NATIONAL COMMUNICATIONS COMMISSION BILL PASSES,

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