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90779
2006-12-22 19:13:00
06MEXICO7054
Embassy Mexico
UNCLASSIFIED//FOR OFFICIAL USE ONLY
06MEXICO1080
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UNCLAS SECTION 01 OF 03 MEXICO 007054 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE: WHA/MX FOR MATT ROTH, EB/CIP FOR NICK FETCHKO; USTR 
FOR JONATHAN MCHALE, CATHERINE HINKLEY; FCC FOR EMILY 
TALAGA; DOC FOR GERI WORD 
 
E.O. 12958: N/A 
TAGS: ECON ECPS MX EINV
SUBJECT: MEDIA WARS: THE CONTINUING DEBATE OVER 
ESTABLISHING A THIRD TV NETWORK IN MEXICO 
 
REF: MEXICO 1080 
 
¶1. (U) Summary:  The new head of the Secretariat of 
Transportation and Communications (SCT) Luis Tellez has been 
sending mixed signals this past week over whether or not the 
Calderon administration will push for the opening of a third 
television broadcast channel in Mexico.  Both Tellez and a 
commissioner of Cofetel have been quoted as saying that 
Q&additional analysisQ8 is required before granting a license 
for a new company to compete with broadcast television 
duopolists Televisa and TV Azteca.  For their part, the two 
broadcasters have continued to attack potential rival General 
Electric (GE) and its Mexican partner Isaac Saba.  The debate 
has also reached the halls of the Senate.  Even if the new 
government does indeed press for a third station, the steps 
that need to be taken to open the doors to a new channel in 
Mexico still remain unclear.  Some analysts claim that the 
apparent hesitancy is due not to inexperience in opening new 
licenses but to lack of political will.  End Summary. 
 
Mixed Signals from SCT 
---------------------- 
 
¶2. (U) Media reported on December 14 that Tellez had met 
earlier in the week with Cofetel to inform the commissioners 
of president Felipe CalderonQ,s goal of opening the market to 
a third television broadcaster.  Currently, Televisa controls 
258 of MexicoQ,s 455 television stations while TV Azteca 
controls 179.  The two companies are responsible for 80% of 
television concessions and 90% of audiovisual content in 
Mexico.  According to unconfirmed reports in the media, which 
were later rejected by Cofetel commissioner Eduardo Ruiz 
Vega, Tellez informed Cofetel that it should work with the 
SCT to find a way to counter the duopoly and find a legal 
formula to open the way for NBC-Telemundo to enter the 
market.  Columnist Dar!o Celis of Reforma charged that Tellez 
had threatened the Cofetel commissioners not to make public 
their discussion. 
 
¶3.  (U) On December 15, however, Tellez held his first press 
conference as head of the SCT and evaded directly answering 
questions about authorizing a third television network.  He 
said that CalderonQ,s plans do not include a third national 
network, but instead focus on licensing regional radio and 
television channels. Tellez did say that the GOM would be 
ready to open the fixed telecommunications sector and media 
to greater foreign investment, but only if the United States 
and other countries open their radio and television markets 
to Mexican companies.  The statement may have been in 
reference to NBC/UniversalQ,s suit filed with the FCC against 
TV AztecaQ,s participation in KAZA in Los Angeles. 
Undersecretary for Communications Rafael del Villar said at 
the press conference that the idea for a third channel had 
not been rejected but that it would Q&be analyzed.Q8 
 
¶4. (U) On December 14, media reported Cofetel commissioner 
Gerardo Gonz lez Abarca as saying that the conditions do not 
yet exist in Mexico to merit the licensing of a third 
national television channel in the short run.  He claimed 
that Q&Mexico does not have experience in licensing radio and 
television frequencies Q( and there is no study over the real 
necessity of a new alternative, or above all of the type of 
content that should be offered (by a third channel).Q8  In 
order to create these conditions, Gonz lez Abarca said it is 
necessary to reach agreement between Hacienda (the 
Secretariat of Finance), the SCT, the Secretariat of 
 
SIPDIS 
Governance (Segob), and Cofetel.  Gonz lez did recognize that 
opening a licensing process in the first trimester of 2007 is 
one of Felipe CalderonQ,s promises for his first 100 days in 
office, though Secretary Tellez denied this in his press 
conference the next day. 
 
