Cuba

The 3 Things to Know Before Doing Business Online in Cuba

The 3 Things to Know Before Doing Business Online in Cuba
Image credit: REUTERS | Stringer

For the past 53 years, Cuba has been closed for business to much of the international market. Following the Castro-Krushchev missile crisis, Cuba was even barred from trading with many Western countries and excluded from the kinds of modernization deals and investments that its Latin American neighbors take for granted. For the past 20 years, it has also been Internet dark.

Related: No, McDonald's Won't 'Ruin' Cuba

But, as tensions with the West have cooled, Cuba has turned on the Internet, opening the floodgates (albeit, slowly) to its 11 million citizens and giving the green light for businesses to enter the market in earnest. While not without its risks, Cuba is a market that holds deep potential, especially given its proximity to the United States, its educated population and its wide-open commercial potential.

Following are the three most important things to know for businesses hoping to enter and succeed in Cuba:

1. Internet access is limited but growing.

The Cuban market has been virtually closed to the Internet for years. The only access points have been at tourist-only hotels and among those citizens -- a small percentage of the population -- possessing the connections and deep pockets to secure dial-up-speed access. Most estimates put total access on the island at 5 percent, but recent additions of Wi-Fi capacity to dozens of state-run Internet centers has put the ball in motion for broader future access.

Though expensive, at $6 to $10 per hour (a significant investment in a nation where the average weekly salary is $20), the introduction of Wi-Fi signals a move to greater availability moving ahead.

Another sign that access could soon become more widespread is the fact that the infrastructure is already in place for a larger network to be built. In 2011, Dyn Research broke a story indicating that there was fiber optic access to Cuba via Venezuela; and in 2013, Spanish telecom Telefonica began service to Empresa de Telecomunicaciones de Cuba S.A. (ETECSA), the state telecom of Cuba.

The capabilities are in place, then, for Cuba to have more extensive Internet access; and if political conditions continue to soften, we’ll likely see services and use become much more prevalent.

Indeed, if the Internet is opened up for greater consumer -- and business -- access, cloud access will be available, but at less-than-perfect performance speeds. Through our research, we’ve examined connection speeds to Havana and found that they are between 100 and 249 milliseconds -- which is relatively poor performance.

By comparison, the same cloud providers connect with San Juan, Puerto Rico, at 50- to 99-millisecond connection speeds, which means that residents in San Juan are much more able to quickly load and access websites for shopping, social media connections, news sites and more.

2. Mobile will eventually dominate.

According to ComScore, mobile-only Internet access in the United States now exceeds desktop-only access, and we’ve seen this same shift to mobile play out in India and China, as well. In fact, in China, a shocking 89 percent of Internet users access the Internet by mobile first.

However, the landscape is quite different in Cuba, where residents can find Internet-ready phones, but where actual Internet access is expensive and hard to find. However, as this changes and Internet speeds and infrastructural investments improve, the mobile market will likely explode.

Much like their counterparts in India and China, Cuban consumers will skip over desktops or laptops for Internet use and transition straight to mobile-first platform use. Soon, they will be catching up to the Internet-browsing behaviors in other developing countries.

Related: Headed to Cuba for Business? ¡Cuidado!

3. The long view is the only view.

Doing business in developing markets is invariably a tricky business. Cuba is particularly difficult to assess, not only because the market has been closed for so long, but also because it has been open only to a small handful of countries that have had time to gain a strong foothold (primarily, China, Russia and Venezuela). Combine that scenario with the fact that international business and politics go hand in hand, and the word “complex” only begins to describe Cuba's entry-level environment for foreign business.

Companies that want to do business in Cuba also need to be aware that the buying power of the Cuban market is quite small compared to that of larger markets. Economically, Cuba is better off than neighbors like Haiti, Dominican Republic and Jamaica, but it still lacks the free market economy that can support consumers who have buying power.

It will take some time for higher-paying travel and hospitality jobs and other, more diverse industries to drive job and wage growth in the country. The long-term approach to building a presence and brand reputation in Cuba is the only way to enter this developing market and experience success.

This level of diligence should include a thorough vetting of potential partners. It’s crucial to understand their ability to help you with market penetration and growth, help you navigate the political and regulatory waters and become long-term allies committed to your business. It's crucial not to be "at the dance" with multiple suitors.

Conclusion

Cuba is influenced heavily by U.S. culture, and the many expats who fled the island decades ago could be highly influential in a Cuban renaissance. As Internet access and a greater openness to foreign investment begin to snowball in the coming decade, early entry in the Cuban market will prove a smart investment for companies that go in with both eyes open.

This will not be a quick pay-off, but rather a long game. The path to full Westernization will be a bumpy one.

It takes time for a country to invest in infrastructure, for the population to gain enough access to the technology that enables Internet connection and for brands to gain a toehold in a market with incumbent names. But playing the long game will be the key to success -- and companies that invest early will gain the upper edge as this nascent Internet-connected market comes online.

Related: What Will Franchising Look Like in Cuba? 3 Clues From Similar Markets.