OBG talks to Gabriel Oswaldo Contreras Saldívar, President Commissioner, Federal Institute of Telecommunications

Interview: Gabriel Oswaldo Contreras Saldívar

Why was a new regulator needed, and what powers does this agency have over its predecessor?

GABRIEL OSWALDO CONTRERAS SALDIVAR: The functions of the previous regulator, the Federal Commission of Telecommunications (Comisión Federal de Telecomunicaciones, COFETEL), were closely linked with executive power: COFETEL was a decentralised agency within the Ministry of Communications and Transport, under the federal executive. The creation of the Federal Institute of Telecommunications (Instituto Federal de Telecomunicaciones, IFT) was necessary to form an autonomous constitutional agency subject only to the constitution and the law.

To a certain extent, with the set up of the IFT, the federal executive’s power in telecommunications was scaled back, and the IFT was granted authority as regulator of telecommunications, broadcasting, networks and spectrum in public services. It was also allocated anti-trust powers. In addition, with the establishment of the IFT, all disputes related to the authority’s decision-making acts go solely to specialised judicial courts and only by injunction. The previous environment created a significant number of lawsuits.

What changes are being planned by the IFT?

CONTRERAS: After the IFT was set up, we were asked to submit a number of changes, which have just been sent to the Senate. The main one declared the existence of a leading financial operator in the telecommunications sector and of another in television. All the measures we adopt are subject to scrutiny and control, and are intended to encourage competition.

The long-term strategy is to remove barriers to competition, establish mechanisms allowing secondary markets to share spectrum and infrastructure, and to create interconnection efficiencies. We are now in the implementation phase, though there is no set process that allows us to calculate how long this will take.

In television, the application of the “must carry, must offer” measure – the obligation of cable television companies to transmit the television broadcast signals at no charge as part of their service offering – takes effect immediately. Another measure, the requirement for mobile phones to be sold unblocked and unassociated with any company, became effective on April 6, 2014. Other areas, such as the unbundling of telecommunications infrastructure have longer implementation times, and it is estimated that this will affect competition two or three years after being put into practice.

The constitutional reform generated much attention worldwide. We have since been approached by many different investment funds, as well as more generally from across the telecoms sector. Our mission as a regulator is to fulfil the necessary changes and to signal that the Mexican telecoms sector is open for investment. We are talking about a global market requiring more investment and greater competition.

In what ways is the television segment expected to be affected by the new changes?

CONTRERAS: In 2012, the Mexican telecoms market was valued at $30bn, and growing almost five times faster than the national economy. The sector is a major growth engine, with high income levels and opportunities for expansion. However, it also has low penetration rates, low investment and is highly concentrated.

Two television chains take most of the advertising revenue. This means a lack of diversity as well as a lack of competition. The information Mexicans receive does not have the variety of sources that exist elsewhere. This reform aims to reduce sector concentration, encourage competition and increase diversity.

We have already proposed the creation of two new national chains, but, as in telecoms, this sector is highly capital-intensive, even though most of the competition is in content. Being able to compete in a market like Mexico is a significant challenge, not only because of the long-standing concentration, but also given the success of existing content. Achieving higher television ratings is complicated, but we have important measures that will help to generate further competition.