US embassy cable - 05TAIPEI4423

C O N F I D E N T I A L SECTION 01 OF 03 TAIPEI 004423 
 
SIPDIS 
 
STATE FOR EAP/RSP/TC AND EB/CIP, STATE PASS AIT/W AND USTR, 
USTR FOR WINELAND AND WINTERS, USDOC FOR 
4431/ITA/MAC/AP/OPB/TAIWAN/MBMORGAN 
 
E.O. 12958: DECL: 10/31/2015 
TAGS: ECPS, ECON, ETRD, TW 
SUBJECT: NATIONAL COMMUNICATIONS COMMISSION BILL PASSES, 
NOW WHAT? 
 
 
Classified By: Director Douglas Paal, reason 1.4 b/d 
 
1.  (C) Summary: A bill to create a National Communications 
Commission (NCC) was approved by Taiwan's Legislative Yuan 
(LY) on October 25.  The bill establishes a two-step process 
to select 13 commissioners who will have oversight for 
Taiwan's telecommunications and broadcasting policy.  What 
was originally intended to be an independent regulatory body 
is instead looking like a political battleground for control 
of the media.  Intensive inter-party negotiations coordinated 
by LY Speaker Wang Jin-pyng were crucial to overcoming 
disagreements about the party affiliation of commissioners. 
Despite the negotiated settlement, the vote on this 
controversial provision was split firmly along party lines. 
Government threats to refer the bill to the Council of Grand 
Justices for a ruling on its constitutionality are unlikely 
to be carried out according to one ruling party lawmaker.  If 
the law is promulgated as expected, the NCC could be 
operational before the end of 2005.  Local observers fear 
political conflict among the NCC commissioners could prove 
detrimental to Taiwan's telecommunications industry.  End 
summary. 
 
======================= 
NCC Compromise Surprise 
======================= 
 
2.  (U) To the surprise of industry insiders and the media, 
the controversial bill establishing an NCC was passed by the 
LY, just days after the debate over how to select 
commissioners devolved into physical violence on the floor of 
the LY.  The establishment of an independent media regulator 
was one of Taiwan's WTO accession commitments.  The bill was 
originally proposed in 2003 and the law authorizing the 
establishment of an NCC was passed in December of that year. 
However, the organizational portion of the bill, especially 
the section dealing with the appointment of commissioners, 
proved much more controversial.  Debate in May 2005 proved so 
contentious that the LY imposed a four month "cooling-off 
period" when the bill could not be discussed in the LY. 
Several days of inter-party meetings and hearings in October 
chaired by LY Speaker Wang and including non-government 
telecom and media organizations resulted in a compromise 
article that creates an LY appointed nominating committee and 
divides commissioner slots roughly along party lines. 
 
3.  (C) Under the new law, 15 candidates for commissioner 
will by nominated by the legislature, with the number 
nominated by each party determined by its proportion of seats 
in the LY (i.e., eight pan-blue and seven pan-green).  The 
Executive Yuan will nominate three candidates for a total of 
eighteen.  An eleven member review committee composed of 
"experts" nominated by the political parties in proportion to 
their strength in the legislature (i.e., the pan-blue parties 
will choose six and the pan-green will chose five)  will then 
select 13 commissioners.  A candidate will need to win the 
approval of 60% of the nominating committee in order to be 
selected.  If fewer than 13 candidates reach this 60% 
threshold, those supported by a majority of the nominating 
committee will fill in the vacancies.  Commissioners must not 
work for any government agency or state owned company and 
they are prohibited from simultaneously working for any 
communications or broadcasting company.  Executive Yuan 
Secretary General Cho Jung-tai told AIT that the 
 
SIPDIS 
KMT-cotrolled review panel will likely approve all 8 
KMT-nominated candidates, leaving just five seats for the 10 
pan-green nominees. 
 
4.  (U) According to the new law, the LY caucuses will submit 
their lists of review committee members within ten days of 
the law's promulgation (required by Taiwan law 10 days after 
submission to the President's Office) and lists of 
commissioner candidates are due 15 days after promulgation. 
The review committee then has 20 days to submit its chosen 
list of commissioners to the EY.  The Premier then must 
submit the list of names to the LY for confirmation within 
seven days.  If the bill is promulgated on schedule, the 
names should go to the LY by December 30.  Upon their 
appointment, commissioners will choose one of their number to 
serve as Chairman and one to serve as Vice-Chairman.  The 
Chairman and Vice-Chairman should not be nominated by the 
same political party. 
 
