A few days before President Enrique Peña issued the secondary legislation of the telecommunications and radio broadcasting reform, América Movil Company (AMX), which had been previously been pointed out as a “relevant stakeholder” within the sector by the Federal Telecommunications Institute (IFT), surprisingly announced its intention of withdrawing a sufficient number of assets with the purpose of changing the context in which it would operate. The main objective is to avoid the asymmetric rules that have been imposed on interconnection, roaming, passive infrastructure, networks, user services, information and accountability separation. With this unexpected corporate decision, legislators reacted differently. On one hand, those that oppose the law voiced their stance against the “relevant stakeholder” criteria. On the other hand, those in favor praised the AMX decision as the first major impact of a regulation that will enhance competition as well as benefits for consumers. With such technological convergence and promptness within markets, is this new regulation enough to modify the oligopoly structure that has blocked the development of the aforementioned industry for decades?
The measure taken by AMX – that still needs to detail the terms and conditions under which the sale of assets would be made – initially shocked the markets, which recognized its prompt nature and hailed it by giving it a confidence boost with a 10 percent increase on the shares’ value. In its press release, AMX hinted that Mexican telecommunication companies do not invest enough and that assets sold by América Móvil may be bought by a foreign company (the reform allows up to 100 percent of foreign investment within telecommunications). Currently, AMX is an important stakeholder in the fixed telephone lines, mobile telephones and Internet sectors and the company is looking forward to expanding towards public and cable television if it manages to get rid of the “relevant” label.
When legislators established measures on the scope of oligopolies in the aforementioned industry, they thought that it would suffice with the establishment of the “relevant stakeholder” criteria, supporting it using a rigid measurement (which is a sector participation of over 50 percent). They forgot that markets respond to dynamic and flexible decisions that change according to circumstances – obviously including the corresponding regulatory changes. The government is now facing a dilemma. If AMX manages to get rid of the “relevant stakeholder” label, IFT will have to give up its power of imposing preventive asymmetric measures and limit the use of analysis tools that are available within the competition law – determining a substantial power on relevant markets and the damage assessment versus possible efficiency derived from the aforementioned “relevant” label – that has already created a legal mess for the extinct Federal Competition Commission; less than a year after its creation, IFT faces 500 lawsuits. As a matter of fact, it is not unconceivable that the decision taken by AMX will be way more transcendent for the industry’s future.
The attempt for control established by legislators will possibly have no effect before the law is issued. If the AMX asset sale goes to a major international company, its impact could be greater than that of the legislation, showcasing how powerful relevant stakeholders are when unilaterally imposing their conditions to authority. It will undoubtedly be a major challenge for IFT to establish its regulatory powers on competition. Ironically, the concept of “relevance”, which legislators and public figures have discussed for such a long time, is close to losing its efficiency before it is legally valid. As a matter of fact, the action undertaken by ANX forces IFT to rethink the implications of declaring Televisa as a relevant stakeholder, which is exactly the opposite of what the law was aiming from. Markets have a peculiar way of making an impact on political processes…
CIDAC
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