Constitutional Reform Addressing Broadcasting and Telecommunications in Mexico
Thursday, March 21, 2013

On March 4, 2013, the President of Mexico introduced a bill to the Mexican Congress calling for the amendment of several provisions of Articles 6, 7, 27, 28, 73, 78 and 94 of the Mexican Federal Constitution, to set forth a new constitutional framework for the regulation of the broadcasting and telecommunications sector.

In the following days this bill will be discussed initially by the Mexican Cámara de Diputados (the “House of Representatives”) and thereafter by the Cámara de Senadores (the “Senate”) and state legislatures.

Major political forces in the Mexican Congress have agreed to discuss this bill within the following days.

In the event the bill is passed without any major amendment and thereafter enacted, direct foreign investment will be allowed up to a 100% for telecommunications and satellite services, and up to 49% for broadcasting services. Notably, before the first anniversary of its enactment (1) a new broadcasting and telecommunications law shall be enacted, (2) public auctions shall be called to grant licenses to operate at least two nationwide television networks, (3) after conducting investigations on the competition conditions in the broadcasting and telecommunications market, the new regulator may impose measures to those economic agents having been found in a dominant position to ensure fair trading and competition in such markets, and (4) “must carry” and “must offer” obligations shall be in place without consideration.

The bill amends Article 73 of the Mexican Constitution, which relates to the powers of Congress to pass laws. Such amendment will add specific wording empowering Congress to pass laws on information technologies and communications, broadcasting, and telecommunications, including broadband services. Congress’ power to legislate with respect to such matters had been challenged in court; however such power has been upheld by Mexican courts.

The bill provides that the Mexican state shall safeguard the right to have access to information technologies and communication, broadcasting and telecommunications services, including broadband services.

According to the bill, telecommunications services are considered public services of general interest, thus the Mexican state shall ensure they are provided under conditions of fair competition, quality of service, plurality, universal coverage, interconnection, technological convergence, fair access and continuity.

Broadcast services are also considered public services of general interest, thus the Mexican state shall ensure they are provided under conditions of fair competition and quality of service. Such services shall promote culture and national identity while preserving plurality and accuracy of the information provided.

According to the bill the law shall create a public agency with technical, operational, administrative, and decision-making authority, charged with the duty of providing non-for profit broadcasting services to ensure that the majority of the population has access to such services and content that promotes national integration, educational, cultural, and civic formation, and broadcast impartial, objective, timely, and accurate information, and provide a space to express plural and diverse opinions and ideas that strengthen democracy.

Such agency shall have a nine-member citizen’s council charged with the duty to warrant the agency’s independence and an impartial and objective editorial policy. Such members shall be elected through a broad public consultation by the affirmative vote of two-thirds of the attending Senate’s members. Annually the two members having most seniority in office shall be substituted, unless reelected for a second term.

The agency’s chairman shall be nominated by the President of Mexico and designated by the affirmative vote of two-thirds of the attending Senate’s members. The chairman shall hold office for five years and may be re-elected once for the same term.

This bill provides for the creation of an autonomous agency under the name Instituto Federal de Telecomunicaciones (the “Federal Institute of Telecommunications”) having its own legal capacity and property. Conversely, the current Comisión Federal de Telecomunicaciones (the “Federal Telecommunications Commission”) was created by presidential decree as an administrative body devolved from the Secretaría de Comunicaciones y Transportes (Ministry of Communications and Transportation). Pursuant to the Ley Federal de Telecomunicaciones (the “Federal Telecommunications Law”) the regulator has technical, operational, budgetary, and administrative autonomy, but neither legal capacity nor property on its own. The Federal Institute of Telecommunications would be created by constitutional mandate as a means to safeguard its legitimate creation and authority.

The purpose of such Institute is to efficiently develop broadcasting and telecommunications, to which it shall be vested with the authority to regulate, promote, and oversee the use and enjoyment of radiofrequency spectrum and telecommunication networks, the provision of broadcasting and telecommunication services. Notably, this bill grants authority to the Federal Institute of Telecommunications to regulate access to active and passive broadcasting and telecommunications infrastructure, as well as to other essential resources related thereto.

In carrying out its regulatory powers it shall render decisions with full independence and it may issue generally applicable administrative resolutions.

The bill provides that such generally applicable regulations and the actions or omissions of such agency may be solely challenged through a constitutional proceeding (amparo indirecto) and no injunction shall be granted against them. In the event of decisions resulting from a proceeding as in a trial proceeding; only the final decision may be challenged. Such proceedings shall be heard by specialized courts. Such specific provisions are arguably the result of the repeated practices of certain licensees contending every single regulation issued by the Federal Telecommunications Commission.

Another major proposed change to the current regulatory framework is to empower the Federal Institute of Telecommunications in matters relating to fair trade and competition in the broadcasting and telecommunications sector. Currently the Comisión Federal de Competencia (the “Federal Competition Commission”) is charged with such duty.

Pursuant to such bill the new agency shall have exclusive authority to prevent, investigate and deter monopolies, abusive behavior, concentrations and other restrictions to an efficient functioning broadcasting and telecommunications market. The bill states further that this agency may impose asymmetric regulation on participants in such markets to efficiently eliminate barriers to fair trading and competition, and to impose limitations to national and regional concentrations of radiofrequencies, licenses and cross-ownership of several communication media serving the same market or geographic area. To such purpose, this agency shall have authority to order the divestiture of assets, rights or interests.