================= 
Wang works his LY 
================= 
 
5.  (C) Wang's efforts were crucial to reaching an agreement 
that the pan-green parties could live with.  Following 
fighting and bloodshed on the floor of the LY October 18, 
Wang held daily meetings between caucus leaders and key 
legislators from all parties that resulted in a process for 
selecting commissioners that both sides could accept, or at 
least would not again result in fisticuffs.  The 
controversial provision was passed by the full LY by a vote 
of 112 to 98.  The other provisions of the bill were not put 
to a direct vote but rather were passed by acclamation. 
Despite subsequent calls by the ruling Democratic People's 
Party (DPP) and the EY spokesman to refer the bill to the 
Council of Grand Justices for a ruling on its 
constitutionality, the bill would not have passed without the 
acquiescence of  the ruling party.  Taiwan Solidarity Union 
(TSU) lawmaker Ho Min-hao said the DPP and TSU decided to 
relent in their boycott of the offending clause because media 
organizations involved in licensing disputes will retain the 
right of appeal to the judiciary.  Wang's willingness to 
allow media reform groups to present their views to LY 
committee-members also played well with the ruling party. 
 
6.  (C) According to DPP lawmaker Lee Wen-chung, the manner 
of the bill's passage may have been unusual, but he saw no 
threat to the constitutionality of the law.  He was confident 
that the Executive Yuan would not refer the bill to the Grand 
Justices for their consideration, but acknowledged that 
internal differences within the DPP meant that there was 
still some debate about next steps.   Lee said provisions 
requiring publication of the votes of the Commission 
contributed to the willingness of the pan-green parties to 
accept the passage of the bill.  Lee also had praise for 
Wang's willingness to work with the DPP on this issue and to 
bring public advocacy groups into the process, noting that 
the series of meetings that led up to the passage of the bill 
was unusual.  EY SecGen Cho confirmed that the government 
would not appeal this bill to the judiciary.  Instead, it 
would open discussions with the opposition to reach agreement 
on how best to implement the bill's provisions. 
 
============================================= = 
Industry Observers Hope for Best, Expect Worst 
============================================= = 
 
7.  (C) Industry insiders and analysts were surprised at the 
speed with which the NCC was finally passed.  June Su, a 
telecom lawyer and co-chair of the American Chamber of 
Commerce's telecom committee questioned whether the 
politicized structure of the committee would allow the NCC to 
function as an independent regulator.  She noted that the 
pan-blue parties had been concerned about their eroding 
influence over the media and their fear that new license 
applications would be dominated by pan-green supporters, but 
that the structure of the NCC eased these fears.  In spite of 
the potential for political conflict, the NCC could be a boon 
for telecommunications policy, Su said, freeing the 
Directorate General of Telecommunications (DGT) from the 
control of the Ministry of Transportation and Communications 
(MOTC) and the domination of newly privatized Chunghwa 
Telecom (CHT).  She suggested that having one agency in 
charge of both broadcast and telecom policy would push the 
convergence of media and telecommunications that industry 
insiders see as the future engine of growth for telecom 
providers. 
 
7.  (C) Jan Nilsson, President of Far East Tone (FET), one of 
the big three mobile operators in Taiwan, was pessimistic 
about whether the NCC could operate free of political 
interference.  He said that FET had been holding off on 
making significant business plans because of the uncertainty 
surrounding the passage of the NCC and its eventual role as a 
regulator.  Nilsson worried that the NCC would focus all of 
its attention on the perpetual controversies surrounding the 
broadcast media and would neglect telecom regulation.  DGT is 
incapable of acting without orders from above, he said.  In 
the absence of a commission that is actively engaged in 
telecom issues, DGT lacks the internal leadership necessary 
to create a telecommunications environment that will allow 
the market to remain at the forefront of innovation.  He 
predicted political infighting and lack of sound policy would 
lead to stagnation in Taiwan's telecom market. 
 
=========================================== 
Comment: Politics Likely to Trump Economics 
=========================================== 
 
8.  (C) The battle for control over the media is one of the 
most bitter conflicts in Taiwan politics today.  The LY has 
created an NCC that is divided clearly along partisan lines 
and uses a formula that seems certain to give control of this 
executive branch commission to the pan-blue opposition for 
the next three years.  Industry and policy watchers fear that 
the political battles that led to bloodshed in the LY will be 
continued in the NCC, leading to an uncertain and contentious 
regulatory environment that will discourage new investment 
and damage Taiwan's competitiveness in the telecommunications 
and broadcasting market.  Telecom operators fear their issues 
will be subjugated to higher political profile broadcast 
policy questions.  Cable operators are concerned that with 
the majority of NCC staff coming from DGT, broadcast policy 
development will favor telecom operators. 
 
9.  (C) The very different organizational cultures of the two 
bodies that will come together to staff the NCC, the 
Government Information Office (GIO) and DGT, are almost 
certain to result in inefficiency and confusion.  But the 
establishment of the NCC could finally provide at least some 
measure of accountability to organizations that have been 
operating as lame ducks for the past 2 years.  In the end, 
the NCC's role will be determined by the as yet unnamed 
commissioners.  If they can minimize political conflict and 
establish clear rules for media and telecom operation the NCC 
could still be effective.  If the body is paralyzed by 
political infighting, as appears likely, Taiwan's telecom and 
broadcast industries will suffer.  End Comment. 
PAAL