Cablegate: Ambassador and Minister of Communications Discuss

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UNCLAS SECTION 01 OF 02 BRASILIA 002905

SIPDIS

SENSITIVE

NSC FOR MIKE DEMPSEY
STATE PLEASE PASS TO USTR FOR SCRONIN
DEPT OF TREASURY FOR FPARODI
USDOC FOR 4332/ITA/MAC/WH/OLAC/SHIELDS
USDOC ALSO FOR 3134/ITA/USCS/OIO/WH/RD/CREATORE
USDA FOR FAS/ITP AND FAS/FAA/WH
DOE FOR SARAH MARQUIS
STATE PASS OPIC FOR MORONESE, RIVERA, MERVENNE
STATE PASS EXIM FOR NATALIE WEISS, COCONNER
STATE PASS USTDA FOR AMCKINNEY

E.O. 12958: N/A
TAGS: ECPS EINV BEXP PGOV ETRD BR
SUBJECT: AMBASSADOR AND MINISTER OF COMMUNICATIONS DISCUSS
THE GOB'S DIGITAL FUTURE

1. (SBU) SUMMARY AND INTRODUCTION. ON NOVEMBER 4,
AMBASSADOR PAID A COURTESY CALL ON MINISTER OF
COMMUNICATIONS EUNICIO OLIVEIRA. IN RESPONSE TO THE
AMBASSADOR'S PITCH FOR THE GOB TO CONSIDER FAVORABLY THE US
STANDARD FOR DIGITAL TELEVISION, THE MINISTER REPLIED THAT
BRAZIL WAS KEEPING ITS OPTIONS OPEN. THE GOB WOULD BE
DISPOSED TO ADOPT A FOREIGN-DEVELOPED DIGITAL TV STANDARD,
OLIVEIRA OBSERVED, IF: A) THAT STANDARD SUPPORTED GOB
EFFORTS TO ESTABLISH A DIGITAL BACKBONE LINKING FEDERAL
GOVERNMENT AGENCIES, SCHOOLS, AND LIBRARIES, AND B) A
PORTION OF THE NECESSARY HARDWARE/SOFTWARE COULD BE
MANUFACTURED/DEVELOPED IN BRAZIL. MEANWHILE, RUMORS
CONTINUE TO CIRCULATE THAT OLIVEIRA, A FEDERAL DEPUTY WHO
PREVIOUSLY SERVED AS LEADER OF THE PMDB PARTY IN THE
CHAMBER, WOULD STEP DOWN IF THE PMDB PARTY LEAVES THE
RULING COALITION. SEPARATELY, OFFICIALS AT ANATEL, THE
GOB'S TELECOM REGULATORY AGENCY, STRESS THAT WHILE THEY
TAKE PART IN INTER-AGENCY DISCUSSIONS ON DIGITAL ISSUES,
THE MINISTRY HAS THE LEAD ON THESE MATTERS. END SUMMARY
AND INTRODUCTION.

DIGITAL TV STANDARD
-------------------

2. (SBU) ON NOVEMBER 4, AMBASSADOR, ACCOMPANIED BY
ECONCOUNS AND FCS DEPUTY SENIOR COMMERICAL OFFICER, MET
WITH MINISTER OF COMMUNICATIONS EUNICIO OLIVEIRA AND HIS
INTERNATIONAL ADVISOR CLAUDIO NASCIMENTO. THE CORDIAL 45-
MINUTE CONVERSATION FOCUSED ON THE STATUS OF THE GOB'S
DELIBERATIONS REGARDING THE ADOPTION OF A NEW DIGITAL
TELEVISION STANDARD. (BRAZIL IS CURRENTLY IN THE PROCESS
OF CHOOSING FROM ONE OF POTENTIAL THREE DTV STANDARDS: THE
ATSC - I.E., AMERICAN), THE DVB - I.E., EUROPEAN), AND THE
ISDB - I.E., JAPANESE). THE MINISTER NOTED THAT THE
GOVERNMENT'S INTERNAL DECISIONMAKING ON THIS ISSUE HAS BEEN
ONGOING SINCE 2000, AND THAT ONE OF THE REASONS PROGRESS
HAS BEEN SLOW IS THAT THE GOB WANTED TO ENSURE THAT
WHATEVER STANDARD WAS ADOPTED ALSO SUPPORTED THE
ADMINISTRATION'S PLANNED DIGITAL INCLUSION EFFORTS.
CURRENT PLANNING WAS TO LINK LIBRARIES, SCHOOLS, AND
SIMILAR TYPE FACILITES TOGETHER VIA A DIGITAL BACKBONE,
OLIVEIRA SAID, AND IT ONLY SEEMED NATURAL THAT THE
GOVERNMENT SEEK AS MUCH SYNERGY AS POSSIBLE WITH RESPECT TO
DTV.

