Cablegate: Amb. Gross Leads Interagency Delegation to Brazil For

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1. Summary: Ambassador David A. Gross, U.S. Coordinator for
International Communications and Information Policy (EEB/CIP) led a
senior-level U.S. delegation to Brazil for meetings with the
Brazilian Ministry of Communications and the telecommunications
regulator, the National Telecommunications Agency (ANATEL) August
14-16, 2007. The delegation, which included Federal Communications
Commission (FCC) Commissioner Deborah Tate and National
Telecommunications and Information Administration (NTIA) Deputy
Assistant Secretary (DAS) Meredith Baker, secured a commitment from
ANATEL to move toward establishing a mutual recognition agreement
with the United States for importation of telecommunications and
information technology (IT) equipment. The Ministry of
Communications also expressed interest in working with the U.S. in
its Digital Freedom Initiative (DFI) efforts in Africa. End

Mutual Recognition Agreement

2. Prior to meeting with the Ministry of Communications and ANATEL,
the telecommunications regulator, in Brasilia, the delegation
traveled first to Sao Paulo to meet with U.S. telecommunications and
IT companies operating in Brazil. During the course of a two-hour
roundtable discussion, U.S. companies (including Intel, Cisco, and
Nextel) described market access difficulties faced by
telecommunications and IT companies trying to do business in Brazil
and issues related to Brazil's Universal Service Fund (USF). In
addition to criticizing Brazil's complicated tax and tariff policies
(that have an impact on all industries), industry representatives
singled out the need for a mutual recognition agreement between the
United States and Brazil in order to speed the introduction of new
equipment/technologies to the Brazilian market. Industry
representatives described how approval of a recent application to
the FCC for a particular piece of equipment took only three weeks
while a similar application to ANATEL has been pending for three
months. (Note: Mutual recognition agreements are negotiated by USTR
with technical assistance from the FCC. Post will work with
EEB/CIP, FCC and USTR to follow up. End Note.)

Cooperation in Africa

3. In a private meeting with the delegation, Minister of
Communications Helio Costa noted that while the Brazilian Ministry
of Foreign Affairs coordinates a number of projects (primarily
language exchange) with countries in Africa, he would like his
Ministry to cooperate with the U.S. on DFI projects in Africa. Amb.
Gross noted that the State Department was developing a conference in
West Africa for early 2008 with the U.S. Trade and Development
Agency (USTDA) that would be similar to EEB/CIP's 2007 East Africa
conference that took place in Kigali, Rwanda, and that we would
welcome Brazil's participation. EEB/CIP has offered to follow up
with the Embassy as planning for this conference progresses.

--------------------------------------------- ---------
Other Industry Concerns/Independence of Regulatory Agencies
--------------------------------------------- ---------

4. Representatives of the industry also encouraged the U.S.
Delegation to share its procedures and experiences for managing
spectrum and other telecom issues with the Brazilian government.
Noting that convergence of services across platforms (cable, fixed
and mobile telephone companies, satellites) is flourishing in the
United States, the facilities-based competition in Brazil is slow to
develop (although companies are just beginning to offer "triple
play" services - Internet, Telephone, and Television - in Brazil)
because of conflicting legislation that regulates the media,
telephony, and the Internet. The delegation also noted that the
U.S. government (NTIA) would be more than happy to share additional
information about digital television (DTV) transition in the United
States, as appropriate, as this issue was raised by industry.

5. Industry sources also noted their growing concern over what they
see as increasing Brazilian government criticism and interference in
Brazil's independent regulatory agencies - primarily through
withholding of budgetary resources. Independent regulatory agencies
have come under heavy criticism for their competency following the
recent plane crash in Sao Paulo. The day the delegation met with
ANATEL, Minister of Communications Costa participated in a

BRASILIA 00001870 002 OF 004

Congressional debate on the role of independent regulatory agencies
and argued that such organizations should not be "untouchable."
Privately, Costa told the delegation that the Ministry was only
seeking to reclaim powers that had been taken away from it when
Brazil privatized its telecommunications industry in 1997. At that
time, Costa explained, ANATEL was created by the 1997 Telecom Act
and the Ministry of Communications was abolished. The Lula
administration has since reestablished the Ministry to set
telecommunications policy, so the 1997 law needs to be amended to
reapportion certain powers back to the Ministry.

Internet Governance

6. Both ANATEL and the Ministry of Communications expressed a
desire for internationalization of the International Corporation for
Assigned Names and Numbers (ICANN), the entity charged with
assigning domain names for the Internet, and Brazil's plans to raise
this issue at the Internet Governance Forum (IGF) to be held in Rio
de Janeiro on November 12-15, 2007. The delegation noted the
importance of ICANN being transparent and accountable to the
international community, stressed the importance of more countries
participating in ICANN's Government Advisory Committee (GAC),
highlighted the importance of scholarships for developing countries
to attend ICANN meetings, and noted that ICANN's Board of Directors
was becoming more international and that this is a welcome
development. The delegation pointed out that ICANN is only
responsible for a small part of management of the Internet and that
the IGF is not a forum for negotiation, but rather a forum for

7. The delegation also stressed that the United States supports
expanding the number of languages supported by the Internet (e.g.,
the internationalized domain names (IDN) issue), but that critical
and lengthy tests need to be undertaken to ensure that technical
risks to the network are avoided. Note: ICANN will be testing
eleven (11) new languages very soon. End Note. The delegation
pointed out that cybersecurity is a critical area for collaboration
and that the U.S. would be happy to hold a dialogue with Brazil on
this issue. The delegation noted that the U.S. objective for the
IGF will be to address the central and critical issues of increasing
Internet access around the world and promoting the free flow of
information and freedom of expression on the Internet.

