|How will initial US investment affect Cuba’s telecom market? – Cuba Cuba’s journey towards a better telecom market – which began in 2008 when the government allowed citizens to own mobile phones for the first time – accelerated when, on the heels of newly rekindled relations with the US, the latter opened up the way for companies to invest in Cuba’s barely functioning telecoms industry.
The US and Cuba signed an agreement to halt animosity in December, and it took three months for the first investment deal to take place: Cuba’s state-owned telecom provider Etecsa and US international telephony provider IDT agreed to exchange international long-distance voice traffic between both countries.
The agreement was filed with the Federal Communications Commission (FCC) for review, and it should resolve the matter within 10 days.
The interconnection, of which technical details are still unknown, will “ultimately help make it easier and more affordable for our customers to call friends and family in Cuba,” according to Bill Pereira, CEO of IDT.
Should it move forward, the interconnection will provide a much-needed push to the country’s telecom industry. Cuba’s telecom and IT market remains one of the most underdeveloped in Latin America, with the island’s internet penetration estimated at 25.7% as of 2013, according to data from the International Telecommunication Union (ITU).
Mobile lines have reached 3mn since 2008. (SOURCE: AFP)
In 2013 Cuba started receiving international internet service through a submarine cable that connected the island to Jamaica and Venezuela.
Mobile lines have reached a total of 3mn since Raúl Castro’s government lifted the ban in 2008, and Etecsa has said it plans to make an additional 800,000 mobile lines available through this year. Since November Cubans have been allowed to register to up to three mobile lines since November. Previously, each customer could register just one.
Citizens are also allowed now to have their e-mail connections accessible via mobile phones. Between March and November, 460,000 people had registered for the service.
However, being connected remains hard in Cuba. The internet is still a prohibitively expensive service. Plans start at US$10 per month for 20 hours of internet, making it unattainable for the average working class Cuban, who makes around US$20 a month.
This has not stopped US-based companies from beginning to announce their entry into the Cuban market. Streaming-service Netflix will bring its video offerings to the island, despite the fact that most Cubans do not own internet service and will have great difficulty paying the US$7.99 monthly cost of the service.
Reed Hastings, CEO of Netflix. (SOURCE: AFP)
Even for those who can access Netflix, the question remains how will they pay. Currently, Netflix is paid by credit or debit card – a payment method notable by its absence on the island. This is not the first time Netflix has had to come up with a country-specific payment, as it has already done so in several countries in Latin America, such as Brazil or Mexico.
The Cuban government continues to control the legal and institutional structures that determine who has access to internet and how much access will be permitted. This regulation extends to the sale and distribution of internet-related equipment.
This tight grip did not stop hardware giant Apple from announcing the clearance of an undisclosed list of equipment and software to enter the market – despite its products being too costly for most Latin Americans, a situation likely to be repeated in Cuba.
Cuba temporarily lowers internet rates – Cuba Cuban state-owned telecom Etecsa announced a 50% reduction in internet rates in 155 public access points, but only for the next two months.
The price of an hour of internet use will fall from US$5 to US$2.50 until April 10, according to an Etecsa release.
The company had said in January that it would not lower the price of its plans.
Internet cafes, which offer internet speeds of 2Mb, are the only way many Cubans can afford to use the net. Private internet plans are too expensive for the majority of citizens, who earn the equivalent of US$20 a month.
Etecsa charges 10 convertible pesos (US$10) per month for 20 hours of internet, while 50 hours cost 15 convertible pesos and 220 hours 60 convertible pesos. Additional hours cost 0.30 convertible pesos.
Wi-Fi hotspots are growing around the country, however, and Etecsa has announced the launch of more public internet access centers.
The internet is one of Cuba’s biggest challenges, and the island’s telecom and IT market remains one of the most underdeveloped in the region.
The latest data from the International Telecommunication Union (ITU) put Cuba’s internet penetration at 25.7% in 2013, the year the country began receiving internet service through a connection with Jamaica via a submarine cable.
However, international companies are looking to the island as the last frontier, especially after the recent thaw in relations with the US. Movie and TV streaming service Netflix announced its arrival in Cuba earlier in February.
Roundup: Telefónica TU Go, LIME, Colombian smartphones – Regional Telefónica has announced the launch of its application TU Go using WebRTC technology. The app will be available through a browser, without the need to download software, and will offer voice and message services.
TU Go has been available in the UK and Argentina for a year, and will soon start services in Mexico, Brazil and Peru.
