Monday, June 4, 2007

Thanks for calling!!!

Miami generates the pressure for U.S. sanctions to cut off hard currency flows to Cuba.

Miami is also the place that generates a great deal of hard currency flows, which is why the Administration tightened its sanctions in 2004 to reduce family visits and family remittances.

One form of family contact that the Administration has not curtailed – I’m not trying to give anyone any ideas – is phone calls.

International calls are a big money-maker for Cuba, resulting in $102 million in payments from American phone companies last year, according to U.S. Treasury Department data cited in the current issue of CubaNews, a terrific newsletter that keeps back issues on its site.

CubaNews reporter Ana Radelat obtained the unclassified data on her own after Treasury apparently tried to treat it as a state secret. Treasury would not divulge how many minutes of phone traffic went back and forth between Cuba and the United States last year.

But the FCC does release that data – 2004 is the latest – and it shows why Etecsa, Cuba’s phone company, effectively has a license to print money through international long distance service.

The company, a joint venture with the Italian corporation Stet, is a monopoly in Cuba. It does not have to cope with the pressures of technology and competition that have driven down the cost of phone calls virtually everywhere in the world.

What’s more, it operates in unusual market conditions. Cubans and their relatives abroad want to talk. Because nearly all the purchasing power is abroad, nearly all the calls come from abroad. Because phone companies pay each other for terminating calls, this means that U.S. phone companies, whose customers originate the calls, pay Etecsa for terminating the calls. And they pay at high rates that are unaffected by competition, because Etecsa brooks none.

The FCC’s data on U.S.-Cuba phone traffic in 2004 (contained in this report on U.S. international phone traffic, pdf) shows that 3 million minutes were billed in Cuba, vs. 118 million minutes billed in the United States that year. That is, for every minute of phone traffic originating in Cuba, 39 minutes originated here. The net payment to Etecsa from U.S. companies was $86.2 million.

But Etecsa’s life is not entirely a bowl of cherries. It has hard currency expenses and a customer base that pays mainly in Cuban pesos. So it relies on Cuba’s business and tourism sectors, and on revenues from calls coming from abroad, for its hard currency revenues. (A 2001 report on Cuba’s telecom/IT sector is here [pdf, 16 pages]).

For years, visitors to Cuba have seen Etecsa workers replacing museum-piece switching equipment, installing digital switches in neighborhoods, extending new lines to residences (Cuba now has about eight lines per hundred population, more than twice the 1996 amount), and generally upgrading a 1950’s phone system.

It’s only a slight exaggeration to say that Miami is paying the bill.


Mambi_Watch said...

Great post. Without question that CubaNews is among the best sources of information about Cuba, and they have produced a great story.

Unfortunately, it is not available to non-subscribers, and few CubaNews articles make it out to the public.

Nevertheless, some university libraries have these issues available and can be accessed.

I hope you can link the PDF files anyway.

Phil Peters said...

Sorry, the links were dropped from that post, fixed now. The CubaNews site does have back issues available.

leftside said...

Yeah sweet deal, but it is worth remembering that Cuba did not receive a dime from phone calls for 30 years due to the embargo. They are owed some $200 million I think...

The money has been diverted to pay $91 million to the US family of a Bay of Pigs veteran/arms dealer who was shot down during the invasion. A "wrongful death" by a terrorist country the US court ruled. What I don't know is if the money has actually been paid to the family as yet, or the Hermanos member family.