IRAQ TELECOM 2008: MINISTER OF COMMUNICATIONS

C O N F I D E N T I A L STATE 113842

SIPDIS

E.O. 12958: DECL: 10/24/2013
TAGS: EAID ECON ECPS EINT IZ PGOV PREL
SUBJECT: IRAQ TELECOM 2008: MINISTER OF COMMUNICATIONS
SEEKS CONTROL WHILE PRIVATE SECTOR FLEXES ITS MUSCLES

REF: A. BAGHDAD 3331

B. BAGHDAD 2452

Classified By: NEA/I DAS R. SCHMIERER, REASONS 1.4(b) and (d)


1. (U) This is an action request ) see paragraph 12.


2. (C) Summary: The third annual Iraq Telecom conference
illustrated the potential opportunities and risks that derive
from recent policy initiatives by Iraq's new Minister of
Communications, including his attempted establishment of
state monopolies in international gateways and in fiber optic
networks. However, the conference also made clear that the
private telecom operators may be sufficiently strong and
independent to resist these initiatives. In addition,
Muhammad Allawi, former Minister of Communications and
current Member of the Council of Representatives, announced
his intention to seek broad input from industry on a revised
draft telecommunications law. Telecom companies welcomed
this development, and strongly encouraged the Ministers to
strengthen Iraq's telecom regulator, the Communications and
Media Commission (CMC). The Department requests Post to:
-- Encourage Minister of Planning Baban to request World Bank
assistance in the development of telecommunications
legislation;
-- Encourage the GOI to reconstitute the CMC; and,
-- Consider additional funding for training CMC personnel.
End Summary.


3. (SBU) Approximately 100 representatives from industry and
government attended the third annual Iraq Telecommunications
conference in London on October 13-14. Representatives from
the World Bank, the International Telecommunications Union,
MNF-I, and a variety of equipment manufacturers, service
providers, and investors were present for two days of
frequently contentious discussions, including a dramatic (but
unfulfilled) threat by Minister of Communications Abdulrahman
to walk out of the meeting. USG representatives included
Embassy Baghdad/Econ Shwan Halkurd, NEA/I-Econ Tom Gramaglia,
and MNF-I/CCJ6 BG Steve Spano.

Minister Seeks to Establish State Monopolies
--------------


4. (SBU) Minister Abdulrahman stated that the Council of
Ministers had already issued an order that provides the
Ministry of Communications (MOC) with monopolies on
international telecommunications gateways and on fiber optics
networks inside Iraq. (Comment: A gateway monopoly would
require the current service providers to funnel their
international traffic to the MOC-owned Iraq
Telecommunications and Postal Company (ITPC). International
gateways provide the highest source of revenue for telecom
operators in emerging markets. End comment.) The Minister
also stated that he had already signed contracts with gateway
operators and with international carriers to provide
international connectivity.


5. (SBU) Dr. Dia Ahmed, the CEO of mobile phone company
Asiacell, stated that the company's operating license, as
issued by the CMC, did not require it to use the MOC's
gateways. Ahmed acknowledged that his license included a
clause requiring Asiacell's use of MOC gateways, but he
claimed that it had no legal impact because the MOC did not
legally own the gateways, and the clause did not specify
whether Asiacell must use the gateways of the national MOC or
the Kurdish regional Ministry of Communications. (Comment:
Such imaginative legal reasoning reflects the confidence of
the firm in resisting the Minister's pressures. End
Comment.) The CEO of one Wireless Local Loop (WLL) telecom
company, Kalimat Telecom, stated that his license explicitly
permitted his company to build a backbone. Ali al Dahwi, the
CEO of Zain Telecommunications, Iraq's largest mobile phone
company, also objected to the Minister's intentions, accusing
the Iraqi government of "mistrusting the private sector" and
stating that Iraq was "moving in the reverse direction" from
international best practices. CEO al Dahwi also objected to
taxation by the Iraqi government, which he claimed was
"arbitrary" and imposed "without a clear process," despite
Zain's payment of 18 percent of total revenues to the GOI (as
required by the terms of its license). He has previously
stated his desire that the Ministry "get out of the way" so
the private sector operators could serve the Iraqi citizens.