Digital Radio Standard

8. Costa said Brazil was very near selection of the U.S. In Band On
Channel (IBOC) Digital Radio broadcast standard (designed by U.S.
company IBIQUITY). In order to be able to reach the most remote
parts of the country and meet its goal of 100% radio coverage for
the country by the end of President Lula's term of office, Costa
indicated that Brazil is also looking to the European digital radio
standard for short wave radio. The delegation addressed the
proliferation of Digital Radio in the United States, noting that as
of August 2007, the FCC has authorized 1,276 stations (213 AM and
1,063 FM) to broadcast using the IBOC system, and approximately 700
FM stations have requested and received special temporary authority
for multicasting. The FCC will follow-up with the Ministry and
ANATEL regarding technical questions on aspects of how IBOC is
working in the United States.

--------------------------------------------- ---
Spectrum Policy and DTV/700 MHz and AWS Auctions
--------------------------------------------- ---

9. The delegation provided both ANATEL and the Ministry with a
presentation on "US Telecom and Regulation and Market Developments."
Among the topics discussed was the FCC's recent auction of Advanced
Wireless Service (AWS) spectrum licenses, where more than 100
companies won licenses in the auction, at a price of almost $14
billion. The delegation emphasized that this auction should
dramatically increase the availability of next generation mobile
services, including mobile broadband. Following a discussion of
auction issues with U.S. Ambassador Sobel, the delegation invited
Brazilian government officials to observe an FCC auction either
virtually or in person.

10. Moreover, the delegation addressed the FCC's role in furthering

BRASILIA 00001870 003 OF 004

the United States mandate to convert to digital television. Federal
law requires that all full-power television broadcast stations stop
broadcasting in analog format and broadcast in digital only by
February 18, 2009. The FCC recently adopted rules with respect to
reclaimed 700 MHz spectrum from the broadcasters that the Commission
will auction on January 16, 2008, to providers planning to provide
innovative new services like WiMax. The delegation noted that some
of the reclaimed spectrum will be used for providing
interoperability between first responders. Costa noted that Brazil
had last year chosen the Japanese Digital Television (DTV) standard
(over the two espoused by the United States and Europe respectively)
and that their transition date is June 20, 2016.

11. The delegation also noted that the FCC will help facilitate
this transition for millions of Americans by setting technical rules
and policies, ensuring vigorous enforcement of those rules, and
promoting consumer awareness.

12. Costa explained that Brazil has modified the DTV standard to
enable better mobile reception while using less power for
transmission. Based on these modifications, he indicated that
Brazil and Japan would soon be sending a joint delegation to other
Latin American countries to urge them to adopt the hybrid
Japanese/Brazilian standard.


13. Minister Costa described a number of innovative programs aimed
at increasing Internet broadband penetration in Brazil, including a
project to connect 18,000 schools by the end of 2007 and 142,000
schools by the end of Lula's term. The Ministry is not applying a
one-size-fits-all method to increase access to the Internet. Costa
described projects that employ wireless and satellite technologies
as well as more traditional methods such as through television cable
(Triple Play - voice, Internet and Television - services are now
available in Sao Paulo and on a more limited basis in Rio de
Janeiro). Costa also said that his Ministry is exploring the
possibility of employing Broadband over Power Lines (BPL)
technology, which would reduce the cost of having to lay new cable
to many locations. In several of the projects, U.S. companies such
as Cisco, Motorola, and Intel are actively partnering with Brazil.

14. Costa added that an important legislative obstacle that is
inhibiting further spending on these sorts of projects will soon be
overcome. Brazil's 1997 Telecom Act established a Universal Service
Fund to help connect remote and poor locations of the country.
According to Costa, the Act stipulates that Universal Service Funds
are to be spent on traditional wireline telephony, which is more
costly and economically less attractive than wireless services as
has been demonstrated in Brazil and many other developing countries.
Costa said that there is currently about U.S. $2.5 billion in the
fund that will be available for broadband deployment projects once
the law is modified.

15. The delegation discussed with both ANATEL and the Ministry the
FCC's commitment to achieving ubiquitous broadband deployment in the
United States. The delegation noted that inter-modal competition
has developed due to the FCC's efforts to remove regulatory hurdles
and promote infrastructure investment and that competition in
broadband has spurred a dramatic increase in deployment across the

Public Diplomacy

16. The U.S. Delegation also undertook several significant public
diplomacy activities, including an exclusive interview with
important business periodical Valor Economico. The resulting
article highlighted the U.S. interest in deepening its relationship
with Brazil while stressing the importance of the private sector and
the critical role of independent regulatory agencies, which have
come under heavy criticism for their competency following the recent
plane crash in Sao Paulo. The delegation also held an outreach
event with business and law students at the prominent Getulio Vargas
Foundation in Sao Paulo and participated in a press conference with
Minister Costa at the conclusion of the meetings with the government
in Brasilia.

BRASILIA 00001870 004 OF 004

17. This cable was cleared by Amb. Gross and other delegation
members in Washington.


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