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When the Internet Service Provider is Government-Owned Monopoly: Cuba’s Forthcoming 3G Pricing Model

Jorge Luis Valdés Hernández, Director de Servicios Convergentes de la Vicepresidencia de Integración Comercial de ETECSA, described the forthcoming changes to their mobile Internet service in a recent press conference. (He also has a very long job title).

To be honest, the press conference coverage left me a bit confused, but this is some of what he said as I understood it:

There are 5.1 million active mobile accounts today and of those 35% use 2G phones, 45% 3G and 20% 4G. (ETECSA will be selling a lot of 3 and 4G phones).

Fourth generation LTE service is being tested in Varadero and deployment will begin in 2019. (Armando Camacho has reported on the tests and found the preliminary speeds surprisingly slow).

I believe that access to selected sites will be free or subsidized—zero-rated—and others will be capped by the amount of data transferred. My guess is that the majority of the free sites will be on the national intranet as opposed to the global Internet.

He gave a hypothetical example in which a user on the 1 GB plan would receive .5 GB free access to sites on the national intranet, stating that international access was more expensive than domestic.

While not defining plans or prices, he presented two hypothetical paid plans—one for “moderate” users at 500 MB per month and a second for “intense” users at 2.5 GB per month—and showed typical data utilization for various applications:

The press conference hailed the “launch” of the mobile Internet, but Cuban 3G mobile access began in 2015 when it was made available to tourists in limited locations and it has steadily expanded. Today there are over 520 3G-compatible base stations covering 47% of the population and all of Havana.

This press conference was not about new technology, but about new pricing, which favors government-approved political content and protects local content and services from the global competition.

Subsidized content delivery is an attractive consumer marketing tool, but proponents of network neutrality argue that it gives the Internet service provider (ISP) the power to pick winners and losers. For example, AT&apm;T could begin zero rating—delivering content produced by its recently acquired Time-Warner subsidiary—at no cost to the user.

Zero-rating or other forms of subsidy are even more problematical when the Internet service provider is a government-owned monopoly, as it is in Cuba. If you live in the US, depending upon your point of view, you probably consider Fox News or MSNBC politically biased, but your ISP does not give you a discount on either. Will Granma.cu be zero-rated?

Going beyond political information, the new pricing continues the Cuban policy of favoring content or service on the national intranet over that on the global Internet. Valdés asserted that in addition to increasing the consumption of national service, this policy would help offset the increased cost of delivering international content, but that increase is marginal and the national intranet discount amounts to a protectionist tariff on foreign content and services. (And, I bet ETECSA will make a handsome profit even with this national-intranet discount).

Mobile connectivity, not WiFi hotspots or home DSL, is the focus of Cuba’s current “universal Internet access” campaign and the new pricing plans will serve to protect local content and service providers and control political information.

By Larry Press, Professor of Information Systems at California State University

He has been on the faculties of the University of Lund, Sweden and the University of Southern California, and worked for IBM and the System Development Corporation. Larry maintains a blog on Internet applications and implications at cis471.blogspot.com and follows Cuban Internet development at laredcubana.blogspot.com.

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