The US wants to sell Internet equipment and services in Cuba, but we have not succeeded.
In December 2014, the administration announced that we were taking "historic steps to chart a new course in our relations with Cuba and to further engage and empower the Cuban people." The following month, the US International Trade Commission began a study of the economic effects of US restrictions on trade with and travel to Cuba. They held hearings on potential exports in several sectors and I testified on potential telecommunication exports.
In March, the US sent a high-level delegation to Cuba to discuss telecommunication and the Internet and no doubt Internet service and equipment companies began analyzing the potential Cuban market. Most visibly, Google visited several times and eventually made a concrete proposal for the installation of some sort of wireless infrastructure, but that offer was rejected, perhaps for lack of trust in the US Government and Google.
|Google made several trips to Cuba, but their proposal was rejected.|
This month the White House extended our policy, authorizing US companies to establish a business presence in Cuba and provide "certain" telecommunications and Internet-based services or do joint ventures or enter into licensing agreements to market such services.
To date, this effort has led just a few small Internet deals like Netflix offering Cubans accounts, Airbnb renting rooms or Verizon offering cell-phone roaming in Cuba.
Cuba has turned to China, not the US, for Internet connectivity and equipment and is committed to doing so in the short term future.
China played a major role in the financing and construction of the ALBA-1 undersea cable, which connects Cuba to Venezuela and Jamaica. It was reported that China lent Venezuela $70 million to finance the cable, which was installed by a joint venture made up of Alcatel-Lucent Shanghai Bell and Telecomunicaciones Gran Caribe (TGC) -- TGC is a joint venture between Telecom Venezuela (60%) and Cuban Transbit SA (40%), both state-owned companies.
The cable landed in Cuba in February 2011, but the first traffic was not transmitted until January 2013. Much of Cuba's international traffic continued to be routed over satellite links until July 2015, when nearly all of it had finally shifted to the cable. Cuba's international traffic continued to be routed over slow, expensive satellite links for over four years because the cable landing point is at the east end of the island and there was little domestic infrastructure to connect it to Havana and other locations.
|The ALBA-1 cable traffic has shifted from satellite (blue) to cable.|
At the time of the cable installation, we speculated that China might play a role in building the domestic infrastructure needed to reach it and it turns out that Cuba had awarded Huawei a contract to build a national fiber-optic network in the year 2000. Today there is a backbone network connecting the Cuban provinces to the cable landing point. The current load is light compared to expected future traffic from homes, schools, universities and public access locations, so Cuba must be planning a faster, more comprehensive backbone and I imagine Huawei is involved.
|ETECSA backbone diagram, date/status unknown, source: Nearshore America|
Huawei equipment was also used in the recent installation of 35 WiFi hotspots across the island. Since they claim the access points will support 50-100 simultaneous users at 1 Mb/s speed, these 35 locations must connect to the national backbone network. While 35 access points are a drop in the bucket, Cuba is committed to adding more. Counting WiFi, "navigation rooms," Youth Clubs and hotels, there are now 683 public access points in Cuba, all of which reach the backbone.
|Huawei WiFi antennae|
In addition to expanding public access and the backbone, they plan to make DSL connectivity available to 50% of Cuban homes by 2020. (Note that that is not to say 50% of Cuban homes will be online). Doing so will require new equipment in the telephone central offices serving those homes and Huawei will supply that equipment. Two other Chinese companies, ZTE and TP Link are providing DSL modems for network users. (ZTE has an office in Havana and may also be involved in the backbone network).
|Home Internet: Huawei central office equipment and ZTE and TP Link modems|
Cuba also has plans to connect all schools and make fiber connections to the backbone available to all universities. I don't know whose equipment will be used for those upgrades, but, if Huawei is the backbone vendor, I suspect that they would have the inside track on customer premises equipment (CPE). A recent market research report shows that Chinese CPE sales are growing rapidly, fueled by a large domestic market.
|Lina Pedraza Rodríguez, Minister of Finance and Prices, said that Cuba is in|
"very advanced" negotiations with Huawei, May 2015.
In spite of China's success in Cuba, all has not been perfect. As this Wikileaks memo from the US Interests Section in Havana shows, the Chinese have had some difficulty collecting Cuban debt. Cuba remains a tricky place to do business.
Finally, note that all of these sales are for equipment, not network operation. While Huawei has sold Cuba equipment, the backbone installation has been supervised by a Cuban engineer who has worked for Huawei since 2002 and Huawei does not seem to have an office in Cuba. Cuba bought Telecom Italia's share of ETECSA, Cuba's monopoly telecommunication company, in 2011 and remains independent. That may turn out to be a good or bad thing for the Cuban people, depending upon ETECSA's policy and goals.
It looks like China has won the first round. That's the bad news for US companies. The good news is that very little infrastructure has been sold so far and much of what has been sold and is planned for the near future is already obsolete by today's standards. That says there will be a much larger second round -- will the US be a player?