By mandate of a Special Court, the regulator had to reverse the process that determined that Grupo Televisa does not have substantial market power in pay TV, which forced it to undertake rectifications and now the fate of the company is in the hands of said regulator.
Nicolás Lucas*/Mexico/March 2017
The Mexican regulator ruled that the Televisa Group is an agent with the ability to set prices and displace its competitors in the pay television sector in 2,124 markets throughout the territory, this after a judge accepted a series of legal appeals presented by Televisora Valle de México (TVM), the controlling company of Channel 40 and a subsidiary of TV Azteca, which was disappointed by the refusal of the Federal Telecommunications Institute (IFT) to declare Televisa as a stakeholder with substantial power in pay TV in the first instance, in September 2015.
The appeal lodged by TVM was not easy and took more than a year. First it was dismissed and later, when finally it was accepted, it faced other appeals presented by subsidiaries of the Televisa Group. It also had to deal with an appeal filed by the IFT itself.
Eventually, the First Collegial Circuit Court on Specialized Administrative Matters in Economic, Broadcasting and Telecommunications Competence vindicated TVM and the arguments that were contained in the appeal according to case file 1675/2015, which was the reason why it ordered the IFT to analyze for a second time the elements presented by the Investigative Unit in 2015, according to which Televisa was presumed to be an agent with substantial market power in the provision of restricted television and audio services (STAR).
The legal argument presented by TVM derived from the fact that the Televisa Group, being an agent with substantial market power, was not entitled to the regulation of free retransmission of open television content on pay TV platforms, known in the industry as “must offer” and therefore would be obliged to pay for those retransmissions, which would later be translated as an economic impact for the company.
Moreover, Judge Jean Claude Tron Petit’s ruling stated that the IFT acted in an “illegal” fashion and beyond the “principle of rationality” by establishing that Televisa, then with a market share of more than 55% in the sector, has no substantial power in the area of restricted television:
It was “illegal” because the regulator discussed and defined its position based on market information between September 2014 and March 2015, when the findings of its Investigation Unit contained information from 2009 and August 2014. This was the main reason why the court forced the IFT to adopt another decision.
The IFT resolved in a first stage to reverse the resolution in which it declared Televisa as a stakeholder without substantial power in the market of pay television and ordered its Economic Competition Unit to present a new project for discussion, retaking the elements that had already been presented by the Investigating Unit. A new investigation was ruled out.
Once the IFT has defined that the company is a stakeholder with substantial power, it will notify the company, which in turn will be able to inform its investors. The regulator is then expected to begin the design of regulatory policies that will prevent Televisa from setting fees or displacing the competition with the establishment of commercial barriers, and it will also incur economic fees for the retransmission of open TV broadcasts on its cable and satellite channels.
The Televisa Group is the primary stakeholder according to market size in the pay TV sector. It closed 2016 with 4,205,000 active customers in the fixed division that was reported by TVI, Cablemás, Cablecom, Cablevisión Red and Izzi Telecom. In terms of satellite customers the figure is 8,026,000 users. Cable sales rose by 11.9% in 2016 and Sky sales were up by 14%
Televisa’s share now exceeds 57% of the market, but this data was dismissed by the IFT in 2015 on the grounds that Megacable, Dish, Totalplay and Axtel all recorded growth, a claim that has already been refuted by the special court.
The resolution of the IFT came at a time when the operation of the Televisa Group was fluctuating in virtually all segments where it holds interests.
In the division where it has historically always been strongest, which is to say free-to-air television over the last 60 years, Televisa’s main news bulletin began January with a rating of 12 points at national level, while that of its direct competitor, TV Azteca, has been on an upward curve since the second half of 2016, with a rating of 15.2 points in January. TV Azteca has been making great progress on Televisa in other programmatic segments, thanks to its transmission of more risk-taking content.
The promising strategy of developing fixed telecommunications has also not been very successful. The business has been consuming so much money from the investment plan that the company stated in its fourth quarter 2016 stock market report that it will cut its investments by 33% in 2017, a figure that comes to about US$500 million compared to what it invested in 2016.
One possibility that could provide better results to the television station is to spin-off its cable telecommunications franchise. The key here is how it could benefit from regulations or move away from them without wasting the opportunity to access the infrastructure of Telmex, the other dominant player, in order to increase its market share.
The immediate future of the Televisa Group has already been defined within the fold of the IFT, not in the corporate realms of television. This is because the resolution on its substantial power in the pay TV sector will be followed by the results of the analysis of the behavior of the company with respect to the rest of the asymmetric regulations that it must adhere to as a major economic agent in the area of broadcasting.
On this occasion judicial control worked. However, what really matters will be the measures of asymmetric regulation that the regulator imposes on Televisa to evaluate whether competition has been finally stimulated in the pay TV market, although it is believed that this may be limited, given that the IFT investigation did not take into account the company’s participation in the advertising and content production markets.
*Specialist businesses reporter for the El Economista newspaper.
Initially worked in Grupo Radio Centro in 2000 and since 2007 has been working for the written press, contributing articles to El Financiero and the journals ‘Valor’ of Banco Banamex, Alto Nivel and El Contribuyente.