VZCZCXYZ0001
PP RUEHWEB

DE RUEHBO #0156/01 0162138
ZNR UUUUU ZZH
P 162138Z JAN 09
FM AMEMBASSY BOGOTA
TO RUEHC/SECSTATE WASHDC PRIORITY 6511
INFO RUEHCV/AMEMBASSY CARACAS 1549
RUEHZP/AMEMBASSY PANAMA 2901
RUEHQT/AMEMBASSY QUITO 7620
RUEHPE/AMEMBASSY LIMA 6918
RUEHBR/AMEMBASSY BRASILIA 8587

UNCLAS BOGOTA 000156 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECPS EINV SCUL ECON KPAO CO
SUBJECT: PRIVATE TV CHANNELS RENEW LICENSES; THIRD CHANNEL 
ADJUDICATION STILL UNDERWAY 
 
¶1.  SUMMARY: Private television channels Cadena Radial Colombiana 
(Caracol) and Radio Cadena Nacional de Colombia (RCN) and the 
National Television Commission (CNTV), after much debate, have 
reached an agreement to renew their license for another ten years. 
The agreement, signed one day before the January 10 deadline, 
outlines a payment of between USD 55 million and USD 118 million, 
depending on the national economic growth.  The CNTV also announced 
that the adjudication process for the third private channel will 
begin in February.  CNTV set the base bidding price for the third 
channel at USD 33 million.  A third national channel will improve 
balance in news coverage and provide viewers with additional 
options. END SUMMARY 
 
Background 
---------- 
 
¶2.  Prior to 1998, nationally broadcast television in Colombia 
consisted of three channels (Canal Uno, Canal Dos and Canal Tres). 
Airtime on Canal Uno and Canal Dos was assigned through a concession 
system with various production companies assigned different 
timeslots to broadcast their products (soap operas, news programs, 
etc) and/or syndicated programs purchased abroad.  Canal Tres (now 
called Seal Colombia) was-and still is-operated entirely by the 
government with content focused on educational and cultural 
programming.  In 1997, the CNTV, which directs, develops and 
regulates all policies for public broadcast television in Colombia, 
privatized Canal Uno and Canal Dos by granting ten-year broadcasting 
licenses, at a cost of U.S. $95 million to Cadena Radial Colombiana 
(Caracol) and Radio Cadena Nacional de Colombia (RCN).  The private 
channels began broadcasting as Canal Caracol and Canal RCN in July 
¶1998.  In the ensuing ten years, Canal Caracol has made additional 
investments in networking and equipment estimated at U.S. $130 
million.  RCN has invested an additional U.S. $200 million.  Caracol 
and RCN's broadcasting licenses officially expired on January 10, 
¶2009. 
 
Contract Renewal Process Criticized 
----------------------------------- 
 
¶3.  Based on analysis by two independent firms, CNTV began the 
renewal of the two existing contracts by initially setting a price 
of U.S. $82 million with additional (variable) yearly payments equal 
to 7.52% of the channels' gross income.  Once the contract terms 
were released, however, both RCN and Caracol protested claiming that 
this figure was unreasonable given the current global financial 
situation and based on their own projections of lower earnings and 
profitability.  They also claimed that the pricing process lacked 
transparency and presidents of both channels went so far as to hint 
at wrong-doing on the part of the CNTV board.  These claims and the 
ensuing media coverage resulted in President Uribe directing the 
Minister of Communications and CNTV to release the financial studies 
upon which they based the pricing as well as the base bidding price 
for the third channel. 
 
¶4.  On January 9, shortly after the publication, CNTV, Caracol, and 
RCN announced that an agreement had been reached for a ten-year 
contract renewal.  The financial terms of the deal are flexible, 
with installment payments, determined by the economic conditions, 
ranging from U.S. $50 million to U.S. $110 million. 
 
Third Channel on the Horizon 
---------------------------- 
 
¶5.  In early 2007, the CNTV announced the opening of a public 
bidding process for a third private national television channel. 
Three organizations, Promotora Audiovisual de Colombia (a 
Colombo-Spanish consortium), Canal Tres Televisisn (also a 
Colombo-Spanish consortium), and Inversiones Rendiles S.A. (a 
Colombo-Venezuelan consortium) submitted qualified bids.  On 
December 2, 2008, the CNTV announced the financial terms for the new 
third channel.   Following the controversy surrounding the license 
renewals for the two existing channels, CNTV published the base 
bidding price for the third channel at U.S. $33 million and 
indicated that the new channel would also be subject to the 7.52% 
charge on annual gross income.  The CNTV also announced that the 
adjudication process for the third private channel will begin in 
February.  As a concession to the existing private channels, CNTV 
postponed licensing a fourth private channel for the foreseeable 
future. 
 
COMMENT 
------- 
 
¶7.  The opening of the market to include a third channel is seen as 
a positive step to improve the balance in media coverage of the 
news.  Further, the general consensus is that, in terms of 
advertising dollars, the market can support another channel.  And 
finally, wide ranging surveys of the viewing public indicate that 
 
there is a demand for more varied programming on national TV.  While 
the controversy surrounding the contract renewals for Caracol and 
RCN made for a rough start, CNTV's concession to a flexible payment 
mechanism helps resolve the transparency concerns while helping the 
existing channels remain economically viable in the event of 
declining advertising revenues from a slowing economy. 
 
BROWNFIELD