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government regulation – on both sides – is deterring telecommunication between the US and Cuba

September 3, 2010

Big ups to Jens Erik Gould at Bloomberg for packing lots of information into his piece on US regulation of telecommunications services to Cuba.

Cuba’s wireless market is virtually untapped by foreign capital. Telecom Italia SpA owns 27 percent of Empresa de Telecomuniaciones de Cuba S.A. (ETECSA), the state monopoly, but as of yet there are perhaps 800,000 to 1 million mobile phone lines (compared to 1 million land lines) on the island of more than 11 million people. Gould says it “could become the largest telecom market in the Caribbean, topping Puerto Rico’s $1.6 billion market.” It could, that is, but for the Cuban and US governments. In Cuba, mobile phone ownership was tightly restricted until 2008, when the government allowed all citizens, not just the elite, to own cell phones. After that the main obstacle was cost. Initially, a connection required 6 or 7 months worth of wages. The price has fallen by at least half, but voice minutes remain prohibitively expensive. As a result, few people actually talk on their phones. More send texts (a month’s salary buys about 120 text messages), but most people use their cell phones as beepers – ID’ing the caller and then searching out a working pay phone to call them back. Yoani Sánchez and her friends created a code: two rings if it’s urgent, three rings if it can wait.

Things changed slightly in April 2009, however, when the Obama administration eased various restrictions on communications with Cuba. US residents are now permitted to pay the cell phone bills of Cuban residents. With US residents paying the bills, Cubans will start talking more. While this made Cuba a potentially lucrative market, it did not make it accessible. So now US telecom corporations are asking for more:

Nokia, the world’s biggest mobile-phone maker, is urging the U.S. to ease its 47-year-old trade embargo so it can sell handsets to Cuba. AT&T and Verizon, the largest U.S. wireless providers, urged regulators to make it easier for U.S. companies to directly connect calls to and from Cuba.

Unfortunately for telecom stockholders, there are still sanctions in place. For example, the paradoxical provision of “the 1992 Cuban Democracy Act that prohibits investment in Cuba’s telecommunications network.” Elsewhere, US investment in telecommunications is about “empowering people” and “improving the standard of living at home and abroad”. In Cuba, however, democracy is somehow best served by prohibiting such investment. That’s the type of duplicitous logic that has permitted neoliberalism to wriggle its way into the hegemonic mindset.

Will the Obama administration push for more substantial changes? US companies (as well as foreign companies, like Nokia, who want to distribute from Miami) cannot sell hardware on the island until the embargo is lifted or relaxed. Service providers, meanwhile, are hemmed in by an FCC rule which prevents them from paying more than 19 cents per minute to connect to the Cuban system. The Cubans are demanding 89 cents per minute. Given the FCC’s slow progress on much more salient issues, its hard to see how this will change anytime soon, though Gould reports that “[t]he FCC is considering whether to waive the rate cap”. Even deeply conservative, anti-communist free marketeers would be hard pressed to argue against that decision.


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