Cuba telecoms market

Cuba telecoms market

Close but no cigar.

Sourcing verifiable facts about Cuba is challenging. A communist state which was suspended from the Organisation of American States in 1962, Cuba has been charged with numerous human rights abuses, has imprisoned more journalists since 2008 than any country but China, and has one of the lowest computer ownership rates in the world. Reporters Without Borders considers it as “one of the 10 most repressive countries as regards online freedom”. There are indications of a slow move towards liberalisation but reports are hard to verify. While there is huge scope for growth, developments will probably happen slowly.

Cuba’s telecoms market is completely dominated by state-controlled operator Empresa de Telecomunicaciones de Cuba (Etecsa), which holds 100% of the telecoms market, along with its wholly-owned subsidiary, Cubacel, the sole mobile operator. It had 1.14 million fixed lines and nearly 890,000 mobile subscribers in Q3 2010, with a further 28,000 internet customers. Competition is sorely lacking, and if anything the Cuban government has been further consolidating its control. In January 2011, it bought back the 27% stake in Etecsa from Telecom Italia for $706 million, bringing the final foreign-owned stake in the telecoms market back into state hands. Telecom Italia had originally been seeking $780 million for its shares in 2009, and for a time its dialogue with Telefónica about an acquisition had seemed likely to bear fruit.

A number of other carriers have been named as possible entrants to the fixed or mobile markets in Cuba, including Mexico’s América Móvil, Venezuela’s CANTV and Vietnam’s Viettel, should market liberalisation eventually make it feasible. Telecoms carriers have been lobbying the US to reduce the restrictions on operating in Cuba. The Obama administration has expressed a desire to increase the US telecoms presence in the country, saying it would “decrease dependency of the Cuban people on the Castro regime”, although little action has been taken. Some embargo rules have been relaxed, but the FCC will not amend its rules to allow US operators to pay the 84 cents per call required by the Cuban government, prohibiting US operators from entering the market.

Official figures report that 1.6 million users accessed the internet in 2009, though according to the Havana Times: “the great majority of these enjoy limited email service or simply the national intranet, with many outdated sites.” Strict regulations prohibit the ‘personal and creative’ use of available online services.

Until recently, mobile services were only available to those working for state-run organisations, or to foreign workers. In 2008, Etecsa finally allowed ordinary Cubans to purchase prepaid mobile phones, though they were required to pay in Cuban convertible pesos (worth 24 times the Cuban peso), so costs were prohibitively high. A handset costs on average $60, three times higher than the average monthly salary. At the end of 2011, mobile penetration was less than 12.4%, although BMI forecasts that the penetration rate is set to double over the next four years, reaching 25.6%, or 2.9 million mobile subscribers, by 2016.

The Cuban government is slowly introducing reforms to cut the costs of mobile usage. On February 1 2012, the cost of sending SMS messages was due to fall by 46%, and the charges for receiving calls on mobile phones were to be scrapped. The most significant incentives however would be offered by competition bringing down prices, which could grow penetration rates significantly, though the cost of constructing adequate infrastructure would be an inevitable pressure on any new entrants.

Cuba is entirely dependent upon a satellite connection for all internet and telephone access. Many Cubans feel that its lack of connectivity can be blamed upon the US trade embargo. The Gramma has written: “The blockade prevents Cuba from being connected to any one of nearly a dozen international connections that surround us. One of these cables, Cancun-Miami, passes as close as only 20 miles from the Havana seawall.”

The construction of an 1,800km submarine cable called ALBA-1, linking Venezuela to Santiago de Cuba and laid by Shanghai Bell, the Chinese subsidiary of Alcatel-Lucent, was widely reported as a significant development of Cuba’s infrastructure. Waldo Reboredo, VP of Etecsa, stated that this fibre-optic cable “would reduce the costs of current operation by 25%”. It was expected to increase Cuba’s download speeds by a factor of 3,000, although there would still be limits in terms of personal and public access to online information. The construction of ALBA-1 was reported to have been completed in February 2011, but its launch date has since repeatedly been delayed. Meanwhile, El Nuevo Herald reports that the Cuban attorney general’s office is investigating several senior executives from Etecsa for alleged corruption charges in connection with a fibre-optic cable project, although no other details have as yet been disclosed. As reported in the Havana Times, rumours are now circulating in Cuba that the cable doesn’t exist or that it has been “eaten by sharks”.

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