SCENESETTER FR 2008 U.S.-EU INFORMATION

UNCLAS SECTION 01 OF 04 BRUSSELS 001449

SENSITIVE
SIPDIS

NOT FOR INTERNET DISTRIBUTION

FCC FOR WEISLER
DOC FOR NTIA - ALEXANDER
STATE FOR EUR/ERA, EB/CIP, EB/IPE
PLEASE PASS TO USTR

E.O. 12958: N/A
TAGS: ECPS ECIN EINV EINT ETRD ECON EUN
SUBJECT: SCENESETTER FR 2008 U.S.-EU INFORMATION
SOCIETY DIALOGUE

1. (SBU) SUMMARY. This yearQs annual U.S.-EU
Information Society Dialogue (ISD) talks, on
September 26, come after a busy period in Europe,
with the European Parliament voting on a final
scaled-back telecom reform package, the EU calling

for negotiations to update the WTO Information
Technology Agreement (ITA),InfoSociety Commissioner
developing popular new roaming regulations, and the
EU adopting decisions on mobile satellite services.
The ISD will feature informal exchanges on these
issues, as well as the digital TV transition,
cybersecurity cooperation, and other issues. This
will be the last ISD for Director General Fabio
Colasanti. END SUMMARY.

ISD OVERVIEW
--------------


2. (SBU) On September 26, the U.S. and EU will meet
for our annual Information Society Dialogue (ISD),
an informal exchange on respective market and policy
developments in the two largest ICT markets in the
world. This yearQs ISD, the last for U.S. lead
Ambassador David Gross (from EEB at State) and for
European Commission lead Director-General Fabio
Colasanti, will feature updates from the European
Commission on the EU telecoms review, roaming
regulations, and new selection system for mobile
satellite services.


3. (SBU) Both sides will discuss respective spectrum
decisions, the digital television switchover,
cybersecurity cooperation, telecom assistance
programs in third countries, and other issues.
Additional issues that may be discussed include the
new EU proposal to update the WTO Information
Technology Agreement (ITA),and a new Commission
investigation of the Google-Yahoo advertising
agreement. The European Commission will be
represented primarily at the ISD by officials from
DG Information Society and Media (DG INFSO).


4. (SBU) Just before the ISD, two transatlantic
events on Radio Frequency Identification Devices
(RFID) will be held in Washington; a U.S.-EU
Symposium on Societal Benefits of RFID, cosponsored
by DOC and DG INFSO, and a workshop on held by FTC
on September 23. The U.S. and EU are also launching
government-to-government pilot projects on RFID.
The first one of these will focus on the use of RFID
to track the movements of radioactive isotopes in
commerce. The day prior to the ISD, the European
American Business Council will hold its annual
Digital Economy Workshop, to bring policymakers and
industry together for discussions on ICT market and
regulatory issues. The entire week of ICT-related
events will significantly advance U.S.-EU
cooperation on ICT and innovation under the
Transatlantic Economic Council (TEC).

EU INFORMATION SOCIETY LEADERSHIP AND REGULATORY
STRUCTURE
-------------- ---


5. (SBU) Viviane Reding, Commissioner for the
Information Society and Media, is a politician and
former journalist whose populist initiatives to cut
mobile phone roaming prices have made her among the
most high-profile Commissioners. Reding, Director
General Fabio Colasanti, and DG INFSO, seek to
promote development of a single, integrated
information and communication technologies (ICT)
market in Europe.


6. (SBU) DG INFSO plays three key roles:
establishing regulatory policy, supporting ICT
research, and overseeing programs to promote wider
use of and accessibility to ICT. Reding and DG
INFSO share competence over EU telecoms regulation
with 27 National Regulatory Authorities (NRAs) and
partly with the EU competition Directorate-General
(DG COMP). There is no EU-wide telecoms regulator

BRUSSELS 00001449 002 OF 004


and licenses are awarded nationally, so telecoms
markets remain more fragmented than most other parts
of the Single Market.


