Recently, a delegation of top-level U.S. telecommunications officials visited the Cuban capital Havana to discuss about restoration of full diplomatic relations between two countries.
The U.S. delegation was headed by Mr. Daniel Sepulveda, the U.S. coordinator for international communications and information policy. He was accompanied by officials from the U.S. State Department, the Federal Communications Commission and Commerce Department.
In Dec 2014, President Barack Obama had announced that the U.S. intends to normalize its diplomatic and economic relations with Cuba, which has been considerably strained since 1961.
President Obama’s announcement indicates that agricultural, banking and financial institutions along with the telecommunications industry will gain initial exemptions from the existing embargo to invest in Cuba.
This truce will allow U.S. telecom operators to export telecom equipment and products to Cuba. The operators will also be able to establish the necessary infrastructure in Cuba to offer various telecom services including the Internet.
The export of communications devices, related software, applications, hardware, and other items to upgrade the systems will enable Cuban citizens to communicate freely with the U.S. and worldwide.
Recently, the two countries have discussed new regulations for implementing modifications to the U.S. trade embargo with respect to telecommunications. The Cuban officials provided information on the country’s information technology and cybersecurity policy to the U.S. delegation.
Cuba is predominantly a less developed country with a population of around 11 million. At present, only 5% of the inhabitants have free access to global Internet connection through government institutions, high-end hotels and the black market.
Near about 23.2% people access the Internet under highly restrictive conditions. The government of Cuba strictly monitors global networks, keeps a check on phone connections of anti-government activists and also surveys private email accounts through the installation of software in offices.
Such stringent measures have significantly escalated the price of telecom gadgets and services in Cuba. The price of an average personal computer is as high as $700 while an hour of Internet connectivity may cost 20% of the average minimum monthly salary earned by an individual in the country.
The U.S. telecom and tech giants have so far given a mixed opinion regarding Cuban business opportunity. Google Inc. GOOGL is one major player which may look to tap this opportunity to generate more online customers. In this regard, T-Mobile US Inc. TMUS earlier stated that it will always look forward to promote open telecommunications as U.S. policy evolves. However, telecom behemoths Verizon Communications Inc. VZ and AT&T Inc. T are yet to comment on the matter.
Our View
We believe that the U.S. telecom operators may not reap any near-term gain from Cuban investments as the country is less developed at present and reels under highly restrictive government regulations. However, in the long-term, Cuba may become a boon for telecom carriers. An opportunity to sell products to 11 million customers is something to reckon with.
Further, with the Communist rule is quickly losing its control and wind of globalization is spreading across the world, Cuba may become an emerging market in the future. Finally, Cuba’s geographical proximity with respect to the U.S. is a major positive in terms of cost of operations.
The U.S. telecom industry is currently witnessing cutthroat pricing competition. At this juncture, an opportunity outside the U.S. may bode well for this industry. Notably, AT&T is expanding significantly in neighboring Mexico.
Telecommunications is a necessary utility. The need for telecom in both rural and urban areas, and its role in the infrastructure of both developed and developing markets, continues to grow and Cuba is no exception.
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