Photo credit: DSC_6391 by Jeff Meyer
Last January 30, 2014, Mexican telecom watchdog, IFT, revised the tender program for 2 national digital-TV networks. The new program revised 8 locations based on comments from interested parties.
The revisions are for coordinates in: a) location 123, channel 42 (638-644 MHz) in Toluca, b) location 124, channel 47 (668-674 MHz) in Toluca, c) location 137, channel 23 (524-530 MHz) in Cuernavaca, and d) location 138, channel 24 (530-536 MHz) in Cuenavaca.
The revisions are for channels in: a) location 143, channel 15 (476-482 MHz) in Agualeguas, b) location 195, channel 18 (494-500 MHz) in Agua Prieta and Cananea, c) location 196, channel 15 (476-482 MHz) in Agua Prieta y Cananea, and d) location 221, channel 20 (506-512 MHz) in San Fernando.
The call is expected to be published by March 9 2014, on the same deadline when IFT must determine whether Televisa is “preponderant” player in the TV market (50% of more of the TV market). A process that has already started, as confirmed by Televisa and IFT. As a consequence, IFT could apply asymmetric regulation to Televisa, or force de-investing.
What other conditions precedent should IFT meet before launching the call? Can IFT pitch TV market to investors?
Photo credit: BT Screens by Jeremy Keith
Last December 20, 2013, the IFT, Telecom regulator, published the tender program for two TV broadcasting networks with the location of the TV stations and frequencies to be granted under license. The call is expected by March.
IFT acknowledges that commercial free-to-air TV (FTV) has a high concentration with Grupo Televisa (GTV) and Televisión Azteca (TVA), which jointly have, directly or indirectly, 95% of the licenses, 96% of the audience and 99% of the advertising incomes. As a consequence, the tender will prevent companies with 12 MHz in any locality to participate.
The program is set to tender 246 localities/frequencies throughout Mexico for Digital FTV service. However, any interested party could request additional localities or frequencies by January 18, 2014.
Public tenders are pitches to the market. FTV in Mexico is a very hard project to pitch due to concentration. There is not an easy elevator speech for that. On first sight, the entrant conditions of FTV seem hard. However, some factors could diminish that power:
1. Participants could ask adding locations and frequencies. This means that entrants can design its own network architecture for deploying at low cost or preparing for providing additional services.
2. IFT is in process of determining relevant operators for FTV markets. As a result, relevant players who have more than 50% of a given market could be forced to share its passive infrastructure. This could bring down deploy cost for entrants.
3. New networks are set for providing D-TV. However, the licensor could provide any new service, as long as it complies with FTV services. Broadcasting has always been the hard node to interconnect in Mexico. Most of the time because of isolating regulation. Maybe it is time to leave legacy technology behind and mix it with some IP, double screen marketing, interactive systems, VOD, big data mining, and many other models that could make FTV profitable.
4. IFT launched last month, a public consultation on must-carry and must-offer rules, which soon will be in force. Under those obligations, signal of FTV will be repeated into CATV systems, including advertising. This is an automatic upgrade to any infrastructure of FTV network for free, which could bring on more value to sponsors.
5. Operators having broadcasting licenses accumulating 12 MHz or more in a given locality are not elegible for participating into the tender. Under a legal definition of the current Radio and TV Law, broadcasting includes both TV and radio. Technically, this is restricting radio and/or TV groups in Mexico. Also, it does not impose restrictions to participants for bidding on both new networks for the moment.
There are many other factors to consider for assessing whether this tender has real market value. Who knows? Maybe the TV revolution will be televised after all.
Ibope chooses a group of homes at random to represent the population to obtain data on TV viewers to later report to broadcasters. As reported by Mexican business journal “El Economista“, TV Azteca, second largest broadcasting corporation in Mexico, sued Ibope over the validity of rating results. TV Azteca decided not to bill advertising to its clients based on ratings in the future.
Mexico will finish its migration to digital free-to-air TV by December 31, 2015. This change offers an exclusive opportunity for rating companies to penetrate not a “representative population”, but to collect real-time data of preferences from all viewers. “Peoplemeters” provided by companies like Ibope, certainly could be replaced by either “tuned” digital converters or apps for Smart TVs, as long as privacy rules are complied.
Now, considering that telecom operators are forced by law to must-carry and must-offer (with some exceptions) content broadcasted by TV operators, the spot prices will have more value, as the reach has been expanded beyond its original network. Big data analytics will play a key role in pricing and marketing for telecom companies under this rule.
On the other hand, Article 6 of Mexican Constitution protects the rights of the audience. It is still uncertain how telecom law would regulate (or not) the plurality of content in broadcasting and CATV. It is also uncertain if broadcasters will be forced to program “cultural” content and the rules for considering it as such. However, as TV is becoming more interactive, the right of the audience could be implemented with technical solutions as VOD, PPV or collective interaction of viewers (i.e. through social networks, etc.)
