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### Viewing cable 06SAOPAULO245, BRAZIL CRAWLS TOWARD DIGITAL TV

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
06SAOPAULO245 | 2006-03-06 19:39 | 2011-07-11 00:00 | UNCLASSIFIED//FOR OFFICIAL USE ONLY | Consulate Sao Paulo

`

    VZCZCXRO9796
    RR RUEHRG
    DE RUEHSO #0245/01 0651939
    ZNR UUUUU ZZH
    R 061939Z MAR 06
    FM AMCONSUL SAO PAULO
    TO RUEHC/SECSTATE WASHDC 4612
    INFO RUEHBR/AMEMBASSY BRASILIA 5770
    RHEHNSC/NSC WASHDC
    RUCPDOC/USDOC WASHDC 2293
    RUEHMN/AMEMBASSY MONTEVIDEO 1833
    RUEHKO/AMEMBASSY TOKYO 0390
    RUEHBS/USEU BRUSSELS
    RUEHBU/AMEMBASSY BUENOS AIRES 2066
    RUEHAC/AMEMBASSY ASUNCION 2417
    RUEHSG/AMEMBASSY SANTIAGO 1580
    RUEHLP/AMEMBASSY LA PAZ 2612
    RUEHRG/AMCONSUL RECIFE 2735
    RUEHRI/AMCONSUL RIO DE JANEIRO 6863

` `

    UNCLAS SECTION 01 OF 03 SAO PAULO 000245

    SIPDIS

    DEPT FOR WHA/BSC AND EB/CIP
    STATE PASS TO USTR FOR MSULLIVAN
    NSC FOR SUE CRONIN
    USDOC FOR 4332/ITA/MAC/OLAC/DRISCOLL,BASTIAN
    USDOC FOR 3134/USFCS/OIO/MKESHISHIAN

    SENSITIVE
    SIPDIS

    E.O.  12958: N/A
    TAGS: ECPS ECON PGOV ETRD BEXP BR
    SUBJECT: BRAZIL CRAWLS TOWARD DIGITAL TV

    ¶1.  (SBU) SUMMARY.  With the nominal March deadline set for the
    adoption of a digital television (DTV) standard, Brazilian officials
    remain divided on the issue, and the recent entry of the Brazilian
    Congress into the process will likely delay a final decision.
    Brazil is currently choosing a digital TV standard from among three
    competing consortia: ATSC (embraced by the United States, Canada,
    Mexico, and South Korea), DVB (the European standard), and ISDB-T
    (Japan's choice).  While the Japanese standard is favored by
    Minister of Communications Helio Costa, it has become clear that the
    President's office will be making the ultimate call on this.  U.S.
    Mission is working with the ATSC Forum and ATSC-related companies to
    showcase the merits of that standard.  END SUMMARY.

    ---------------------------------------
    DIGITAL TV DECISION STILL UP IN THE AIR
    ---------------------------------------

    ¶2.  (SBU)  Brazil's interagency community is in the midst of a
    complicated process to select the standard for the country's digital
    TV system.  While Minister of Communications Helio Costa, a
    proponent of the Japanese standard, has led much of the Government's
    preparatory efforts, responsibility for presenting the options to
    President Lula has now shifted to the president's Chief of Staff:
    Dilma Rousseff.  Based upon Mission's contacts with Rousseff, she
    appears determined at all costs to avoid a repeat of the debacle
    surrounding Brazil's choice of its PAL-M analog standard - which
    ended up being embraced by only Brazil and Laos (the latter hardly a
    major world player).  According to Rousseff and Minister of Trade
    Luiz Fernando Furlan, Brazil's decision should be based on the needs
    of Brazilian manufacturers and the country's potential export
    markets.  Minister of Culture Gilberto Gil has chimed in as well,
    noting that all three standards equally meet Brazil's technological
    requirements and that the choice will be based on business and
    regulatory concerns.

    ¶3.  (SBU)  While Minister Costa announced recently that Lula has all
    the information he needs to make a decision, this statement appears
    to be a bit premature.  The various ministries involved have until
    March 10 to submit their views to the President's office (the
    Planalto).  Thereafter, it is unclear when a decision would be made.
     One industry contact Emboff spoke to thought that given the desire
    on the part of some GOB staffers to convene another round of
    meetings between high-level officials and consortia reps, no
    decision would be forthcoming until May or June.

    ¶4. (SBU)  Meanwhile, Federal Deputy Walter Pinheiro (PT-Bahia) has
    presented a bill to Congress that would suspend the March 10
    deadline and allow more time to discuss the issue within the
    Brazilian government.  While Pinheiro's bill stands little chance of
    passage, it has served notice to the executive branch that Congress
    would like input into the ultimate decision, thus throwing another
    wild card into the deck.  A recent editorial in the influential
    newspaper "O Estado de Sao Paulo" notes that Congress' decision to
    enter the debate comes late in the process and will only deepen the
    differences within the GOB, adding pointedly, "this is a billion
    dollar business.  The changeover from analog to digital will cost
    about USD 45 billion dollars over four years...  Depending on the
    standard selected, Brazil stands to export digital TV sets, and not
    just to South American countries."

