On April 13, 2009, President Obama announced the easing of restrictions on telecommunications service to Cuba, a development we reported in an earlier DWT client advisory, “U.S. Loosens Policies on Telecommunications Links with Cuba.” The President’s order directed the Departments of Treasury, Commerce and State to implement changes in current regulations and procedures that restrict telecommunications services to and from Cuba, and in the financial transactions incident to such services, and to take other steps to increase the flow of communications between the United States and the island nation.
However, the President’s order and the accompanying press statement did not address another important element in promoting greater telecommunications services between Cuba and the United States—the role played by the Federal Communications Commission (FCC) in authorizing such services. The FCC enforces regulations and guidelines that, as currently constituted, interpose onerous application, operating and compliance requirements on U.S. carriers that seek to serve Cuba. Until the FCC is instructed to change its enforcement procedures—instructions that the FCC thus far has not received—staff of the FCC has indicated that it intends to apply more burdensome regulatory guidelines that have been in force since the passage of the Cuban Democracy Act of 1992 (CDA).
The FCC’s streamlined 214 process
The FCC’s rules generally require that a carrier seeking to provide international service to any foreign destination must receive so-called “214 authorization” pursuant to Section 214 of Title 47 of the U.S. Code, which grants the FCC jurisdiction over international communications service. For the past decade or so, the FCC has streamlined the 214 process such that most applicants are granted international authorization within just a few weeks after filing a complete application. Even applicants with full or partial foreign ownership routinely receive authorization from the FCC.
A typical 214 authorization is a fairly short narrative disclosing all owners with a 10 percent or greater share, foreign carrier participation, circuit description and a verification that no “special concessions” have been made with the foreign country (or its telecom company) to serve the foreign market. So long as any foreign owners are from World Trade Organization countries, and no special concessions exist, the FCC typically allows for streamlined consideration of the application, which usually is placed on Public Notice within a few weeks of filing and will be deemed approved (in the absence of opposition or comment) a few weeks after Public Notice.
Additional requirements to serve Cuba
The FCC’s streamlined 214 process, however, currently does not extend to carriers seeking authorization to serve Cuba. Instead, harking back to U.S. policy developed after passage of the CDA, and based upon eight policy guidelines crafted by the State Department, applicants to serve Cuba must file both a regular 214 application and meet the following additional requirements:
- Proposals must have the potential to be operational within one year;
- Proposals are limited to equipment and services necessary to deliver signals to an international gateway in Cuba;
- Settlements with ETECSA (the Cuban-owned telephone monopoly) are limited to a 50/50 split of a $1.20 accounting rate, and ETECSA must cover half the cost of construction and maintenance, or lease, of transmission facilities;
- Proposals using existing facilities face potentially streamlined approval while proposals involving new transmission facilities are reviewed case-by-case;
- Carriers must file twice-yearly circuit reports;
- The Treasury Department monitors ETECSA's earnings, and carrier deals with ETECSA are reviewed case-by-case;
- Cuba's blocked accounts containing prior settlements remain frozen; and
- Carriers are required to obtain licenses from the Treasury Department’s Office of Foreign Assets Control, and possibly also from the Commerce Department’s Bureau of Industry and Security and/or the Department of State, under regulations that restrict financial transactions with, and sales of goods and services to, Cuba and other nations subject to trading-with-the-enemy restrictions. See our prior advisory.
As a result of these additional requirements—and the further limitation that carriers cannot routinely upgrade facilities (some of which may date back decades) to the gateway—only a handful of U.S. carriers have received authorization to serve Cuba since 1992.
Post-directive procedures at the FCC
New entrants interested in taking advantage of the Obama administration’s announced change in telecommunications policy toward Cuba certainly can file with the FCC immediately under the agency’s legacy requirements, but run the risk that their additional efforts to meet the eight special Cuba requirements may turn out to have been wasted when the FCC finally receives instructions on easing the Cuba application process.
While it is possible that applications “in process” under the old policy regimen will be transferred to whatever new regimen emerges, or will otherwise be given priority under any new processing procedures (such that it would make sense to get in the queue now), that outcome is not guaranteed.
We are in regular contact with the FCC about authorizations to provide telecommunications and other services and equipment to Cuba, as well as to other countries with which trade generally is restricted. If you have questions about the current process or how and when it might change, or wish to file applications to provide telecommunications services to Cuba or other embargoed nations, please contact us.