7. (SBU) Director General Colasanti is an Italian
economist and veteran of many European Commission
jobs. He is open and candid in discussing policy
issues and concerns, and has built good rapport over
the past few years with Ambassador Gross of State.
Colasanti will depart DG INFSO shortly as part of a
larger reshuffling of DGQs throughout the
Commission.

EU i2010 STRATEGY
--------------


8. (U) The EU i2010 strategy, launched in June 2005,
is the latest Commission attempt to develop a
coherent policy framework for the era of convergent
ICT services. The i2010 strategy aims to complete
integration of EU national ICT markets, reinforce
innovation and investment in ICT, and promote
information society inclusion, public services and
quality of life. A Commission mid-term review of
the strategy in April 2008 lauded progress in
broadband and Internet usage but noted the lack of
an integrated market and a persistent digital divide
across member states. The reported noted that
broadband penetration across the EU ranged in
January 2008 from 36 percent in Denmark to only
eight percent in Bulgaria.

EU ICT MARKET AND POLICY FRAMEWORK
--------------


9. (U) The EUQs ICT market is one of the largest and
most advanced in the world. Total market size was
about $913 billion in 2007 (versus $1.2 trillion in
the U.S.). The EU telecoms sector accounts for
about $401 billion of this total, and is growing at
two percent annually. The computer and internet
sector account for the remainder.

U.S. FIRM PRESENCE IN EUROPE
--------------


10. (SBU) All major U.S. ICT firms are invested in
Europe; many of these are prominent in EU ICT
associations. AmCham EUQs Digital Economy Committee
is large and active on policy issues here, as is the
American Electronics AssociationQs European arm, AeA
Europe. Key players include AT&T, Intel, Microsoft,
Google, eBay, SAS, GE, Symantec, IBM, Apple, Cisco
and Qualcomm.

EU TELECOMS REVIEW UPDATE
--------------


11. (SBU) The European Commission proposed in
November 2007 a significant overhaul of the EUQs
existing 2003 telecoms regulatory framework, to
address persistent lack of competition, incumbent
dominance and market fragmentation across Europe.
Key European Parliament committees in July 2008
passed heavily amended versions of the CommissionQs
proposals. The committees rejected Commission plans
to establish an EU-wide telecoms regulatory
authority or give the Commission a veto over
national regulator remedies. The EP committees also
watered down proposals for greater EU-wide
coordination of spectrum allocation, which U.S.
industry had strongly supported.


12. (SBU) The EP committees did vote to strengthen
the existing group of national telecoms regulators,
as the leading regulatory body; supported
Qfunctional separationQ (forced sale of telecoms
units in some cases) to promote competition; and
backed many Commission proposals to strengthen
consumer rights on transparency of pricing and
contracts. The Parliament debated the package
September 2, with comments generally supporting the

BRUSSELS 00001449 003 OF 004


committee outcomes. The Parliamentary vote (First
Reading) on the package is planned the week of
September 22, just before the ISD.


13. (SBU) The Council (of EU Member States) was very
negative about the initial Commission proposals, and
has moved toward the EP position in opposing an EU-
wide regulator, a Commission veto or much greater
Commission powers over spectrum policy. The French
EU Presidency seeks a Member State agreement on the
package at the November 27 Telecoms Council, leaving
the Czech Presidency to guide the package through a
second reading in Parliament by early next year.
Council discussions have gone slowly, however,
leaving some concern that time may be short to
finalize the package before EP elections in May

2009.

ICANN REFORM
--------------


14. (SBU) Commission ISD participants may raise the
question of revisiting internet governance
arrangements. Over the past few years, the European
Commission has consistently pushed for reform of
Internet governance. The EU is uncomfortable with
the existing contractual relationship between the
Internet Corporation for Assigned Names and Numbers
(ICANN),which supervises internet domain names, and
the USG (DOC) in particular, and wants to see a
system that includes Qinternational, governmental
accountability.Q The French have indicated to USEU
that Internet governance is one of their EU
Presidency priorities.

