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Cuba's Internet elite emerges

Industry Standard

April 11, 2000
Web posted at: 4:42 p.m. EDT (2042 GMT)

(IDG) -- In a section of Havana called Vedado, the 1950s-style architecture is as modern as anything gets in Cuba. There, in a boxy split-level house, lives Robert Sajo, a Hungarian-born citizen of Canada, who is founder of Cuba's first Web site, Cubaweb -- and the holder of Cuba's only legal residential Internet connection.

Sajo's abode is ground zero for Cuba's Internet elite. Day and night, high-ranking government officials, Net entrepreneurs, students and foreign observers drop by for Cuba libres, advice or small talk, mostly on one topic -- bringing the Internet to Cuba.

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The fact that Fidel Castro's Cuba has even considered using the Internet -- a product of Yankee know-how and a tool of capitalist expansion -- is something of a surprise. Cuba's bureaucratic and anti-entrepreneurial regime seems more inclined to squash innovation than encourage it. The island's ideology so glorifies a crude equality that Cubans with special talents, from baseball pitcher Orlando "El Duque" Hernandez to jazz trumpeter Arturo Sandoval, often feel compelled to leave. And the U.S. embargo has only made matters worse, helping to lock Cuba in a state of perpetual poverty.

But many Cuban movers and shakers believe that information technology could give the country an unprecedented chance to pull itself up by its own computer cords. Cuba has a few things going for it that will help: Unlike most Third World nations, it boasts a highly educated population, a small but expanding class of computer software engineers and a strong track record developing another technology -- biotech.

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Most important, government officials -- after a long and torturous debate over whether the Web would be used to subvert the socialist regime -- have now seen the light. A 1997 decree mandates that the entire island be wired as fast as scarce resources will allow. And an e-commerce commission -- patterned after the one that developed the Clinton administration's Framework for Global Electronic Commerce -- is laboring to clear regulatory hurdles to domestic business-to-business transactions and exports.

Many people have contributed to this progress, but Cuba would not be half as far down the road to a wired future if it wasn't for Robert Sajo, a wily and disarming small-time operator who believed he could make a buck in communist Cuba.

Only an oddball entrepreneur like Sajo would have attempted to ignite an Internet fire in a place like Cuba. Short, thin and quick out of the gate, Sajo, 54, loves to chat and spin exotic tales. There's the story of his father, Geza Sajo, a noted philosopher who contrived a theory about the duality of truth and hung out with Albert Einstein in college. Or the one about hawking his hard-disk technology at a trade fair in the early 1980s and running into the not-yet-famous Bill Gates. The two shook hands, Sajo says, and Gates soon introduced a clever operating system that just happened to kill Sajo's hardware-based company.

Defeated as an early computer pioneer, Sajo says he transformed himself into a middleman for Arabs keen to pump petrodollars into Canada. This led to a series of adventures, like the time he peddled an iceberg to Saudi Arabian princes short on water, or when he was held under hotel arrest with other business travelers by Saddam Hussein during the Gulf War. Sajo's Middle East adventures went up in smoke, he says, when he lost at least $1 million after the Bank of England summarily closed the fraud-plagued bank BCCI.

Next stop, Havana.

The year was 1994. Cuba, sent reeling by the Soviet bloc's disintegration and low commodity prices, had begun to flirt with foreign capitalists. Sajo's Russian wife Lana, who had lived on the island during her previous marriage to a Cuban, suggested her husband scope things out there.

Sajo was skeptical about Cuba's business prospects. Raised in communist Hungary, he's not a fan of state-run societies. He says he nearly bit off the head of a reporter from Maclean's, a leading Canadian magazine, who assumed that anyone who planned to do business in Cuba must be a communist.

But once in Cuba, Sajo liked what he heard about its business potential. The country's workforce is nearly universally literate and thousands of people study computer technology in universities and vocational schools. Yet many highly qualified workers take home as little as $15 a month (plus free education, health care and subsidized food and housing). Despite the low wages, Cuban workers generally are highly motivated, according to reports from foreign businessmen and executives at Cuban state companies. This combination of technical training and motivation helped Cuba build a biotechnology industry that has developed more than 200 products and boasts revenues of more than $100 million a year. Cuba's Center for Genetic Engineering and Biotechnology ranks among the best in the Third World.

If Cuba could splice genes, Sajo thought, it could transfer digital bits of information over a wire. But one fact loomed large: Cuba wasn't linked to the Internet. Government officials were just beginning a lively discussion: Internet or InterNot. "The Internet at first was mainly a U.S. phenomenon," says Juan Fernandez Gonzalez, head of Cuba's E-Commerce Commission. "It is not paranoid to think carefully about how to use the Internet without giving additional tools to the people who want to trip up the Cuban economy," a reference to U.S. officials like Sen. Jesse Helms and anti-Castro Miami Cubans.

Unperturbed, Sajo registered Cubaweb.cu, established a Toronto-based company called ICC, and began making the rounds of Cuban state companies. Sajo started with the tourism industry, one of Cuba's strongest sectors and the one with leaders likely to understand the advantages of having a Web site.

