Mexico's Telecommunications' Reform Ready To Be Signed By President Peña Nieto

On May 23, after the approval of 24 Mexican states (Aguascalientes, Baja California Sur, Campeche, Chiapas, Chihuahua, Coahuila, Colima, Durango, Guanajuato, Hidalgo, Jalisco, México, Morelos, Nayarit, Puebla, Querétaro, Quintana Roo, San Luis, Potosí, Sonora, Tamaulipas, Veracruz, Yucatán and Zacatecas) the president of the Permanent Commission (Comisión Permanente) has declared constitutional the Telecommunications' Reform and sent the bill to President Peña Nieto for his signature and publication in the Official Gazette.

Here is a summary of this major reform. It took Mexican Congress two months to discuss and pass the bill:

Restrictions to media ownership The Federal Telecommunications Institute (Instituto Federal de Telecomunicaciones) ("FTI"), sister to the Federal Communications Commission ("FCC") of the United States, will impose limitations on both national and local media ownership consolidation.

The FTI will have powers which in the United States are under the umbrella of the Antitrust Division of the Department of Justice, since it will supervise the economic competition within the main players of the industry by investigating and scrutinizing monopolies, media ownership consolidation and other economical restrictions that cause market inefficiencies in accordance with the Herfindahl index.

Although it has not been decided which threshold the FTI will use for horizontal and vertical ownership restrictions yet, the bill grants the FTI with the power to order mandatory divestments on certain entities that cause restrictions on competition. The question is how will they approach such divestments. This will be discussed in the secondary law (i.e. the regulation that will explain and expand this bill, which they estimate to pass in the next months).

One alternative would be the one carried forward in the United States in FCC v. National Citizens Committee, 436 U.S. 775 (1978), where the ban on cross-ownership between newspapers and broadcast was deemed constitutional, but mandatory divestments were only ordered on egregious cases (i.e. those where one entity or person was holding the only newspaper and the only broadcast station in a particular local market). Such entities were given a five (5)-year period to divest, together with some tax exemptions for the transaction.

Another alternative could be the Argentine route. Unlike the United States, Argentina's telecommunications law, enacted in 2009, mandates a divestment at a national...