GOI ANTIBODIES ATTACKING INDEPENDENT IRAQI TELECOM

UNCLAS SECTION 01 OF 03 BAGHDAD 000156

SENSITIVE
SIPDIS

STATE FOR EEB/CIP/BA ALAN GIBBS

E.O. 12958: N/A
TAGS: ECON ECPS EINT KGIT KWIR TINT TSPL
SUBJECT: GOI ANTIBODIES ATTACKING INDEPENDENT IRAQI TELECOM
AUTHORITY

REF: A. 07 BAGHDAD 2820

B. 08 BAGHDAD 3633

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Summary
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1. (SBU) Five members of the Communications Media Commission
(CMC) caretaker authority met with EMIN on January 13 to
discuss the beleaguered commission's challenges and search
for ways to help the CMC navigate Iraq's treacherous
political waters. Provisionally established by CPA Law 65 to
manage Iraq's frequency spectrum and license and regulate the
telecommunications sector, the CMC has not yet been
successful in assuming its responsibilities within the Iraqi
political or economic system. Three rival laws formally
establishing the CMC, the Ministry of Communications (MOC),
and the overall telecommunications sector structure have been
slowly percolating through the Shura Council and Parliament
since 2004. Harmonizing these three laws has thus far proven
to be a task beyond the GOI's capability. The MOC continues
to battle to assume the CMC's regulatory and licensing
authority, both to control the revenues and to prevent what
they perceive as nongovernment control over sovereign issues.
There are new indications the Prime Minister is leaning
towards the MOC view. With few political allies and process
momentum running against them, the CMC's future is uncertain
at best.


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CMC Limping Through a Political Minefield
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2. (U) Five members of the CMC caretaker authority met with
EMIN and Embassy and MNF-I telecom officers on January 13 to
discuss the beleaguered commission's challenges and search
for ways to help the CMC navigate Iraq's treacherous
political waters. The Prime Minister has never appointed the
nine commissioners called for under Coalition Provisional
Authority (CPA) Law 65, which established the CMC in 2004.
Thus, though endowed with independent authority to manage
Iraq's frequency spectrum and license and regulate the
telecommunications sector, the CMC has not yet been
successful in assuming its responsibilities within the Iraqi
political or economic system. The CMC has limped along for
years with only a Chairman to direct the independent
regulator's actions and fend off political rivals looking to
assume the CMC's lucrative regulatory authority. (Comment:
For some sense of the lucrative nature of the CMC's licensing
authority, Iraq's August 2007 auction of mobile
telecommunications operator licenses fetched USD 3.75 billion
up front, plus 18.5 percent of monthly gross revenues and 15
percent of net profits (reftel A). End comment.) Since the
CMC Chairman, Dr. Sayemand Othman, resigned in April 2008
after completing his 4-year appointment, the CMC has been
rudderless and lost most of its already limited political
standing. The CMC caretakers say political opponents,
primarily in the Ministry of Communications, have taken
advantage of the opening to try and complete the demise of
the CMC.

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The CMC-MOC Rivalry
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3. (U) Three rival laws establishing the CMC, MOC, and
overall telecommunications sector structure have been slowly
percolating through the Shura Council and Parliament since

2004. Harmonizing these three laws has thus far proven to be
a task beyond the GOI's capability. CPA Law 65 directed the
CMC to draft an all-encompassing Telecommunications Law which
would define the overall sector parameters, including the
broad strokes of the MOC's responsibilities. The MOC's draft
law, in contrast, drafted by the MOC to constitute the
communications ministry's specific structure and
Qcommunications ministry's specific structure and
responsibilities, calls for the MOC to assume several key CMC
responsibilities, including spectrum management and service
provider licensing. The MOC is itself a major service
provider through its two state-owned internet and telephone
companies, a role plainly incompatible with the licensing and
regulatory authority they seek.


