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Why Activists Don't Trust Mexico's New Antitrust Telecom Laws

Cellphone service and TV signals are set to be opened up to more competition in Mexico — but possibly at the expense of privacy.

by Manuel Larios and Daniel Hernandez
Jul 11 2014, 6:55pm

Photo by Alfredo Lecona

Stop by any Mexican customer-service center belonging to the dominant cell-phone carrier Telcel — owned by megabillionaire Carlos Slim — and it’s easy to distinguish new clients from returning customers.

New clients excitedly peer into display cases, ogle the various devices, and chat with vendors. Eventually they leave the building with a shiny blue Telcel bag and a smile on their face.

The returning customers, however, arrive at the “centro de atención al cliente” mostly to sit and wait. On a recent visit to one Telcel customer-service center in Mexico City, many people looked aggravated and frustrated, some pacing the center like caged animals.

Today, Telcel dominates 70 percent of Mexico’s mobile market. It is notorious for its shoddy service and rates that in 2013 were deemed the highest for cellular users among nations in the Organization for Economic Cooperation and Development (OECD), which includes the United States and most Western countries.

Waits can drag on for hours at service centers. Meanwhile, Telcel customers in dangerous regions of Mexico complain that their mobile signals often drop during narco shootouts just when they they need their phones most.

"They are like vampires," Mauro Enciso told VICE News as he waited to see a Telcel agent. "They suck money from you with small extra charges."

But all that might change thanks to a government plan to boost competition in Mexico’s quasi-duopolies.

The main targets are, on one hand, Telcel and fixed-line provider Telmex, both owned by Slim; on the other, media giant Televisa along with smaller network TV Azteca, two separate but cozy entities that control between them about 96 percent of the television airwaves in Mexico.

The country's Congress this week passed a telecommunications reform package aimed at offering Mexicans more options. Under the new law, Telcel will have to loosen its stranglehold on the cellphone carrier market until it controls less than 50 percent — meaning smaller cellphone carriers have been officially given room to grow. That’s pretty big news for people like Enciso.

A loyal customer since 2007, he said that his experience with Telcel has been overwhelmingly negative. But he stays with the company to avoid the extra costs and inconveniences that would arise if he switched to one of its smaller competitors, like Movistar or Iusacell.

"First, the problem is that you would have to pay a fine and, additionally, lose your phone number," he said. "Another inconvenience are the interconnection charges between companies, and since many of my friends and acquaintances use Telcel, calling them from another provider would be more expensive."

Indeed, Telcel controls most of the cellphone network infrastructure in Mexico, permitting it to levy high costs on rival providers for connecting calls using its lines. The reform bill outlaws these so-called interconnectivity costs, one of a host of measures meant to chip away at Slim’s dominance in telecommunications in Mexico.

Starting January 1, 2015, for example, long-distance national rates will be history, which will directly impact Telmex, the fixed-line service that Slim has owned since the government essentially sold it to him during deregulation in the 1990s. The loss of long-distance charges is a significant change in a country where roughly half of the nation’s 112 million people still live in poverty. Residents of some villages in rural Mexico still share a single Telmex telephone line.

In the telecom reform package, Televisa and TV Azteca are barred from offering bids on two new broadcast channels that will be opened on Mexican television, in the interest of fomenting competition in a market drowning in telenovelas and trashy game shows. Leftist lawmakers, activists, and analysts, though, said the reform package did not go far enough against Televisa and TV Azteca — or, for that matter, Carlos Slim.

A demonstrator at a recent anti-telecom reform protest in Mexico City. Photo by Alejandro Mendoza

Televisa's orange logo is ubiquitous in Mexico. The behemoth network is often accused of bias and favoritism toward the current ruling party, the Institutional Revolutionary Party (PRI). In a sign of how disliked Televisa is by younger generations, a grassroots student-led movement known as #YoSoy132 emerged during the 2012 presidential campaign against what they called a corrupt alliance between the PRI and the media giant.

The telecom law, in turn, sparked its own set of protests. With many Mexicans focused on the World Cup, activists argued, the PRI administration was given the perfect cover to get some of the more unpopular elements of the law passed through Congress.

While Mexicans fan watched the World Cup at the Zocalo main square, a telecom reform law inched closer to passing. Read more here.

During a July 2 demonstration outside the Senate building on Mexico City's Paseo de la Reforma boulevard, a group of activists used a "jammer" to interfere with mobile reception inside as Mexico's senators debated the bill. Later, activists requested floor time during a committee session, but once they got before the lawmakers, security forces shoved them out.

Lawmakers passed provisions in the law that irked privacy-rights advocates. For instance, telecommunications providers are obligated to store data of cellphone and Internet use for 24 months, to be referenced when deemed necessary by law enforcement officials.

Activists say corrupt government officials might make such data available to criminal organizations or foreign governments such as that of the United States. The National Security Agency already has an enormous spy center set up in the heart of Mexico City, and credible allegations have also arisen of collusion between US and Mexican authorities in an effort to shut down an activist site called 1dmx.org.

On Wednesday, Slim reminded everyone that he's as rich as he is for a reason; America Móvil, the umbrella company of Telcel, announced it would be selling off a series of its assets, so it keeps only 49 percent of the cellphone market in Mexico.

Just like that, Slim preempted the new regulations, meaning he will choose who runs any split-off parts of his company, not regulators. Incidentally, Slim plans on entering the pay TV market under the new competition-boosting law. Not to be outdone, Televisa and TV Azteca’s chiefs have also hinted they’d like to take a shot at the mobile-phone business. In the end, this means that Mexico's two biggest telecom duopolies might end up milking fresh advantages from a reform law meant to weaken them.

Regardless of what is promised by the government, Enciso, the waiting customer at the Telcel customer center, remained skeptical. "I understand that these changes are still a few months away," he said, "but until I see it reflected on my receipt, and feel it in my pockets, I won’t believe it."