Legislation in a Way in the Telecommunications Law: Transitory Article Nine

For some of the more naïve among us, 2012 ended with a unique sense of optimism. I still remember the feeling after reading the six commitments of the Pact for Mexico that promised to transform the telecommunications sector…

Opinion Piece by Mony de Swaan*/ Mexico, August 2014

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For some of the more naïve among us, 2012 ended with a unique sense of optimism. I still remember the feeling after reading the six commitments of the Pact for Mexico that promised to transform the telecommunications sector. I knew that the proposal to establish a new regulatory entity would eliminate my job, but I also knew that it didn’t make sense to continue to do my work without political agreements; of having to deal with two institutions regarding the same issue, and with the worrisome deficit of powers and budget with which the now-defunct Federal Telecommunications Commission (COFETEL) historically regulated. I was happy.

In March 2013, the first warning regarding the true reach of the reform effort arrived. “No matter how good the constitutional text is, if it is not approved together with the regulatory law, it will end badly,” a friend who does not have influence in the industry forecast. Despite having worked closely with the main stakeholders involved in the constitutional reform –or perhaps precisely because of this- I didn’t see it coming. I was convinced that it was good, that the political class had finally found a way to shake off the de facto powers to the benefit of millions of Mexicans. I was wrong.

Everything returned to normal with the “new” Federal Telecommunications and Radio Broadcasting Law. This shameful presidential initiative was subjected to a gangster-style legislative process, became a mocking order and ended with the approval of a text full of omissions, barriers, dedications and gifts. The clearest proof that something had gone terribly wrong was the media campaign that the government designed, the fickle blue opposition (I am referring to the National Action Party, which is located to the right of the political spectrum) and some regulated entities. It was impossible to distinguish a senator from a Movistar aide informing us that we could now check our balance. The discourse was exactly the same. I was indignant.

A great deal has been written, and the first thing that must be accepted is that the law will not manage to take away all of the benefits contained in the constitutional reform. But perhaps now we understand why last year some legislators protested and claimed that our Charter had been undermined through the inclusion of too many temporary articles, too much detail, too many specifications. These just happen to be the same people who ended up applauding and approving the regulatory text. They were only upset that everything that was clear and exhaustive in the Constitution thus kept them from making changes. Even so, we must recognize a praiseworthy effort to mount a counter-reform.

The law is full of artifice, fine print and a distribution of markets sanctioned by government branches. It is full of ambiguous language that invites litigation or that keeps officials from being able to apply it. No matter how many times one reads it, one simply cannot stop finding full paragraphs that should shame and taint those who took part in this trickery.

Transitory Article Nine is paradigmatic of that which has occurred and the clearest expression of parliamentary cynicism. It was never discussed openly or publicly, but it did not go unnoticed. It was moved several times. They promised to eliminate it and then it was found there again. Experts in camouflage dressed it up, renamed it, changed its text, played with the formulas, changed the name in the indexes but never changed its essence: allowing an economic agent to regulate the purchase of 1.2 million subscribers in a market in which it already holds over 60% of the same. This was the case in the midst of a time of dominance, when supposedly no more abuse would be tolerated, when we had a new regulatory agency that could do it all and we drank from the cup of competition. No.

I don’t have enough space here to go into detail. I would, however, like to offer three observations. First, Transitory Article Nine is by all accounts unconstitutional because it uses a regulatory route to usurp a power granted by the Constitution to the IFETEL. Article 28 states that the Institute will be the authority in the area of competition in the telecommunications sector. This power is not granted to the legislative power much less to those who are regulated so that they can sanction their own financial transactions by applying a formula in their own way. The Ninth Transitory Article is only unconstitutional if someone decides to use their power to bring it before the Supreme Court. We need brave people, and believe me; they won’t be coming from the political class.

If I remember correctly, today we have a regulatory agency that specializes in this area, that is autonomous and technical (not political) and has this power in its hands. There is no one better than the Institute to ask the Supreme Court to sanction the legality of an article which, in practice, makes the Mexican regulatory agency the secretary of the regulated entities: “with the ninth article, they just closed an 8.5 billion peso deal. Take note, please.” We’ll see.

Second observation. The entire debate that cropped up around whether the dominance should be declared by sector or service is closely linked to Transitory Article Nine. As a mere anecdote, the existence of this article would have been impossible if the legislature had decided that dominance should be applied to telecommunications services and not sectors. It would have been inconceivable to accept the inclusion of an article that gives free reign to those who would concentrate market shares in a specific service area when the dominance limits that share to 50% of the same. The only way that Televisa could take this juicy piece of business home was to defend it like a cornered beast against any sectorial interpretation. That was the only way.

Though it is not the focus of this article, what we will have for dessert is a situation in which neither public nor pay TV will be regulated through dominance. Of course there are other routes in which there will not be a constitutional mandate, where the basis and motivation are radically different, in which there are different time frames, and where, after long investigative processes, restrictions will not necessarily end up being imposed. I would also like to see who will be brave enough to order Televisa to disaffiliate itself from its most recent acquisition, no matter what is concentrated or dominant.

Third and final observation. Transitory Article Nine is not a gift that is exclusively for Televisa. It is actually permission for anyone who is not named Carlos Slim to take advantage of this situation and do as much telecommunications business as they want. The formula is designed (again, by sector) so that the broad sleeve for acquisitions, ceding or changes in control take place before the passive gaze of the regulator in this area. It is a straw regulator who watches how those who are regulated decide which transaction is most beneficial to them, which ones generate efficiency, which place them in the best position to compete. All of this, of course, with the consumer at the center of their concerns and as the only recipient of the benefits. Don’t be cynical.

*Mony de Swaan is a former President of the Federal Telecommunications Commission (Comisión Federal de Telecomunicaciones, COFETEL).

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