Must Carry, Must Offer in Mexico Clara Luz Álvarez, Nonresident Scholar, Mexico Center
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ISSUE BRIEF 06.05.15 Must Carry, Must Offer in Mexico Clara Luz Álvarez, Nonresident Scholar, Mexico Center Given the reform’s legal framework, however, INTRODUCTION content diversity and pluralism will not be Mexico’s free-to-air television programming enhanced by MC/MO in Mexico. has long been dominated by two corporate groups: Televisa and TV Azteca. They jointly hold—directly or through subsidiaries—95 THE EVOLUTION OF MC/MO POLICY percent of the commercial licenses, 90 IN MEXICO percent of audience share, and 99 percent Mexico’s MC/MO policy arose as a of the advertisement income.1 Televisa is patchwork of reactions to various acts by also a major pay TV player, controlling 62 regulators and Congress. percent of the market with its cable and Prior to Dish México’s entry into the satellite companies.2 With this level of Mexican pay TV market in December 2008, high concentration in the television sector, pay TV success in Mexico was determined Mexico’s 2014 telecommunications reform by whether programming packages established constitutional “must carry” and offered Televisa’s3 channels 2 and 5, as “must offer” (MC/MO) regulations. acknowledged by the former Mexican Must carry and must offer (MC/MO) are Antitrust Commission (COFECO).4 This two sides of the same coin. Must carry (MC) allowed Televisa to leverage its market refers to the obligation of pay TV providers position vis-à-vis pay TV broadcasters. to include free-to-air channels in their In 2008, in order to comply with a programming packages. Must offer (MO) Mexico’s MC/MO policy condition imposed by COFECO to allow regulations, on the other hand, mandate arose as a patchwork Televisa to acquire pay TV companies, that free-to-air (FTA) broadcasters offer Televisa began to offer its free-to-air of reactions to various their channels to pay TV licensees so channels as a bundle. However, the company acts by regulators and the channels can be included in pay TV expressly excluded pay TV providers with programming packages. Congress. more than 5 million users and US$1.5 billion While the reform legislation places of income. This policy targeted América rhetorical importance on promoting Móvil—the parent company of Telmex and culturally diverse and pluralistic content Telcel—which has long tried to receive an for all broadcast audiences, there is little authorization to provide pay TV. substantive commitment to these ideals. The Televisa’s dominance over audience Mexican variation of MC/MO is an ad hoc share of free-to-air programming means MC policy with many flaws. Congress failed to has not been terribly relevant in Mexico. Pay duly assess the impact on other provisions, TV customers want Televisa’s channels and like those related to the copyrights of content pay TV providers want to carry them. creators. Ultimately, the Supreme Court will determine the future of MC/MO in Mexico. RICE UNIVERSITY'S BAKER INSTITUTE FOR PUBLIC POLICY // ISSUE BRIEF // 06.05.15 telecommunications sector. The 1996 TELECOMMUNICATIONS REFORM Copyright Act11 was also amended to (2013–2014) acknowledge MC/MO, but without specifying whether content creators and artists could The recent telecommunications reform oppose some stipulations of the new law includes a constitutional provision for MC/ in light of their copyrights (e.g., opposing MO.5 Free-to-air broadcasters must allow retransmission or demanding royalties for pay TV companies to retransmit in the same retransmission through MC).12 coverage area without payment (must offer); Free-to-air broadcasters pay TV companies must provide audiences must allow pay TV with these free-to-air broadcasts without companies to retransmit passing fees along to subscribers (must LIMITATIONS OF THE REFORM FOR CONTENT CREATORS AND in the same coverage carry). For satellite pay TV companies, MC is mandated only with respect to free-to- CONSUMERS area without payment air TV channels transmitted in at least 50 Copyright Issues (must offer); pay TV percent of the country. Federal, public TV companies must provide stations are also included in the MC rules. A copyright case between Televisa (plaintiff) audiences with these Dominant or preponderant agents, as and Dish México (defendant) in a Mexico City court began long before the constitutional free-to-air broadcasts determined by the Instituto Federal de Telecomunicaciones (IFT),6 do not benefit amendment took place. Copyright matters without passing fees from the free MC/MO arrangement. These may be brought to both federal and local along to subscribers companies must enter into agreements judges, but the local judge in question sent (must carry). with free-to-air broadcasters to an order to the IFT to refrain from acting in determine retransmission prices or risk MC/MO issues, arguing that the IFT had no license revocation. authority