FCC adopts new Cuba policy, finally!

Our last report on Cuba ended with a cliffhanger: the Department of the Treasury’s Office of Foreign Assets Control (OFAC) and Commerce’s Bureau of Industry and Security (BIS) had eased their Cuba regulations with respect to telecommunications, but the FCC was clinging to its 16-year old, highly-restrictive policy. It turns out that the FCC was waiting on word from the State Department—and once that word rolled in, the Commission moved quickly.

On January 12, 2010, FCC Chairman Genachowski received a letter from the State Department rescinding its 1993 policy letter and setting out new policy guidelines.  Sure enough, a scant nine days later, the Commission issued a Public Notice modifying its process for applications for service to Cuba. While the most burdensome restrictions from the old regime have been removed, applicants looking to serve Cuba should be aware of the following:

  •  Applications for international authority to serve Cuba must be filed separately and are not eligible for streamlining. Service to Cuba will not be covered by a grant of Section 214 global authority under section 16.18(e)(1) of the Commission’s rules, but must be applied for separately under section 63.18(e)(3).
  • Applications will go to the State Department for review. The Commission will submit all Section 214 applications for service to Cuba to the State Department for review. If State does not object within 30 days, the Commission will assume that it does not object to the grant of the application on foreign policy grounds.
  • The International Settlement Policy (ISP) and Benchmark Policy still apply to Cuba, but the FCC is prepared to grant waivers “reasonably limited in duration” based on “unique circumstances presented.” The ISP is designed to prevent U.S. carriers from being whipsawed by dominant carriers in foreign markets by restricting the terms and conditions U.S. carriers may agree to. Under the ISP, any carrier seeking to enter into an agreement with Empresa Telecomunicaciones de Cuba S.A. (ETECSA), which the FCC presumes to have market power in Cuba, must: (a) not agree to a higher effective accounting rate than other U.S. carriers; (b) receive a proportionate share of return traffic; and (c) divide the accounting rate 50/50 with ETECSA for U.S. inbound and outbound traffic. Similarly, the Benchmark Policy is intended to reduce above-cost settlement rates by requiring U.S. carriers to negotiate settlement rates at or below certain benchmark rates. Cuba is classified in the Benchmarks order as a lower middle income country, for which the most recent settlement rate is $0.60 per minute.
  • The new rules do not authorize investment in Cuba’s domestic infrastructure. This point is made explicit in both the State Department letter and the FCC Public Notice.
  • Applications may also need to be licensed by OFAC or BIS. Companies should ensure that in addition to FCC approval, they have appropriate authorization from OFAC (for travel and payment) and/or BIS (for export of U.S. goods).

Potential applicants should also bear in mind that while the scope of authorized telecommunications activities is broad, it is not unlimited. U.S. telecommunications companies may apply for FCC authorization to: (a) enter into agreements to establish fiber-optic cable and satellite communications facilities linking the U.S. and Cuba; (b) enter into roaming service agreements with Cuban service providers; and (c) provide satellite radio and television services to customers in Cuba.