No Internet? No Problem. Inside Cuba's Tech Revolution

No Internet? No Problem. Inside Cuba's Tech Revolution
This story appears in the July 20, 2015 issue of Forbes.

Robin Pedraja, a lanky 28-year-old former design student from Havana,
walked into the Cuban government's office of periodicals and
publications early last year seeking approval for a dream: starting an
online magazine about Cuba's urban youth culture. Hundreds of thousands
of Cubans in recent years have been able to obtain licenses for small
businesses, albeit only in a limited set of service categories such as
restaurants, hair salons and translation. Media remains under strict
government control. An online magazine? Pedraja was laughed off even
before he could finish his pitch.

He decided to publish anyway, without identifying the magazine's
creators. The first issue of Vistar came out last March. "We had nothing
to lose," he tells me on a recent visit to his office, a room the size
of a walk-in closet in his Havana apartment. Vistar is packed with
attitude and eye-catching photography, covering music, art, ballet, food
and celebrities. "It's a reflection of a new Cuban generation," says
Pedraja, who grew up among artists and musicians in Havana. Soon the
artsy young Cubans who were reading Vistar all seemed to know who was
behind it. So Vistar published its masthead a few issues later, with
Pedraja's name at the top, e-mail address included.

Sixteen monthly issues into his supposed transgression, Pedraja has yet
to hear any official objections. That's not unusual in Cuba's murky
legal environment. "There's an attitude among some government officials
that 'I'm not going to authorize something, but I'm not going to
prohibit it either,' " says Carlos Alzugaray, a retired diplomat and
former head of Cuba's mission to the European Union.

More surprising: the success of an online magazine in a country where
only a tiny minority have access to the Internet. Cubans by and large
can't have home connections, and access at hotels costs about $7 an
hour, out of reach for most. To circumvent that problem, Vistar's
readers–a best guess is somewhere in the tens or hundreds of
thousands–share the magazine through memory sticks or hard drives.
Pedraja in turn supports himself and more than a dozen staffers through
advertising–also remarkable, since advertising not tied to the
government has been virtually nonexistent in Cuba for 50 years. " We're
not waiting for modernization," Pedraja says. "We're pushing forward,
adding our little grain of sand."

Those grains are starting to accumulate. Cuba's frosty relations with
the U.S. are thawing quickly, but even before President Obama's historic
decision in December to begin normalizing relations, Cuba ' s private
sector had been undergoing a massive transformation. Back in the
mid-1970s Fidel Castro began moving in fits and starts to open up the
economy to entrepreneurs in a few business categories. In the last few
years, however, since Fidel's younger brother Raul took over, the number
of licensed cuentapropistas (roughly translated as "those who are on
their own") has soared to more than 471,000 across more than 200
approved professions, from upholsterer to children's pony wagon
operator, as of 2014. At least another million of Cuba's 5 million
workers are engaged in some form of official or unofficial private
sector activity.

The word "Internet" may not appear on any approved government list of
professions, but that isn't stopping young Cubans, such as Vistar's
Pedraja, from harnessing the digital revolution. Smartphones are common,
but they lack data connections. With no legal way to send or receive
payments through credit cards or PayPal , charging for an app via
Google's GOOGL -0.29% Play or Apple's AAPL +0.7% App Store is
not an option.

No matter. Go behind the scenes in Havana, as I did, and you'll find a
swirl of tech action, overlaid by the kind of stunning creativity forged
by necessity. It's a world of memory sticks and human middlemen,
physically dispatched to conduct what in the U.S. would be a
frictionless digital transaction. There's enough progress that Airbnb
announced in April that it would expand into Cuba–and has already nabbed
10% of the 20,000-plus rooms for rent that have long been a mainstay for
locals looking to supplement the meagre official wages, which average
about $20 a month. Enough progress that Netflix NFLX +1.82% and Google
are dipping in their toes. Enough that one Cuban entrepreneur has
launched the island's first "big data" startup, collecting information
on all these private businesses that it will market to foreign companies
interested in local investment.

Driving all of this: Cuba's Millennials, who have the same ambitions and
(relative) tech savvy as their peers in Miami, a mere 220 miles
northeast. While they're tired of the stifling conditions they live
under, they're not interested in politics. They say they want to improve
their lot and have normal lives, and they dream of the kind of
basics–widespread Internet access and the ability to tap into the
international financial system–that would crack the economy wide open
for them and, yes, for foreign competitors. "I want to continue to live
in Cuba," says Yondainer Guti?rrez, who has started AlaMesa, a thriving
website and Android app that's something like the Yelp-meets-Open-Table
of Cuba. "But I want to live in a different way."

