http://havanajournal.com/business/entry/cuba-telecommunications-calling-us-citizens/

HavanaJournal.com: Cuba Business

Cuba telecommunications calling US citizens?

Posted April 16, 2009 by publisher in Cuba Business.
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By Latin Business Chronicle staff

President Barack Obama’s liberalization of restrictions on U.S. telecom services in Cuba won’t lead to any surge in business any time soon, although the Caribbean island has big potential with the right policies in place, experts say.

“Everybody is forgetting that the Cuban government will need to take some measures to change the regulatory framework for U.S. companies to benefit,” says Jose Otero, president of Signals Telecom Consulting. “Just the fact that that you need a [Cuban] regulatory change is a big obstacle.”

NEW U.S. RULES

The White House announced Monday that it would authorize U.S. firms to establish fiber-optic cable and satellite telecommunications facilities linking the United States and Cuba, allow roaming service agreements with Cuba’s telecom providers and permit U.S. firms to engage in transactions necessary to provide services to customers in Cuba.

“Most observers expected to see a loosening of travel restrictions and perhaps a greater ability to transfer money between Americans and their family members in Cuba, but, a general opening up for this key U.S. industry was a bold move that was not widely expected,” Richard Burke, trade counsel in the Washington, D.C. office of U.S.-based law firm White & Case said in a statement today. “The Obama Administration may be betting that the benefits of exposing the Cuban people to the Internet, satellite television, and modern communications outweigh any resulting financial windfall to the Castro regime.”

However, experts warn that there are several challenges ahead for U.S. firms that may be interested in taking advantage of the new regulations. In addition to necessary changes by Cuba’s government, U.S. firms face the hurdle of strong competition from companies in other countries that are already active in Cuba or have better relations. ”Even before U.S. companies, there are a lot of [non-U.S.] companies with better relations that will also try to bid for any type of concession in Cuba,” Otero warns.

STRONG POTENTIAL

That being said, he sees strong potential in Cuba if the government implements the right policies aimed at attracting foreign investors. “Cuba is the ... biggest opportunity in the region in terms of low penetration of various telecom services, be it fixed, wireless, Internet or broadband, it becomes a really, really attractive market for anyone coming in there,” Otero says. “Once the market opens, there’s going to be a huge boom…It reminds me of the Czech Republic after the fall of Communism….There’s going be a lot of business”

Cuba today has the lowest wireless penetration in Latin America—1.8 percent in 2007,  according to the International Telecommunications Union (ITU). No other country in the region has single-digit penetration. Haiti, the country with the second-lowest wireless penetration in Latin America, had a penetration rate of 26.1 percent in 2007.

As a result of having Latin America’s lowest wireless telecom, Internet and broadband rates in addition to low fixed telecom and PC penetration rates, Cuba ranked at the bottom of the latest Latin Technology Index from Latin Business Chronicle.

In addition to the low technology penetration, Cuba’s market will be spurred by factors such as close proximity to the United States and a large Cuban-American population that will send more money to the island, Otero says.

HAITIAN MODEL

Cuba won’t be the first Latin American country to show dramatic improvements in technology. Another Caribbean nation, Haiti, has seen a boom in wireless penetration in recent years, largely thanks to wireless operator Digicel.  Haiti went from having 140,000 wireless subscribers in 2002 to 2.5 million in 2007, according to the ITU. “Look at Haiti,” Otero says. “With the proper business model you can [boost] mobile penetration.”

And despite the low telecom penetration, Cuba is far from an untapped market for foreign telecom providers. “Cuba does have foreign telecom providers and vendors on the island,” he says. “So it’s not a completely untapped market.”

Telecom Italia owns 27 percent of Cuba’s telecom company Etecsa, while equipment vendors like Ericsson and Alcatel are also active. And previously, Spain’s Telefonica was also a partner in a Cuban venture. And Venezuela’s government is already deploying an undersea cable system to Cuba.

LEGAL CHALLENGES

Meanwhile, the track record of U.S. telecom companies in Latin America has not been that positive, Otero adds. In recent years, they have largely withdrawn from the region, which is now dominated by operators like Mexico’s America Movil and Telefonica.

U.S. companies that start operating in Cuba may also face legal challenges from Cuban exiles who lost property during the revolution and today are U.S. citizens, Otero warns.

Although Obama’s new rules will allow U.S. firms to provide roaming in Cuba, that won’t necessarily have much of an impact.

First, high-priced roaming is generally a service targeting business travelers rather than tourists and Obama’s liberalization does not lift the overall commercial sanctions against Cuba nor restrictions on travel by Americans in general. The new rules do allow Cuban-Americans to travel.

TECHNOLOGY HURDLES

Second, Cuba today offers limited technical roaming capability, mainly using GSM technology used by only two U.S. carriers – AT&T and T-Mobile – and the 900 MHz band frequently used in Europe, but not in the United States. There are only some patches of Havana and Varadero that offer the 850 MHz band used in the United States, Otero points out.

That means that Cuba would have to invest considerable amounts in new equipment to provide widespread roaming for Americans, which it won’t likely do until the U.S. travel embargo in general is lifted.

Even today, roaming is hardly used by the 2.35 million tourists that visit the island yearly, mostly from Europe.  “Roaming is a very niche service,” Otero says. “No one wants to be surprised with a $500 to $1,000 bill after their trip.”

Member Comments

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On April 16, 2009, publisher wrote:

Anybody have any cellphone horror stories?

What does Cuba need to do to accommodate visitors?

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On April 17, 2009, bernie wrote:

With the high cost of USA cell phone usage who in Cuba will be able to afford the service????

