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. Although Telmex be used to enhance competition as well as has long requested an amendment to this dominant actor that content offerings, it is worth looking at MC/ limitation, the government has denied the has benefited from MO in other countries around the world. This company’s efforts; now the Constitution is particularly relevant because Mexican free MC/MO would be imposes several hurdles before this could legislators appear not to have reviewed MC/ revoked. take place. Dish México, a satellite pay MO regulations elsewhere as they drafted TV company and the sole competitor of and debated the rules for Mexico. Sky (Televisa’s satellite affiliate), entered into certain agreements with media United States conglomerate MVS Comunicaciones and Telmex. Telmex and Dish México have stated While the United States does not have that this relationship was only to streamline must offer rules, MC was implemented in invoicing and revenue collection on account 1992 because pay TV transmitted the free- statements for Telmex clients. After the to-air local channels of big broadcasters constitutional amendment was approved, but would not include those of small and Dish México was eager to include Televisa independent local broadcasters. Therefore, and TV Azteca’s broadcast channels. When MC sought to provide programming relevant
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to local audiences’ needs and interests, supplementary services. Compensation may as well as prevent pay TV operators from be mandated in order to cover the costs of giving preference to large, more lucrative retransmission of broadcast channels. broadcasters. Every three years, current MC rules allow free-to-air TV channels to elect between (1) CONCLUSION allowing free access to all pay TV providers in a given regional broadcast market (must In a country where 73 percent of citizens carry) or (2) negotiating with each pay TV obtain information through television, company the terms and compensation for the companies that control TV content retransmission (may carry). are especially powerful.20 Pluralism and A “carry one, carry all” approach diversity are two of the main challenges to governs satellite TV: If a local TV channel is the quality of Mexico’s telecommunications distributed by the satellite pay TV company, sector. Establishing ways to achieve then all the local TV channels of the same these goals would limit the influence of area must be distributed as well.15 Televisa and TV Azteca, allowing people to receive and interpret information from a Canada broader array of sources and ideological perspectives. MC/MO regulations have the The Canadian MC system is exceptional potential to promote diverse and pluralistic in that it reflects the country’s ethno- programming, but in Mexico, these rules cultural, linguistic, and regional diversity. focus only on increasing competition and It also aims to increase accessibility for give little regard to content, copyright persons with disabilities. Preference is holders, or television audiences. given to original Canadian programming. The costs of MC are passed from pay TV providers to their customers. At least every five years, the Canadian Radio-television ENDNOTES and Telecommunications Commission 1. Federal Institute of determines which channels will benefit from Telecommunications, “Acuerdo mediante The IFT will have to MC and the subsequent pricing scheme.16 el cual el Pleno del Instituto Federal analyze the Telmex- de Telecomunicaciones determina el European Union valor mínimo de referencia, a que se MVS-Dish case to refiere el numeral 4.1.3.5 de las Bases de In the 1990s, MC rules sought to assure determine whether Licitación Pública para concesionar el uso, diverse and pluralistic programming for aprovechamiento y explotación comercial de Telmex benefited pay TV users in the European Union, as well canals de transmission para la prestación del from MC, although as the inclusion of general interest free- servicio público de televisión radiodifundida a revocation of this to-air TV channels in pay TV programming digital, a efecto de formar dos cadenas packages. Some countries also enacted nacionales en los Estados Unidos Mexicanos Mexican telecom giant’s MO to complement MC, and, in certain (Licitación No. IFT-1)” [Agreement whereby license seems more cases, enabled pay TV companies to give the Plenary Authority of the Federal Institute academic than probable. customers more competitive programming. of Telecommunications determines the Free-to-air TV and pay TV companies were minimum benchmark, in reference to free to negotiate transmission costs and paragraph 4.1.3.5 of the Rules for Public Tender to concession the use, development, copyright royalties.17 and commercial exploitation of channels Today, the Universal Service Directive18 of transmission for the public provision of allows EU member states to impose MC on digital television broadcasting, in order to electronic communication networks (i.e., form two national networks in the United 19 cable TV and Internet Protocol TV ), which Mexican States (Solicitation No. IFT- 1)], are the main media through which people April 15, 2014. See http://www.ift.org.mx/ access free-to-air channels. MC includes iftweb/wp-content/uploads/2014/04/ free-to-air radio and TV, as well as other IFT_EXT_150414_90_valor_minimo.pdf.