The bill sets forth that broadcasting and telecommunications licenses shall be granted and revoked by Federal Institute of Telecommunications, prior non-binding opinion of the federal executive power. Licensing assignments and changes to the control, ownership or operation of business organizations related to broadcasting and telecommunications licenses shall be decided by such agency.

Such licenses may be for commercial, public, private or social use. Licenses shall be granted through public auction, except for those for public or social use, in which case they shall be directly allocated.

Such public auctions shall prevent concentrations against the public interest and guarantee the lowest consumer prices; however, the award shall not be based solely on economic factors.

The bill calls for the law to set forth an effective system of penalties, which shall indicate, among other causes for license revoking, failure to comply with definitive and non-appealable resolutions relating to business practices constituting abusive behavior. Prior notice to the federal executive power shall be required so that it exercises the necessary authority, as the case may be, to ensure that the relevant services will continue to be provided.

This new agency shall have authority to issue its own bylaws (estatuto orgánico). It shall exercise its budget with full autonomy. Congress shall ensure the sufficiency of such budget to enable timely and efficiently exercise of the authority vested upon such institute.

The governing body shall jointly deliberate and take decisions by majority voting. Meetings, decisions, and resolutions shall be public. Such governing body shall be comprised of seven commissioners, including its chairman. Commissioners shall be appointed upon nomination from the federal executive power and confirmation by the Senate for staggered 9-year terms.

The bill even sets forth the requirements to be appointed as commissioner, among which are: (1) Be a natural born Mexican citizen, (2) Be more than 35 years of age, (3) Have at least five years of relevant experience in the field of broadcasting or telecommunications, (4) Have the required technical knowledge to be in office; (5) For the last five years not having performed as Secretary in the Mexican Federal Government, Federal Attorney General, Senator, federal or local Representative, Governor or Head of Government for the Federal District, or employee, director or officer of private or commercial licensees or its affiliates under regulation of the institute.

Candidates shall show to an Evaluation Committee that they satisfy such requirements. This committee shall be formed by the heads of the following entities: (a) the Banco de Mexico (Central Bank of Mexico), (b) the Comisión Nacional de Derechos Humanos (National Human Rights Commission), (c) the Instituto Nacional para la Evaluación de la Educación (National Institute for Educational Evaluation), (d) the Instituto Nacional de Estadística y Geografía (National Institute of Statistic and Geography), and (e) the Universidad Nacional Autónoma de Mexico (National Autonomous University of Mexico). The committee shall be called each time there is a vacancy and shall decide matters by majority voting.

This committee shall make a public call with regard to the vacancy and shall verify that the candidates satisfy the minimum requirements. Those candidates that comply with such requirements shall be examined on matters relating to broadcasting and telecommunications.

For each vacancy, the Evaluation Committee shall deliver to the federal executive power a roster of at least three but no more than five pre- examined candidates with the highest satisfactory grades. The federal executive power shall choose from such roster the candidate to be appointed commissioner if confirmed by the Senate.

The Senate shall confirm the appointment by the affirmative vote of two-thirds of the attending Senate’s members in the following 30-days non- extendable term. If the candidacy is not confirmed, the federal executive power shall propose a new candidate as provided above. This process shall be repeated until only one candidate is left in the roster in which case the remaining candidate shall be directly appointed commissioner by the federal executive power.

This bill provides that it shall begin on the day following its publication in the Diario Oficial de la Federación (Official Gazette).

Within 180 days following enactment of the bill, Congress shall pass laws (i) regulating the public agency that will provide non-for profit broadcasting services, (ii) directing the substitution of broadcasting permits for broadcasting concessions, (iii) prohibiting cross- subsidies and preferential treatment, (iv) determining the criteria according to which the Federal Telecommunications Institute may grant authorizations to have access to multicasting, and (v) regulating in the same statute the use and enjoyment of radiofrequencies, telecommunication networks and the provision of broadcasting and telecommunication services.

Upon the enactment of this bill, direct foreign investment shall be permissible up to a 100% for telecommunication and satellite services and up to 49% for broadcasting services.

The bill provides that the digital terrestrial switchover shall conclude on December 31, 2015. The federal executive, legislative and judicial powers, according to their authority, shall promote the implementation of receivers and decoders, as well as ensure budget resources that may be necessary. Upon conclusion of such switchover, licensees shall be required to return the 700 MHz frequencies that were originally licensed.

Upon integration of the governing body of the Federal Telecommunications Institute, licensees of broadcasting services and cable operators are respectively required to comply with “must offer” and “must carry” obligations without consideration. Such obligations shall simultaneously cease to exist without consideration when this agency determines there are fair competition conditions in broadcasting and telecommunications markets.

Also, within 120 days following the integration of the governing body of the Federal Telecommunications Institute, such agency shall make public the calls for, and the terms and conditions of licensing auctions for at least two nation-wide television networks. Broadcasting licensees holding 12 MHz or more in any geographic area, and its affiliates will not be allowed as participants to such auctions.

Additionally, within 180 days following the integration of the governing body of the Federal Telecommunications Institute, such agency shall determine whether there are dominant economic agents in the broadcasting and telecommunications markets, in which event it shall set forth the measures to ensure fair trading and competition. Such measures may include obligations relating to information, quality of service, and tariffs, as well as to exclusivity agreements, limits to the use of terminal equipment among networks, asymmetric regulation in tariffs and network infrastructure, including the unbundling essential resources. An economic agent shall be deemed dominant if, in relation to its nation-wide share in the provision of broadcasting or telecommunications services, it has either directly or indirectly a nationwide share higher than 50%, as measured by the amount of final users, network traffic or used network capacity.


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