The Politics of TV 
------------------ 
 
¶5. (U) The debate on opening a third channel has also surged 
in the Senate.  PAN senators Federico DQring and Marco 
Antonio CortQs Mendoza (both on the SenateQ,s Radio, 
Television, and Cinema (RTC) Committee) came out in favor of 
a serious debate on the issue, saying that the Federal Radio 
and Television law need to be revised, particularly regarding 
the regulation of content.  DQring acknowledged that there 
are frequencies available for a third channel, and said that 
the idea of a third network formed by educational and 
cultural stations should not be discarded.  However, DQring 
 
MEXICO 00007054  002 OF 003 
 
 
also accused PRD senator Ricardo Monreal, who is not on the 
RTC committee, and his party of trying to pressure the 
Calderon government to open a third network through 
Q&political beatings and insultsQ8 directed at Secretary 
Tellez.  The president of the RTC, PRD senator Carlos Sotelo, 
has not commented on the issue.  One PRI senator on the 
committee voiced objection to opening the sector, claiming 
that it would run the risk of augmenting the exorbitant costs 
of political campaigns. 
 
¶6. (SBU) Comment: The political nature of the debate becomes 
more apparent every day, from the rumors of Q&secretQ8 
meetings between Secretary Tellez and Cofetel to TellezQ,s 
denial of such a meeting and carefully worded, ambiguous 
statements on the subject.  Cofetel commissioner Gonz lez in 
the daily Q&El FinancieroQ8 accused the old SCT leaders of 
leaving Cofetel with Q&a hot potato.Q8 Q&You have to ask the 
ex-officials (of the SCT) why they didnQ,t grant new 
frequencies or commence licensing in their six years in 
office.Q8  The answer is likely that they lacked the 
political will to do so.  Though no officials like to admit 
it, the PRI senator's objection may explain why: candidates 
depend on Televisa and TV Azteca for advertising during the 
political campaigns.  PRD's support of a third channel stems 
from its opposition to the so-called Q&Televisa LawQ8 passed 
by Congress in April (reftel), which the PRD and others 
condemned as strengthening the existing duopoly.  Televisa 
and Azteca in turn angered PRD leaders with their coverage of 
the hotly contested presidential election and CalderonQ,s 
inauguration. End Comment. 
 
Televisa and Azteca Pick a Fight 
-------------------------------- 
 
¶7. (U) Outside the political realm, the media wars rage on as 
Televisa and TV Azteca continue their coordinated attack on 
Mexican businessman Isaac Saba and his Grupo Xtra, General 
Electric's (GE) partner in Palmas 26.  GE, owner of 
NBC/Universal and Telemundo, formed Palmas 26 with Grupo Xtra 
in April, and the partnership was approved by the GOM in May. 
 In September, Palmas 26 officially requested that Cofetel 
and SCT start the process needed for a spectrum auction to 
open a new network.  Since November 20, Mexicans have been 
treated a series of almost nightly Q&exposQsQ8 on both 
Televisa and TV Azteca news program, delving into the world 
of pharmaceutical distributors.  The programs blamed two 
dominant companies, most prominently Isaac SabaQ,s Grupo 
Saba, in that industry for killing Mexicans because of the 
high price of medicines.  Both networks have aired interviews 
with sick and dying Mexicans dependent on medications, as 
well as with the new Secretary of Health and the president of 
the Federal Competitive Commission (CFC), to demonstrate how 
Casa Saba and the other major firm controlling pharmaceutical 
distribution in Mexico, the Nadro company, had created a 
monopolistic market, contributing to the deaths of thousands 
of Mexicans.  The interview with CFC president Eduardo PQrez 
Motta was a particularly interesting inclusion, since PQrez 
Motta had recently advised Congress that opening a third 
network would be good for competition.  In late November, the 
CFC also issued a recommendation to open the spectrum and to 
develop mechanisms to prevent monopolies from building in 
broadcasting. 
 
¶8.  (U) One reporter for duopolist TV Azteca noted: 
 
 Q&It is almost impossible to think that someone can create 
competition in this country, not even foreign competition. 
If some company from the United States or Canada wanted to 
compete with Casa Saba, it couldn't because it is prohibited 
by NAFTA. Q( The worst is that neither Mexican laws nor 
international treaties have been able to impede Isaac Saba 
and his empire in the pain they cause Mexicans.Q8 End quote. 
 
