IT in Cuba

Telecommunication Infrastructure

Liberalization and Deregulation

Internet Diffusion

Electronic Commerce

Hardware Manufacturing

Software Manufacturing

Who Uses IT?

IT Labor Market

IT Geographics

IT Financing

Government Policies

Legal Environment

Transborder Data Flows

Analysis: IT Strengths and Weaknesses

Analysis: Impacts on the Business

Sources and Links

About the Authors

Information Technology in Cuba

Telecommunication Infrastructure

Introduction

The Cuban telecommunications infrastructure trails behind most of the Caribbean region and the world. Cuba has fewer telephone lines as a percentage of population than any large Caribbean nation with the exception of Haiti, and is closer to the low-income nations of the world rather than the lower-middle income bracket to which it belongs (1). Its international telephone infrastructure far surpasses its domestic telephone backbone, and few improvements have been made since Fidel Castro took power in 1959.

Nation
GDP($Bil.)
Mainlines (1000)
Mainlines/100 Citizens
Cuba
14.8
433.8
3.89
Low-Income
1,157
64,032
1.98
Lower Middle
1,653
103,028
9.09
Upper Middle
2,258
69,238
14.51
High
20,800
455,203
53.16
World
25,868
692,101
12.14

Note: Income category information from 1995. Cuban figures from 1999 (2).

Telephones

The Cuban telephone infrastructure has experienced scarce growth and improvement since the Cuban Revolution. In 1957, two years before the Revolution began, Cuba had 170,000 main lines, equating to 2.44 lines per 100 residents. By 1995, Cuba had only 353,200 main lines, equating to 3.21 per 100 residents. Although Cuba is considered by most to fall in the lower middle income bracket, its key telecommunication indicators align more closely with low-income nations.

1999 Key Telecommunications Indicators

The following countries were selected for comparison purposes: Dominican Republic, Haiti, Jamaica, Puerto Rico, and Trinidad and Tobago. These nations were selected for geographical proximity and demographic similarity.

 
GDP($Bil.)

Population (Millions)

Mainlines
Teledensity (mainlines/100 cap.)
Cuba
14.8
11.16
433.8
3.89
Dominican Republic
15.8
8.36
763.9
9.28
Haiti
3.5
8.09
70
0.87
Jamaica
6.9
2.56
509.6
19.91
Puerto Rico
34.8
3.89
1295
33.29
Trinidad & Tobago
6.1
1.29
278.9
21.58
United States
8,759.9
276.22
18,8331
68.18
The Americas
11,396.6
818.11
275,779
33.71

Notes: The Americas include the Caribbean, Central and South America, Canada, Mexico, and the United States. The Dominican Republic's reported GDP is from 1998 (4).

The Cuban telephone infrastructure is obsolete and in poor working condition. In 1995, 3% of local main lines connected to digital central offices. Faults per 100 lines doubled between 1992-1995, and the number of working pay phones dropped by 50%. Estimates project that 40% of Cuban telephone equipment and network backbone were installed in the 1930s and 1940s. To make matters worse, maintenance and interoperability are made highly difficult by the diverse mix of sources for Cuban equipment. Equipment comes from Alcatel and Thomson-CSF (France), Western Electric and GTE (U.S.), Northern Telcom and Mitel (Canada), Ericsson (Scandinavia), Germany, and Hungary (5).

The Cuban telephone network has one central office in Havana, identifiable by the "33" phone number prefix. These 33 numbers are available for purchase in dollars, and are primarily used by phone company employees, diplomats, and prominent businessmen. Cubans can have phones installed for 6.25 pesos, but for most citizens, this rate is not affordable. Phone users with 33 numbers can directly dial for international calls. Users without these numbers must request a call from an operator, who places the call and calls them later when the connection is made (6).

