will determine what content must be considered relevant by May 31, 2014, and every two years thereafter.
9. Telmex cannot invest on Televisa, or have shared directors or high executives.
10. IFT will review and revise the regulation every two years, and could apply, as necessary, functional or structural separation, disinvesting of assets.

The analysis of the legal process deserves another post, as IFT has a complex dual function as regulator and competition authority, and therefore is subject to two different process laws that requires surgeon hand to operate. It also would requiere STEM lawyer skills to make a successful challenge.

This is a new beginning for the Mexican telecom industry, but it is a good start for planning telecom business strategies.

Do you think this was enough, or something essential was left out? Let me know.


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