Hiram Centelles is one of the pioneers of Cuba's Internet sector. He
grew up in a country where black markets in everything from car parts to
computers to diapers were a part of life, but it was always hard for
buyers and sellers to find one another. So in December 2007, while a
computer science student at the Instituto Superior Politécnico José
Antonio Echevarría, Centelles anonymously created Revolico.com, a
classifieds site that quickly became the Craigslist of Cuba. Three
months later the government blocked it. That began a game of
cat-and-mouse (constantly changing the Web address for its servers,
personalized URLs e-mailed to users to circumvent blocks) that continues
to this day. None of it stopped Revolico from becoming part of the daily
life of many Cubans.
Centelles, who became public about his affiliation with Revolico in 2012
after he moved to Spain, says the site gets 8 million page views a month
and 25,000 new listings daily. About half of its traffic comes from
outside Cuba–most of it from south Florida–where the site makes some
money selling ads. In Cuba, where Revolico has no legal standing, it
charges for "premium" listings, which get promoted on the site.
Associates of Revolico collect the payment for those listings
unofficially, and in cash.

Similarly, AlaMesa's success underscores the hunger Cubans have for the
kinds of apps and services that are taken for granted in the rest of the
world. Started by Gutiérrez and four friends in 2011, AlaMesa is eager
to promote Cuban culinary culture. Going door-to-door, the group checks
out restaurants, examines their menus and lists them on the app, if the
restaurants agree. More than 600 restaurants have, in nine Cuban
provinces, and 30% of them pay, in cash, to get promoted on the app.

Again, the user market is twofold. Foreigners planning a trip to Cuba
can download the app while at home. In Cuba it's passed along, like
Pedraja's online magazine, by devoted fans. While the site has grown to
6,500 monthly users from Cuba, the United States, Spain and other
countries, and 2,800 are registered to receive its newsletters, the
business is far bigger offline.

To call these ventures bootstrapped would be a wild understatement. On a
stiflingly humid late June morning Vistar's Pedraja agrees to meet in
the lobby of the Havana Libre, a hulking hotel known as the Havana
Hilton before the 1959 revolution. After a few minutes we head a few
blocks over to his home office, upstairs from a handmade ceramics shop
on a leafy street in the Vedado section of Havana. The front room houses
a 1970s washing machine, a threadbare ironing board and a couple of
faded armchairs. Through the kitchen is an air-conditioned room that's
so small you can touch the walls on opposite sides of the room if you
stand in the middle.

A colleague of Pedraja's is working on the next issue at a desk with two
computers and large displays. Leaning against one wall, Pedraja talks
fast–like most Cubans–with an intensity that's tinged with pride and
impatience, like a teenager who's tired of being told what to do. "They
should let us Cubans do other kinds of business that are not restaurants
or fixing cellphones," he says.

Pedraja, the son of a musician, used his art-scene connections to land
interviews with some of the country's biggest celebrities, including
Kcho (pronounced ca-cho), a reclusive contemporary artist of
international renown who graces the June cover, and to publicize events
that even connected Cubans didn't know were going on. Vistar, which now
publishes in English and Spanish, has more than 100,000 downloads, 60%
of them from outside Cuba. When it ran a photo contest promising an
iPhone to the winner, it received more than 3,000 submissions. "It's an
era of transition in Cuba where we needed a publication to cover these
things," Pedraja says. And it's an era where good ideas are
copied–there's now also a slick digital magazine dedicated to Cuban
sports–creating nascent industries that are expected to quickly
accelerate now that the genie is out of the bottle.

If these scrappy startups are Cuba's budding BuzzFeed, eBay and
OpenTable, then El Paquete Semanal ("the weekly package") is more akin
to the Google and Comcast of the island. Think of it as the
Internet-in-a-box for an unwired country or, more precisely, the
Internet on a terabyte portable hard drive.

El Paquete began some half-dozen years ago, compiled by a small, shadowy
group of friends in Havana every week. It's a massive digital trove of
recent movies, TV shows, magazines, apps, software updates and other
digital goodies made available to Cubans, often mere hours after they
become available elsewhere in the world. It's copied and distributed on
portable drives to 100 people, who distribute it to 1,000, and so on,
and then it's delivered through an informal network of human mules who
travel in public buses to every corner of the island. Most customers get
the drive at home, where they exchange it for last week's drive and the
equivalent of $1.10 to $2.20. (Distributors selling to other
distributors charge ten times as much.)