Fiber Trunks and Submarine Cables

The Cuban telephone infrastructure is comprised of a coaxial cable trunk system using an X.25 network, with the exception of fiber-optic backbone utilizing frame relay used in Havana and on Isla de la Juventud. Two microwave radio relay installations are used, one American-built, one Soviet-built. International telephone service is carried by one Intersputnik satellite station based in the Atlantic Ocean region (7). No T1 or T3 lines are in use in Cuba, and high-speed services such as DSL are non-existent.

The most prevalent voice channels in Cuba are used to provide international long-distance calling to the United States. Cuban-American telephone connectivity began in 1921 with the installation of an AT&T undersea cable between Florida and Cuba. After the start of the U.S. embargo, AT&T was allowed to continue its Cuban operations with the clause that existing operations could continue but new user capacity could not be added. However, the U.S. State Department issued the 1992 Cuban Democracy Act in 1992, which allowed an embargo exception in support of "efficient and adequate telecommunication services between the United States and Cuba." Currently, the United States maintains 953 64kbps voice channels in Cuba. As illustrated below, Cuba currently has adequate capacity, not to mention unused capacity, with which to add additional long-distance and international calling users. However, the meager incomes earned by the average Cuban citizen disallow a significant increase in phone usage without a major price drop by phone carriers (8).

Voice Channels from U.S. to Cuba (9)

Carrier
Link
Authorized by FCC
In Use
AT&T Undersea Cable
143
114
AT&T P.R. Intelsat
150
150
MCI Intelsat
150
120
Sprint Intelsat
120
30
Worldcom

Intersputnik
Intelsat
Columbia

390
90
Totals:  
953
504

Mobile and Cellular Systems

Only one cellular company, Cubacel, has an established presence in Cuba. Billing rates continue to be prohibitive for most Cuban citizens, with rates higher than average monthly salaries. The most recent estimates project that 1,939 citizens currently have cellular access (10).

Cubacel's permanent mobile service can be purchased for an access fee of $120 US. Consumers can purchase telephone equipment in Cubacel offices as long as it is compatible with the D-AMPS standard. Monthly rental is $40 US, and airtime per minute costs $0.40 USD Monday-Friday, 8:00 AM-8:00 PM, with a charge of $0.30 USD for all other times. Automatic national roaming is included with all cellular accounts at a cost of $0.60 USD per minute. International long distance rates are $2.45 USD per minute to North America, $3.40 to Central America, the Caribbean and Mexico, $4.45 to South America, and $5.85 to any additional locations (11).

Cubacel does have international roaming agreements with numerous companies. They include: Telcel (Mexico), Portatel (Mexico), Miniphone (Argentina), Telecom Personal (Argentina), Telefonica Moviles de Espana (Europe and some countries in Asia and Africa), Telefonica Moviles de Peru (Peru), Bell Mobility and Telus Mobility (Canada), and Rentacel (Panama) (12).

1999 Cellular Subscribers (13)

Country
Population (Millions)
Users (1998)
Users (1999)
Users Per 100
% Digital
Cuba
11.16
4.1
5.1
0.05
0
Dominican Republic
8.36
255.9
420.1
5.02
0
Haiti
8.09
10
25
0.31
0
Jamaica
2.56
78.6
144.4
5.64
0
Puerto Rico
3.89
580
813.8
20.92
0
Trinidad & Tobago
1.29
26.3
38.7
2.99
10
US
276.22
69,209.3
86,047
31.15
28.9
Americas
818.11
96,177.9
134,548.4
16.45
29.9

Cellular Telephony Coverage (14)

Privatization of the Cuban Telecommunications Industry

Cuba straddles the boundary of allowing new foreign direct investment into its emerging telecommunications industry while closely monitoring usage and content. The telecommunications industry, like the rest of the Cuban economy, has suffered dramatically from the U.S. embargo since the completion of the Communist Revolution.

Potential entrants into the Cuban telephone system face three primary obstacles. First, the country cannot receive remittances from its largest long-distance market, the United States. Second, the Cuban peso is not convertible. Finally, the telephone network is inherently the same as prior to the 1959 Revolution.

