In a recent flurry of activity to implement the President's policy agenda to reestablish relations with Cuba, federal agencies are moving forward with a wave of proceedings and regulations with specific provisions geared towards promoting and deploying telecommunications services to Cuba.
The Federal Communications Commission (“FCC” or “Commission”) has taken several actions in 2016 already to relax regulations – and thereby further open opportunities for carriers – on the U.S.-Cuba route. In January, the Commission removed Cuba from the Commission's Exclusion List for International Section 214 Authorizations, which enables U.S. telecom carriers to provide facilities-based telephone and Internet service to Cuba without separate approval from the Commission. In February, the FCC proposed yet another measure to ease regulatory requirements on carriers seeking to provide international telecommunications to Cuba. The FCC hopes the new policy, if adopted, will further promote competition on the U.S.-Cuba route by encouraging more direct agreements between U.S. can Cuban carriers.
By Notice of Proposed Rulemaking (“NPRM”), the FCC is soliciting comment on a proposal to eliminate one of a few remaining restrictions on facilities-based switched voice service to Cuba. Specifically, the FCC is considering removing the nondiscrimination requirement of its International Settlement Policy (“Settlements Policy”) which is typically also imposed as a condition on carriers seeking to pay above-benchmark settlement rates to Cuban carriers. (Commissioner Michael O’Rielly, in a statement concurring in the decision to seek comment, expressed concern about the proposal, noting that he did not see changed circumstances warranting removal of the nondiscrimination provision and relaxed regulation.) Comments and reply comments on the NPRM will be due 30 and 45 days, respectively, after the NPRM is published in the Federal Register. As of this advisory, the NPRM has not yet been published in the Federal Register.
In response to U.S. State Department guidance over the last few years, the FCC has been easing regulatory obligations on the provision of telecommunications on the U.S.-Cuba route. The FCC had long required carriers to abide by the requirements of the Settlements Policy – which was designed to prevent foreign carriers possessing market power from discriminating or using threats to obtain pricing concessions from competing U.S. providers – and its Benchmarks Settlement Policy, which governs the rates U.S. carriers can pay to foreign carriers for termination of U.S. traffic. One of three key provisions of the Settlements Policy is the requirement that all carriers must receive the same effective accounting rate and date for that rate – the “nondiscrimination” requirement. For service to Cuba this means that the terms and conditions of operating agreements, for facilities-based switched voice service, between a U.S. carrier and Cuban carrier with market power, must be identical to equivalent terms of other U.S. carriers providing similar services on the route.
The FCC now seeks comment on whether removing application of the Settlements Policy’s nondiscrimination provision, and the nondiscrimination condition imposed on Benchmark Settlement Policy waivers, on the U.S.-Cuba route will serve the public interest. The public is also invited to comment on other actions the Commission can take to further open the U.S.-Cuba route and whether operating agreements between U.S. and Cuban carriers should continue to be routinely available to the public.
We continue to see an easing of regulations on the U.S.-Cuba route, but the road ahead for U.S. carriers is not completely open. The FCC is not proposing to lift the Benchmark Settlement Policy for Cuba and carriers seeking to enter into operating agreements at above-benchmark settlement rates still must obtain an FCC waiver and agree to other conditions including, for now, the nondiscrimination requirement.
This latest proposed action is consistent with the FCC’s easing, earlier this year, of the process for obtaining international Section 214 authority to serve Cuba and, over the past few years, waiver grants, which permit payment of above-benchmark settlement rates. In January 2016, the FCC removed Cuba from its international Section 214 exclusions list. As a result U.S. carriers are no longer required to seek separate authority from the FCC to provide facilities-based service to Cuba and carriers holding global international section 214 authority can immediately begin serving Cuba.
The NPRM proposal follows close on the heels of the January 2016, September 2015, July 2015, and January 2015 rules released by the Departments of Commerce and Treasury to ease trade restrictions against Cuba. These rules expand an existing general license now authorizing a variety of business and travel-related activities. Separate from the Commission's 214 authorization process, the Department of Commerce's Bureau of Industry and Standards expanded the authority under an existing general license to allow for the export of equipment intended to improve the free flow of information to, from and among the Cuban people as well as the sale of telecommunications infrastructure equipment and communications devices such as mobile phones computers and related hardware and software to Cuban government-owned, operated or controlled companies and corporations.
This expanded license enables providers of telecommunications or internet-based services to maintain a physical presence in Cuba, provide telecommunications services in Cuba or that link third countries and Cuba, and engage in transactions including payments related to the provision of telecommunications involving Cuba or provided to Cuban individuals. This includes authorization for U.S. persons to purchase calling cards for use in Cuba or to pay the calling card bills directly to a telecommunications operator physically located in Cuba. This license also allows persons subject to U.S. jurisdiction to provide services incident to internet-based communications for a fee to end users in Cuba.
In addition, State Department officials have been urging Cuba to consider foreign investment to upgrade its telecom networks to implement transparent procurement for telecommunications and to make Internet service more widely available by increasing the number of Wi-Fi hotspots, lowering prices, and loosening regulations for consumer and residential Internet use.
In light of these recent actions and the FCC's current proposal, it appears the trend in easing of regulation on the U.S.-Cuba route is likely to continue. As relations between the U.S. and Cuba continue to warm, carriers should expect to see increased opportunities on the U.S.-Cuba route. Carriers interested in positioning themselves to take advantage of any new opportunities should consider participating in the FCC's rulemaking proceeding or one of the Department of Commerce's monthly call-in programs.
For more information on this advisory, please contact Steve Augustino at (202) 342-8612, Chip Yorkgitis at (202) 342-8540, or Denise Smith at (202) 342-8614.