Cuba’s Telecommunications Industry and Miami’s Expanding Silicon Beach
The social and familial ties Miami has to Latin America are well known. What may be less obvious are its network connections. Miami is ranked as one of the top-five most connected cities in the world. Miami’s growing telecommunications industry, including the eMerge Americas movement, has earned it the name “Silicon Beach.” About 90% of data traffic from Central and South America passes through Verizon Terremark’s Network Access Point (NAP) facility, located in Downtown Miami. Miami’s development as a technology hub for Latin America has drawn the attention of major industry players who have recently opened regional offices in Miami, such as Facebook and Apple, as well as government leaders who are investing in Miami’s infrastructure so it can better support this growing industry.
Ninety miles away from the fifth-most connected city in the world is the second-worst connected country in the world. Only 3.4 percent of Cuban homes have internet access, according to one study. What to some may ostensibly be a technology failure, is considered by many a social crisis. In fact, the Foundation for Human Rights in Cuba has launched a “Connect Cuba” initiative, asserting that Cuba’s lack of telecom connectivity is a human rights violation.
While other industries face the political resistance of those who oppose any investment or business dealings with Cuba for fear it would only profit the Cuban government, the telecommunications industry is different. The telecommunications industry has traditionally been linked to the free exchange of information, with facilitating exposure to, and contact with, the world outside of Cuba ― something most, regardless of political conviction, agree is vital to any social reform efforts.
Back in April 2009, years before the current “post-sanctions Cuba” conversations were taking place, the Obama administration announced a series of changes in U.S. policy that authorized greater telecom connections with Cuba. These 2009 policy revisions promised to make significant strides towards initiating relations between U.S. telecom companies and Cuba:
U.S. telecom network providers were allowed to enter into agreements to establish fiber-optic cable and satellite facilities linking the U.S. and Cuba.
U.S. telecom service providers were allowed to enter into roaming service agreements with Cuba.
U.S. satellite radio and satellite television service providers were allowed to enter into agreements to provide services to customers in Cuba.
U.S. citizens were allowed to activate and pay U.S. and third-country service providers for telecom, satellite radio and satellite television services provided to individuals in Cuba (with the exception of certain Cuban government officials).
Despite these legal clearances, there were very few takers. The problem? Lack of clarity. For example, telecom companies were not sure exactly how close to Cuban territory a U.S. cable could be placed. Legal uncertainties translate to financial exposure. This likely contributed to U.S. telecom companies deciding that the cost-benefit analysis at the time counseled against moving into Cuba.
The White House’s December 2014 announcement of its plan to renew diplomatic relations with Cuba reinvigorated efforts to entice U.S. telecom companies to enter into Cuba, by allowing U.S. companies to sell consumer communications devices in Cuba and to work on projects to improve Cuba’s outdated telecom infrastructure.
A few weeks ago, the Obama administration issued new revisions to the Cuban Assets Control Regulations (CACR) and Export Administration Regulations (EAR) that went into effect September 21, 2015. These regulations give telecom companies much better guidance:
U.S. telecom companies may establish a physical presence in Cuba, including through joint ventures with Cuban entities, to provide certain telecom and internet-based services.
U.S. telecom companies are allowed to enter into licensing agreements related to, and to market, certain telecom and internet-based services.
U.S. telecom companies may import Cuban-origin mobile applications into the U.S. and even hire Cuban nationals to develop them.
U.S. telecom companies are authorized to provide certain services related to consumer communications devices exported to Cuba, including training related to the installation, repair, or replacement of these items.
These authorizations and clarifications of what U.S. telecom companies may do in Cuba seem to have worked: earlier this month, Sprint became the first U.S. wireless carrier to sign a direct roaming agreement with Cuba’s government-run telecom company, Empresa de Telecomunicaciones de Cuba (ETECSA), allowing Sprint customers visiting the island to continue using their phones as they would in the U.S. This reinforced Sprint’s position as a key industry player in the U.S.’s telecom presence in Cuba; since June of this year, Sprint also has had a direct long-distance interconnection agreement with ETECSA, allowing U.S. customers to call Cuba directly.
While Miami’s tourism and hospitality industries are expected beneficiaries of the loosened restrictions on Cuba, Miami’s telecommunications industry should be paying attention. Cuba’s virtually uncharted telecom territory presents many opportunities for Miami’s Silicon Beach.