US embassy cable - 04BRASILIA2905

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, Telecommunications 
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