Wall Street Journal Report: Public Outcry Has Complicated Eutelsat's Decision to Terminate NTDTV's Contract

In a story entitled "Eutelstat's Chinese Aims Hit Static: French Satellite Firm Finds Outcry Complicates Strategy For Bargaining With Beijing" published in the April 13 Wall Street Journal, correspondents Murray Hiebert and Andy Pasztor are reporting that Europe's second largest satellite operator, Eutelsat, has become embroiled in controversy over the Chinese Communist government's treatment of the media and religious dissidents. But in a new twist, the WSJ states that "the company appears to be as much a shrewd opportunist as a victim in the increasingly murky affair."

The report states, "Like many of its brethren in the satellite industry, France's Eutelsat SA for years tried in vain to find ways to beam mainstream television and data services into China. Then last spring, according to critics as well as current and former executives, the company devised a plan that already has produced a breakthrough for it in China.

"The strategy was kicked off when Eutelsat used an intermediary to sign a one-year agreement to broadcast New Tang Dynasty Television, a New York-based news and information channel that includes some programming sympathetic to the banned Falun Gong spiritual movement."

The Chinese government was outraged by the deal, maintaining that NTDTV has connections with Falun Gong, a popular spiritual practise that it has been severely persecuting and trying to silence for over five years.

The authors continue, "But in a striking twist, these people say, Eutelsat from the outset envisioned using NTDTV as a pawn that could be sacrificed. Last May, just weeks after Eutelsat began broadcasting NTDTV, a Beijing-owned satellite company sent it a stern warning about continuing the programming.

"Eutelsat signalled its willingness to cut its ties with NTDTV. The Paris-based company, controlled by private-equity groups, has since snared broader, potentially more-lucrative deals from Chinese authorities."

"What was supposed to remain as backroom manoeuvring, however, has become a bitter international dispute over human rights and freedom of the press. U.S. lawmakers and Bush administration officials have jumped into the fray, demanding that NTDTV be kept on the air. The International Federation of Journalists and French-based Reporters Without Borders accuse Eutelsat of knuckling under to pressure from Beijing.

Eutelsat claimed that its decision to drop NTDTV was based solely on economic factors, and it did not, as many critics have claimed, bow to pressure from Beijing. The Chinese Embassy in Washington declined to comment when asked if it played a role in ending the contract.

The article goes on to report, "Regardless of whether Eutelsat cuts NTDTV programming Friday as it has said -- or does a last-minute reversal and extends the service, as many company officials now expect -- the flap highlights both the opportunities and the political minefields facing Western companies as they seek to tap China's vast markets."

"The Bush administration, which has Pentagon contracts valued at tens of millions of dollars with Eutelsat for communications over Iraq and Afghanistan, is quietly pressing the satellite company to keep NTDTV on the air. Adding to the pressure, a bipartisan group of more than 90 U.S. lawmakers yesterday sent a letter telling President Bush that 'we see no reason why U.S. taxpayers should continue to fund satellite companies
that discriminate in favour of repressive regimes and against free media.'

"Largely unnoticed amid the rhetoric is the fact that Eutelsat already has gotten some of the commercial advantages it sought. In December, Skylogic, an Italian Eutelsat affiliate, signed an agreement with ChinaSatcom, one of six Chinese telecommunications operators, to provide satellite links between the two countries. Around the same time, Eutelsat also signed a memorandum of understanding with Beijing paving the way for further ties, including sending limited European news programs into China, according to
industry officials."

The WSJ reports that the Chinese government is "sensitive about foreign media companies disseminating Chinese-language programs in China."

"Last May, soon after Eutelsat took over broadcasting NTDTV, a vice president of Beijing-owned China Satellite Communication Corp., sent the French company a letter warning that 'broadcast of such [NTDTV] transmission is not authorised in our country and violates the laws of [China].'"

"When Eutelsat considered responding by terminating its contract with NTDTV, the Pentagon, which gets more than 40% of its leased satellite bandwidth from the French company and is one of its largest customers, intervened to help keep the channel on the air. But this year, Eutelsat has told the U.S. government that it can retain NTDTV only if Washington buys more capacity on its satellites, according to internal Pentagon e-mail communications reviewed by The Wall Street Journal.

"'Eutelsat USA has approached us, basically saying that, absent a business case involving [the] U.S. [government], Eutelsat is likely to take China's offer of increased business, and drop NTDTV,' a Pentagon official told Assistant Secretary of Defence Peter Rodman in a March 7 e-mail. The e-mail from Linton Wells, deputy assistant secretary of defence for
command, control, communications and intelligence, conceded that Washington has 'leverage' with Eutelsat, but added that 'we also need to be careful that we don't shoot ourselves in the foot by incurring termination liabilities or impeding the ability of warfighters to get the bandwidth they need.'

"A Pentagon spokesman confirmed that 'we have met with Eutelsat, and we have business dealings with them' but added that it would be inappropriate to comment further on those discussions.

"A Eutelsat spokeswoman said company officials weren't available to comment on its dealings with the U.S. government, but the company said in a statement that it wants 'to regain the flexibility' to look for other customers.

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