Cable & Wireless Communications (CWC) Caribbean brand LIME has announced the launch of broadband services in Anguilla and Turks & Caicos.
The 48Mbps broadband will be six times faster than that currently available, and subscribers will be able to access it within the next three months at no extra cost.
The broadband was made possible through CWC’s Project Marlin, which aims to improve telecommunications in the Caribbean region.
Smartphones could become between 20% and 25% more expensive in the coming weeks, due to currency exchange rates and the fall in oil prices, Claro Colombia president Juan Carlos Archila was reported as saying by Comunidad Olá.
The strengthening of the US dollar against Latin American currencies, including the Colombian peso, has rendered 4G handsets a lot more expensive than usual, which will mostly affect users, despite efforts from operators to offer more affordable plans.
WhatsApp voice more a threat to OTTs than carriers in Latin America – Regional Global press and research firms recently predicted that messaging service WhatsApp would be a major threat to voice service providers now that it has launched a VoIP add-on to its platform.
However, carriers’ voice services, and even SMS traffic, have already suffered from the popularity of WhatsApp’s text-based service – as well as rival chat services such as Line, Viber, WeChat and Kakao – leading us to question whether WhatsApp VoIP would really have any impact beyond the subscriber migration to data services that is already underway.
Argentine academic and telecoms expert Gustavo Fontanals, from Universidad de Buenos Aires, agrees that given the relatively low penetration of data plans in Latin America – averaging 30% of subscribers across the region – and the lack of stability in 2G and 3G networks, WhatsApp voice is unlikely to have much of an impact in the medium term.
Smartphone users without a data plan already seek out WiFi connectivity to use chat applications whenever possible, and it therefore makes no difference whether they use VoIP or chat, since they are no longer on the mobile network.
Fontanals points out that the migration process of long distance fixed telephony traffic to WiFi-based OTT services is already established, and it is here where WhatsApp has the advantage over other OTT voice applications such as Skype, because of the sheer number of users already in the WhatsApp system, the way contacts are listed by phone number, the ease of adding them, and the ease of creating groups.
Within this process, “the advance of WhatsApp will be more against the existing OTT competitors than the traditional carriers,” he says.
However, Fontanals does warn that the effect of OTT services has understandably been most notable in Latin American countries with better networks and higher adoption of data plans.
This has forced operators to price data plans in such a way that unlimited SMS traffic and large quotas of voice minutes can be included, thus justifying that side of the business. However, smaller operators and MVNOs recognize that these services are not in such great demand for data users and have the freedom to offer competitive data plans without these obligations. Eventually, the large operators are going to have to offer similar plans, Fontanals says.
Also, mobile operators that already waive WhatsApp traffic from their customers’ data plans will see WhatsApp voice as a threat and are likely to exclude VoIP traffic from that agreement, or try to renegotiate a financial deal with WhatsApp to cover the loss of that business.
This stands in contrast to the North American market, where operators recognize that OTT services like Skype make data plans more attractive and play on that element in their marketing activities, the academic adds.
LatAm deals boost international revenues for SES in 2014 – Regional Global satellite operator SES’s international revenues, which include its Latin American operations, increased by 8.3% to 560mn euros (US$635mn) in 2014, according to a company earnings statement.
A significant part of that total can be attributed specifically to a series of deals closed by the company in the region last year.
Overall, the company collected almost 2bn euros in global revenues, up 3% as reported and 4% at a constant exchange rate.
In Brazil, SES acquired two of four satellite positions in a tender held last May. SES paid 33mn reais (US$11.3mn) with a 170% premium, and 26.8mn reais (up 120%), respectively.
Last February, SES signed a deal with Telefónica Global Solutions focusing on Brazil’s Vivo mobile phone clients in the country’s north and northeast.
In April, SES and Telecomm Mexico signed an agreement to provide high-speed broadband to rural communities.
During 2014, SES announced the procurement of three new satellites (SES-10, SES-11 and SES-12).
Earlier this month, SES announced it had contracted Airbus to manufacture its SES-14 satellite, part of the extension of its SES line, to which the upcoming SES-15 and SES-16/GOV 17 also belong.
With the new SES satellites announced, future launches now involve seven new satellites, two of which will benefit Latin America: the SES-10, scheduled for launch in the fourth quarter of 2016, and the SES-14, which will be used for corporate, mobility and video coverage in the broad Americas region and in the North Atlantic as from 4Q17.