Carlos Slim and Mexico’s Telecom Reforms

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Here is a link to a recent on AQBlog article of mine, titled “Carlos Slim and Mexico’s Telecom Reforms“, published on May 12th, 2014.

Please feel free to visit and comment.

Here is a verbatim copy of it in case you prefer to read it on my personal blog, though I recommend actually going to the site because of additional content, other blogger’s articles, etc.

Every year around February, Carlos Slim Helú’s name is tossed around in the offices of Forbes magazine. Numbers are crunched, and Forbes’editors determine if they will publish the Mexican businessman’s name with a 1 or a 2 beside it in their famous “World’s Richest People” list.

In a country ranked 88th in the world in GDP per capita in 2013, with 52.3 percent of its population living below the poverty line in 2012, one has to wonder how it is that Slim is able to accrue so much wealth.

Forbes calculates Slim and his family’s net worth at $72 billion dollars. Other publications calculate his worth at around $75 billion, so let’s settle for $73, give or take a few billion. Putting things into perspective, based on last year’s GDP per capita estimates, Slim’s $73 billion net worth is equivalent to more than the wealth of 4.6 million average Mexicans put together.

There are a number of explanations for how Slim got this rich. Some appeal to theromantic story of an entrepreneurial boy who learned to invest from his father at the age of 12. Others, more critical of Slim, point towards the moment that Slim bought Teléfonos de México (Telmex)  in 1990 during the privatizations of former President Carlos Salinas Gortari.  In reality, Slim was a wealthy man well before 1990, but I’m sure that gaining control of the only phone company in the country at the time helped grow his assets, which include ownership and/or shareholder participation in over 200 companies in Mexico.

One of the keys to Slim’s success has been his ability to find his way into companies with little or no competition in the commercial market. Let’s take a look:

Slim is the chairman of Telmex and América Móvil. This means he controls the phone lines, the largest local and long distance phone providers, the largest broadband Internet service provider and the largest mobile phone company in the country (Telcel), which has70.8 percent of the market share, according to IFC estimates.

So, practically every time a Mexican makes a phone call or connects to the Internet, he’s giving money to the second-richest man in the world—and not at a cheap price.  According to the OECD, Mexico’s mobile rates are the fifth most expensive in the world.

But Slim doesn’t just control Mexico’s telecom sector. Quick, think chocolate! Chances are you thought of Hershey’s, right? So do most Mexicans. And every time they buy a Hershey’s bar, they’re also helping Slim accumulate wealth, since he holds a 50 percent interest in the Mexican branch of this company. Does he have any real competitors? Yes, one: Mars Mexico.

Meanwhile, every time a Mexican buys music at a Mixup or Tower Records location, Slim gets a cut.

Mexico also has only two cafeteria chains nationwide. One is Vips, currently in the midst ofbeing acquired from Walmart by the Alsea conglomerate. The other one is Sanborns, with over 125 stores—and helping Slim make money each day. Sanborns is much more than a cafeteria—it’s actually an integrated restaurant/bar/bakery/gift shop/book store concept.

Slim also provides Mexicans the opportunity to contribute to his wealth by shopping at any of nearly 50 Sears stores and the one Saks Fifth Avenue store in Mexico City. Want to open a bank account? If you do it at Banco Inbursa, guess who gets the profits?

Grupo Carso, one of three main holding companies led by Slim (Carso is a contraction of the first letters in Slim’s first name and that of his late wife, Soumaya), is also the umbrella for energy, construction, infrastructure and automotive industry companies such asCondumex and CILSA, to name a couple.

Slim also owns a real estate and hotel company called OSTAR Grupo Hotelero, and an upscale shopping mall in Mexico City called Plaza Carso.

With all this in mind, it may come as a surprise to most Mexicans that Slim hates monopolies and duopolies—especially when he’s not a part of them. That’s why, in March of 2013, he supported the telecom reform, interpreting it as an opportunity to open up the market for him in Open TV and broadband services. Slim recently launched Claro TV, a broadband TV service similar to Netflix, and has been pushing to become the third player in the open TV market for some time now.

Yet the congratulatory words Slim bestowed on the federal government in 2013 have turned into criticism, now that the secondary telecommunication legislation is being discussed in Congress (the final version is set for a vote in June).

When the federal government’s legislative proposal was presented in March, it met public rejection on the grounds that parts of the bill violated freedom of speech and privacy rights. However, Slim had other reasons to be mad.

One of the key aspects of the telecom proposal now opposed by Slim’s mobile company, América Móvil, is the premise that the “preponderant economic actor” will be obligated to provide its competitors free interconnection to its network. In a statement it released to the news media, América Móvil explains that this action “rewards the lack of investment from its competitors and harms end consumers.”

