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why did Alcatel-Lucent win the ALBA-1 fiber-optic cable contract with Cuba and Venezuela?

January 14, 2011

As I mentioned in a recent post, Venezuela, Cuba, and Jamaica are jointly installing an undersea fiber-optic cable, dubbed ALBA-1, that will, according to Cuba’s Prensa Latina, “break the communications blockade imposed by the United States” and improve internet connection speeds in Cuba by a factor of 3,000. Earlier this week, the first 994 miles (1,600 kms) of cable (of a total 3,125 miles / 5,000 kms) began a trans-Atlantic voyage from Calais, France to Venezuela aboard the Ile de Gatz. The connection between Cuba and Venezuela is projected to become operational in July at the earliest. Prensa Latina lists a cost estimate of $70 million, though it’s unclear to me if that is the total cost or just the Cuban investment. (UPDATE: The initial cost estimate, from October 2006, was $55 million: $35 million for the undersea portion and $20 million to extend the cable to the Cuban and Venezuelan networks in Havana and Caracas. I assume, therefore, that $70 million is the current estimate for total cost.)

map showing La Guaira, VenezuelaVenezuela’s CVG Telecomunicaciones C.A. (CVG Telecom) and Cuba’s Empresa de Telecomunicaciones de Cuba S.A. (ETECSA) signed a preliminary accord for the project in October 2006, at which point Jamaica was not involved. The Venezuelan connection will be made at Camurí, near the country’s main port of La Guaira, just north of Caracas. The cable will connect to Cuba’s national network at Siboney, roughly 9 miles (14 kms) from Santiago de Cuba on the southeastern coast.

Currently, Cuba depends on costly and relatively slow satellite service. According to the Cuban government, this is largely the result of the US State Department’s refusal to permit Cuba to connect to a fiber optic cable linking Cancún, Mexico and Miami, Florida, despite its passing only 20 miles [32 km] from Havana. In addition to increasing data and voice connection speeds, ALBA-1 is expected to reduce Cuba’s satellite costs by 25 percent.

The cable is being shipped from France as a result of the project contract having been awarded to Alcatel-Lucent. According to (my interpretation of) a document made available on WikiLeaks, Alcatel-Lucent bid on the project via their Chinese subsidiary, Alcatel Shanghai Bell (ASB; now Alcatel-Lucent Shanghai Bell / ALSB), and in conjunction with a French subsidiary, Alcatel Submarine Networks (ASN). The document indicates that ALSB’s main competitor was China’s Huawei, which created a Venezuelan subsidiary (Huawei Technologies de Venezuela) in 2001. Huawei cell phones are common in Venezuela and the company was selected by Venezuela’s dominant telecommunications corporation, Compañía Anónima Nacional de Telefonos de Venezuela (CANTV), to upgrade its national fiber-optic backbone in 2004. (CANTV was re-nationalized in 2007.)

Given the close relationship between Venezuela and China, generally, and Huawei’s significant Venezuelan footprint, why would the Venezuelan and Cuban governments select Alcatel-Lucent, a French/US transnational? (Alcatel and Lucent merged on December 1, 2006. Nonetheless, the bid document made available on WikiLeaks, copyrighted 2007, uses “Alcatel-Lucent” only once; all other instances, including the copyright, use “Alcatel”.) The answer may be that Alcatel-Lucent offered better technology without subcontracting any major elements of the project. As Alcatel Shanghai Bell  put it, “ASB is the only Chinese partner able to provide turnkey submarine solution with inhouse field proven products and total independancy” [sic]. For example, Alcatel-Lucent billed its cable as resistant to 7,000 meters versus only 1,500 meters of resistance for Huawei’s line. Alcatel-Lucent also committed to in-house “dry and wet” maintenance, as well as using its own “vessel fleet” for installation. According to Alcatel-Lucent, Huawei would have had to outsource these and other operations. It might also be the case that Alcatel-Lucent simply bribed the requisite officials, as Alcatel is alleged to have done in Costa Rica, Honduras, Malaysia, and Taiwan between December 2001 and June 2006. Whether Alcatel’s claims of superiority or the SEC’s claims of bribery are true, I can’t say, but I suspect that another set of factors was more influential.

