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Cablegate: Costa Rica's Spectrum Auction

VZCZCXYZ0026
RR RUEHWEB

DE RUEHSJ #0102 0202322
ZNR UUUUU ZZH
R 202322Z JAN 10
FM AMEMBASSY SAN JOSE
TO RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEHC/SECSTATE WASHDC 0278
INFO RUEHSJ/AMEMBASSY SAN JOSE

UNCLAS SAN JOSE 000102

SIPDIS
DEPT FOR OFFICE OF INVESTMENT AFFAIRS-EB/IFD/OIA WHAT/CEN
(JENNIFER VANTRUMP)
PASS TO USTR

E.O. 12958: N/A
TAGS: ECON ECPS BTIO CS
SUBJECT: Costa Rica's Spectrum Auction

1. (U) Costa Rica's telecom regulator, SUTEL, held a public meeting
January 18th to announce the schedule and conditions under which
the cellular phone market will be opened to competition. The method
of choice will be a "hybrid" auction in which competitors must
first demonstrate their qualifications and present their technical
proposals. Then the qualifiers bid against each other for the
cellular spectrum. Only companies that have operated in multiple
countries and managed networks of similar size and complexity to
Costa Rica's network will qualify. The published schedule starts
with SUTEL's presentation of the auction announcement February 5,
followed by reception and examination of the companies' technical
proposals on March 19, opening of the bids on April 16th, delivery
of SUTEL's recommendation to the Executive April 20, and signature
of the concession contracts three days before the end of the Arias
Administration on May 5. If all goes as planned, the new cell phone
competitors would begin operating in the market in late 2010.

2. (SBU) Despite the formal nature of the announcement, we
anticipate some problems going forward. The manner in which the
schedule has been compressed in order for contracts to be signed by
the outgoing Administration raises some concern that the process is
too hurried. One specific issue that has not yet been
satisfactorily resolved is designation and use of the microwave
frequencies that are used to transmit signals from each individual
radio tower to trunk lines. Those microwave frequencies are
partially occupied by ICE and television operators and are not a
part of the bid package. The President of the SUTEL board George
Miley stated that, at some point after the May 5 contract
signature, the GOCR will ensure that the winners of the cellular
licenses are given sufficient transmission capacity over microwave
frequencies. The frequencies will be made available on a
non-exclusive basis to the auction winners through a process known
as "direct concession".

3. (SBU) The Administration's non-competitive assignation of
microwave frequency on a non-exclusive basis will create
uncertainty among prospective spectrum bidders. As one observer
told us with some hyperbole, building a cell-phone network without
guaranteed microwave transmission capacity is "like building a
highway without bridges." We expect Vice Minister of
Telecommunications Hannia Vega to address aspects of this issue in
the near future, but any modification to the plan outlined above
would likely require more time and upset the Administration's
schedule.
BRENNAN

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