    --------------------------------------------- -------
    JAPANESE DIGITAL TV STANDARD COSTS THE CONSUMER MORE
    --------------------------------------------- -------

    ¶5.  (U)  According to a report by the GoB's Technological Research
    and Development Foundation Center (CPqD), the Japanese digital
    television standard would be the most expensive for the consumer
    among the systems being considered for adoption in Brazil.  Reports
    say the leaking of the report's conclusions displeased Minister
    Costa, who labeled the data as "inconsistent".  The report states
    that, of the three consortia, the European standard would have the
    lowest broadcasting cost to Brazil.  The study also recommends that
    selection not be based on technological considerations alone.

    SAO PAULO 00000245  002 OF 003

    --------------------------------
    GOB SEEKING FINANCIAL INCENTIVES
    --------------------------------

    ¶6.  (SBU)  In recent days, it has become clear that the GOB is
    placing a great deal of emphasis on the financial incentives that
    each consortia can offer.  We know that Trade Ministry staffers have
    approached one ATSC manufacturer seeking a commitment to invest in
    local production of television sets and/or semi-conductors.  Other
    key factors for the Brazilians will likely be exemptions from
    royalty requirements, cut-rate financing and/or loan guarantees,
    opportunities for both technology transfer and Brazilian
    participation in the development of "middleware," and the potential
    for duty-free access by Brazilian manufacturers of receivers to
    developed country markets.  We were told by one industry contact
    that the GOB thought that if it were accorded duty-free access to
    the U.S. market, DTVs manufactured in the south of Brazil could get
    to the U.S. market as cheaply as those made in Mexico.  Meanwhile,
    the Europeans are already moving to sweeten their often.  Siemens
    has announced that it will create a DTV Development Center in
    Manaus.  Once operational, the USD 5.5 million facility would be
    capable of exporting 2.5 million Euros annually in software and
    set-top boxes.

    ¶7.  (SBU)  According to the ATSC Forum, there are at least eight
    equipment manufacturers competing to provide ATSC transmission
    equipment (compared to only two for the Japanese system).  In the
    U.S., Harris Corporation is the leading provider in this highly
    competitive market.  Harris played a leading role in preparing U.S.
    broadcasters for the introduction of DTV, and, if Brazil were to
    adopt the ATSC standard, Harris would be prepared to:

    --  Conduct up to three, week-long, intensive ATSC Convergence
    Seminars,

    --  Following ATSC adoption, for any transmitter sold, train up to
    three technicians about the transmitter, and

    --  Open a factory in Brazil for the final assembly of transmitters
    and exciters.

    ¶8.  (SBU)  Meanwhile, the ATSC Forum also reports that, again if
    Brazil were to adopt the ATSC Standard, Zenith Electronics and its
    parent company, LG Electronics, would be prepared to support the
    transition to DTV broadcasting through:

    --  Direct contributions to a Brazilian DTV development fund,

    --  Transfer of receiver reference designs to Brazilian
    manufacturers,

    --  Transfer of ATSC modulator reference designs to Brazilian
    manufacturers, and

    --  Expanded manufacturing investments in Brazil.

    The timing and amounts of these investments and contributions would
    depend on the pace of the DTV transition in Brazil.

    ---------------
    MISSION EFFORTS
    ---------------

    ¶9.  (SBU)  Over the past month, FCS and State have worked closely
    with the ATSC Forum to highlight the advantages associated with the
    ATSC system.  Now that the competition is reaching the end-game
    stage, we are intensifying our
    efforts.   Charge has co-signed a letter with the Canadian and South
    Korean Ambassadors (the Mexican Ambassador couldn't get
    authorization from his capital to sign) emphasizing the degree to
    which the ATSC standard would
    promote the GOB's goal of digital inclusion. In addition, we are
    pushing forward on the public diplomacy front and keeping in touch
    with ATSC manufacturers - who are conducting their own lobbying

    SAO PAULO 00000245  003 OF 003

    campaign.  Specifically, both Embassy and Consulate will note to our
    interlocutors here
    that the GOB can easily gain duty-free access to the U.S. market for
    Brazilian-manufactured digital televisions by simply signing on to
    the WTO Information Technology Agreement.  Overall, Mission shall
    continue to report
    on the DTV issue as the situation develops.

    ¶10.  (U) This cable was coordinated with Embassy Brasilia.

    McMullen

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