The case of the transition to digital TV in Mexico should be analyzed so that other countries can avoid making the same mistakes and causing delays that go against the public interest. In this article, Clara Luz Álvarez explains why.
Clara Luz Álvarez*/ Mexico/ June 2014
In Mexico, commercial open television is dominated by two corporate groups: Televisa and TV Azteca. These companies hold 94% of the open TV concessions with commercial purposes in the republic. Televisa and TV Azteca are also joint owners of a mobile telephony company called Iusacell.
In 2004, the Mexican government and representatives of commercial television companies developed the policy for transitioning to land digital TV behind closed doors. The policy established the granting of mirror channels for the transmission of the digital signal, set out a tentative schedule for the transition, and chose 2021 as the estimated (not definite) date for the analog TV shut-off.
In 2006, legal reforms known as Ley Televisa (the Televisa Law) were approved. They state that bidding will be used for granting new open TV concessions. This procedure, which is preferable to arbitrarily granting concessions, actually was meant to serve as a barrier to entry for new competitors. This barrier has been so effective that no new concessions have been awarded since the law was passed.
In 2010, a presidential edict was issued that set December 31, 2015 as the date of the analog shut-off. The pilot project of the first cities that would transition to digital TV was very controversial for several reasons. The first is due to the cost of distributing decoders and installing them in households. The second was because the analog signal was terminated in the midst of elections in that region. In the end, the regulator decided to restore the analog signal until after the elections.
The Transition in the Constitution
In 2013, a constitutional reform was introduced that stated that: (1) the transition to digital TV was to conclude on December 31, 2014; (2) the federal executive branch was to develop a program for that process; (3) the various branches of government were to support the transition; (4) the Federal Telecommunications Institute (IFT) was responsible for the digital TV transition policy as the regulatory agency; and (5) bidding for at least two TV channels with national coverage would begin.
Problems quickly ensued. First, as an autonomous constitutional agency, the IFT is not legally part of the branches of government. Second, the schedule set for the transition had to be adjusted because it was determined that the trust that financed the purchase of decoders and the cost of the installation would have to be modified. Third, the distribution of responsibilities for the transition meant that the IFT would set the policy while the Communications and Transportation Directorate would develop a schedule for implementing it.
As the date of the analog shut-off approached for the next cities without a work plan in place or actions by the SCT, the IFT decided to delay that phase of the termination.
The calendar was finally issued on May 13, 2014. The SCT decided to give away televisions instead of decoders to households registered with social support programs offered by the Social Development Directorate. The agency argued that those televisions would have Internet access and that agreements would be made with Internet providers so that low-income families could access preferential rates.
Reflections on this Situation
For the purposes of the transition to digital TV, Mexico is not the U.S. or the European Union. There are many reasons for this. The main ones are:
In the U.S. and the European Union, there was a strong need to free up the spectrum of the 700 MHz band so that it could be used for broadband services, as there was a high level of use of channels. This freeing up of the spectrum so that it could be used for broadband is what is called a digital dividend. The situation of Mexico is completely different. During the 20th century, Mexico selectively granted open TV concessions for political reasons. The limited number of TV channels was an artificial lack generated in order to guarantee economic profits for television companies and with it their continued support for the government. Even when granting digital mirror channels, Mexico was not in the situation of the U.S. or the EU because Mexico could use the 700 MHz band and could have granted new concessions for open TV without having implemented the analog shut-off.
In the U.S., support was provided for low income individuals, but that country does not have the outrageous levels of poverty that Mexico has. In this country, 46.3% of the population is living under the poverty line. As such, the cost of transitioning through subsidies is infinitely higher for one simple reason: the number of poor people in Mexico.
The delay of the transition to digital TV has had a direct impact on the interest that may exist in bidding on new open TV channels in Mexico. This is due to the fact that open TV is supported by sponsors and income from commercials. The price of commercials is directly related to the potential audience of a channel within a certain time frame. If the analog shut-off does not take place on December 31, 2015, new open TV concessions will have to offer commercials to a smaller potential audience. In addition, the companies with the new concessions will need to spend significant amounts of money in order to deploy the networks, position their brand and create an audience. This is even more difficult because rather than favoring local or regional television stations in order to encourage local expressions and diversity, Mexico opted to seek out national channels, which limits the number of parties that might be interested in taking part in the bidding process.
The most important reflection is one that has not been taken up in the main discussion of this issue: Should Mexico prioritize open TV over access to the Internet? I believe that the answer to this question is simply ‘no.’ Mexico should let the transition happen at its own pace with other types of incentive and invest in digital inclusion. The then-regulatory commission for telecommunications, the Federal Telecommunications Commission, recognized that in order to bring the percentage of Mexicans with access to broadband and Internet services through a fiber optic trunk network to 98%, a total of MXN 8.375 billion would be required, while it would cost MXN 13.188 billion to subsidize decoders and antennae. Why did Mexico opt to invest in digital TV when the transition to that service involves more resources? What would people prefer in the digital era: digital television or access to the Internet and broadband service?
*Researcher with the Legal Research Institute at Universidad Nacional Autónoma de México.