3. (SBU) A FURTHER COMPLICATED FACTOR, OLIVEIRA ADDED, WAS
THE LINE OF THOUGHT THAT BRAZIL SHOULD ADOPT ITS OWN ONE-
COUNTRY STANDARD, WHICH WOULD ALLOW THE GOVERNMENT TO
ENSURE THAT THE STANDARD CHOSEN WAS CONSISTENT WITH THE
DIGITAL INCLUSION PROJECT. HOWEVER, THE MINISTER CONTINUED
(CHOOSING HIS WORDS CAREFULLY), SHOULD TECHNICAL STUDY
REVEAL THAT THE ATSC STANDARD SATISFIED GOB CONCERNS
REGARDING SUPPORT FOR DIGITAL INCLUSION, THERE WOULD BE A
GOOD CASE FOR CHOOSING THAT STANDARD. HE COMMENTED THAT IT
WOULD BE EVEN MORE HELPFUL TO US LOBBYING IF U.S. FIRMS
COULD SHOW THAT THEY PLANNED TO MANUFACTURE AND/OR DEVELOP
SOME OF THE NECESSARY HARDWARE/SOFTWARE FOR DTV IN BRAZIL.
OLIVEIRA SAID THAT THE GOB WAS OPEN TO RECEIVING WHATEVER
TECHNICAL INFORMATION THAT THE USG OR SPECIFIC U.S. FIRMS
WANTED TO OFFER REGARDING THE ASTC STANDARD.

4. (SBU) COMMENT. WHILE THE MINISTER'S STATEMENTS ABOUT
BRAZIL HAVING AN OPEN MIND ON THIS ISSUE WERE GOOD NEWS,
THE PICTURE IS A BIT MORE COMPLICATED. ACCORDING TO THE
LOCAL RUMOR MILL, OLIVEIRA - WHO PREVIOUSLY WAS THE CHAMBER
OF DEPUTIES' FLOOR LEADER FOR THE PMDB PARTY (ONE OF THE
LULA GOVERNMENT'S COALITION PARTNERS) - WOULD STEP DOWN AS
MINISTER SHOULD THE PMDB DESERT THE GOVERNING COALITION.
THE PRESS REPORTS THAT WHILE WITHIN PARTY STRATEGY SESSIONS
HE IS AMONG THOSE ARGUING IN FAVOR OF CONTINUED PMDB
PARTICIPATION IN THE GOVERNMENT, SHOULD HIS ARGUMENTS FAIL
TO CARRY THE DAY THERE IS NO GUARANTEE THAT ANY SUCCESSOR
WOULD HAVE THE SAME ATTITUDE ON THE DTV ISSUE. INDEED,
BOTH OLIVEIRA AND OUR CONTACTS AT ANATEL (THE GOB TELECOM
REGULATORY AGENCY) NOTED THAT THERE ARE SOME WITHIN THE PT
(THE PRESIDENT'S PARTY) WHO STRONGLY FAVOR A HOME-GROWN
BRAZIL STANDARD. END COMMENT.

