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Loosening of Cuba embargo could mean huge possibilities for U.S. businesses

The policy shift could lead to telecom deals and more air travel, among other opportunities. The degree of access that Cuba will offer, however, is still in question.

April 14, 2009|Peter Pae and Alana Semuels

Airline flights. Phone service. Money transfers.

Those are among enticing new or expanded business opportunities seen ahead for U.S. companies with Monday's loosening of the U.S. embargo with Cuba.

"This is a big deal; it's a significant change in U.S. policy," said former Ambassador David A. Gross, the U.S. coordinator for international communications and information policy and a partner at law firm Wiley Rein.

Though the announcement by the Obama administration signaled thawing of relations with the communist nation, questions remain about what kind of access to the island market Cuba will allow U.S. companies.

Telecommunications businesses will now potentially be able to enter into roaming agreements with Cuban carriers -- if the Cuban government agrees, Gross said. That means Cuban Americans could send U.S. cellphones to their relatives, who will be able to make roaming calls on them and communicate with friends and family in the U.S.

And the latest policy shift has raised prospects that travel restrictions could be lifted for everyone, fueling a surge in tourism. About 1.5 million Americans, including about 85,000 Cuban Americans who live in Los Angeles, have relatives on the island.

"This is definitely a step in the right direction for the airline industry and for the travel industry," said Michael Zuccato, general manager for Cuba Travel Services, a Long Beach agency that specializes in booking travel to the island. With the loosening of travel restrictions, the company said it was working to return direct charter flights from Los Angeles to Havana in June or July. The flights were eliminated after the Bush administration tightened restrictions in 2004.

"But the big thing will be when the restriction is lifted for everyone. You'll see a tremendous boost in tourism," he said.

U.S. airlines are currently restricted from operating regularly scheduled flights, and planes chartered by federally licensed travel agencies will still be the only way for Cuban Americans to visit the island.

Americans without families in Cuba can travel to the island only if the visit is related to agriculture, a sporting event or for humanitarian missions. Journalists can also travel to Cuba.

Several U.S. carriers said it was too early for them to know what kind of effect the new policies would have on air travel to Cuba.

"It is a little bit too premature to say exactly what kind of opportunities this will present to Delta or to any other U.S. carrier," said Carlos Santos, a Delta Air Lines Inc. spokesman. "The industry is waiting for details and seeing how this will be implemented."

The biggest immediate effect could be with satellite TV and radio companies such as Sirius XM Radio Inc., which could potentially provide service to Cubans, Gross said.

There is potential for significant growth in Cuba's telecom industry.

According to 2007 statistics from the International Telecommunications Union, 11% of Cuba's population subscribes to telephone services, and only about 2% of the population subscribes to cellphone service.

Fewer than 1 of every 100 Cubans is a broadband subscriber, even though 12% of the population use the Internet.

As a matter of comparison, in the Dominican Republic, 56% of the population subscribed to cellphone service and there were two broadband subscribers for every 100 inhabitants.

With any of these services, however, companies will have to wait for the Cuban government to issue licenses -- if it decides to do so at all.

The administration also said Monday that it would allow U.S. telecom providers to establish fiber-optic cable services linking the United States and Cuba.

If Cuba approves of a fiber-optic connection, there are dozens of companies that could benefit by building and operating this connection, which could provide lower-cost telephone, Internet and video services to Cuba.

"This is a sea change in U.S. policy," Gross said.

"Now it's up to the Cuban government to let its people have access to this type of goods and services."

The administration also will now allow computers, software and phones to be donated to Cuba without a license.

Many U.S. wireless companies were mum Monday about how they planned to react to the policy changes.

"We're certainly going to study the administration's proposal, but beyond that, we can't comment," said Geoff Mordock, an AT&T Inc. spokesman.

--

peter.pae@latimes.com

alana.semuels@latimes.com

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