How many people get El Paquete is impossible to know, and not all
versions are identical, as people operating in nodes along the network
add or remove content. But virtually all of the taxi drivers and others
in Havana I asked said they get it.

El Paquete's creators have kept a very low profile, but perhaps in a
sign of Cuba's growing openness–and the growing boldness of its
entrepreneurs–the man many in Havana's tech circles know as El
Transportador, or the conveyor, agreed to meet me. Elio Hector Lopez
lives in a ramshackle block of apartments known as a solar, which can
charitably be described as a tenement. To get to his second-floor
apartment, we walk through a courtyard where street dogs snooze in the
shade, up a cement staircase to a long corridor lined with modest
apartments that get their power from a maze of jury-rigged wires.
Lopez's unit is dingy and dark, with a couple of grimy armchairs and a
two-seat sofa.

"The Paquete has become something that's necessary for the country," he
says, as we sit down across from each other. "People see it as a form of
Internet." Google executives have come to see him, he says.

Lopez, 26, was an economics student and toured Europe with a theater
troupe. At 18 he began collecting digital music and distributing it on
thumb drives and CDs to deejays across Havana and the rest of Cuba.
Within a year or two he met up with a small group of like-minded types
who had done the same with movies, TV and software, and they agreed to
team up.

El Paquete was born, and while the original members are no longer
together, it remains the creation of a loose band of collaborators. How
exactly they manage to keep El Paquete current, compiling so much data
so quickly on everything from the latest app and digital magazine to
Jurassic World or a new episode of Game of Thrones –not to mention
updates of AlaMesa and Vistar–Lopez refuses to say. "These things are
complicated," he says with an evasive smile, though he admits much of
the video content comes from pirated satellite TV. Sitting at the head
of the principal network that connects Cuba to the digital world, Lopez
says he feels a keen sense of responsibility. While he's happy to make a
modest living, he's not interested in fortune or fame, and El Paquete is
certainly not run like a company. "Some of the distributors make more
money than we do, because they have a larger network of customers," he
says. That's fine with him.

Those are the same notes coming from Airbnb. Cuba has always been the
original rent-a-room market; thousands of locals, marketing via word of
mouth, have generated money this way for years. These hosts are poised
to play a more critical role as the American détente promises to flood
the country with new visitors the island's hotels won't have the
capacity to absorb. What's more, Airbnb's efforts have the potential to
supercharge these cuentapropistas (even if they will also presumably
squash the crop of Cuban middlemen who currently help hosts promote
their rentals)–and underscore the peace-and-empowerment message that the
Silicon Valley startup espouses. "The primary reason for doing this
right now is to show people how connecting individuals in different
countries can bring countries closer together," says Airbnb cofounder
Nathan Blecharczyk, who was visiting Havana last month.

It's been a boon to hosts like Magalys Lara Ramos, 75, who rents an
apartment in Old Havana. She was expecting it to be empty during most of
the off-months of May and June but has seen a steady stream of mostly
American visitors. "It's been all-full," she says.

Everyone plows on, mindful that this will surely change. A few weeks ago
the Castro government announced that it will sanction 35 Wi-Fi hot spots
around the country, which Cubans can tap into for $2 an hour. Such
fitful progress explains why Google has sent executives to meet with
officials and entrepreneurs frequently. And why Netflix unblocked its
service in Cuba this year, even if, since few Cubans have broadband and
fewer still a digital way to pay for a subscription, the move was mostly
symbolic.

As far as Cuba's young tech revolutionaries go, the sooner the U.S. tech
giants invade, the better. It would signify a new openness, they say,
and surely create more opportunities than it would snuff out. But they
also recognize that these nascent years will establish those with
position. "We have a window of at least a couple of years before any of
the big players come here," says one of the founders of AlaMesa, who,
unlike his partner Gutiérrez, is still not comfortable enough to use his
name. "But I try not to be naïve: Winter is coming. "

Gutiérrez, though, is thinking the exact opposite way: "
I'd love some day to have AlaMesa Miami or AlaMesa Buenos Aires." He has
a point: Given the obstacles faced by him and his pioneering peers,
global expansion would be a cakewalk.

Source: No Internet? No Problem. Inside Cuba's Tech Revolution -
http://www.forbes.com/sites/miguelhelft/2015/07/01/no-internet-no-problem-inside-cubas-tech-revolution/