6. (SBU) Minister Abdulrahman said that, in his opinion, a
MOC monopoly on fiber optic backbones was essential because
of the large investment required, which he claimed was too
large for any individual company. The mobile phone CEO's
were less vocal in their objections to this statement for two
very different reasons: a) they welcome the option of
purchasing services from the ITPC in order to reduce their
satellite bandwidth costs and their capital investment in a
private backbone network; and b) they do not believe that the
ITPC can build and maintain a backbone successfully.
Phillippe Dongier, the World Bank representative, gently
reminded the audience that the establishment of a single,
common backbone was not essential or desirable for the robust
development of the telecommunications sector, even in poor or
low-income countries. He said that the Bank's experience is
that the demand for telecommunications is sufficiently high
to warrant investment in two or more competing backbones.
(Comment: The mobile phone and WLL companies acknowledge that
they are investing in some short haul fiber backbone links,
thus proving the Bank's point. End Comment.)

Parliamentarian Seeks New Telecommunications Law
-------------- ---


7. (SBU) Several speakers cited the absence of a robust and
effective regulator as an impediment to the development of
the telecommunications sector. Zain CEO Al Dahwi said that,
following the resignation of CMC CEO Siyamend Othman, "there
is no regulator," adding that the CMC "needs to be
revitalized" and a "good regulator is exactly what the
private sector needs." Several service providers said that
the absence of an interconnection regime has hindered the
expansion of services to the Iraqi public, and they
encouraged the CMC to establish a framework between carriers
and the ITPC for the exchange of telecom traffic and the
establishment of fair interconnection prices.


8. (SBU) International organizations also emphasized the
importance of regulation for the development of the
telecommunications sector. Sami Al-Basheer Al Moshid, the
Director of Development at the International
Telecommunications Union, stated that "a fair and transparent
regulatory framework that promotes a level and competitive
playing field" was required to increase investment. The
World Bank's Mr. Dongier stated that "best practice calls for
separation of policy, regulation, and operations,"
specifically citing Iraq's lack of separation of the policy
and regulatory functions as a problem for development of the
telecom sector in Iraq. (Comment: An independent regulator is
particularly important in a country where there is a
state-owned carrier (like ITPC) that competes and/or is
expected to cooperate with the commercial carriers).


9. (SBU) Former Minister of Communications and current
member of the Council of Representatives (COR) Mohammad
Allawi stated that he was "now charged with the
responsibility of preparing final drafts of the
Telecommunications Law, the Law of the Ministry of
Communications, and the Law of the Regulator." Allawi said
that he was working closely with the World Bank on these laws
and on restructuring of the MOC through privatization. He
also offered to share his draft laws with the private sector
in November in order to seek industry input.


10. (C) Mr. Dongier of the World Bank told State
representatives at the conference that, contrary to Mr.
Allawi's comments, the Bank has provided only limited
comments on the COR's draft laws. He said that the Bank is
ready to provide technical assistance to the GOI on the draft
telecommunications law, but that the GOI's Minister of
Planning Baban must first issue a formal request in order to
ensure the Bank's perceived neutrality between the the MOC,
the CMC, and the COR. Mr. Dongier asked for State Department
assistance to encourage a request from the GOI to the Bank.


11. (SBU) The State Department continues to fund training
classes for CMC personnel, strengthening the CMC and building
its nascent capacity to establish proper regulation for the
telecom sector in Iraq. This training will end by Nov. 30 if
no additional funding is made available.

Action Request:
--------------


12. (SBU) Post is requested to encourage Minister of Planning
Baban to invite the World Bank's participation as a neutral
facilitator in Iraq's development of telecommunications laws.
In addition, Post is requested to encourage the GOI to
appoint a new CEO and a full slate of Commissioners for the
CMC, which will help maintain it as an independent voice for
fair and transparent regulation. The Department, especially
the Office of the Coordinator of Communications and
Information Policy, remains available to provide insight into
best practices around the world and specific recommendations
on new drafts of telecom laws. Finally, Post is requested to
consider providing additional funding for training of CMC
personnel, particularly from capacity development funds
through the Iraq Transition Assistance Office.


13. Baghdad Minimize Considered.
RICE