By: Martyn Warwick
As relations between the US and Cuba continue slowly to thaw, American businesses are increasingly turning their attentions to a virtually untapped and potentially highly-lucrative emerging market opportunity sited just a few miles off the coast of Florida. One of the first and most determined to gain a foothold on the largest island in the Caribbean is AT&T. Ma Bell will use the upcoming and groundbreaking visit to Cuba by US President Barack Obama as a springboard from which to launch a mobile roaming agreement with Etesca, (Empresa de Telecomunicaciones de Cuba) Cuba's "let's-pretend-it-isn't-even-though-it-actually-is" state-owned telco.
AT&T wants to be in a position to parlay its early involvement in Cuban telecoms to be able, in due course, to grow it's interests as political and economic relations between the two nations continue to improve and evolve.
It is 90 years since a US president last visited Cuba and Mr. Obama's visit, planned for March 20 through March 22, will, it is hoped, put a brake on to what was beginning to look a lot like a continuing and unstoppable ideological continental drift. The visit, in the last 10 months of the Obama presidency, will set the seal on his personal determination to normalise relations with Cuba - or to normalise them as much as possible given the massively partisan and polarised nature of the current American political system.
The president will be helped in his task by a wide range of new Cuban policy initiatives and regulations that have been approved by various US Departments of State including Commerce and the Treasury. Among those industries that will be most helped by the new regulations are US telcos who are top of the growing list of those now exempt from the continuing but dwindling Congressional embargo on US firms investing in Cuba.
In fact, AT&T isn't the first US telco to do a mobile roaming deal with Cuba. In September last year, AT&T's arch-rival, Verizon, was allowed to institute a service but it was both expensive and very limited. In essence it applied only to the very few US citizens that were officially allowed to visit Cuba and users had to be members of Verizon's 'Pay-As-You-Go International Travel" club and pay for voice calls at the rate of US$2.99 a minute and (slow) data calls at $2.05 per minute. AT&T wants to provide much more than that- and at lower cost.
The US/Cuba rapprochement will also permit US telcos to export telecoms equipment to the erstwhile pariah island and service providers to deploy infrastructure and offer a variety of comms services to the Cuban people, including much-needed Internet access. It is hoped that in the fullness of time, and perhaps a lot sooner than might be expected, the export of comms equipment, devices, software, services and apps will enable Cuban citizens to communicate freely with the US and the rest of the world. It is not for nothing that AT&T is spending heavily on expanding its interests and presence in Mexico.
Cuba has a population of some 11 million plus but less than two million of them have access to a heavily controlled and policed version of a state-approved subset of part of the global Internet and it is certain that other US telcos and service providers will want to gain access to the nascent Cuban market as quickly as possible. Verizon won't stand idly by and watch its place being usurped by AT&T and T-Mobile US has already declared that it intends to get into Cuba as soon as possible.
Pulling Cuban telecoms up by its frayed bootstraps
When the Soviet Union collapsed in 1989 and the Russians left Cuba they took with them the the more than $11,000 per capita per annum subsidy they had been paying the Castro regime for many years. The subsidy was was keeping Cuba afloat in the face of the stringent embargo imposed by the US and when it was removed financial collapse swiftly followed and Cuba entered its infamous "Special Economic Period" when, basically almost nothing worked in the bankrupt republic and poverty stalked the land.
By the early 1990s, Cuba’s telecoms infrastructure was on its knees. The domestic network was still 99 per cent analogue and running on ancient equipment that had been in place since the 1920s and 1930s. There were just 350,000 (sometimes) working lines for Cuba's 11 million people and it was jokingly said that that there was more chance of any of them winning the Florida State Lottery (totally forbidden to ordinary Cubans, of course) than of getting dial tone.
Later in the decade in an astonishing about-face that flew in the face of what Fidel Castro had been ranting on about for 35 years, the Cuban government suddenly partially privatised the state-owned monopoly telco, EMTELCUBA. Spun off from the Ministry of Communications as (allegedly) a totally separate entity the new company was granted an exclusive, long-term concession to provide landline telecoms services in Cuba. It rapidly went into a joint venture with Mexico’s Grupo Domos Internacional and the jv was later expanded to include Telecom Italia. It didn't work (largely because of pressures put on Mexico by the US and the surely and purely coincidental run on the Mexican peso that accompanied it).
Telecom Italia was left holding the sticky end of the sickly Cuban babe when Grupos Domos of Mexico exited the joint venture and in due course, Rafin, a shadowy a state-owned company with intimate links to the Cuban military establishment bought out Telecom Italia's interest for the knock-down price of $700 million. Thereafter as de facto owner of Cuba's telecoms the Cuban government re-nationalised ETESCA.
However the act of cynicism (or of necessary real politik, according to your point of view) that resulted in the short-lived partial privatisation did permit some degree of capital injection on the part of various overseas investment vehicles and, by 2010, switches and landlines across Cuba had been digitised. The number of landlines increased to over a million and teledensity increased to 10 per 100 inhabitants. Furthermore a major programme of deploying fibre-optic infrastructure across the length and breadth of the island was instituted.
he mobile mambo at the Tropicana? More likely the lobster quadrille at the Ministry of Communications
At least it will be entertaining and possibly even instructive to watch AT&T doing the do-si-do with the Cubans. Its hard to envisage Ma Bell coming over all svelte and sultry in an attempt to woo a sexy Latin American lothario with a roving eye. Expect more galumphing earnestness than a quick-moving Tropican Club extravaganza.
For, notwithstanding the undeniable recent improvements in the country's landline infrastructure it is in the mobile space that the main battle for the Cuban domestic telecoms market will take place and it is where US (and other) services providers are readying themselves to make their plays.
Whilst there have been some foreign investments in Cuba’s mobile telephone infrastructure in recent years and the mobile network has expanded beyond recognition since 2008 when the government rescinded the the ban that prevented ordinary Cubans from buying mobile devices and simultaneously reduced tariffs, Cuba's mobile network and services continue to lag a long way behind that of most of its Caribbean neighbours and the country still has one of the lowest mobile penetration rates in Latin America.
What's more, despite the price reductions of recent years, the cost of making and taking calls puts the ownership of a mobile phone way beyond the reach of the average Cuban. And even those that can afford it get a shoddy and dated service based on obsolete and obsolescent 2G technology - and, of course, no mobile Internet service at all. That is the preserve and privilege of Cuba's top-heavy mass of government officials and state apparatchiks, a few overseas business execs and diplomats and tourists staying in the best hotels.
In the final months of his presidency, Barack Obama is trying to change things but his initiative to normalise relations with Cuba is contentious in some quarters and faces strong opposition from many Republicans. Only last week, at a Republican presidential debate in held in Miami, Donald Trump together with Senator Marco Rubio and Senator Ted Cruz promised that they would put an end to the tentative rapprochement and return diplomatic relations between Washington and Havana to the deep freeze it has been in since the early 1960s. They are also promising to bring back Howdy Doody.
However, James Williams, the president of Engage Cuba, a pressure group pushing for the speedy normalization of trade links with the island says "Every deal that happens shows we're only moving forward and makes the whole process irreversible. It also argues for why we need a full lifting of the embargo, to get the real major deals that we all want to see."