New Cuba Policy Could Impact Telecom

The Obama administration is changing U.S. policies toward Cuba that might create some new opportunities in the wirless, broadband and long distance spaces.

For example, the administration proposes to let telecom companies establish fiber-optic and satellite links between the U.S. and Cuba, let U.S. carriers enter into roaming service agreements with the island's carriers, let U.S. satellite radio and television companies provide service in the country and allow people to donate consumer telecommunication devices to Cuba without a license.

Obviously, the Castro government needs to agree to issue licenses or permission before these changes can occur. But Cuba is a large country for the Caribbean so theoretically it has potential to make a nice new market. According to the International Telecommunications Union, only 11 percent of Cuba's population subscribes to telephone services, and only about 2 percent of the population subscribes to cellphone services.  And though 12 percent of the population uses the Internet, less than 1 percent subscribe to  broadband.

"Roaming might be a nice new option for Cubans, but using WiFi enabled mobile phones to bypass roaming and get the lowest possible international rates seems like the best option," says Danny Adams, partner with D.C. law firm Kelley Drye.

Carrier execs say that interest in long distance routes to Cuba has been increasing for months -- long before the Obama administration's recent announcement. Historically, it's been extremely difficult to get quality long distance routes to Cuba. Telecom Italia is the only carrier with a direct "white" route into the country and its wholesale rate hovers around 83 cents per minute. Numerous other carriers offer much cheaper "gray" routes, but service is spotty. Sometimes it can take up to 30 seconds before the call starts to ring (called "Post-dial ring"). In these scenarios various carriers could be passing the call through a dozen different IP switches before it finally connects and rings.

But if Cuba "plays" with the Obama administration in the cellular and satellite areas, long distance routes to the country could open up too.