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2. Televisa’s 60.1 percent of share on Telecomunicaciones” [Agreement whereby the pay TV market is prior to its acquisition the Plenary Authority of the Federal of Cablevisión Red, which held 3.9 percent Institute of Telecommunications issues of the pay TV market. Federal Institute of general guidelines regarding the provisions Telecommunications, “Informe Estadístico of Section I of the eighth transitory article del 3 Trimestre 2014” [3rd Quarter 2014 of the Decree amending and supplementing Statistical Report], 38, http://www.ift.org. various provisions of Articles 6, 7, 27, 28, mx/iftweb/wp-content/uploads/2015/03/ 73, 78, 94 and 105 of the Constitution of InformeEstadisticoVF.pdf. the United Mexican States on Matters of 3. Televisa is Mexico’s first national Telecommunications], Diario Oficial de la television corporation and was founded Federación, February 27, 2014. MC/MO regulations have in 1955 through the consolidation of 9. Federal Institute of three other television stations. Since Telecommunications, “Resolución mediante the potential to promote then, Televisa has dominated the Mexican la cual el Pleno del Instituto Federal de diverse and pluralistic television market. Telecomunicaciones determina al grupo programming, but in 4. Clara Luz Alvarez, Derecho de las de interés económico del que forman Telecomunicaciones (Mexico City: Fundalex parte América Móvil, S.A.B. de C.V. et al., Mexico, these rules and Posgrado de Derecho de la UNAM, como agente económico preponderante focus only on increasing 2013), 219–222. en el sector de telecomunicaciones y le competition and give 5. Government of Mexico, “Decreto por impone las medidas necesarias para evitar little regard to content, el que se reforman y adicionan diversas que se afecte la competencia y la libre disposiciones de los artículos 6º, 7º, 27, 28, concurrencia” [Resolution whereby the copyright holders, or 73, 78, 94 y 105 de la Constitución Política Plenary Authority of the Federal Institute television audiences. de los Estados Unidos Mexicanos” [Decree of Telecommunications determines that amending and supplementing various the economic interest group, which provisions of Articles 6, 7, 27, 28, 73, 78, includes America Movil, SAB de C.V. et 94, and 105 of the Constitution of the al., as a preponderant operator in the United Mexican States], June 11, 2013. telecommunications sector and imposes 6. “Preponderant agent” (agente the necessary measures to avoid affecting económico preponderante) is a term competition and open access], March 6, introduced in the Mexican Constitution by 2014. See www.ift.org.mx/iftweb/sector- the telecom reform and is used to identify de-telecomunicaciones/. economic agents with excessive market 10. Federal Institute of power and impose special obligations to Telecommunications, “Resolución mediante cope with such power through a fast- la cual el Pleno del Instituto Federal de track procedure. For more information telecomunicaciones determina al grupo de on “preponderant agent” and judicial interés económico del que forman parte resolutions regarding the concept, see Clara Grupo Televisa S.A.B., Canales de Televisión Luz Alvarez, “Preponderant agent, what Populares et al., como agente económico is that?” Journal of Law and Regulation 1, preponderante en el sector radiodifusión no. 1 (2015): 23-46, http://www.ndsr.org/ y le impone las medidas necesarias para SEER/index.php?journal=rdsr&page=article evitar que se afecte la competencia y la &op=view&path%5B%5D=145. libre concurrencia” [Resolution whereby the 7. In Mexico, telecommunication and Plenary Authority of the Federal Institute of broadcasting are federal matters. Telecommunications determines that the 8. Federal Institute of economic interest group, which includes Telecommunications, “Acuerdo mediante Grupo Televisa S.A.B., Canales de Televisión el cual el Pleno del Instituto Federal de Populares et al., as a preponderant operator Telecomunicaciones emite los Lineamientos in the broadcasting sector and imposes generales en relación con lo dispuesto por the necessary measures to avoid affecting la fracción I del artículo octavo transitorio competition and open access], March 6, del Decreto por el que se reforman y 2014. See www.ift.org.mx/iftweb/sector-de- adicionan diversas disposiciones de radiodifusion/. los artículos 6o., 7o., 27, 28, 73, 78, 94 11. The Copyright Act was enacted in y 105 de la Constitución Política de los 1996 and last amended in 2014. Estados Unidos Mexicanos, en Materia de