over such matters. As of April 2015, The IFT has a broad constitutional this jurisdictional issue has been brought to mandate to regulate broadcast and antitrust the Supreme Court. However, the court’s issues.7 In 2014, the IFT determined that decision might focus narrowly on the IFT’s channels 2 and 5 (Televisa) and 7 and 13 scope of authority instead of resolving (TV Azteca) were transmitted in 50 percent whether content creators and artists have a of the country; satellite pay TV companies right to oppose retransmission or demand are therefore now obliged to carry these royalties for MC retransmission of their work. channels in their TV packages.8 The IFT also declared America Móvil (Telmex, Telcel, and Pluralism and Diversity other related companies) preponderant in Televisa and TV Azteca dominate Mexico’s 9 the telecommunication sector and Televisa free-to-air programming; truly independent and its independent free-to-air TV affiliates local channels are very limited. Increasing (although not its pay TV companies) as the diversity and pluralism of content 10 preponderant in the broadcasting sector. has been a key rationale behind MC in The objective of MC/MO was not other countries. In Mexico, however, laid out explicitly in the Constitution. satellite providers are only obliged to carry Nonetheless, it states that once there are programming that reaches 50 percent of the “competitive conditions in the broadcast country. Satellite makes up nearly half of all and telecommunications markets,” the pay TV providers in Mexico, so this greatly free-of-charge provision will no longer diminishes the influence of MC on content be enforced and providers (broadcasters/ diversity and pluralism. pay TV providers) will have to confer To determine which free-to-air TV on retransmission terms and prices. If channels would be distributed through negotiations fail, the IFT will determine the satellite TV, the IFT identified—with conditions and fees. information annually provided by In June 2014, the Mexican Congress broadcasters—the channels that had at enacted a series of laws to implement least 75 percent of the same programming these constitutional changes to the 2 MUST CARRY, MUST OFFER IN MEXICO from 6:00 a.m. to midnight, even if such constitutional MC entered into force, Dish programming was presented in a different México gladly obliged. order.13 In other words, there was no In January 2015, the IFT sanctioned assessment whatsoever as to how this Telmex-MVS-Dish México because the content contributes to pluralism and arrangements among these companies diversity. Of course, with the 50 percent represented a de facto merger, and as such, stipulation, the law also puts local content at they should have filed a notice. The IFT a disadvantage. expressly stated that such a merger does It is also worth noting that the IFT not have anticompetitive effects, nor was limited MC to free-to-air TV; MC does not it a prohibited merger. As it did not receive apply to radio broadcasting, as it does in the a prior notice of the merger, however, the European Union, for example. IFT imposed different sanctions on the companies.14 The IFT could also initiate a License Revocation for MC/MO revocation of Telmex’s license if it finds that Noncompliance Telmex benefited from the free-of-charge License revocation is the most extreme MC/MO rules. The IFT will have to analyze regulatory penalty for a telecommunications the Telmex-MVS-Dish case to determine service provider; it can be justified only whether Telmex benefited from MC, although for public interest reasons. However, the a revocation of this Mexican telecom giant’s new legislation stipulates that the license license seems more academic than probable. of any preponderant or dominant actor that has benefited from free MC/MO would be revoked. Under ideal circumstances, a INTERNATIONAL COMPARISONS dispute between a free-to-air broadcaster MC rules have been enacted around and a pay TV provider, in which the latter has the world mainly to preserve pluralistic, benefited from free MC, would be resolved diverse and local content, and MO rules are in court, where the free-to-air broadcaster sometimes included to complement and would try to claim its outstanding profits. Of reinforce MC. In Mexico, MO has been much course, this policy was directed at América more relevant than MC due to Televisa’s Móvil and its subsidiary, Telmex. free-to-air market power, and MC/MO Consequently, it is important to note rules have been implemented to increase the context of the prohibition of free MC The new legislation competition. However, as mentioned above, for dominant and preponderant market stipulates that it is unlikely that they will improve the players. In a Telmex license that dates back diversity or pluralism of programming. the license of any to 1990, Telmex is expressly prohibited from In order to understand how MC/MO can preponderant or providing television service.