There has been a fair amount of publicity regarding the Obama administration’s recent action rolling back Bush administration policies on family remittances and travel to Cuba. The much less discussed communications provision of the action have been touted by some as potentially opening up a number of opportunities for U.S. companies seeking to provide telecom service in and to Cuba. Under these provisions, the new administration is permitting U.S. companies to “enter into agreements to establish fiber-optic cable and satellite telecommunications facilities linking the United States and Cuba” as well as to enter into roaming agreements for cell phone usage in Cuba.

To be understood, however, this action needs to be put into some historical context as comprehensively described in this paper published by the Columbia Business School’s Virtual Institute of Information. When the Cuban embargo was imposed in 1962, this effectively froze the development of telecommunications links between the United States and Cuba, which at that time consisted of a submarine cable with a capacity to carry 130 calls and a tropospheric radio channel with a capacity of 79 calls. OFAC allowed the operation of these telecommunications channels to continue despite the embargo under a grandfather clause but prohibited upgrading these channels and forbidding payment of settlement payments to Cuba. (Settlement payments are those payments made by a carrier to a foreign carrier for connecting the incoming international call to its domestic subscribers.)

When the cable wore out in 1987, OFAC authorized its replacement, but only with the oldest cable available, which turned out to be some mothballed copper-cable with a capacity of 138 circuits. The antique cable was put down between West Palm Beach and Cojimar, Cuba at a cost of $8 million. Cuba refused to activate the cable until the U.S. met its demands for settlement payments for Cuba’s carriage of the local leg of calls originating in the U.S. and carried over the underwater cable. When Hurricane Andrew destroyed the Florida link of the troposphere channel, Cuba allowed a limited number of calls from the U.S. over ItalCable, Italy’s international carrier rather than allow the operation of the cable, which only went into operation several years later.

In the early 90s, the United States began to reconsider its telecommunications policy toward Cuba in large measure because it became easier for U.S. callers to Cuba to make those calls through Canada, bypassing AT&T and other U.S. carriers. As a result, the U.S. allowed carriers to make settlement payments to Cuba, an authority now codified in section 515.542 of the Cuban Assets Control Regulations. Section 515.542 of those regulations authorized transactions incident to the use of cable and satellite channels to provide telephone service to Cuba. As a result, U.S. telephone carriers can freely use existing satellite channels to provide telecom service to Cuba.

Indeed, the real barrier to building additional cable and communications facilities with Cuba may be economic more than regulatory. As an impoverished nation, telecommunications carriers may not see Cuba as a very attractive market. ATT’s response to the new policy was, to say the least, lukewarm:

AT&T spokesman Michael Coe said the [West Palm Beach-Cojimar] cable is no longer in operation, and the company connects calls to the island through third-party carriers. As for roaming agreements and direct connections to Cuba, the company has no plans yet.

“We’re certainly going to study the administration’s proposal,” Coe said.

Further liberalization of U.S. telecom policy toward Cuba is certainly laudable, but, at least for the moment, it’s not clear that the liberalization will have much practical effect.

Don’t start making room in you humidors for any Cuban Cohibas just yet, but provisions attached by the House of Representatives to the 2009 Omnibus Appropriations Act rolling back some Cuba sanctions are likely to be approved by the Senate. At least that’s the word from Senate majority leader Harry Reid.

Three sections of the Omnibus Appropriations Act deal with the Cuba Sanctions program. Section 620 amends the Trade Sanctions Reform and Export Enhancement Act of 2000, commonly known as TSRA, to provide for a “general license” to travel to Cuba in connection with “marketing and sale of agricultural and medical goods.” In OFAC-speak, this means in effect that licenses would no longer be required for such travel. Currently, individuals seeking to travel to Cuba in connection with TSRA transactions need to apply for a specific license. And, although such licenses are generally granted, the specific license requirement can result in delays and added expense in connection with such travel.

Second, section 621 prohibits the expenditure of any funds to enforce amendments to “section 515.560 and section 515.561 of title 31, Code of Federal Regulations, related to travel to visit relatives in Cuba, that were published in the Federal Register on June 16, 2004.” Those amendments, among other things, narrowed the definition of relatives that could be visited, limited such trips to once every three years, imposed a requirement that a specific license be obtained for relative trips that previously could be made under a general license, and decreased the amount of money that could be spent during visits to relatives from $167 per day to $50 per day and $50 per trip. Other amendments to sections 515.560 and 515.561 not involving relatives, such as the amendment allowing authorized travelers to bring back $100 worth of Cuban goods for personal consumption (cigars, of course) would presumably not be affected by section 621.

Finally, section 622 reverses a rule adopted by OFAC requiring that payment be received for TSRA exports to Cuba prior to the ship’s departure from the shipping port. In effect, this eliminated the “cash against documents” rule standard for export transactions. Under that rule, the Cuban buyer’s bank (usually a European bank) would pay for the shipment upon presentation to it of a negotiable bill of lading which is considered to be equivalent to the delivery of the goods themselves. Often the goods would have arrived in the Cuban port prior to this presentation of the bill of lading. Requiring payment prior shipment from the U.S. port, and, hence, prior to delivery of the bill of lading to the confirming bank, materially increased the risk of Cuban TSRA exports and made it more difficult for such transactions to be financed or handled by banks.

With a new administration in the White House, opponents of the Cuba embargo are hoping to pass legislation that could gradually chip away at the total embargo in place against the island. Last week Representative Bill Delahunt [D-Mass.] introduced the Freedom to Travel to Cuba Act. That legislation would completely prohibit the President from prohibiting travel to Cuba, and transactions incident to such travel, by U.S. citizens and legal residents. The only exceptions would be a state of war between the U.S. and Cuba (presumably a war actually declared by Congress) or an imminent danger to public health.

Coincidentally, on the same day that Delahunt introduced his legislation, the pro-embargo group Cuba Democracy Public Advocacy issued a press release announcing the results of a poll that the group had commissioned and which found that 69 percent of Cuban-Americans “support the prohibition of tourist travel to the island.” Leaving aside the somewhat peculiar notion that U.S. policy on this matter should be controlled by the opinions of Cuban-Americans rather than the entire population, the commissioned poll doesn’t really support the conclusion asserted by CDPA.

Accepted poll methodology requires that the questions used by the poll be neutral questions that don’t influence the likely response. For example, a poll might properly ask “Do you prefer Cola A or Cola B,” not “Do you prefer the refreshing taste of Cola A to the acrid taste of Cola B?” Here’s the question asked by the poll which allegedly supports the conclusion that 69 percent of Cuban-Americans do not favor travel to Cuba:

Do you agree or disagree that US tourism [sic] should not be authorized to vacation in Cuba until the Cuban regime releases all political prisoners, respects basic human rights and schedules free elections?

I wonder what the results would have been if the poll asked this question instead:

Do you agree or disagree that U.S. tourists should not be authorized to vacation in Cuba even though such tourism might promote better relations between the United States and the Cuban people?

My guess is that the numbers would be significantly different. Even if a majority of Cuban Americans still agreed with the question biased in the other direction, CDPA doesn’t enhance its credibility by promoting the results of a push-poll.