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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