By March 9, 2014, Ifetel, Mexican telecom regulator, must determine which telecom operators are relevant to the market and impose asymmetric regulation or even functional, accounting or structural separation. For the purposes of the Reform, a relevant operator is the one holding more than 50% in a given relevant market, using metrics of Ifetel for calculating users, subscribers, audience, network traffic or used capacity. In this regard, big data metrics will play essential role for backing up either ruling.
While many parts of telecom regulation are still up in the air in the Congress, the truth is that big data tools are needed for implementing the Reform. Do you have any other unseen opportunity? Let me know.
Last Tuesday, Mexican Senate confirmed appointment of the 7 commissioners for IFETEL, the new telecom authority in Mexico replacing the COFETEL. Now that the IFETEL has been officially integrated as an autonomous regulator, it is time to catch up with major challenges that have been somehow left behind. Here are some of them.
1. For years, value added services have been sub-regulated, as traditional voice and data transport services have been on the spotlight of the Regulator. However, as internet services, apps and social networks are merging voice, data and video services, it is necessary to deregulate them enough to make them grow, but regulate them to avoid illegal activities, like abuse of dominant position and by-pass.
2. TV and Radio Law and Regulations were originally published on 1960, and many of their provisions got stuck in time despite the several amendments that have suffered, as well as vast case law from the Supreme Court and Federal Courts. With the recent Telecom Reform, foreign investment can have a participation up to 49%. This percentage could become handy for the upcoming tenders for Free-to-Air Digital TV and the radio frequencies. However, regulation needs to be designed for convergence and cross-ownership provisions with Congress collaboration.
3. Before 1991, telecommunication services were provided by the Government, mostly. Then, the industry was ruled by the Law of General Ways of Communications and the Regulations of Telecom. Thereafter, Telmex was fully privatised, and in 1995 the new Telecom Law was issued. However, the Regulations kept in force. On the text of the 2009 Telecom Reform, COFETEL was forced to draft new Regulations by August of that year. It has not happened yet and Regulations are very inconsistent with the new telecom services.
4. The 2013 Telecom Reform transfers telecom antitrust authority from COFECO (antitrust body) to IFETEL. Before that, the antitrust authority was shared. As COFECO was the leader of this partnership with knowledge, authority and specialists, COFETEL followed and executed such lead under the extent of the Law. However, as IFETEL is now the sole telecom antitrust authority, it will require to catch up, and avoid that operators challenges their resolutions in court.
5. Telmex is currently regulated by its Amended Concession Title. It contains several obligations for Telmex, as dominant player, as well as the prohibition to render TV services. Granting permission to Telmex for entering the TV industry would have a big impact on the service. Should it be granted? It depends whether the impact is good or not for the market. Should it be discussed? It must be.
Now that IFETEL is getting a fresh start with autonomy for redesigning the market, it is time to push forward the market. This time, let´s not forget that telecom remains a lawyers game.
Photo credit: Dell Tech Camp 2013 by Dell Inc.
The Reform started effects on June 12, 2013. As from this moment, several deadlines were triggered that will define the new telecom and antitrust landscapes:
- Since June 12, 2013, foreign companies and individuals can invest in telecom companies up to 100%, and 49% in TV/Radio companies (the latter subject to country reciprocity to Mexicans in those sectors).
- Since June 12, 2013, the only recourse against acts of New Telecom Regulator (IFETEL) and the New Antitrust Regulator (CFCE) will be Indirect “Amparo” (constitutional writ), repealing administrative recourses. This “Amparo” does not grant injunctions against regulators anymore.
- By August 10, 2013, the Federal Judicial Council (administrative officers of Judicial Branch) will set the telecom and the antitrust courts with exclusive jurisdiction on those matters.
- By September 1, 2013, the process for selecting IFETEL and CFCE Commissioners will be finished.
- By December 31, 2015, migration to digital TV will be completed. Before that date, IFETEL would start a tender process for 1 or 2 national Digital TV networks.
Last Tuesday, the Calling for Aspirants to Commissioners of IFETEL and CFCE was issued with requirements for being eligible. If you read between the lines of the Reform and Calling, you may conclude that:
- Regulators will be autonomous from Government and their decisions will have real impact on telecom and other markets, including power for functional and technical separation, ability to declare essential facilities and dominant players, and grant telecom licenses (IFETEL), among others.
- Mexico is leaving administrative review tradition set by Telecom Law (1995) and Antitrust Law (1992) for the newly reformed “Amparo” proceeding.
- The profile and eligibility requirements for Commissioners favors telecom and antitrust lawyers, but are inclusive with economists and engineers.
- Secondary regulation will create a legal turmoil of interpretation and integration. Expect landmark cases and battles.
- Legal analysis and litigation will be on the rise. This represents a great opportunity for the global legal market that has suffered from liberalization of the profession and the world crisis.
Now, the real question is: Would courts and lawyers be able to argument with STEM knowledge (science, technology, engineering and mathematics) and apply it to law? That is quite a challenge and yes, some will succeed.