The idea of a tourism site was solid. Since the early '90s when Soviet subsidies dried up, the country has been luring both foreign visitors and investment partners to find new sources of hard currency. Foreign investors refurbished Cuba's grand old hotels with the hope that tourists would pour in: 1.6 million are expected to visit this year, more than three times the number who visited the island in 1993. During the high season, rooms fill up in hotels like the Sevilla, an old and elegant Spanish-style structure that was a Hollywood favorite in the pre-embargo days.

A budding entrepreneurialism among Cuban businesspeople also worked to Sajo's advantage. Like executives anywhere, Cuban CEOs are beholden to their shareholders -- albeit in this case there's only one, the state. But starting in 1991, this shareholder began backing away from micromanaging companies. Subsidies were slashed, and executives were encouraged to take independent initiatives to maximize profits. No longer would apparatchiks meddle in details like marketing and advertising. But, initially, the cash-strapped tourism executives turned down Sajo.

Despite Cuba's reputation for vigilant security, Sajo seemed to be flying under the government's radar screen. At one point, according to Sajo's grapevine, one top Cuban leader took to calling him "that Hungarian dissident," presumably for pushing a subversive technology. But nobody lifted a finger to hinder his efforts.

Slowly, almost by accident, the pieces started to fall into place for Sajo. He found his staff for Cubaweb at a seminar he spoke at in Havana when he met Pedro Urra, the ringleader of a health group called Infomed. Infomed was taking advantage of Cuba's dogged efforts to improve health care -- even in the worst of budgetary times -- and had won official approval to build a domestic digital network for medical professionals. A grant from the United Nations Development Program ensued, and Infomed was born. Since Cuban officials had yet to authorize an Internet gateway, Infomed rang international long distance on a 2,400-baud modem to hook up with the leading academic and medical networks: Bitnet, ISIS and Medline.

"There was Robert Sajo explaining about the Web," says Urra. "It wasn't the Internet that we had, but we were working with the same concepts."

The techies at Infomed were thrilled to learn that there were others in Cuba, if only Sajo, who shared their vision of a wired nation. They volunteered to help Sajo launch Cubaweb and worked for months, often after-hours, without additional compensation. Sajo wasn't exactly flush with cash and eventually had to sell his Toronto home to finance the Cuban venture.

It wasn't long before the persistent Sajo snagged his first client. Business Tips on Cuba, a Cuban magazine that covers foreign investment and trade, agreed to pay him to put them online. Sajo then coaxed Hoteles Horizontes, the No. 2 hotel chain in Cuba, onboard. When executives at No. 1 hotel Cubanacan got jealous, their chain followed suit.

Cubaweb was stationed offshore since Cuba had no hosting facilities and the telecommunications infrastructure couldn't handle incoming traffic. (Plans to lay new fiber-optic cable between Cuba and the United States have run aground because of the embargo.) The offshore location meant that Sajo didn't need to wait for Cuban government officials to decide whether or not Cuba would join the Internet revolution. By October 1995, Sajo established Cubaweb's physical presence in a vacant Toronto office -- making Cubaweb a reality. Sajo carried content from Cuba to the Toronto office himself, packaged and saved to floppy disks by the Infomed team.

Buoyed by his modest but real progress, Sajo beefed up Cubaweb's content by offering to host domestic media outlets for free. Sajo first approached the most cosmopolitan branch of Cuba's insular press, Granma International. The weekly organ of the Cuban Communist Party is translated into several languages and distributed globally. Director Gabriel Molina Franchossi agreed to a pilot program -- and pilot programs do not need full approval from above. Things looked good until Molina started sending stories formatted on his ancient desktop. Cubaweb's newer machines couldn't read them. Sajo went home, packed up his wife's PC, and installed it in the otherwise barren Granma offices.

Adding news to Cubaweb, which was getting only about 6,000 hits per day, gave Sajo the break he needed. He hardly expected Cubaweb to take off quickly, but on Feb. 24, 1996, Cuban gunners shot down two private planes piloted by anti-Castro activists flying over Cuban airspace. As part of its coverage, CNN.com linked readers to the only Web site around that could tell Cuba's side of the story -- Cubaweb.

The site drew so much traffic during the international incident, some 60,000 hits per day, that Cubaweb couldn't handle the load and had to ask CNN to take down the link. (Currently, traffic hovers around 57,000 hits a day.)

Four months later, Sajo's Toronto-based ICC inked a joint venture deal with Teledatos GET, the electronics arm of the Cuban tourism industry, to establish Cubaweb as a legal entity within Cuba. Soon Cubaweb graduated from a content site to the country's first e-commerce venture by selling Cuban music CDs. Payments were routed through a Canadian service, InternetSecure, in part to skirt the U.S. embargo.

The InternetSecure partnership allowed Cubaweb to add another idiosyncratic service to its site: money transfers. Many of the island's residents bolster their meager incomes with cash from family members or other benefactors abroad. The Cubaweb service has eased these transfers considerably because it lets people use credit cards. Of course, Cubaweb benefits as well, keeping 2 percent of each transaction.

