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Cablegate: Defining Dtv Hits a Bump; Mission Strategy For

This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 02 BRASILIA 000311

SIPDIS

DEPT. FOR EB/CIP/BA
COMMERCE FOR MAC/WH/BRAZIL

E.O. 12958: N/A
TAGS: ECPS ETRD EINT BR
SUBJECT: DEFINING DTV HITS A BUMP; MISSION STRATEGY FOR
ENGAGEMENT

REFS:

A. RIO 0108
B. 02 BRASILIA 3393
C. 02 BRASILIA 1639
D.01 BRASILIA 3714

SENSITIVE BUT UNCLASSIFIED, PLEASE TREAT ACCORDINGLY

1. (SBU) SUMMARY. On January 23, new Minister of
Communications Miro Teixeira proposed that the GoB form an
inter-ministerial group to study and present findings on
the viability of a made-in-Brazil digital television (DTV)
standard. The announcement immediately followed Teixeira's
review of a CPqD (Centro de Pesquisa e Desenvolvimento em
Telecomunicacoes) report espousing the benefits of an
n
indigenous standard (Note. CPqD is an independent research
institute based in Campinas, Sao Paulo. End Note.)
Although Teixeira had previously made statements that
Brazil should go it alone on DTV, most informed sources
assumed the new minister was still in his reading-in
period. Teixeira's declared intention is to produce a
definitive GoB decision on DTV in the next six months, with
implementation to start in 2005. END SUMMARY.

2. (SBU) BACKGROUND. The GoB has been debating the DTV
decision for the past several years. In 2000, Globo
sponsored a series of tests that supposedly established the
Japanese standard as the "technically superior" model based
on its alleged mobile capabilities (reftel D). Since that
time, the debate within ANATEL and Ministry of
Communications (MOC) circles turned from technical points
to discussion about the need to define the "business model"
and solicit "offsets." In April 2002, then-Minister of
Communications Juarez Quadros told Ambassador the MOC
viewed the technical capabilities of all three standards as
approaching parity, and therefore a non-issue (reftel C).

3. (SBU) In September 2002, the outgoing GoB sang its swan
song on the subject by publishing an official strategy
defining technical requirements, outlining desirable
"deliverables" to be negotiated, and expanding
participation in the process to several ministries (reftel
B). As we commented at the time, in so doing the GoB
brought the DTV process in effect back to square one. END
BACKGROUND.

ENTER THE NEW BOSS, NOT ENTIRELY LIKE THE OLD BOSS
--------------------------------------------- -----
4. (U) Shortly after being sworn-in as Minister of
Communications, Miro Teixeira (bio in reftel A) suggested
that Brazil develop its own DTV standard, perhaps in
partnership with China and/or India. Although many
informed insiders believed the Minister was simply not up
to speed on the issue, CPqD subsequently gave force to his
assertions by presenting a report on the feasibility of the
indigenous standard concept. According to the CPqD report,
a Brazilian DTV standard could be created within a year and
be ready for debut in mid-2005. The quoted R$100 million
cost would be financed by FUNTTEL (Fund for
Telecommunications Technological Development.) Proponents
of the report claim Brazil could reduce unit cost by
avoiding royalties, while creating a potential export
platform for other countries that might adopt the Brazilian
standard. (Comment: CPqD is a former government research
institute that underwent phased-privatization over a number
of years, and now must seek its own financing sources. The
credibility of the organization is unclear.)

THOSE WHO CANNOT REMEMBER THE PAST.
-----------------------------------
5. (SBU) Teixeira, in making his earlier comments and now
in announcing the inter-ministerial study, risks repeating
a historical mistake. In the 1960s, when world governments
were choosing color television standard, Brazil's military
dictators decided to go it alone by creating the PAL-M
standard. Contrary to the GoB hope, PAL-M did not widely
expand beyond Brazil and resulted in higher unit costs.
(Note: Econoffs have heard ANATEL officers joke about the
failure of the PAL-M system many times over the course of
the last year.) Convincing GoB officials that choosing an
indigenous DTV standard would be to tread down the same
false path twice will be one of Post's strategies in any
upcoming debate on the subject.

COMMENT: MISSION RESPONSE
--------------------------
6. (SBU) The Minister's announcement indicated that the
inter-ministerial group, to include the Ministry of
Communications, the Ministry of Science and Technology, the
Ministry of Trade and Development, and the Ministry of
Foreign Relations, would conclude a study and present
findings leading to a decision within the next six months.
This affords ample mission time to engage the GoB on the
merits of CPqD's paper, and to continue arguing that the
ATSC standard presents the best path to achieving Brazilian
social and economic goals. We will not be alone in
pointing out the defects of a native Brazilian standard.
There have already been editorials in Folha and the Sao
Paulo Jornal da Tarde (left-leaning regional newspaper)
calling Teixeira's concept "extreme" in the case of the
former, and asserting the decision "would trade probable
profits for certain losses" in the case of the latter.
Informal meetings between Consulate Rio and high-level
ANATEL advisors indicate similar sentiment, and ABERT
(Associacao Brasilia de Emissoras de Radio e Televisao,
whose largest member is Globo) has also already voiced
concerns.

7. (SBU) The MOC's door is open. Advisors in the MOC say
that Teixeira is interested in obtaining more information
on ATSC, and is looking forward to a courtesy call with the
Ambassador. Post strategy will be to stick to arguments
concerning the potential economic gains available with ATSC
while avoiding any sidetracking to technical aspects of the
four potential standards, which has proven to be an
unproductive red herring in the past. We will focus on
convincing the GoB that North America is already the most
well-developed market, and that neither the U.S. nor Canada
produce televisions or place onerous barriers on their
importation. On a practical level, we will maintain our
relationship with the ATSC forum, placing them in contact
with appropriate GoB decision-makers, and working toward
facilitating information flow through frequent contact and
visitor exchanges. Post suggests that continuation of last
year's superb bilateral exchanges is also vital to
maximizing communications and credibility.

8. (U) This cable was coordinated with Consulate Rio.

HRINAK

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