FCC Lifts Cuban Restriction, Opening Door for U.S. Telecoms

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By Lydia Beyoud

Jan. 15 — U.S. telecommunications carriers such as AT&T Inc. and Verizon Communications Inc. can now offer telephone and Internet services to Cuba without the need for special approval from the Federal Communications Commission, the agency said Jan. 15.

The landmark change comes thanks to an order approved by the International Bureau to remove Cuba from its exclusion list of countries and facilities requiring special authorization under Section 214 of the Communications Act of 1934. Cuba was the last country on the list.

Before this change, only Sprint Corp. and Newark, N.J.-based IDT Domestic Telecom, Inc., a prepaid calling company, had sought and received approval from the FCC and State Department to offer services to the island. Now, any U.S. company can enter into direct communications with the Cuban government-run telecom provider Empresa de Telecomunicaciones de Cuba S.A. (ETECSA) to establish interconnection agreements, an FCC spokesman told Bloomberg BNA.

The latest announcement is a logical step in efforts by the agency and Obama administration to heal a Cold War legacy rift between the communist country and the U.S., Francisco Montero, managing partner of Arlington, Va.-based Fletcher, Heald & Hildreth, PLC, told Bloomberg BNA.

It is no secret that telecom providers, equipment manufacturers and infrastructure vendors have been trying to get into the Cuban market and help build it out, ever since the Obama administration made a historic announcement on Dec. 17, 2014, that the U.S. would liberalize trade and diplomatic restrictions with Cuba .

Even medical device maker Medtronic Plc wants in on the market. The company urged the FCC to remove Cuba from its list, claiming easier deployment for carriers would promote connectivity for medical devices and services and for the exchange of medical information between the two countries, according to the FCC's order. New medical services and technologies are badly wanted by the Cuban government, which values its highly trained medical practitioners, investment analysts have previously told Bloomberg BNA.

“It's new ground that they would love to be first movers in, at least from the U.S.,” Montero said. “This is lifting one of the few remaining obstacles” for them to do that.

However, it won't necessarily be smooth sailing ahead for U.S. companies that want to do business in Cuba. Even telecom behemoths like AT&T and Verizon will have to chart the precarious waters of dealing with the Cuban government.

Companies will probably face off with a tough and experienced negotiator in the form of ETECSA, which has long experience striking deals with other international carriers to provide telecom services. Furthermore, the companies will still have to abide by the Cuban government's financial and other restrictions.

He cautioned on the side of slow growth expectations. “The Cuban government is going to watch this carefully in terms of the kind of access to outside information that this allows their population to have access to; it's still a controlled economy and society,” Montero said.

Baby Steps

U.S. telecom deployment to Cuba will probably occur in baby steps, Montero said. In addition to carriers being able to offer coverage, or at least roaming service in Cuba, the appearance of storefronts may also be telltale signs of investment and agreement between U.S. carriers and ETECSA, he said.

The FCC's action and whatever deals come next will likely make it easier for U.S. tourists traveling to Cuba to access the Internet, make calls, and use their mobile devices there, he said.

So in three to five years, tourists and possibly locals might be able to Instagram selfies of themselves sipping mojitos on the beach from Havana, depending on how willing the Cubans are to ease their social media restrictions.

To contact the reporter on this story: Lydia Beyoud in Washington at lbeyoud@bna.com

To contact the editor responsible for this story: Keith Perine in Washington at kperine@bna.com