With the research that is going on NOW, about the effects of micro-waves and other types of electro-magnetic interference with the atmosphere, in less
than 10 years telephone users will go back to the land lines???

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On April 19, 2009, Marek wrote:

José Otero’s prognosticating makes sense… *if* Cuba were a capitalist economy with sufficiently high incomes to enable a significant portion of the population to pay market rates for telecoms. This isn’t likely to happen anytime soon…

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On April 22, 2009, Lucien Lenoire wrote:

I agree completely with Marek.  As Fidel said after the mercenaries were defeated in 1961, there will be a successful revolution in the USA before there is a successful counter-revolution in Cuba.  As well, I think cell phone use in Cuba is priced similarly to that in Europe.  Of course prices could be as high in USA as they are in Canada.  I pay about $100 CAD for my cell service, an outrageous amount, probably the highest market rate in the world.

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On April 22, 2009, paul wrote:

European mobile phones are both expensive and the pricing plans are through the roof. Very expensive to have lots of talk time, so most people just sms.

You can get metroPCS or boost for 50 dollars in the USA. Very reasonably priced, and non existent in Europe. I’m sure you trolls will go google crazy trying to 1up me.

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On April 23, 2009, Yeyo wrote:

There is no reason for the high costs of the Cell phones and rates in Cuba, other than as always the Cuban Government trying to take as much as possible from the people.

The government is always “trying” to keep capitalistic competition away from the “clean” Cubans, allowing predatory practices from unscrupulous Cuban and foreign companies that permit more rip-offs from the people.

The company that introduced the Cell phones to Cuba got a 20 year exclusive agreement for the distribution of Cellular services in Cuba from the government, something that is unheard in any democratic country. Obviously that allowed the company to charge whatever they wanted without the risk of losing business, in fact the business grew steadily every single year.

Doing business in Cuba is extremely difficult for any foreign company, however if you learn the system and work the right (corrupt) way it can be extremely profitable, because you can get the exclusive for your products, again something that is inconceivable in most countries.

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On April 23, 2009, Marek wrote:

And what were the details of that 20-year deal? Cuba needed massive infrastructure upgrading (fibre lines, towers, transmitters, etc.) that it had no resources nor expertise to develop itself.

This is no different than the 15-20 year agreements signed in the early 1990s with foreign investors to develop the tourism infrastructure. Unlike other countries, the country ultimately benefits at the end of these agreements, as the foreign investor recoups a guaranteed profit and the state retains ownership of the infrastructure.

Normal business practice anywhere else in the world -but Cuba, as always, is held to a different standard.

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On April 24, 2009, Yeyo wrote:

A bunch of companies/investors are always interested in a new large market like Cuba. In this particular case the technology was readily available around the world and coming to Cuba several years later. There is no gain for the Country when the bidding process is done across closed doors and only include couple of guys that may or may not have previous experience on the industry.

The 15-20 years contracts signed with foreign investors for tourism infrastructure were in my opinion also a mistake, because were not open to all potential investors but only to few and involved lot of corruption as always when bidding processes are not clean. 

Normal practices are to encourage competition to reduce prices and therefore benefit for the people.
Like what the Canadian government is doing that even when the Country is already covered by three large national carriers, they posted more spectrums to open bidding and for new entrants, to raise competition, push for more offerings/lower prices. That is normal business practices.

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On April 29, 2009, beachgirlbaby wrote:

just a thought i have magic jack phone service its land line i can make calls any where in usa and canada for free cuba calls are .92 cents a minute if i send someone a magic jack in another country all calls are free but one problem you have to have internet acess dsl. but international calls are cheap or free if you could send a family member a magic jack. have a good day

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On April 29, 2009, manfredz wrote:

i think you’ll find that most private cubans who have internet use dialup, which wont support voip (which is what magic jack is); most who have dsl will share 112k adsl across their network, which also may be too weak to support voip.

Then there is the additional factor.  I know when VoiP first came out , some countries were blocking the ports used by VoiP so that it wouldtn be competing with their local telecoms.  Don’t know if Cuba is or not. (or would if VoiP started being used.

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On April 29, 2009, beachgirlbaby wrote:

i called cuba a couple of times with my magic jack put 40.00 dollars on my account i had no trouble calling took awhile to get through. in some areas its easy to get through right away.havana i have no problem, santiago i do have a bit trouble the operator takes up most of the time, or i have to keep calling over and over again.till i do get through.

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On April 29, 2009, manfredz wrote:

calling cuba would not be the issue because your VoiP call goes into the regular phone system ; what I was describing was the issue that would be faced with someone at the Cuban end being given a Magic Jack (obviously with a US nbr) to call the US.
Whether or not to use it to call Cuba boils down to, for reliability and quality, how does it rate cost-wise compared to other ways of calling Cuba.

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On April 29, 2009, Lucien Lenoire wrote:

A friend of mine here in Canada bought a cellphone, which he only uses in the USA.  It costs him $30 US for 300 minutes including the phone at Costco in Bellingham, WA.  That is way cheaper than his Canadian cell, BUT he cannot use it Canada.

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On April 29, 2009, beachgirlbaby wrote:

it costs .92 cents a minute i cant send it to cuba unless they have fast acess dsl it hooks up to a computer to your phone line i dont pay nothing to call

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On April 29, 2009, beachgirlbaby wrote:

sorry for the typo i dont pay nothing to call in the usa and canada

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On May 24, 2009, oprina tiberiu wrote:

Today, one of the greatest marvels of our advances in information technology is the ability to connect to the Internet without slow dial-up connections, cumbersome modems, and the inconvenience of cables. Visit http://WiMAXWireless.com, for a complete guide to wireless technologies!