VZCZCXRO0516
PP RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV RUEHSR
DE RUEHMD #0417/01 1180633
ZNR UUUUU ZZH
P 280633Z APR 09
FM AMEMBASSY MADRID
TO RUEHC/SECSTATE WASHDC PRIORITY 0553
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHLA/AMCONSUL BARCELONA 3964
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS SECTION 01 OF 03 MADRID 000417

SENSITIVE
SIPDIS

STATE FOR EEB/TPP/IPE AND EUR/WE
STATE PASS USTR JGROVES AND DWEINER
STATE PASS COPYRIGHT OFFICE
USDOC FOR 4332/DCALVERT
USDOC ALSO FOR USPTO

E.O. 12958: N/A
TAGS: ECON ETRD KIPR ECPS SP
SUBJECT: INTERNET PIRACY IN SPAIN: SUSPENSION OF
PRIVATE-SECTOR NEGOTIATIONS

REF: A. MADRID 410
¶B. MADRID 397
¶C. MADRID 224 AND PREVIOUS

MADRID 00000417 001.2 OF 003


SENSITIVE BUT UNCLASSIFIED - PLEASE PROTECT ACCORDINGLY

SUMMARY
-------

¶1. (SBU) On April 17, negotiations between the association
of Internet Service Providers (ISPs) ("Redtel") and the
Coalition of Creators and Content Industries ("Coalition")
were suspended. The parties had been meeting regularly for
almost a year in an attempt to negotiate an agreement on
combating internet piracy. According to Coalition sources,
Redtel advised that it could not accept the Coalition's
latest proposal and did not see any point in negotiating
further. The government, which had been pressing the parties
to reach an agreement that it hoped would serve as a basis
for legislative and regulatory reform, asked each side to
send its proposal in the hopes of identifying a solution that
would bridge the differences between the two sides. However,
the proposal submitted by Redtel was four months old and did
not recognize more recently negotiated points of agreement.
The government is analyzing the proposals and must decide
whether to try to broker an agreement or to develop and
implement its own initiative independent of service and
content providers' positions. End Summary.

MOVING TOWARDS A GRADUATED RESPONSE SYSTEM

¶2. (SBU) Per ref C, the GOS has long believed that any
"graduated response" regime or other package of measures to
dissuade internet users from unauthorized file-sharing and
punish repeat offenders will be politically controversial,
and has pinned its hopes on the private-sector negotiations.
Senior government officials had pressed the presidents of
Redtel and the Coalition to submit their agreement by
December 31, and then by March 4. After the parties missed
both deadlines, the government reportedly expressed the
intention to form a Working Group to develop its own
solutions. This was apparently an attempt to pressure the
parties to conclude a voluntary agreement rather than have
the government impose its will.

¶3. (SBU) As might be expected, the parties have approached
the negotiations from vastly different perspectives. Redtel,
whose members represent four major telecommunications
companies - Telefonica, Vodaphone, ONO, and Orange - is
mostly interested in the "business model" aspects of the
agreement, in which content providers would agree to make
some content available online, which the ISPs could market.
This poses a problem for the U.S.-based Motion Picture
Association of America (MPAA - perhaps the most influential
Coalition member), which argues that it can agree to general
statements about the desirability of online legal content but
cannot, for U.S. anti-trust reasons, enter into business
negotiations with Redtel on behalf of its members, which are
individually considering online distribution deals.

THE DEAL THAT WAS ON THE TABLE

¶4. (SBU) With respect to dissuasive measures, before the
negotiations were suspended, the parties had reportedly
agreed to a watered-down version of the graduated response
regime currently under consideration in the French
legislature. The parties would agree to ask the government
to create a national commission to receive complaints about
illicit websites and downloading activity and send warning
letters. However, the government believes it could probably
send only about 1000 such letters per month. Websites that
post IPR-infringing content would receive only one warning
before being blocked; Coalition president Aldo Olcese
believes that some 70 sites account for 80 percent of all
infringing content and that their takedown would go a long
way towards solving the problem. With respect to individual
users who download infringing content, Redtel is on board
with sending them two warning letters but insists that any
agreement explicitly rule out suspension of internet access
as a sanction for repeat offenders. Representatives of the
film and music industries accept that account suspension
should be a rarely used last resort in extreme cases but have
not agreed to eliminate it as an option. Redtel also

MADRID 00000417 002.2 OF 003


believes that fines should be the only sanction for offenders
who ignore the first two warning letters. Its negotiators
argue that such technical measures as posting reminder
warnings on individual internet accounts or reducing
bandwidth are too difficult and costly to implement or too
interventionist. Content providers insist, however, that the
agreement include the possibility of some technical measures,
even if the specific details are left to be worked out later.