The statement also mentions that the proposed legislation “creates entry barriers to the highly concentrated markets of open and restricted television broadcasting,” and gives theInstituto Federal de Telecomunicaciones (Federal Telecommunications Institute—IFETEL) a window of up to two years to evaluate if Slim’s Telmex can enter the open television market. In layman’s terms, Televisa CEO, President and Chairman Emilio Azcárraga would be allowed to enter the telephone sector at a lower cost, and Slim’s dream of entering the open TV industry would be put on hold. Azcárraga: 2, Slim: 0.

The telecom discussion-turned-telenovela now includes accusations from Televisa-friendly news pundits claiming that Slim was behind the #EPNvsInternet protests, and responses to those attacks calling Televisa an “ill-willed disinformation provider”.

The fate of the country’s telecom industry will be settled by Congress’ decision in June, while average Mexicans are hooked to their TV sets watching the World Cup—but depending on the outcome, these reforms could be less about opening markets up, and more about which of Mexico’s oligarchs are favored by them.

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Will Mexico’s Telecom Reform Hurt Internet Freedom?

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Here is a link to a recent on AQBlog article of mine, titled “Will Mexico’s Telecom Reform Hurt Internet Freedom?“, published on April 22nd, 2014.

Please feel free to visit and comment.

Here is a verbatim copy of it in case you prefer to read it on my personal blog, though I recommend actually going to the site because of additional content, other blogger’s articles, etc.

 

On March 24, Enrique Peña Nieto presented the Mexican Senate with a bill for a new telecommunications law that complements theconstitutional reforms he approved in 2013. The legislation proposes, among other things, to promote competition in the sector, improve telecom services, and regulate the radioelectric spectrum through the new telecommunications regulator, the Instituto Federal de Telecomunicaciones (Federal Telecommunications Institute—IFETEL).  The bill is now being revised, and is expected to be approved in the coming days.

However, the proposal is already raising eyebrows and creating waves in the digital sphere, where it’s being labeled as a form of government censorship.

According to Article 2 of the bill, the legislation is intended to “protect the nation’s security and sovereignty,” and the most controversial articles in the initiative are preceded by mentions of criminal prosecution and promoting the public interest. There is room for discussion on the potential effectiveness of this objective, but much like the current debate in the U.S. over the NSA’s capabilities vs. individual freedoms and privacy, citizens in Mexico are worried about ceding too much power to the federal government.  The far-reaching legislation has created a number of trending topics on Twitter, under hashtags like #EPNvsInternet #ContraElSilencioMx and #NoMasPoderAlPoder (roughly translated to #PeñaNietoV.Internet, #AgainstSilenceMx and #NoMorePowerToTheOnesInPower).

One of the most popular bloggers in Mexico, “Sopitas,” criticized Peña Nieto’s proposal by stating that social media has been the only widespread communication channel where the public can express its dissent with the current government.  On April 21, #EPNvsInternetbecame a worldwide trending topic on Twitter and, as these words are being written, “netizens” in Mexico City are organizing a massive demonstration at the Ángel de la Independencia monument in downtown Mexico City, which also hosted many of#YoSoy132’s protests against Peña Nieto’s alleged alliance with Televisa in the 2012 presidential elections. When the neutrality of the largest news media conglomerate in the country is in question, citizen journalism becomes crucial.

Attempts to control speech on the Internet are not new. One need only consult Global Voices’ Advocacy project to see that, when given the power to do so, governments unequivocally use Internet restriction as a means to block and control dissent.

But how would the president’s telecom law proposal trample on free speech? What are netizens protesting against? Here are some highlights:

  • Article 145, Paragraph III states that Internet Service Providers (ISP) “will be allowed to block access to content, applications or services upon express request by the user, per order of authority…”
  • Article 189 proposes that ISPs be forced to provide real-time geolocation of specific devices to public officials “awarded the faculty of requesting it…”
  • Article 190 states that ISPs will be “obligated to permit […] intervention of private communications…”
  • Article 197, paragraph VII states that, if requested by authorities, ISPs will “temporarily block, inhibit or nullify telecommunication signals in events and locations critical to public or national security…”

Supporters of the proposed telecom law might argue that these new attributions would allow government to better combat organized crime, but the other side of the story shows that if the legislation is approved as-is, any government would be legally awarded the power to read emails exchanged between its detractors, know their location and cut off their communications.

Would the government consider a mass protest on Avenida Reforma to be an event against public security, and thus block cell phone communications in the area? Those opposing the new law seem to think this is a possibility.

This developing story has caused outrage on Twitter, Facebook and other social networks. Will this outrage help write a different conclusion—one in which the proposed telecom bill is overturned? Or will Mexico join the ranks of censorship-friendly countries such asCambodiaTurkey and Venezuela?