4. (U) According to CMC caretaker authority, in an attempt
to force compromise between the CMC and MOC, the Prime
Minister's Office (PMO) appointed a committee in 2007, headed
by the Chief of the Shura Council with members from the PMO,
MOC, Council of Ministers (CoM),and several other GOI
agencies. This committee has twice reported to the PMO

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General Secretary that they are unable to find a compromise
position to harmonize the three laws. CMC Deputy for Legal
Issues Omar Ghassan told CETI that the PMO issued a decision
on January 11 to support the MOC law and return it to the
Parliament for discussion and vote. "This could be the end
for the CMC," he lamented. (Comment: Embassy independently
confirmed that in a January 11 press release, the Council of
Ministers declared their support for most provisions of the
MOC's version of the law. End comment.)

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GOI Institutional Fear of an Independent Regulator
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5. (SBU) Several remarks from members of the CMC caretaker
committee demonstrated a limited understanding of the concept
of an independent regulator within the GOI and among CMC
staff. Mazin Hashim, CMC Deputy for Administrative Affairs,
claimed the MOC argued to the PMO and CoM that "the
government must maintain control of licensing and regulatory
authority and since the CMC is not part of the government,
this responsibility should reside with the MOC." EconOff
questioned Hashim later whether a CMC Commissioner would be
considered a government employee: "No, of course not. This
is an independent commission," he responded. (Comment: With
employees of the CMC under the impression they are not
government employees, it is somewhat more understandable how
the MOC might convince the PMO and CoM that the GOI could be
losing sovereign control of their spectrum and licensing
authority if they give such responsibilities to an
independent regulator. End comment.) It is not just spectrum
control and licensing authority at stake, but also the
billions of dollars in licensing and services revenue the MOC
stand to gain control of. Previously, the MOC told us that
they far prefer to have these revenues channeled through the
MOC to the Ministry of Finance (MOF) rather than straight
from the CMC to the MOF (reftel B).

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Comment: Can the CMC be Saved?
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6. (SBU) With few political allies and process momentum
running against it, the CMC's future is uncertain at best.
Lacking commissioners and a Director General, CMC budgeting
decisions are presently being handled through the MOF. The
CMC caretaker authority lacks the authority to hire new
employees, so as the rank-and-file workers leak away to more
optimistic employment opportunities, the CMC's fortunes
spiral downward. Efforts by the World Bank to influence the
GOI to establish a strong independent telecommunications
regulator have waned under the new Minister of
Communications. Some members of the Council of
Representatives, including the Chair of the Services
Committee, Abdullah Saleh, do appreciate the importance of
the role of an independent regulator, and may be able to
check, if only temporarily, the MOC's drive to undermine the
CMC. EMIN will meet with Abdullah Saleh and the Minister of
Communications in the coming weeks to again emphasize U.S.
support for the independent regulatory authority of the CMC.
Section VII of the bilateral Strategic Framework Agreement
(SFA) that came into force this month explicitly calls for
bilateral cooperation to strengthen the independent
telecommunications regulator, so the Mission will continue to
press this issue within the appropriate SFA Joint
Coordination Committee. However, with such institutional
misunderstanding of the CMC's role and no GOI precedent for
Qmisunderstanding of the CMC's role and no GOI precedent for
an independent regulator, Iraq may have to learn the hard way
the importance of having an independent regulator to balance
the MOC's power as a state-owned service provider.


7. (U) Participant list:

Iraq:
- Mazin Hashim Al-Haboubi -- CMC Deputy for Administrative
Affairs
- Omar Ghassan -- CMC Deputy for Legal Issues
- Firas Sami - CMC Deputy for Finance
- Mohammed Al-Gharbawi - CMC Frequency Management Director
- Ahmed Al-Hameed -- CMC Frequency Management Deputy Director

United States Embassy:
- Ambassador Marc Wall -- Coordinator for Economic Transition
in Iraq (CETI)
- Michael Dodman -- Economic Counselor
- Julie Chung -- CETI Senior Advisor
- Michael Uyehara -- Economic Section Infrastructure Team
Chief
- Roy Therrien -- ESTH and Telecom Policy Officer

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- Shwan Halkurd - Senior Telecommunications Advisor
- MAJ Jared Voneida -- MNFI CJ6
- Laurie Driver -- MNFI CJ6
CROCKER