ASB claimed to be “fully compliant with Venezuela Cuba technical specifications” and listed “[f]ull repesct of Embargo regulation” [sic] among them. The document goes on to state that:

Alcatel, Alcatel Shanghai Bell, Alcatel Submarine Networks are committing to deliver the project while respecting Embargo policy

  • Alcatel group and ASN are french registered companies
  • Alcatel Shanghai Bell is a chinese registered company
  • Specific embargo clauses will be part of the T&C’s [terms and conditions] to ensure our commitment for the whole life of the project [sic]

Of course, Huawei, being a Chinese company with an established Venezuelan subsidiary, should not have had any problems in avoiding the US embargo. Their supposed subcontractors,  however, did pose some potential problems. Global Marine Systems Ltd. (GSML), for instance, was to handle the cable installation and maintenance. Based in the UK with representation in Singapore, Florida, and Boston, GSML itself may have avoided the embargo, but – according to the Alcatel-Lucent document – it was offering power-feed equipment from Spellman High Voltage Electronics Corporation, “an American company headquartered in NY state, USA [that] may cause Embargo enforcement issues in Cuba”. Alcatel-Lucent also pointed out that it would be using ASN repeaters, which have no US components or patents. Huawei, on the other hand, was said to be offering repeaters from UK-based Red Sky Telecom, which rely on a US component and make use of 41 patents registered in the US.

So, were Venezuela and Cuba “forced” to select Alcatel-Lucent due to the US embargo? To be clear, that conclusion is merely speculation based on a single leaked document. If  any reader has additional information, one way or the other, please post a comment. If my speculation is correct, however, then we have an odd case in which the socialist states of Cuba and Venezuela chose a French-US transnational over a “communist” Chinese corporation precisely in order to avoid the US embargo! Such, perhaps, are the intricate paradoxes of intellectual property in a neoliberally globalized world.

UPDATE: An Executive Technical Summary, dated October 8, 2006, contains a section entitled “Analysis of the Political Environment”  (“Análisis del entorno político“), that provides considerable support to my suppositions. The full text of that section follows:

The regulations imposed by the blockade against Cuba and the regulations imposed on the rest of the world through extraterritorial laws, hinder enormously negotiations with companies interested in constructing an undersea cable that connects to Cuba. If the possibility of direct aggression against the cable itself is added to that situation, it will be essential to seek all possible protection in international law.

As such the proposal is for a submarine cable constructed and operated by legally established international telecommunications operators, that should count on maximum protection from international organizations. See Appendix 1.

Furthermore for the Venezuelan State, the materialization of an international undersea cable system represents the fortification of the Nation’s communication infrastructure.

Political premises will be present when defining the geographic configuration of the undersea cable.

Appendix one lists the International Telecommunications Union (ITU) and the International Cable Protection Committee (ICPC). Here’s the original text in Spanish:

Las regulaciones impuestas por el bloqueo contra Cuba y las regulaciones impuestas al resto del mundo a traves de leyes extraterritoriales, dificultan enormemente las negociaciones con las empresas interesadas en construir un cable submarino que amarre en Cuba. Si a esa situación se le suma la posibilidad de agresiones directas contra el cable mismo, sera imprescindible buscar en la legislación international toda la protección posible.

Por tanto la propuesta es un cable submarino construido y operado por empresas operadoras de telecomunicaciones internacionales legalmente establecidas, que debera contar con el maximo de protección de las organizaciones internacionales. Ver Anexo 1.

Por otra parte para el Estado Venezolano, la materializaci6n de un sistema de cable submarino internacional representa el fortalecimiento de la infraestructura comunicacional de
la Nación.

Las premisas políticas estarán presentes al definir la configuración geográfica del cable submarino.

UPDATE (1/18): Cuba’s state-owned Juventud Rebelde newspaper reports that the cable installation is being handled by “the french-chinese company Alcatel Shanghai Bell” (“la empresa franco-china Alcatel Shanghai Bell“) without making any mention of ASB’s French-US parent company, Alcatel-Lucent.

UPDATE (8/22): Reuters is reporting that the ALBA-1 project has been delayed due to technical difficulties and is under investigation as part of a larger attempt to deal with corruption within Cuba’s state-owned telecom monopoly, ETECSA. (Thanks to ICTD.de for pointing me to this info.)

UPDATE (5/21/12): The AP has run a story with speculation regarding the reasons why the cable does not seem to be operating and is not mentioned by the Cuban government. Suspicions revolve around corruption and the threat that internet access would pose to the state.

3 Comments leave one →
  1. cableman permalink
    July 7, 2011 3:30 pm

    Some clarification:

    The Huawei company that would have laid this cable is Huawei Marine Networks a 51/49 joint venture between Huawei (China) and Global Marine Systerms Ltd (UK), GMSL are not simply a subcontractor.

    The original Red Sky technology IP used in the HMN repeater now hardly resembles its origins, so much R&D has been done since that date to further develop and improve it. They are manufactured in the UK by HMN. Some people now consider their latest repeaters to be the most advanced on the market.

    The cable proposed in all HMN systems has always been rated to a depth suitable for the engineered route.

  2. Dan permalink
    July 15, 2011 3:30 pm

    Greetings from Venezuela, clicking here and there I found your blog and must say that it’s really interesting. I’m looking forward to reading the rest of your posts.

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