First U.S. telecom company connects directly with Cuba

First U.S. telecom company connects directly with Cuba
BY MIMI WHITEFIELD MWHITEFIELD@MIAMIHERALD.COM
03/06/2015 6:00 AM 03/06/2015 6:19 PM

The first U.S. company to strike a long-distance deal with Cuba since
the Obama administration announced a telecom opening toward the island
is now handling direct calls to Cuba.

"Now we can terminate and make calls directly to Cuba," said Bill Ulrey,
vice president of investor relations for Newark, New Jersey-based IDT
Corp. Previously, U.S. carriers couldn't make direct calls to Cuba and
had to use a non-U.S. carrier for the final connection.

IDT reached an agreement with Empresa de Telecomunicaciones de Cuba
(ETECSA), the island's national telecom provider, to exchange
international long-distance traffic in February, and the Federal
Communications Commission gave IDT the green light for the deal earlier
this week.

IDT began doing business with ETECSA on Wednesday.

The telecom opening, which was announced in December as part of the
White House's plan to renew diplomatic relations with Havana, allows
U.S. companies to sell personal communications equipment in Cuba, as
well as to work on projects to improve Cuba's outdated Internet and
telecom infrastructure.

At this point, it's unclear how far the Cuban side is prepared to go
with the telecom opening but developments are starting to percolate on
both sides of the Florida Straits.

A U.S. delegation led by Daniel Sepulveda, the State Department Bureau
of Economic and Business Affairs' coordinator for international
communications and information policy, will head to Havana later this
month to meet with their Cuban counterparts.

The goal is to "see what's possible from their standpoint," said
Assistant Secretary of State Charles Rivkin.

Cuban officials say they're ready to work with U.S. telecommunications
companies.

"We confirmed we're ready to receive U.S. telecom companies to explore
business opportunities — business that could be of benefit to both
sides," Josefina Vidal, the Cuban Foreign Ministry official heading the
Cuban delegation, said after the first round of U.S.-Cuba talks in January.

Rivkin said that the bureau already has received a lot of feedback from
U.S. companies. "This is a potential opportunity for them; there is
interest," he said. "We're really just beginning the process."

President Barack Obama offered a similar but more limited opening for
U.S. telecom companies in April 2009 but there really weren't any takers.

The problem, said New York lawyer Jose W. Fernandez, was "the
regulations weren't terribly clear on how close to Cuban territory a
U.S. cable could get. Now that's become clear."

Cuba is still a poor country with a low GDP that will continue to hamper
opportunities, "but from a business point of view the cost-benefit ratio
has changed. Now they know they won't be hammered by U.S. regulators,"
said Fernandez, a former assistant secretary of state for economic,
energy and business affairs.

IDT's Ulrey said he isn't sure whether the new telecom opening was the
impetus for Cuba's agreeing to the company's proposal.

"We had conversations for a period of years hoping there would be
interest and nothing happened," he said. "But then we submitted it to
them again last year and we began to negotiate it but it's not clear
whether their willingness was a part of the ongoing negotiations."

The United States and Cuba began secret, high-level talks in mid-2013
that led to the diplomatic breakthrough.

"This is an important first step in the liberalization of
telecommunications between the U.S. and Cuba," said Bill Pereira, IDT
chief executive. "Ultimately, the agreement will make it easier and more
affordable for our customers to call friends and family in Cuba."

However, Ulrey said that in the short-term there won't be significant
savings for customers because IDT will still be competing in the direct
interconnection business with other non-U.S. companies.

The company currently charges 83.3 cents per minute for a retail
land-line call to Cuba and 76.8 cents per minute for a call to a
cellular phone using its Boss Revolution app. New rates haven't been
announced yet.

IDT also will be able to sell its interconnection service to other U.S.
carriers that provide service to Cuba.

Ulrey said the agreement helps IDT get its foot in the door. Eventually,
it would like to offer the same telecom and payment services in Cuba
that it provides in other Latin American countries. Among its services
are topping up a prepaid phone, which allows someone in the U.S. to go
online and transfer minutes prepaid in U.S. dollars to a friend or
family member abroad.

Young Cubans are "hungry" for better telecommunications, said Rep. Anna
Eshoo, a Democrat from California, after returning from a House
delegation trip to Cuba last month. "They understand the power, and the
empowerment that comes with the tools that come about as a result of
broadband."

Only an estimated 5 percent to 25 percent of Cubans have any type of
Internet service.

"I'd love to come back and see 95 percent penetration," said Eshoo, the
ranking member of the House Communications and Technology Subcommittee.

The Internet and broadband are the "essential tools for a 21st century
society" and "they are transformative," she said.

Since Obama's Dec. 17 announcement, Cuba has temporarily cut the the
price at state-run Internet cafes from $4.50 an hour to $5 for two hours
and 16 minutes. That price is good until April 10. The government also
has said that it plans to open more than 100 additional Internet cafes
this year.

Last year, ETECSA also launched a mobile email service, Nauta.cu.

In February, Netflix announced that Cubans with high-speed Internet
connections and access to international payment methods would be able to
subscribe to the service and watch popular movies and TV shows for fees
starting at $7.99 per month.

But few Cubans would be able to leap those hurdles, and at this point
the Netflix move seems mostly symbolic. Most Internet service in Cuba is
dial-up and so slow that it's only good for emails and laboriously
surfing the Web.

A Netflix spokeswoman said the company doesn't release subscriber
information and wasn't able to say whether anyone in Cuba had signed up
for the service.

"The world will know that if Cuba doesn't want people to watch Netflix,
it won't be because of the U.S. embargo," Fernandez said.

But he said there's still more the United States could do if it really
wants to encourage better communication and connectivity in Cuba.

The rules, he said, should make it explicit whether U.S. companies are
able to set up a storefront to sell cellphones and other consumer
communications equipment and franchise such operations to Cuban
entrepreneurs.

"This would have the effect of promoting private enterprise," he said.
"The United States could push the envelope even more."

Source: First U.S. telecom company connects directly with Cuba | Miami
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