By 1997 Cubaweb's success helped the technology and economic development faction win the Internet debate; Cuba finally declared itself ready for the Net. "The discussion was terrible," says Arnaldo Coro, who works for Radio Habana Cuba's English-language service and is an expert on technology.

The Cubans opened a single gateway in 1997, run by a government agency called the National Center for Automated Exchange of Information. E-commerce czar Fernandez, one of the leading Internet proponents in that debate, says, "I'm a pioneer, and the definition of a pioneer is 'the guy laying in the middle of the road with the arrows sticking out of his back.' But now we're not discussing whether the Internet is a good thing or not. The issues are: How? With what financing?"

Given the restrictions to Cuban Internet access, some might challenge Fernandez's trailblazer record. Only select citizens -- 33,000 of the country's 11 million people -- have permission to access the Net. Before approval, the government must deem a person trustworthy, and his work, such as scientific research, must benefit from access to the Net.

Even with the right credentials, it's still difficult to get government permission. For example, it wasn't until last year that high-profile entities like Granma International and the Telematics Department of the Jose Antonio Echeverria Institute -- a leading university computer-studies program -- gained full Internet access. But once it's granted, the government does not censor, filter or -- it appears -- survey traffic. Many people gain limited Net access with permission for an e-mail account only. (Some of the more enterprising individuals in this category try to skirt restrictions and get foreign e-pals to send them Web sites as e-mail attachments.)

Cuba has also slowly, if grudgingly, loosened the reins on free enterprise. In the streets of Havana, signs declaring "we rent rooms to foreigners" are ubiquitous and Cubans often approach tourists and ask if they want a home-cooked meal. This is the result of the government allowing its citizens to turn their homes into private inns and restaurants, subject to hefty taxes. It's a small step -- but one toward capitalism.

Some of that same entrepreneurialism can be found in the nooks and crannies of state companies. Perhaps the Cuban who most closely fits the conventional Web entrepreneur model is Luis Lozano Blanco, the 27-year-old commercial director of the government-owned Cubacar rental agency. He works out of a converted garage, where he launched Cubacar's online reservations system. Two years after launch, Cubacar generates annual revenue of more than $350,000. To avoid upsetting tour operators, whose clients could now theoretically bypass them, Lozano launched one of the first Cuban b-to-b operations -- a proprietary system that streamlines orders from tour operators. "He's my No. 1 protege," says Sajo.

Cuban officials also followed Sajo's lead. Since 1997, the government has launched four industry-related Internet service providers, as well as two portals: the generic Islagrande.cu and Cubanacan.cu., a portal that lets people outside Cuba buy gifts for their friends and relatives living in the country.

Only one other foreign investor is currently making a Web play in Cuba: British entrepreneur Steve Marshall, who runs Cuba-related tourism and real estate ventures. He claims he's on the verge of securing a local partner for his offshore portal Gocuba.com.

Cuban leaders will have to take more radical steps, such as relaxing Net-access restrictions, if the country hopes to attract big Net investments like those flowing to South American countries. But broad Net access in Cuba seems unlikely as long as U.S. officials maintain their anti-Cuban policies. The embargo also prevents Cuban ventures from going public on the Nasdaq -- like other Web startups around the globe -- limiting their potential to raise cash and grow.

But conciliatory gestures are growing more frequent stateside -- especially in business circles. Many U.S. companies -- envious of Spanish, Canadian and German competitors who are free to invest in Cuba -- urge an end to the embargo. In January, nearly 100 Cuban firms participated in the U.S. Healthcare Exhibition, an event exempted from embargo restrictions. George Ryan of Illinois, the first U.S. governor to set foot in Cuba since 1959, led a delegation last year that included business leaders from his state. Thomas Donohue, president and CEO of the Washington-based U.S. Chamber of Commerce, also visited the island last year.

As for the future of Cubaweb, Sajo recently sold his share to fellow Canadian Enzo Ruberto, chairman of Cuban Canadian Resorts International, a time-share real estate venture.

In the post-Sajo era, Cubaweb hopes to bring in more divisa. (Literally, hard currency. The semantic-sensitive Cubans prefer the term divisa to dolar for the greenbacks that, unlike the sometimes shunned local pesos, circulate freely in all local establishments.) Cubaweb is opening a Toronto branch that will peddle Internet products aimed at underdeveloped countries that share some of Cuba's tech problems -- low PC penetration and insufficient telecommunications infrastructure. One product they'll carry allows incoming e-mail messages to be printed and, a la telegram, delivered by mail carriers. Responses to the telegram e-mails would be keyed in at post office kiosks.

Selling Cubaweb didn't make Sajo rich. The terms of the sale were not disclosed, but he couldn't have walked away with much: Cubaweb's revenues are only about $750,000 a year.

So far, he's hush-hush about his next project, but does say it involves an international consortium to develop Web TV for hotels. Cuba will serve as its guinea pig, but the scope of this project is worldwide. Reflecting on Sajo's time in Cuba, Cubaweb's Director Anibal Quevedo says, "No sensible businessman would have done what he did. Robert is like Don Quixote. Some people are lucky like Bill Gates. Others are like Robert Sajo."



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