Cuba, Google Ink Deal to Boost Services Before Trump Takes Over

Bloomberg BNA

By: Lydia Beyoud

Alphabet Inc.'s Google announced Dec. 12 that Cuba’s national telecommunications provider will deploy its Google Global Cache servers to speed up service for Cubans using the company’s products, such as YouTube and Gmail.

The agreement is seen as a bold move that comes with some political risk for the Cuban government and uncertainty about how Google might parlay the deal into anything more meaningful.

The deal will allow the Cuban telecom provider, Empresa de Telecomunicaciones de Cuba S.A. (ETECSA), to use Google’s server technology for that purpose, according to a Google statement. Under the Google Global Cache service, Google stores popular content on servers located in nearly every country in order to speed the loading time for videos or apps through Google Play. A Google spokeswoman declined to comment on whether Google will be paid for the service, when and how many servers would be deployed, or other specifics of the deal.

Cuba is among only a handful of countries in the world that don’t currently have Google servers operating on their territory.

The agreement doesn’t impact competing online services or improve the underlying internet infrastructure on the island. Outdated broadband infrastructure, slow internet speeds, high connection costs, and government surveillance and control are the hallmarks of the Cuban “intranet,” which is still heavily cloistered from global networks.

Trump’s Impact

The deal comes amid uncertainty about what position President-elect Donald Trump’s administration will take towards continuing U.S. rapprochement with Cuba. The Obama administration began a series of trade and diplomatic liberalizations, including in the area of telecommunications, in December 2014.

Companies are reported to be rushing to complete deals with the Cuban government before Trump takes office Jan. 20, in order to make it more difficult for the next administration to roll them back. General Electric Inc. is expected to make a major announcement in coming days on its own deal to resume manufacturing in Cuba.

The Trump administration “should look at what Google is doing in a positive way, because it is designed, by definition, to be disruptive to the status quo,” John Kavulich, president of the New York-based U.S.-Cuba Trade and Economic Council, Inc., told Bloomberg BNA. Trump’s chief policy concern for U.S.-Cuban trade might be whether or not U.S. companies are being compensated for the products or services exported to Cuba, Kavulich said.

Cuban entrepreneurs are also hoping Trump will continue the U.S.'s engagement with Cuba. “Reforms made by the U.S. government to allow for increased travel, telecom services and banking have helped substantially as we attempt to grow our businesses,” a group of 100 Cuban business leaders said in a Dec. 7 letter to the president-elect. That letter was organized by Engage Cuba, one of the groups lobbying Congress to end the Cuban trade embargo.

Google Continues to Lay Groundwork

Google’s efforts to boost its presence on the island date back to 2014. The company is one of the few that have been able to break into Cuba’s closely-held technology and telecommunications field, which is viewed by the government through the prism of national security, particularly with regard to U.S. companies.

The deal may help Google expand its customer base in Cuba over the long term, Larry Press, an international telecom consultant and professor of information systems at California State University, Dominguez Hills, said in a blog post.

“If Google performance improves significantly, they will gain users who click on ads and use services like YouTube, Google Plus, Google Drive and Gmail. These payoffs would not come for some time, but eventually change will come to Cuba,” Press said.

Cuba’s untapped market of 11.4 million Cubans and a robust tourism industry has enticed some U.S. companies to seek out business opportunities there, but Cuba’s government is viewed as a wary and demanding broker of those deals. Typically, the Cuban government “is not acting as a lubricant; they’re acting as a brake pad,” Kavulich said.

Google’s parent company, Alphabet, has the financial resources to operate in Cuba without the need to make a profit in the short-term, Kavulich said.

The company will also be able to leverage an existing customer base comprised of the nearly 2 million Americans of Cuban descent in California, Florida and New Jersey who will seek to reconnect with friends and family through Google-owned services, he said.

The Cuban government appears to be relinquishing some of its grip on the nation’s telecommunications services by opening itself up to this deal, but “no one should be under any illusions that the Cuban government isn’t going to monitor it as much as it can,” Kavulich said.

Still, the deal might signal progress for U.S. tech and telecom companies seeking a way into a market currently dominated by Chinese manufacturers like Huawei Technologies Co. Ltd.