¶9. (U) The irony of TV Azteca, which has so strongly fought 
against Telemundo entering the Mexican market, condemning 
NAFTA for not allowing foreign investment, has not been lost 
on other media outlets.  Radio and print media commentators 
quickly picked up on the connection between the reports on 
Casa Saba and Palmas 26Q,s attempt to enter the television 
market, while acknowledging that the high price of medicine 
is indeed a problem in MexicoQ*and has been for decades.  On 
December 7, TV Azteca turned its attention to GE as well as 
Isaac Saba.  The network's news reporters described the 
Q&black history Q( a story of impunity, abuses, and 
injusticesQ8 of the Saba family, which Q&has made its fortune 
 
MEXICO 00007054  003 OF 003 
 
 
on the suffering of millions of MexicansQ8 through Casa Saba 
and its other companies.  The reporter went on to say,  Q&All 
this is not enough, and now Isaac Saba Raffoul plans to unite 
with General Electric, a transnational company accused of 
unfair monopolistic practices, deception, fraud, and all that 
you can imagine.Q8 He detailed cases brought against GE in 
the 1980s and 1990s, as well as problems the company has had 
in Japan and Spain. 
 
¶10. (U) GE, for its part, responded to the attacks 
immediately with a paid announcement in newspapers and 
through radio and newspaper interviews with the company's 
Mexico director Rafael D!az Granados.  D!az drew the line 
between Palmas 26 and the Televisa/TV Azteca attacks clearly, 
telling one radio reporter that the Azteca program Q&is very 
much related to GEQ,s public interest in participating in 
MexicoQ,s television market. It seems to us at GE that this 
is another attempt on the part of the television company to 
impede free competition Q( we consider this to be part of a 
strategy on the part of the duopoly that wants to protect 
itself and avoid the participation of GE and its partners in 
the media market.Q8   Isaac Saba and Casa Saba have refused 
to comment on the media attacks. 
 
Comment 
------- 
¶11. (SBU) So far, the Televisa/TV Azteca exposQs have done 
little more than provoke some discussion in Congress over the 
price of medications- and more than a little discussion 
within the SCT, Congress, and the press over the options for 
opening a third national network.  By apparently coordinating 
an attack on Casa Saba, Televisa and TV Azteca have 
demonstrated exactly why Mexico needs another competitor in 
the television market.  Still, regulators seem hesitant to be 
seen as favoring Telemundo.  Cofetel commissioner Gonz lez 
said to Q&El Financiero,Q8  Q&From what I know, only one 
company has expressed interest in this opening (of the TV 
market) and that is Palmas 26; but we cannot open the process 
for only one company, neither can we fix a price or a 
concession fee for only one interested party.Q8 
 
¶12. (SBU) For the moment, any talk of opening a third network 
in Mexico is just talk.  After stories in the media that 
Tellez was pushing Cofetel to immediately look into setting 
procedures to grant a license for a third network, Tellez and 
del Villar seemed to backtrack in their press conference, 
focusing on the need for studies to examine the necessity of 
a new network and the content it might provide.  Even without 
studies, setting up a licensing and concession process could 
take years.  If they are serious about opening licensing for 
an additional national TV network or networks, CalderonQ,s 
team should set a clear timeline for opening the television 
market, both regionally and at a national level, and enforce 
deadlines for when Cofetel must issue guidance on the 
licensing process. 
 
¶13.  (SBU) In meetings over the coming months with the new 
Calderon government, Post will stress the importance of 
encouraging competition, especially in the telecommunications 
sector.  Given commissioner Gonz lezQ,s assertion that Mexico 
lacks experience in licensing, we also encourage views from 
Washington as to how to provide support to Cofetel and the 
SCT on the licensing process. Competition is not the only 
issue in play here.  MexicoQ,s laws limit foreign investment 
in the country's media.  Earlier in December, Senator Javier 
Orozco demanded vigilance of GEQ,s role in Palmas 26, and 
Secretary Tellez alluded to the U.S.Q,s own restrictions on 
 
SIPDIS 
foreign ownership of media in his press conference. 
 
 
 
 
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