¶5. (SBU) According to Olcese, Redtel had agreed to the legal
and regulatory aspects of the agreement. To reduce the
burden on the government, these would be minimal: The parties
would ask the government to amend the 2002 Law on Information
Society Services and Electronic Commerce (LSSI) to create the
government body to implement the graduated response regime,
and to some provisions regulating that law. They would also
propose amendments to the law governing civil procedure to
remove some of the obstacles that impede rights-holders from
pursuing civil remedies against internet pirates. There are
conflicting accounts as to whether the parties would also
call on the government to amend the Prosecutor General's 2002
Circular that currently makes it almost impossible to obtain
criminal convictions in digital piracy cases. However,
according to Coalition sources, the proposal Redtel sent to
the government includes none of the legislative or regulatory
provisions, focusing almost entirely on business model issues
and minimizing the legal and technical elements.

GOVERNMENT PONDERS NEXT STEPS

¶6. (SBU) According to Salvador Soriano, Deputy Director for
Information Society Services in the Ministry of Industry,
Tourism, and Trade, the government is disappointed to learn
that negotiations have failed. It is currently studying each
side's proposal to see if there are enough areas of agreement
to provide a basis for government action. Carlos Guervos,
acting Deputy Director for Intellectual Property at the
Ministry of Culture, characterized the breakdown as a small
hurdle. He said the Culture Ministry is determined that
there will be new regulations to address internet piracy; it
would be easier if they were based on a private-sector
agreement, but if that is not possible, the government will
develop its own solution.

¶7. (SBU) Leading members of the Coalition hope that the
government, eager to avoid embarrassment given how much it
has riding on a successful negotiation, will persuade Redtel
to return to the table with a more forthcoming attitude. The
status quo - a legal regime that makes it almost impossible
for content providers to enforce their rights and a
prevailing public belief that P2P file-sharing is or should
be legal - is unsustainable for content providers but
advantageous for Internet Service Providers. Redtel members
and their parent companies state that they will obey any law
or regulation that the government enacts but have been
reluctant to undertake any voluntary measures for fear of
alienating their client base. Pedro Farre, government
affairs director for the General Society of Authors and
Publishers (SGAE), explains Redtel's withdrawal from
negotiations as "a piece of theater." The recent campaign by
the Internet Users' Association ("Internautas") to drive out
the new Minister of Culture (ref B), he explained, enables
Redtel members to argue that anyone who agrees to restrict
internet use in any way will be the object of overwhelming
popular wrath. (Comment: The alleged fear of the Internautas
seems exaggerated to us, as they have not proven able to
mobilize significant numbers for any event.)

COMMENT

¶8. (SBU) Even if this impasse is overcome, there may be more
bumps in the road ahead. In March, the parties were
reportedly close to a deal, with only MPAA holding out,
preferring no deal at all to what it considered an inadequate
offer. Other stakeholders, believing that an agreement
without the participation of MPAA would lack credibility,
prevailed upon the Association to continue to negotiate.
There continue to be disagreements within both the Coalition
- especially between the film and music industry groups and
copyright management societies like SGAE - and Redtel,
between Telefonica and smaller ISPs. This time it is Redtel
that prefers no deal to one that it believes will bring major
headaches.

MADRID 00000417 003.2 OF 003



¶9. (SBU) This impasse offers the government an opportunity
to exercise leadership, but it remains unclear whether the
government will work actively to help the parties overcome
their differences, or propose a solution of its own, or take
no action. One school of thought is that the government
would like to defer this issue until after European
Parliament elections in June. Coalition members are hopeful
that anti-piracy legislation will pass soon in France,
possibly influencing the calculations of Redtel and the
government. Post will use our upcoming meeting to inform the
GOS of its Special 301 status to emphasize the importance we
attach to GOS action. End Comment.
CHACON