On February 5th, the President of Mexico submitted, for consideration of the Mexican Congress, several initiatives to amend the Mexican Constitution. Among them, the “organic simplification” or extinction of certain autonomous constitutional bodies (“OCAs” for its initials in spanish) in order to pursue republican austerity and avoid duplication of functions (between these and the Federal Executive).
Firstly, it is important to highlight that OCAs are independent from the three branches of government, i.e. they have their own legal personality, as well as budgetary and management autonomy to regulate matters that are considered of greatest relevance to the country. Currently, the regulatory authority for matters related to telecommunications is the OCA known as the Federal Telecommunications Institute (“IFT” for its initials in spanish). Previously, however, the telecommunications sector was regulated by the Federal Telecommunications Commission, a decentralized agency of the Ministry of Infrastructure, Communications and Transportation (f.k.a. the Ministry of Communications and Transportation), a subordinate of the Federal Executive.
In 2013, as part of the constitutional amendment within the framework of the “Pacto por Mexico”, the IFT was created with the main objective of (1) guaranteeing freedom of expression and broadcasting rights, the right to information, as well as the right to access broadcasting and telecommunications services, and (2) achieving price reductions and an increase in the quality of telecommunications services.
Now, the Mexican President’s current initiative proposes to return the IFT’s powers to the agencies that had such authority over a decade ago. In detail, this initiative argues that “in practice, the IFT has not been effective in combating monopolies in the sector, despite its gigantic organizational structure and high salaries of its commissioners”.
Evidently, the approval of such constitutional reform would alter the development of telecommunications in the country. Mainly, because the State would control the sector, a series of changes could be triggered, among which the following stand out:
- Competition. The Federal Executive would be responsible for granting concessions related to telecommunications services. Considering that, in the past, concentrations that favored certain economic groups were authorized when they should not have been, and that these caused the reduction of competitors in certain sectors and the creation of market entry barriers, the change of regulatory authority in the supply of telecommunications services could lead to the creation of monopolies and a lack of transparency in public contracting.
- Price to consumers. The evolution of technology, the intensification of competition and the measures adopted by the IFT in the telecommunications sector have resulted in considerable reductions to consumer rates. In 2023, the Communications Price Index was below the 2012 results by 22% (twenty-two percent). However, should the initiative be approved, consumers would possibly have to contract such services among fewer bidders, risking the possibility that prices would be altered.
- Foreign Direct Investment. According to IFT statistics, foreign direct investment in telecommunications services in Mexico increased between 2013 and 2023, with a higher investment by approximately $11,150,000,000.00 dollars (Eleven billion, one hundred and fifty million dollars 00/100 legal currency in the United States of America) in 2023 compared to the 2012 investment. However, due to the legal uncertainty that the change of regulatory authority would cause for foreign investors, such investment could decrease.
- Compliance with international treaties. It is important to mention that, if the constitutional reform were to be approved, the Ministry of Infrastructure, Communications and Transportations would have to ensure compliance with international treaties and adopt regulations that do not violate the provisions of Chapter 18 (Telecommunications) of USMCA.
- Legal Uncertainty. According to the Federal Executive, the concessions granted by the IFT will continue to be in full force and effect. However, concessionaires and/or interested parties in the sector must comply with the new regulations, if any, issued by the Federal Executive in the exercise of its new functions. It is worth mentioning that the new agency would be responsible for deciding whether to renew such concessions.
In addition, since the Ministry of Infrastructure, Communications and Transportation would take over the functions of the IFT, there would be a transition period between the extinction of one authority and the beginning of the operations of the other, since such Ministry would need a period of training, study and, subsequently, the issuance of new regulations. This transition would mainly affect foreign investors and suppliers, who have studied and invested in the market under the current regulatory framework, and would have to adapt to the processes, terms and conditions established by the new authority.
Finally, aside from considering the importance of the implications that the change of authority could give rise to with respect to the telecommunication sector in our country, the essential function of the State will continue to be the reduction of the digital gap among Mexicans as well as to guarantee the population’s freedom of expression and broadcasting rights, right to information and right to access quality broadcasting and telecommunications services.
Ana Patterson