Cuba decided to privatize its telephone system in June 1993 and solicited proposals for joint ventures. Prior to this privitization, ETECSA, also known as Empresa de Telecomunicaciones del Cuba, S.A., operated under the Cuban Ministry of Telecommunications and conducted all phone usage on the island. In June 1994, Grupo Domos Internacional, a Mexican telecommunications firm, announced it would spend $1.5 billion USD to purchase a 49 percent interest in ETECSA. As part of this joint venture arrangement, the Cuban government agreed to invest $250 million over a seven-year period to expand the national telephone network to one million working phone lines (15). To date, this effort has been unsuccessful.

In addition, the Cuban government granted ETECSA a 25-year monopoly (the first 12 years on an exclusive basis,) with two possible 12-year extensions to provide local, domestic long distance, and international calling services. ETECSA was also granted a monopoly on data and image transmission, telex, public telephone, trunked radio communication, subscription TV, paging, and any other value-added services except cellular phone communications. Grupo Domos plans on investing $700 million between 1994-2001 to digitize the Cuban telephone network, refurbish 200,000 existing lines, and reach a goal of 11 lines per 100 people by December 2001 (16).

To date, little information is available on actual plans implemented by the ETECSA-Grupo Domos venture. Grupo Domos is in default on a $350 million payment due to the Cuban government. According to ETECSA officials, plans are underway for a 64 kbps X.25 network and renovation with digital switches in Havana. Company officials have publically stated that the X.25 network would have a 2 mbps data rate in Havana, and that Grupo Domos would built microwave links to four provinces (17). However, no published data can confirm these upgrades.

The 1992 Cuban Democracy Act authorizes the American Federal Communications Commission to increase telecommunications links between the two nations and allows the U.S. Treasury to allow dollar payments to Cuba for phone calls. As a result, Wiltel International, an American long-distance carrier, completed an agreement with ETECSA in March 1994 to construct a 210 km, 2.5 gigabit fiber optic cable from Southern Florida to Havana. This cable would provide 41 times the current authorized capacity. However, Wiltel's application is still pending in the United States Department of Commerce (18). If enacted, the efficacy of this venture will be determined in part on a change in American policy towards telephone communication with Cuba. Calls between Cubans and American relatives comprise the largest volume of international long-distance calling in Cuba. However, all revenues generated by American long-distance carriers for Cuban calls are deposited in an escrow account reserved for potential lawsuits against Cuba. For this reason, the Cuban government restricts calls made to the United States to 300 per day (19).

There is also a $41 million joint venture between Cuba (51%) and Italcable (49%) to provide long-distance and international calling service through five portable earth stations in major tourist areas, including Havana. Estimates project this venture's total circuits are estimated at 1,109 circuits (20).

ETECSA may have trouble attracting foreign investment and capital. ETECSA has inherited the assets of the former nationalized Cuban Telephone Company, an ITT subsidiary. ITT has an outstanding claim for $131 million against the Cuban government (21). Between the escrow account for American-Cuban phone calls and this pending claim, additional investors may have second thoughts about investing in Cuba. In sum, Cuba's international telephone infrastructure is in better condition than its internal network; however, with the current embargo and lack of currency convertibility, Cuba will have difficulty attracting companies that may help upgrade and modernize its failing domestic telephone backbone.

Recent Development

On December 8, 2000, the Cuban Council of State announced it will cut Cuban phone ties with the United States effective December 15 in retaliation for the failure of American phone companies to pay a new tax imposed by Havana in response to American use of frozen Cuban funds. ETECSA informed the United States in October 2000 that it would levy a 10% tax on all phone calls between the two nations. This tax was levied in response to an American congressional measure allowing the use of frozen Cuban funds from phone usage between the two nations to compensate the families of Cuban-American pilots killed by the Cuban Air Force in 1996. American phone companies notified the Cuban government in December that they were not authorized by the U.S. government to pay the new tax.

This is the second phone line cutoff by Cuba since 1998. In an earlier dispute, Havana cut 5 of its 7 phone circuits to the United States in early 1999. These lines were restored in April 2000 (92).

 

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