US embassy cable - 05SANSALVADOR2364

UNCLAS SAN SALVADOR 002364 
 
SIPDIS 
 
SENSITIVE 
 
STATE PASS USTR 
COMMERCE FOR 4332/ITA/MAC/MSIEGELMAN 
COMMERCE ALSO FOR 3134/ITA/USFCS/OIO/WH/MKESHISHIAN/BARTHUR 
 
E.O. 12958: N/A 
TAGS: EINV, ECPS, ECON, ES 
SUBJECT: SALVADORANS TO BAN ADVERTISING ON CABLE TV 
 
 
1. (U) Summary: The Telecommunications and Electricity 
Superintendency (SIGET) is preparing a draft regulation for 
cable television that would ban advertising. Such a rule 
change will have a negative impact on the profitability of 
U.S.-owned AMNET, which dominates the sector. Post are 
concerned that SIGET, at the behest of broadcast television 
stations, is moving forward with the new regulation without 
engaging in a formal consultative process with all 
stakeholders. End summary. 
 
2. (U) In late 2004, SIGET announced it would issue formal 
regulations for cable television (previous regulation 
existed as part of the broader telecommunications sector) to 
reduce piracy and enhance competition in the sector. SIGET 
shared its initial draft with stakeholders in December 2004. 
AMNET, a U.S. company and the largest cable operator in the 
local market, complained to SIGET that the first draft would 
do little to combat piracy because it would allow operators 
who were stealing programming transmitted by satellite to 
register with SIGET under the new regulation, provided they 
negotiated legitimate contracts for the programming within 
100 days. Subsequently, SIGET said it would revise the 
regulation to require that operators transmit legitimate 
programming before registration. 
 
3. (U) In early 2005, President Saca named a special 
commission to support SIGET in further refining the cable 
television regulation. Curiously, the commission included 
representatives of broadcast television companies only-- 
leaving cable television companies with no representation. 
Econoff met July 28 with SIGET Superintendent Jorge Nieto, 
who said that the commission has recommended several changes 
to SIGET's first draft, including a provision to ban 
advertising on cable television. Nieto said local 
advertising would be banned in particular, though banning 
advertising included already in international programming 
would also be considered. [Note: Current telecommunications 
laws and regulations are silent on this issue. End note.] 
 
4. (U) Nieto, in support of this provision to ban 
advertising, said that broadcast television and cable 
television are and should remain two distinct mediums, 
because cable television receives its revenue from 
subscribers and broadcast television from advertisers. 
SIGET's position is that it is a form of unfair competition 
that cable television collects revenues also from 
advertising. In addition, he said consumers have complained 
to SIGET that they shouldn't have to pay a monthly fee for 
cable television and then suffer through commercials. He 
said the issue was still under discussion at SIGET, and that 
he welcomed input from AMNET. However, he was not able to 
provide a draft of the revised regulation for review, nor 
describe a process for further consultations with 
stakeholders on the regulation. 
 
5. (U) Econoff told Nieto that AMNET has made significant 
investment in telecommunications infrastructure in El 
Salvador based on a projection of revenue that included both 
advertising and subscription--changing the rules midstream 
would deal a blow to their plans for infrastructure 
expansion. He also replied that regulatory uncertainty in 
the sector could spill over to other sectors and have a 
negative impact on the investment climate. Finally, Econoff 
express expressed concern regarding the lack of formal 
procedures for consultations on the new regulation. 
 
6. (SBU) Comment: Nieto may be subject to influence on this 
issue from the politically well-organized broadcast 
television owners who have warm relations with President 
Saca. Saca has extensive experience in the communications 
sector, and mainstream press have traditionally supported 
ARENA. Post will continue to press SIGET for regulatory 
transparency and emphasize the impact this case will have on 
the investment climate. However, SIGET will likely approve 
the proposed regulation and ban on advertising--timeframe 
uncertain. If so, AMNET would likely appeal to the Supreme 
Court, claiming that the new regulation violated the freedom 
of speech, which is guaranteed by the Salvadoran 
Constitution. End comment. 
 
Barclay