5. (SBU) MEANWHILE, IN A SEPARATE MEETING THE SAME DAY WITH
ANATEL CHIEF PRESIDENT ZILLER, EMBOFFS TOUCHED UPON THE
SAME ISSUE. ZILLER SAID THAT THE GOB'S DECISION REGARDING
THE CHOICE OF A DTV STANDARD WAS BEING MADE BY AN
INTERAGENCY COMMITTEE (HEADED BY THE MINISTER OF
COMMUNICATIONS) AND THAT IT WAS CONTEMPLATED THAT THE
MATTER WOULD BE RESOLVED IN 2005. NOTE: U.S. FIRMS
INTERESTED IN THE BRAZILIAN DTV MARKET HAVE TOLD US THAT
THE LOCAL BROADCAST INDUSTRY IS PRESSURING THE GOB TO MEET
THIS 2005 DEADLINE. BRAZILIAN BROADCASTERS ARE FACING
INCREASING COMPETITION FOR SCARCE ADVERTISING REVENUE FROM
CELLULAR PHONE COMPANIES -- WHO ARE NOW CAPABLE OF
PROVIDING TELEVISION SIGNALS TO THEIR CUSTOMERS.

THE FIXED LINE MARKET
---------------------

6. (SBU) ANATEL PRESIDENT ZILLER ALSO PROVIDED THE CURRENT
STATE-OF-PLAY FOR EMBOFFS ON VARIOUS OTHER TELECOM ISSUES.
WITH RESPECT TO WIRED TELEPHONY, HE NOTED THAT A NUMBER OF
CURRENT CONCESSIONS WOULD EXPIRE NEXT YEAR. THE GOB, HE
SAID, HOPED TO THEN RENEW THEM FROM 2006 TO 2025, WITH
ANATEL ITSELF WORKING TO INCREASE PORTABILITY OF FIXED
LINES, ESTABLISH A PRICING MODEL FOR INTERCONNECTIVITY, PUT
IN PLACE TELEPHONE METERS FOR RESIDENTIAL LINES, AND
ESTABLISH A NEW AND SEPARATE PRICE INDEX (I.E., OTHER THAN
THE CURRENT IPCA OR IGI-P) FOR THE TELECOMMUNICATIONS
SECTOR. ZILLER DID NOT SEE VOICE OVER INTERNET PROTOCOL
(VOIP) AS AN IMMEDIATE THREAT TO THE FIXED LINE COMPANIES
THOUGH HE ADMITTED THAT A NUMBER OF COMPANIES WHICH HAD
THEIR OWN DATA LINKS WERE MOVING TO THIS TECHNOLOGY. WHILE
ANATEL HAD NOT FULLY THOUGHT THROUGH HOW IT WOULD APPROACH
VOIP - I.E., WAS IT A TECHNOLOGY OR A SERVICE - CURRENT LAW
PROHIBITS USE OF VOIP ON GOVERNMENT TRANSMISSION LINES, HE
OBSERVED. COMMENT. NOTWITHSTANDING THIS LEGAL
PROHIBITION, SEVERAL COMPANIES PUBLICLY ADVERTISE CUT-RATE
INTERNATIONAL AND LONG-DISTANCE PRICES BASED ON THEIR USE
OF VOIP. END COMMENT.

MOBILE TELEPHONY
----------------

7. (SBU) FINALLY, ZILLER STATED THAT ANATEL WAS WORKING ON
A STUDY OF THIRD GENERATION MOBILE TELEPHONY THAT SHOULD BE
READY BY THE FIRST SEMESTER OF 2005. CURRENTLY, ABOUT 50
PERCENT OF THE WIRELESS PHONES IN BRAZIL USED TDMA
TECHNOLOGY, THOUGH OVER THE NEXT FEW YEARS IT WAS EXPECTED
THAT CELLULAR PROVIDERS WOULD MIGRATE TO CDMA AND GSM
TECHNOLOGY. WHILE ANATEL, WHICH SAW ITS REGULATORY ROLE AS
THAT OF A NEUTRAL REFEREE, WAS NOT ENCOURAGING THIS
MOVEMENT, BASED UPON CURRENT TRENDS HE FELT THAT SUCH
MIGRATION WAS INEVITABLE.

CHICOLA

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