Mexico. An identifiable recent strategy in the connectivity market is the incursion of players who were originally engaged in serving a particular segment to others that enable new revenue channels, from taking advantage of economies of scale and scope in the provision of services. For example, telecommunications players seeking to participate in the generation and distribution of audiovisual content.
This market possibility is known as the convergent service offering.
The efforts and actions that companies have undertaken to make their way into new market segments and move to a scheme of packaged offer of services in their different formats, such as the case of double, triple or even quadruple play, are manifest. In this regard, we find operators such as Telefónica that seeks to strengthen its offer by becoming a new generator and distributor of audiovisual content, from the launch and consolidation of Movistar Play in the different national markets in which it participates.
In this same sense, there have been several occasions in which the preponderant economic agent of telecommunications in Mexico, América Móvil (Telmex-Telnor/Telcel) has made public its aspiration to expand its market weight in telecommunications, also to the field of broadcasting and the provision of pay television. Both have a double restriction, both in the clauses of telmex's concession title, and in the declaration of preponderance.
Recently, executives of the preponderant have been positive and even optimistic that they will soon receive authorization for their entry into these markets, based on the request they made at the end of last year before the regulator, through its subsidiary Claro TV.
However, in accordance with the Federal Law on Telecommunications and Broadcasting (LFTR), in order to grant authorization, the IFT must ensure that a route is not enabled to gain greater market share and that adverse effects on competition and free competition in the sector are generated.
The above, it is highly likely even ex-ante to open the door to pay TV.
This is indicated by the statistics related to the market share of the preponderant in lines and mobile revenues to the second quarter of 2019, which register an upward trajectory to reach a level of 63.1% and 71.4%, respectively.
Not to mention enabling the operation in an additional market.
Lessons generated in various countries reveal that entry into adjacent segments has strengthened the market footprint of operators that have undertaken a convergent strategy in the service offering. Therefore, a potential authorization of the IFT would be harmful to effective competition, by enabling a way of market reconcentration for the preponderant.
That is why that optimism regarding that possibility is unsubstantiated, since the LFTR prevents the regulator from validating an authorisation with the potential effects referred to against effective competition.
The metrics so far observed around its market share in telecommunications users, the basic indicator to be declared a preponderant economic agent, demonstrate not only a little or no reduction in market weight, but also a reconcentration in some segments in which it operates.
Thus, in the light of economic logic, it would be categorically anti-competitive to open the door to the preponderant to offer the restricted television service. It will not be the time until the balance in the competitive field determined by the regulatory policy that allows it to abandon the scenario of preponderance materializes.
The convergence in the provision of services, can go forward for the preponderant, yes and only yes, a scenario of effective competition in telecommunications is reached.
Text written by Ernesto Piedras of The Competitive Intelligence Unit.
