NO MORE FREE TV? COMPULSORY LICENSING AMENDMENT

C O N F I D E N T I A L NASSAU 000624 SIPDIS PASS TO USTR KENT SHIGETOMI PASS TO EEB/TPP/IPE JO ELLEN URBAN PASS TO WHA/CAR JOSLYN MACK-WILSON E.O. 12958: DECL: 10/07/2019 TAGS: ECON ETRD BF SUBJECT: NO MORE FREE TV? COMPULSORY LICENSING AMENDMENT NOW EFFECTIVE REF: NASSAU 457 Classified By: Charge d'Affaires, a.i. Tim Zuniga-Brown due to reasons (b) and (d) ¶1. (C) SUMMARY: The 2004 Amendment to the Compulsory Licensing Act to outlaw the exception for encrypted broadcasts became effective October 1, 2009. The amendment was signed into law September 16 following negotiations with GCOB officials, Cable Bahamas, USG representatives and private U.S. cable providers in August 2009. Since then, Cable Bahamas officials have been pursuing negotiations with premium cable content providers but have not been able to reach agreements due to pricing levels. The Cable Bahamas Chief Operating Officer (COO) expressed concern that Cable Bahamas will not be able to compete if it cannot obtain the content that his customers demand. END SUMMARY -------------- -------------- Repeal of the Compulsory License Exception Good First Step( -------------- -------------- ¶2. (U) The 2004 Amendment to the Compulsory Licensing Act to outlaw the exception for encrypted broadcasts went into effect October 1, 2009. The original Act provided the legal basis for Cable Bahamas to extract and distribute encrypted copyrighted content from U.S. satellite providers whose footprint extends over The Bahamas without having entered into agreements with the cable content providers. Instead, the Act permitted Cable Bahamas to set aside whatever funds they would have appropriated to the content providers into a special account that would be used to support operations. The Act appeared to violate article 11 of the Berne Convention, which does not permit compulsory licensing for free, over-the-air cable programming. ¶3. (U) The GCOB actively engaged on this issue with U.S. interlocutors. On August 5, 2009, GCOB representatives hosted a meeting with Cable Bahamas, USG (U.S. Embassy, United States Trade Representative, Congressional Staffer), and private U.S. cable providers (HOB, ESPN, Disney)(REF). Ministry of Finance representatives told EconOff that Cable Bahamas has been actively negotiating content agreements with cable providers since the summer. -------------- (But Will Cable Bahamas Comply -------------- ¶4. (C) Cable Bahamas officials confirmed to EconOff that the company is currently negotiating premium content packages with HBO, Showtime and NBC Universal but has not made significant progress, particularly with HBO. They will meet for the first time with HBO representatives in two weeks. HBO previously refused to meet with Cable Bahamas until the Amendment was signed into law. In a private conversation, Cable Bahamas President and COO Anthony Butler told EconOff that he believes the amendment is a breach of the franchise agreement between Cable Bahamas and the GCOB. Butler said he would be "well within (his) rights" to sue the government. The current franchise agreement expires October 13. Cable Bahamas, he noted, is undergoing renewal talks from a weakened financial position even though he believes the GCOB "won't enforce the amendment." Ministry of Foreign Affairs Economic Officer Alexious Rolle told EconOff that the GCOB enforcement mechanisms include cease and desist orders, licensure removal and, as a last resort, litigation. Rolle noted that Cable Bahamas has 3-6 months to come into compliance with the amendment and may be able to apply for an additional three month extension. ¶5. Butler dismissed the idea of moving to the Television Association of Programmers Latin America (TAPLAT) because it does not offer the quantity of American content or timely airing of popular shows. He also noted that TAPLAT officials would not meet with his company due to the Compulsory Licensing issue. "This is not a Cable Bahamas issue," he said. "This is a Bahamas issue. Cable Bahamas cannot compete without American programming. Bahamians are accustomed to American programming and aren't going to give it up so easily and the government needs to face that." ¶6. (C) Butler added that Cable Bahamas was only established because it was protected under the exception clause of the Compulsory Licensing Act. He said that his USD 250 million operation cannot afford the financing required to obtain premium content at the pricing levels the content providers are offering. He did not believe that the August 5 Stakeholders meeting was helpful and argued that the U.S. cable provider representatives were "a bunch of lawyers" not willing to consider his situation. He requested that the Embassy assist him in getting a fair hearing with the content providers in order to negotiate favorable terms for the small-market Cable Bahamas. ¶7. (C) COMMENT: The GCOB, looking toward WTO accession other free trade agreements, passed the legislation in order to conform with international trade norms. Butler says there was very little consideration of Cable Bahamas ability to compete without compulsory licensing. In spite of this, Butler said the company is making a good-faith effort to comply with the amended law. His frustration stems from a very demanding customer base that is accustomed to U.S. premium programming and is all-too-willing to purchase and illegally install satellite dishes to extricate encrypted material themselves. According to a recent local media report, illegal satellite dishes comprise 21 percent of the market and that number in expected to increase - to Cable Bahamas' detriment. Whether legally obtained or not, U.S. television content has become an important part of Bahamian culture and heavily contributes to the affinity Bahamians have for the United States. Cable Bahamas may have difficulty entering into commercial agreements with providers which perceive the Bahamian market as too small. USG support for these negotiations is vital in order to ensure that Cable Bahamas does not fall back into non-compliance. END COMMENT ZUNIGA-BROWN