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Cablegate: Speculation On Mexico's Media Sector

VZCZCXRO2099
PP RUEHCD RUEHGD RUEHHO RUEHMC RUEHNG RUEHNL RUEHRD RUEHRS RUEHTM
DE RUEHME #3931/01 2061417
ZNR UUUUU ZZH
P 251417Z JUL 07
FM AMEMBASSY MEXICO
TO RUEHC/SECSTATE WASHDC PRIORITY 8148
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RUEAFCC/FCC WASHDC PRIORITY
RHEHNSC/NSC WASHDC PRIORITY
INFO RUEHXC/ALL US CONSULATES IN MEXICO COLLECTIVE PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY

UNCLAS SECTION 01 OF 02 MEXICO 003931

SIPDIS

SENSITIVE
SIPDIS

STATE FOR WHA/MEX. EB/IFD/OIA, AND EB/CIP
STATE PASS TO USTR FOR MCHALE AND HINCKLEY,
FCC FOR EMILY TALAGA
USDOC FOR 4320/ITA/MAC/WH/ONAFTA/GERI WORD
ITA FOR MICHELLE O'NEILL AND DAMON GREER
NTIA FOR JANE COFFIN

E.O. 12958: N/A
TAGS: ECON ECPS EINV PGOV MX
SUBJECT: SPECULATION ON MEXICO'S MEDIA SECTOR

REF: MEXICO 2507

Summary and Introduction
------------------------

1. (SBU) Ernesto Piedras (strictly protect throughout),
President of the Competitive Intelligence Unit and Angel
Lopez Hoher (strictly protect throughout), Head of the Unit
for Planning, Liaison and International Affairs at the
Mexican Federal Competition Commission (Cofeco) agreed that a
new Mexican media law need not be written and that the
pro-competitive nature of the Mexican Federal Communications
Commission (Cofetel) and Cofeco has been strengthened through
the recent Supreme Court (SCJN) declarations following their
review of the 2006 Radio and Television Law. When the final
SCJN decision is released, the industry does not expect any
major changes to previous SCJN announcements; however, as
Lopez remarked, "the devil could be in the details." End
Summary and Introduction.


New Media Law?
--------------

2. (SBU) On July 17 the Policy Coordination Board of the
Mexican Senate agreed to form a working group and initiate a
review of current radio, television and telecommunications
legislation. Published in the Parliamentary Gazette, the
agreement stipulates that the Senate working group be
multi-party in nature and establish an agenda and order in
which topics will be addressed. The Senate Board directed
the group to be guided by principles of legality, plurality,
inclusion and transparency. The group is also to adhere
closely to the resolutions of the SCJN as their guide. Lopez
noted that he hopes that the Legislature will not rewrite the
media law, but instead look at key points in the process to
improve competition. He also noted earlier that the Senate
would take the lead in this process.


Characteristics of Future Auctions
----------------------------------

3. (SBU) In its earlier announcements, the SCJN invalidated
an article that established public auctions for spectrum
because it favored the most economically powerful groups.
Thus far, neither the SCJN nor the Legislative branch has
described how future auctions will be held. In Piedras'
opinion, to have a truly open market, concessions must be
granted to the highest bidder that meets general financial
and legal requirements. He cautioned against involving
personal or political decisions in the auction process.
Lopez noted that the argument does not make sense. As an
example, he recalled the decision granting Telmex's original
concession, based on maximizing "social good," which
generated a huge amount of waste. He continued noting that
auctions must be structured to place a premium on efficiency,
relying on criteria such as the provider of the lowest price
for publicity or the most efficient use of spectrum.


The SCT vs. Cofetel
-------------------

4. (SBU) Piedras noted the continuing bureaucratic conflict
between the Secretariat of Communications and Transportation
(SCT) and Cofetel. Lopez said that no one -- inside the
organizations or in the industry -- "understands who does
what" between the two organizations. In their declarations,
the SCJN ruled against the article which gave the Senate the
right to veto presidential appointments to Cofetel. Rafael
del Villar and Gonzalo Martinez Pous, the two Cofetel
commissioners rejected by the Senate at the end of the Fox
Administration, also won a separate injunction against this
treatment. Although this ruling is currently being appealed,
both Piedras and Lopez believe that Cofetel Commissioners
Eduardo Ruiz Vega and Gerardo Gonzalez Abarca, appointed
instead of del Villar and Martinez, will eventually be forced
from their positions. Piedras speculated that the next
presidential appointments to the body may include Pablo
Gonzalez Manterola (protect), current Director General of

MEXICO 00003931 002 OF 002


Telecommunications in the SCT under del Villar, and
Purificacion Carpenteyro (protect), current Director General
of the Mexican Postal System and former Director of Strategy,
Planning and Innovation at Telefonica Movistar in Mexico.


Foreign Investment in the Sector
--------------------------------

5. (SBU) Mexican press and industry speculate that the
Spanish firm Telefonica was behind the June legislative
proposal that would allow 100% foreign investment in the
Mexican fixed line and cable operators assuming that the
foreign companies' country permitted reciprocal investment
opportunities for Mexican companies. Commenting on this
proposal, Lopez noted that he is not sure how it would be
implemented. He suggested that Telefonica may partner with
Televisa. Lopez highlighted that for the sake of
competition, it would be necessary to have an equally big
player to face Telmex on the other side of the fence. He
added that in principle, Cofeco sees no problem with Telmex
providing video services (and that it would even be
beneficial for consumers). He did note that in order for SCT
Secretary Tellez to change Telmex's current concession,

SIPDIS
Cofeco must first verify that Telmex has successfully
implemented interconnection, interoperability and number
portability.


Comment
-------

6. (SBU) While the official details have yet to be released,
the recent Supreme Court declarations as to the
unconstitutionality of many key provisions of the 2006
"Televisa" Law are promising for increased competition in the
sector. Although the details of how auctions are to be
conducted are unclear, the fact that current duopolists
Televisa and Azteca will not simply be able to inform the
government of their intent to offer new services is a step
forward for the industry. Even though Calderon has remained
behind the scenes in the debate thus far, the industry
assumes that he is very cognizant of developments in the
sector. In time, Calderon would likely have the power to
appoint two new competition-friendly commissioners to
Cofetel, without submitting their names first for Senate
approval. Cofeco's power was also strengthened through the
SCJN decision. Now a company wanting a new radio or
television concession must not only seek Cofeco's view, but
must receive a favorable opinion from Cofeco in order to
proceed. As Lopez noted, the signs are good that the
current administration is supportive of change and
competition in the sector; now it is just a matter of how
much political capital Calderon is willing to spend. End
comment.


Visit Mexico City's Classified Web Site at
http://www.state.sgov.gov/p/wha/mexicocity and the North American
Partnership Blog at http://www.intelink.gov/communities/state/nap /
GARZA

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