COMMISSION PROPOSAL TO UPDATE THE ITA
--------------


15. (SBU) The issue of the EU proposal to update the
Information Technology Agreement (ITA) may arise at
the ISD as well. USTR notes that ISD participants
should not/not comment on the proposal, which will
be addressed by the U.S. at the WTO. On September
15, the Commission sent to the WTO a proposal to
initiate negotiations to update the 1996 ITA, which
provides for duty-free treatment of certain
information technology products. The proposed
negotiations would be to (1) review product coverage
(implicitly, adding new products),(2) adding new
parties (currently, 70 WTO Members are part of the
ITA); (3) establish a mechanism for updating the
Agreement to include newer technologies; and (4)
address non-tariff barriers to trade, such as
conformity assessment rules and standards.


16. (SBU) The USG has not taken a position on this
proposal yet (it would normally be discussed in a
WTO ITA Committee meeting). However, the initial
reaction of USTR is that this proposal Q addressing
the possible expansion of ITA obligations Q is
separate from our WTO case, which addresses the U.S.
view that the EU is failing to meet its current
obligations under the ITA. The WTO case also
addresses the EU approach to the agreement as static
rather than dynamic; the EU does not consider that
it covers development of new converged products.

NEW EU MOBILE SATELLITE SERVICES SELECTION PROCESS
-------------- --------------


17. (SBU) On August 7, the Commission launched a
new single EU-wide selection and authorization
procedure for Mobile Satellite Services (MSS)
operators, with the goal of avoiding market
fragmentation and creating a pan-EU market. MSS are
provided by a satellite system that communicates
with portable ground terminals, and can include
high-speed internet, mobile TV and radio, plus
emergency or disaster relief. The Cmmission
proposed a decision in August 2007; this was
approved by the Council and Parliament and entered
into force on July 5. Under the new procedure,

BRUSSELS 00001449 004 OF 004


which replaces 27 member state selection procedures,
the Commission issued an open call for applications.
Interested firms must apply by October 7.


18. (SBU) The Commission will assess proposals for
technical and commercial viability, efficiency and
consumer benefits; systems will operate at the two
Ghz band and must be able to reach at least 60
percent of area and 50 percent of the population of
all member states. Selections are expected to occur
by mid-2009; after this operators will need to be
licensed at the national level. Satellite and
service launches may occur by late 2009-early 2010.
(Comment: The system seems good on balance; though
it seeks to improve the competitiveness of the
European satellite industry, it appears technology
neutral and should provide opportunities to U.S.
firms. End comment). MSS will be the first truly
single market for an EU telecom service.

ROAMING REGULATION IN EUROPE
--------------


19. (SBU) Commissioner Reding succeeded in 2007 in
regulating the cost to EU subscribers of making and
receiving mobile calls while in another EU country
(roaming) to great popular acclaim, resulting in
price drops to consumers of about 60 percent. This
year, she has turned her attention to the cost of
sending SMS messages and other forms of data across
borders via mobile phones and is moving towards
action on mobile termination rates. These are a
feature of the current European Qcalling party pays
business model, and that contribute significantly to
the cost of mobile telephony in Europe.

GROWING CONCERNS OVER COMMERCIAL DATA PRIVACY
--------------


20. (SBU) A trend to be aware of is the increased
interest on the part of Commissioner Reding and DG
INFSO in the area of commercial data protection.
The CommissionQs privacy unit moved from DG Internal
Markets to DG Justice, Law and Society in the wake
of 9/11, but JLS has not led on the issue very
forcefully, leaving room for INFSO and other DGs to
get involved on specific issues (such as RFID).

RFID COOPERATION
--------------


21. (SBU) RFID cooperation is not formally on the
ISD agenda, but is a very prominent area of U.S.-EU
ICT cooperation. Commissioner Reding has repeatedly
expressed strong backing for RFID technology, but is
determined to address the significant privacy
concerns expressed by stakeholders in response to
her 2007 public consultation. DG INFSO is planning
to issue a Recommendation to Member States and
industry in September or later in 2008 on privacy
and security in RFID. Drafts were highly
controversial, with fears from the USG and
transatlantic industry that privacy protections
could go too far, and kill use of the technology in
the retail context. An interagency group from the
USG provided input on the draft text. Recent drafts
seem more acceptable to industry, however.

SILVERBERG