Telephony / October 30, 1995
By Larry Luxner
WASHINGTON -- Congress has passed and sent to conference legislation aimed at tightening Washington's 34-year-old trade embargo against Cuba, but the bill's chief provisions have become so watered down that it'll have little or no effect on the telecom industry by the time it reaches President Clinton's desk for final approval.
In its original form, the so-called Helms-Burton bill -- sponsored in the Senate by Jesse Helms (R-N.C.) and in the House by Rep. Dan Burton (R-Ind.) -- would have made it easier for U.S. and Cuban nationals to sue companies owning, or investing in, properties confiscated by the Castro regime in 1960.
Under the bill, ITT Corp., which owned parts of the Cuban Telephone Company before it was confiscated by the Cuban government in 1960, would have been able to sue Mexico's Grupo Domos and Italy's STET in the U.S. court system, in the event either of those companies ever acquired assets in the United States. Yet opposition to that provision from both Democrats and Republicans forced it to be removed from the House version; where the Senate version ends up still remains to be seen.
ITT's certified claim against the Castro government comes to around $50 million. Last year, Monterrey-based Grupo Domos acquired 49% of Cuba's government-owned phone monopoly, and later sold part of that stake to STET; both companies promise to upgrade the Cuban phone network.
Even without the Helms-Burton bill, U.S. telecom firms are forbidden from investing in the Cuban phone system, although they may offer long-distance phone service between the United States and Cuba.
With an eye toward improving those services, a top MCI official told Telephony last week the company wants to build a $25 million fiberoptic cable between Florida and Cuba, in consortium with AT&T, Sprint and other U.S. long-distance carriers.
"We've spoken to the Cubans a number of times about our willingness to participate in a consortium to run to run a cable into Cuba," said Larry Codacovi, MCI's vice-president of international services. He added that MCI opposed a similar proposal by WilTel International of Tulsa, Okla., because that cable would be privately run, and "we felt it should be a consortium."
At the moment, said Codacovi, MCI has between 200 and 300 circuits to Cuba, and roughly 36% of total long-distance traffic between the two countries. That's second only to AT&T's 42%, with Sprint and four other carriers sharing the remaining 22% of the pie. Those numbers couldn't be confirmed, since none of the other carriers would comment on revenues or market share. Total traffic, says Codacovi, amounts to between 6 and 7 million minutes a month -- or 80 million minutes a year -- which translates into $100 million in 1995 revenues (shared evenly by the United States and Cuba).
"That's a tremendous increase compared to where it was a year ago," he said. "People unable to get calls through now can pick up the phone and get a dial tone, and have a good chance of connecting on the first try." The call completion rate, he added, has increased from 13% a year ago to "well over 20%" today.
"Right now, it's all residential lines, very little business. That's going to grow as more lines are installed in Cuba and the Mexicans get phones into as many homes and offices as they can. There are a lot of people waiting on the sidelines, and if the embargo is ever lifted, there will be a huge surge in traffic. Even without the embargo lifted, traffic will grow 15-20% a year, peaking five years from now."