The Cuban telecom services market, measured by revenues derived from voice, data, and video services, grew 10% in 2014 to $918 million, slightly slower than the average annual growth rate of 12% during the preceding four years.
The industry is tightly controlled by the government, with ETECSA operating as the monopoly provider in both the fixed-line and mobile markets. ETECSA is also the largest provider of Internet services in Cuba, although CENIA Internet, operated by a branch of the Cuban Ministry of Science and Technology, also offers Internet services.
Cuba’s telecom industry is among the most underdeveloped in the world, the result of more than 50 years of bureaucratic delays, a persistent lack of funding, and the effects of the U.S. restrictions on trade with Cuba, which have directly prohibited US companies from selling telecommunications equipment to Cuba.
US restrictions have also indirectly impaired Cuba’s ability to buy telecom equipment from other countries through de minimis US-content restrictions and by curtailing its ability to earn hard currency, particularly U.S. dollars. At the end of 2013, Cuba’s mobile and Internet penetration rates, defined as the number of subscribers per 100 inhabitants, ranked in the bottom 2% and 9% of reporting countries worldwide, respectively, and fixed-line penetration ranked in the bottom 43%.
The availability of fixed-line voice services is poor in most of Cuba, with only about 11% of the population subscribing to such services in 2014; the majority of these subscribers are likely based in urban areas. Although fixed-line subscriptions grew at a 4.4 percent average annual rate during 2005–14, such growth is from a very low base, with the limited reach of Cuba’s network infrastructure being the main hindrance to the uptake of fixed-line voice services. Much of Cuba’s fixed-line network was installed in the early part of the 20th century, with efforts to expand the network suffering from an ongoing lack of financial resources and bureaucratic delays. Installation delays and a lack of funding have also severely hampered Cuba’s efforts to maintain and upgrade its fixed-line network, not only keeping available services at a very basic level, but also resulting in inconsistent service quality.
In 2013, Cuba’s incoming international voice traffic totaled 464.4 million minutes, whereas outgoing traffic totaled only 46.6 million minutes. Currently, virtually all of Cuba’s international Internet traffic (and most likely voice traffic) is routed via Telefónica (Spain) and Tata (India) over the ALBA-1 cable, although Cuba continues to maintain satellite services with two providers, Intelsat (multinational) and NewCom (Mongolian).
ETECSA demands $0.84 per minute from foreign operators for connecting calls in Cuba, a requirement that has conflicted with the US Federal Communications Commission (FCC) maximum benchmark rate of 19 cents per minute. Both IDT and Sprint received approval from the FCC to offer direct telephone service to Cuba at a rate higher than the 19-cent benchmark rate.
Mobile telephone services emerged in Cuba in the early 1990s following the creation of the Cellular Telephone Company of Cuba (Cubacel). In order to accommodate European tourists, a second company, C-COM, was created to offer mobile services using GSM technologies, the dominant global technology standard. In 2003, both companies were folded into ETECSA. For more than a decade, mobile services were, for the most part, available only to diplomats, foreign businesspeople, and senior government officials.
In 2008, however, the Cuban government lifted its ban on mobile phone ownership, setting the stage for rapid growth in mobile subscriptions. In 2009, for example, subscriptions grew by 87%, and in 2010 by 61%. Overall, mobile telephone subscriptions grew from roughly 331,736 in 2008 to 2,530,752 by the end of 2014, an increase of over 600%. By June 2015, the number of mobile telephone subscribers had grown to an estimated 3,069,537, or roughly 27% of the population.
Despite this rapid growth, Cuba still lags its neighbors: the number of mobile subscriptions per 100 people in Latin America and the Caribbean region in 2014 ranges from a low of 51 in Belize to 171 in Suriname, with the majority of countries exceeding 100.
Over the past 10 years, Cuba’s mobile network has spread throughout the island, with mobile coverage now available to approximately 85% of the population. Since the vast majority of the network operates on older-generation 2G technologies, mobile services are largely limited to telephone calls and text messages. Although ETECSA has announced plans to offer limited broadband mobile services, mainly mobile email and Internet access, such services will not likely be readily available to the general populace due to high service prices and the small number of compatible devices.
In addition to the roaming services recently launched by both Verizon, Sprint and T-Mobile, ETECSA has reportedly established roaming agreements with 365 mobile carriers based in more than 140 countries.
Over the past three years, ETECSA has taken steps to increase the number of mobile users, mainly by reducing costs. In January 2012, for example, the government cut the price of a mobile telephone call from $0.60 per minute to $0.45 per minute, followed by another reduction to $0.35 per minute in early 2013. Also in 2013, the government reduced costs on mobile users by introducing a “calling party pays” system; previously, both callers and recipients were subject to per-minute calling fees. Despite such efforts, the cost of mobile service is still prohibitively high for most Cubans. As a result, many mobile customers reportedly use their cellphones to receive calls, but prefer to make calls using fixed-line phones.
Until recently, most Internet access in Cuba was delivered via low-bandwidth dial-up connections, although faster Internet access speeds were reportedly available at tourist hotels, educational institutions, and government offices. Broadband access, like that delivered via digital subscriber line or cable modem technologies, is still rare in Cuba, although ETECSA has recently opened roughly 600 “navigation halls” and cybercafés.
Such government-sanctioned outlets charge $0.60 per hour to access Cuban websites, and $4.50 per hour to access the global Internet. As of January 2016, ETECSA had opened 65 Wi-Fi access points across the island, which offer Internet access for $2 per hour.
Although the government has reduced the price of Internet services (and other telecom services) over the past two years, such services are still largely unaffordable to the majority of Cubans, given Cuba’s average salary of about $20 per month. Indeed, some observers have expressed the view that the Cuban government limits the Cuban population’s access to information not by using sophisticated filtering and blocking techniques, but instead by rationing the technology needed to access the Internet (i.e., limiting the number of navigation halls and Wi-Fi access points), and also by maintaining prohibitively high pricing for Internet and mobile services, as well as necessary access devices like computers, smartphones, and tablets.
Some observers suggest that the government may also keep costs for telecom services relatively high as a way to attract hard currency from abroad. In particular, they point to the government’s new policy of allowing friends and relatives living outside Cuba to pay the phone bills of domestic users via a Cuban government website.
Although official statistics indicate that 26% of the Cuban population uses the Internet, most users are confined to a tightly controlled, island-wide “intranet,” consisting of a national email system; an encyclopedia; academic journal articles and other educational materials; Cuban websites; and a limited number of international websites. In addition, however, some are able to access the Internet through alternate channels, such as the unofficial Internet-like network known as “StreetNet” or “SNet”. Only 5% of the population is estimated to have access to the global Internet.