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12. Government of Mexico, “Decreto 20. Federal Institute of por el que se expiden la Ley Federal de Telecommunications, “Resolución mediante Telecomunicaciones y Radiodifusión, y la la cual el Pleno del Instituto Federal de Ley del Sistema Público de Radiodifusión Telecomunicaciones determina al grupo del Estado Mexicano; y se reforman, de interés económico” [Resolution by adicionan y derogan diversas disposiciones which the Plenary Authority of the Federal en materia de telecomunicaciones y Institute of Telecommunications determines radiodifusión” [Decree by which the Federal the economic interest group]. Telecommunications and Broadcasting Act and the Public Broadcasting System Act of the Mexican State are issued, amending, AUTHOR supplementing, and repealing certain provisions related to telecommunications Clara Luz Álvarez, Ph.D., is a nonresident and broadcasting], July 14, 2014. scholar at the Baker Institute Mexico 13. Federal Institute of Center, a member of the Mexican National Telecommunications, “Acuerdo mediante Researchers System, and a professor at el cual el Pleno del Instituto Federal the Universidad Panamericana. From 2006 de Telecomunicaciones emite los to 2011, she was the rapporteur for the Lineamientos generales” [Agreement by International Telecommunications Union’s which the Plenary Authority of the Federal study group of information technology Institute of Telecommunications issues the accessibility for people with disabilities. General Guidelines]. Previously, she was commissioner for 14. Federal Institute of Mexico’s Federal Telecommunications Telecommunications, “Resolución Commission and the head of the Legal del expediente E-IFT/UC/DGIPM/ Affairs Office. She holds a doctorate degree PMR/003/2013 y acumulados, Teléfonos with honors in law from the Universidad de México, S.A.B. de C.V. y otros” Panamericana. [Resolution of the record named E-IFT/UC/ DGIPM/PMR/003/2013 and accumulated documents, Teléfonos de México, S.A.B. de See more issue briefs at: C.V. and others], January 7, 2015. www.bakerinstitute.org/issue-briefs 15. See Stuart Minor Benjamin, Douglas Gary Lichtman, Howard A. Shelanski, and This publication was written by a Philip J. Weiser, Telecommunications Law researcher (or researchers) who and Policy, 3rd. ed. (Durham, NC: Carolina participated in a Baker Institute project. Wherever feasible, this research is Academic Press, 2012), 479–528. reviewed by outside experts before it is 16. Canadian Radio-television released. However, the views expressed and Telecommunications Commission, herein are those of the individual “Broadcasting Regulatory Policy CRTC 2013- author(s), and do not necessarily 372,” August 8, 2013. See http://www.crtc. represent the views of gc.ca/eng/archive/2013/2013-372.htm. Rice University’s Baker Institute for 17. See Nico van Eijk and Bart van der Public Policy. Sloot, Must-carry Regulation: A Must or a Burden? (Strasbourg, France: European © 2015 Rice University’s Baker Institute Audiovisual Observatory, 2012). for Public Policy 18. European Union, “Directive This material may be quoted or 2002/22/EC of the European Parliament reproduced without prior permission, and of the Council of 7 March 2002 on provided appropriate credit is given to universal service and users’ rights relating the author and Rice University’s Baker to electronic communications networks Institute for Public Policy. and services (Universal Service Directive), amended by Directive 2009/136/CE of the Cite as: European Parliament and of the Council of Álvarez, Clara Luz. 2015. Must Carry, 25 November 2009.” Must Offer in Mexico. Issue brief no. 19. In the United Kingdom, MC also 06.05.15. Rice University’s Baker Institute includes other technological platforms, for Public Policy, Houston, Texas. such as IPTV. 6