Silicon Valley Firms Eager to Get Into Cuba, But Face a Slow Road

After taking students from Santa Clara University to Cuba over the past three years, Gregory Baker thought he'd seen it all. But in September, he saw something in Havana and other towns that made his jaw drop.

"The biggest thing that surprised me this year was walking into a square and seeing Cubans on smartphones -- antiquated smartphones but smartphones nonetheless -- and accessing the Internet freely," says Baker, director of Santa Clara University's Food and Agribusiness Institute and the student immersion program.

Digital freedom and access to the Web is coming slowly to the largely technology-starved island of 11 million. But there has been progress since President Obama's announcement a year ago that the United States would restore diplomatic relations with Cuba and ease its half-century-long economic embargo of the communist-ruled island nation. At that time, Cuban President Raul Castro also pledged increased Internet connections for the nation's citizens.

Washington, D.C.-based Freedom House estimates one in four Cubans has Internet access but most are relegated to a tightly controlled government-filtered intranet. The report says only 5 percent of Cubans have full access to the Web.

Now that restrictions on travel have loosened, so has the export of telecommunications equipment to Cuba.

Silicon Valley tech companies like Google, Cisco Systems and others are trying to take advantage of the opportunity to jump into the Cuban market. However, they're finding that challenges abound.

In June, Alana Tummino helped organize a trip to Cuba with Google executives to meet with government officials to discuss how the Mountain View-based tech giant can help close the nation's digital gap. She says tech companies are going into Cuba with grand plans and ideas for how they want to build out infrastructure for the Internet. The government, she says, wants to take much smaller steps until trust is built.

"It's [the Cuban government] very much saying, 'We welcome this investment, we welcome this collaboration, but whatever development that is going to happen is going to be on our terms,'" says Tummino, director of policy for the Council of the Americas, a trade group based in New York.

Tummino says that means work won't be happening at Silicon Valley's usual breakneck pace.

"I absolutely don't think there's going to be some massive opening where all of a sudden everyone is going to be able to connect to a free and open Internet in Cuba," she says.

There are seveal major hurdles, says Tummino. Cuba lacks telecommunications infrastructure and the financing to undertake a massive build-out. Just as significant, the government maintains tight control over the entire telecommunications system.

"Etesca is a [Cuban] government-owned telecommunications company that runs everything from telephone, Internet and wireless services," Tummino says. "Anytime you're going to be connecting with these telephones and mobile devices, you have to run it through this Cuban-owned entity."

Some Silicon Valley companies are finding other ways to start doing business in Cuba, even with the country's limited Internet network.

San Francisco-based Airbnb -- a company that started completely online -- entered the Cuban home-sharing market in April by using hosting partners and telephones to make reservations.

"I have always joked that the Internet of Cuba is the telephone," says Kay Kuehne, Airbnb's regional director for Latin America.

Kuehne says Airbnb strategically tapped into an existing government-licensed Cuban home-sharing system called "Casas Particulares."

"Our hosts in Cuba have been doing this for almost 20 years and that was very interesting to us because Airbnb has only been around for eight years," says Kuehne. "So seeing people doing this for longer than we existed seemed like a great opportunity for us to learn and bring these people onto our platform."

The resourcefulness of Cubans without the Internet has particularly impressed Kuehne.

"One person in the neighborhood will download the latest journals, newspapers, television shows from the United States and Europe, and put it on a pen drive," Kuehne says. "They then drive around the neighborhood and then you pay for the pen drive."

Last month, 500 Startups, a Mountain View-based tech incubator, helped host a rare tech startup weekend in Havana. Santiago Zavala, who works for 500 Startups in Mexico City, says Cuba has a highly educated workforce. At the event, some 70 engineers and tech experts practiced pitching their ideas for startup companies.

"There was incredible enthusiasm to succeed and get better," says  Zavala.