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Cablegate: Cht Network Migration Plans

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

300637Z Dec 05

UNCLAS TAIPEI 005046

SIPDIS

SENSITIVE

STATE PASS EAP/RSP/TC AND EB/CIP
USDOC FOR 4431/ITA/MAC/AP/OPB/TAIWAN/MORGAN

E.O. 12958: N/A
TAGS: ECPS ETRD TW
SUBJECT: CHT NETWORK MIGRATION PLANS

REF: SECSTATE 229580

1. (U) This message is Sensitive but Unclassified. It
contains business confidential information and is not for
internet publication.

2. (U) Summary: Chunghwa Telecom (CHT) continues to make
plans for implementing its Next Generation Network (NGN)
project, but has postponed the timeline and is concerned that
the newly-established National Communications Commission
(NCC) could enact policy changes that would make the project
unfeasible. CHT leadership says the newly privatized company
is no longer bound by government procurement regulations but
will do what is best for the shareholders, the largest of
which remains the government. End Summary.

3. (SBU) In response to reftel AIT Econ and Commercial staff
met December 28 with CHT Planning Department, Senior Managing
Director Mark Lee to discuss CHT plans for migration to its
Next Generation Network. This is expected to be a
multi-billion U.S. dollar infrastructure development project
spread over at least eight years. U.S. telecommunications
equipment company Lucent has expressed interest in the
project and have already met with CHT leadership. AIT/T met
with CHT in May 2005 to discuss the NGN project, but since
that time CHT has been officially privatized and Taiwan has
passed legislation to create a National Communications
Commission (NCC) responsible for telecommunications and
broadcast policy.

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4. (SBU) Lee declined to predict when or whether CHT might
open a tender for the NGN system. He told AIT that the
unexpected passage of legislation in November establishing
the NCC made the immediate future of the telecom industry
sufficiently unclear that CHT leadership had decided to take
a cautious approach to implementing any major projects.
While Lee had previously expected the project would be opened
for bids sometime in 2006, he now thought it would be
postponed until 2007. Lee was particularly concerned that
the NCC might endorse a policy that would require CHT to turn
over access to its "last mile" infrastructure to competitors.
Since CHT was now a private company, he said, it needed to
responsibly safeguard the assets of its investors. It made
no sense to begin a multi-billion dollar project that would
not yield a significant return. However, CHT is continuing
to make plans and will be able to move quickly when the time
is right, he added.

5. (SBU) Following "privatization" in August 2005, CHT is no
longer bound by the requirements of Taiwan's Government
Procurement Law, one of which mandates at least three bidders
for any large project. CHT has not decided about whether to
structure the tender as a new project or an upgrade of
existing technology. In any case, Lee suggested CHT would be
reluctant to rely on one provider and would likely choose at
least two companies to provide NGN equipment. Lee noted that
Lucent, Siemens and Alcatel had all expressed interest in the
NGN project and had made efforts to promote the merits of
their individual technologies. All three are currently
providing switching equipment to different regions of Taiwan.
Lee added that he was aware that Lucent's solution was
technologically superior to its competitors and he emphasized
that Lucent had a very solid position, despite being more
expensive. He suggested that any final decision on suppliers
would be based on many factors.

6. (SBU) Lee also noted that Lucent's pilot Internet
Protocol Multimedia Sub-system (IMS) was currently undergoing
testing in southern Taiwan and suggested this would be a good
trial run for Lucent's technology. If it performed well, it
would boost Lucent's chances of successfully winning a share
of the NGN project in the future. AIT staff noted that other
companies had been actively pressing their solutions and
reminded Lee that Lucent was restricted by the FCPA in ways
that European companies were not. Lee appreciated Lucent's
adherence to the requirements of the FCPA and insisted that
any decisions on procurement would be based on the merits of
the equipment.
PAAL

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