Mexico. The Plenary of the Federal Institute of Telecommunications (IFT) resolved by a majority vote the procedure followed to determine the existence of substantial power in the market for restricted television and audio services (Pay TV).
The proceedings had their origin in an investigation ordered by the Thirty-Ninth Transitory Article of the Decree issuing the Federal Law on Telecommunications and Broadcasting. In the resolution of the procedure, the Plenary determined the following:
· Currently over the top (OTT) services are not a substitute for Pay-TV service. OTT services, such as Netflix, are not substitutes for Pay TV, since: i) they focus on offering mainly a catalog of audiovisual content that has previously been provided on other platforms (cinema, movie rental, restricted television or broadcast television); ii) unlike those of Pay TV, they do not offer linear programming in particular and do not have the signals of greater audience of those, and iii) they depend on the capacity of Connection to the Internet, which in Mexico registers low speeds.
In addition, a significant number of Pay-TV subscribers in Mexico do not have an Internet connection. In this regard, the National Survey of Household Income and Expenditure of 2014 indicates that 46.8% of households that have pay-TV service do not have Internet service.
· In order to establish the existence of substantial power, it must be determined, inter alia, whether an economic operator may fix prices or restrict supply on the relevant market on its own, without its competitors being able, currently or potentially, to counteract that power. That is, the high participation of an economic agent in a market does not necessarily imply the existence of substantial power.
· The companies that are currently part of Grupo Televisa (GTV), like their competitors, have grown in the Pay-TV service, with which the latter have increased their market shares. Based on revenue and the number of subscribers, it was observed that the companies that are currently part of GTV have the largest aggregate participation in this service. However, its main competitors have also grown and increased their market share.
According to information from the Institute, from September 2013 to March 2015 the number of Pay-TV subscribers went from 14.3 to 16.4 million, representing an increase of 2.2 million users and an increase of 15.1%. In this period:
- The satellite platform registered 1.49 million new subscribers, of which SKY obtained a share of 59.7% and Dish, 40.3%.
- The cable platform registered 667 thousand additional subscribers, of which the companies that are currently part of GTV accumulated 28.2%; Megacable, 53.4%; Axtel, 7.8%; Total Play, 6.9% and others 3.7%.
Therefore, the aggregate participation of the companies that are currently part of GTV decreased from 64.1 to 62.2%; on the cable platform it fell from 54.0 to 51.7% and on the satellite platform from 73.0 to 70.8%. Dish's aggregate share increased from 14.3 to 16.0% and on the satellite platform from 27.0% to 29.2%, and Megacable's aggregate share grew from 14.9 to 15.1% and in cable from 31.6% to 33.6%.
That is, Dish and Megacable have respectively gained 27.9 and 16.5% of the new users of the Pay-TV service, with growth of 29.5% and 16.7%. Axtel and Total Play have also reported high growth rates.
The growth of GTV's competitors shows that they have the ability to react in existing market conditions. Additionally, as there is competitive pressure from competitors in the satellite market, as well as from providers of fixed telecommunications services such as telephony and internet, services that are usually packaged, there are economic restrictions for unilateral pricing or restriction of the supply of services.
In addition, GTV has an obligation to give its competitors access to the most valuable free-to-air television channels for audiences, which is known as a must offer, which prevents GTV from using these inputs to limit the ability to compete with other Pay-TV service providers.
When evaluating the previous information and the others gathered during the procedure, the Plenary of the Institute resolved that although GTV has a high participation in the analyzed market, the elements provided for in the Federal Law on Economic Competition to determine the existence of an Economic Agent with substantial power in the Pay-TV service are not accredited.
To rule on conditions of competition in the markets, a special procedure provided for in Article 96 of the Federal Law on Economic Competition is used. These procedures are intended to rule and not to sanction, and do not prevent a subsequent analysis of the conditions of competition that prevail, which is why this authority will continue with the work of studying the conditions that prevail in this and other telecommunications and broadcasting services in order to have, within the scope of its powers, effective and timely intervention to protect and promote effective competition.
In terms of the provisions of article 96 of the Federal Law on Economic Competition, a public version of the resolution will be available on the Institute's Internet portal today and in the coming days the relevant data will be published in the Official Gazette of the Federation.
