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Concentration in Pay TV in Mexico: Implications, Problems and New Challenges

“Televisa is placed in a privileged position for distributing and marketing its channels on other platforms and/or through other pay TV companies. This limits opportunities to encourage the entry of new channels and independent audiovisual production…”

Rodrigo Gómez*/ Mexico, October 2014

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The subsector of pay TV in Mexico has grown exponentially over the past nine years. The most recent data reported by the Federal Telecommunications Institute (FTI), the Mexican regulatory agency, suggest that 50% of Mexican households have some sort of pay TV platform. The FTI reported that a total of US$3.567 million in income was generated in 2012.

One of the main reasons for this growth in cable TV is that these companies offer triple play services (telephony, TV and Internet). The growth of Direct Household TV (DHT) is due to exclusive offerings of sporting events (mainly for the satellite TV company SKY) and because in contrast to cable, satellite TV can reach the entire country. The third platform, and one that is relatively new to this market, is fiber optic TV.

This competitive environment among different platforms and their companies generated attractive prices and packages for middle and low socio-economic strata, allowing them to access pay TV services, which significantly broadened penetration in Mexican households. As a result, 50% of them were reached and this became the seventh-largest market in Latin America in terms of penetration –placing behind Colombia, Argentina, Chile, Uruguay, Peru and Venezuela- and the second largest based on the number of clients, trailing only Brazil.

However, over the past seven years, this market has experienced a significant trend towards concentration mainly due to the fact that the Televisa Group companies SKY, Cablemas, Cablecom, Cablevisión and TVI currently carry 63% of pay TV customers (76% of the DHT with SKY and 53% with  its four cable companies). In addition, in 2012, it managed to capture 48% of pay TV income, a number that will rise to 60% during 2014, as Cablecom will be added to the Televisa family of pay TV companies.

What are the implications of this context of high concentration by an economic agent in pay TV services for the users-consumers-audiences? What is expected of the FTI given its new attributes in the areas of promoting competition and imposing limits to the concentration of pay TV services?

First, the fact that a single economic agent can capture over 60% of subscribers inhibits the possibility of reducing prices. It is placed in a privileged position in terms of its ability to increase prices in the markets (cities) in which it does not have direct competition and discourages investment in operating networks. The consumer-user could clearly be the most affected by this situation.

Second, it puts the 24 Televisa pay TV channels in a privileged position compared to their competitors by guaranteeing them continuity and increasing the potential base of their audiences thanks to horizontal and vertical concentration. For example, it is very unlikely that the various Televisa pay TV companies will include new channels that represent direct competition for them, such as the Claro Sports channel, and may (as has already occurred) lead them to drop channels such as those owned by Productora y Comercializadora de Televisión (PCTV).

Televisa is also in a privileged position in terms of distributing and marketing its channels on other platforms and/or through other pay TV companies. This not only presents problems related to the supply of similar content, but also the opportunity to encourage the entry of new channels and independent audiovisual production. This creates barriers to entry for new national and local players and does not help to increase and/or pluralize the supply of international news signals for the audiences for commercial (direct competition) or other (ideological) reasons.

The FTI thus faces significant challenges and obligations. The recent approval of the Constitutional reform in the area of telecommunications and radio broadcasting and the new law granted the FTI new attributes in regard to determining the existence of substantial power in a key market based on the powers granted in its statutes.

Unfortunately, the wording of the reform and secondary legislation defines the figure of dominance (the condition of the telecommunications or radio service provider that dominates over half of a market in Mexico) by sector and not by service. As such, it left the door open to avoid defining Televisa –in this case- as a dominant agent in the pay TV service area with all forethought and advantage. Provisional article 9 of the law offered de facto support for the acquisition of the company Cablecom by Televisa, which positioned it as the dominant agent in the pay TV market.

The FTI is facing significant challenges given that concentration in the pay TV market goes against the Constitution and the law in the sense that the concentrated structure of pay TV affects free competition and thus audiences-consumers-users.

Finally, it is important to note that while the secondary law limits or stands as an obstacle to the FTI in various areas, the regulatory agency has the power to signal the existence of economic agents with substantial power in key telecommunications and radio markets. It also may at any point allude to Article 6 of the Constitution, letter a of which states that “the government will guarantee the right to access to information and communications technologies as well as radio and telecommunications services, including broadband and Internet. To that end, the government will establish effective competition conditions in the presentation of said services.” As such, the FTI is responsible for conducting an investigation in response to the concentration of Televisa in the pay TV market. There is no pretext for moving in that direction, even with the law approved.

*Rodrigo Gómez is a professor and researcher at Universidad Autónoma Metropolitana-Cuajimalpa and is the former President of the Mexican Association of Communications Researchers. 

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