President acts to comply with CAFTA rules U.S. firm finally prevails in battle to provide Internet

After more than three years of struggle, the government has suddenly and mysteriously granted a U.S. Internet service company permission to do business in Costa Rica.

This is the first Internet service provider to open up in Costa Rica independent of the Instituto Costarricense de Electricidad.

The license was granted by a rare concession permit signed by President Laura Chinchilla with behind-closed-doors persuasion by the office of the U. S. Trade Representative.

Executives of the Ohio-based company VSAT Systems and its local subsidiary DatZap have been trying to sell their Internet services in Costa Rica since the Central American Free Trade Agreement, known as CAFTA, took effect and ended the institute’s telecommunications monopoly.

“At the end of the day, the customers are going to have choices,” said Michael Kister, president of VSAT Systems. “That’s what free trade is all about.”

The three-year endeavor to sell satellite Internet in Costa Rica began in January 2009, which is when the Central American Free Trade Treaty stipulated that Costa Rica must allow foreign competition in the telecommunications industry.

Prior to that time, the government-owned Instituto Costarricense de Electricidad and its subsidiary, Radiográfica Costarricense S.A. had a monopoly. The company known as ICE was engaged in numerous industries including generating and providing electricity, telephone service and Internet service. This monopoly has existed for decades prior to the trade agreement. Radiográfica, known as RACSA, was strictly an Internet provider.

VSAT Systems is an Internet service provider that uses satellites to broadcast and receive signals. DatZap, locally known as TicoSat, is, technically, a reseller of their service. That Web site is HERE! 

Most people receive Internet through wires, which in Costa Rica are still owned by the former monopoly.

This new system uses satellites which allow customers to bypass Costa Rica’s Internet and connect directly with Internet in the United States. Customers do not have to use local cable providers, local wifi setups or access the undersea cables that carry the net.

“We think this will be a boon for U.S. businesses down there,” said Kister.

Company spokespeople announced that they had obtained the license in a press release Monday. That announcement is on VSAT Systems’ Web site HERE!

Kister said that when the firm began the application process to get licensing to operate, employees found numerous confused agencies without laws, processes or knowledge of how to grant licenses to new businesses. A spokesperson wrote a narrative up until March of this year. That is HERE! 

“There was no form. There was no process. There was no law defining the form or the process,” said Kister. “They were defining these laws as they went along.”

Kister said that the process was drawn out because they were sent back and forth between the regulatory agency Superintendencia de Telecomunicaciones de Costa Rica and the Ministerio de Ambiental, Energía y Telecomunicaciones.

Sudden regulatory changes and even an occasional typo in the newly drafted regulations lengthened the process, he said.

During the process, spokespeople for VSAT Systems issued a document blatantly accusing Costa Rica of ignoring its obligations under CAFTA. That document is HERE!

The superintendency and the ministry both gave counterproposals to make the process easier. They offered to give DatZap permission to resell the ICE’s Internet. Kister said that this is what other Internet service providers in Costa Rica do, since the telecom giant still owns all of the Internet infrastructure.

Officials also offered DatZap and VSAT Systems the use of a different part of the broadcasting frequency to send a signal to and from their satellites.

It’d be like having them say you can have a license for an AM radio station when his firm has an FM radio station, Kister said.

The firm’s application eventually was rejected in late February by the ministry, and the company appealed. The firm issued a very candid press release at that time which is HERE! 

The press release said that instead of issuing the license, on February 29th, the Ministerio de Ambiental, Energía y Telecomunicaciones requested an additional 14 documents be translated, certified, audited and presented, and the company balked. “Over the past three years and a dozen separate requests for documents, they never asked for any of this before. The current actions of the Ministry are arbitrary and designed only to delay issuance of the license.” stated Kister in the press release. The firm also said that the U.S. Trade Representative was unwilling to engage in any meaningful way to protect U.S. interests and enforce CAFTA.

Kister solicited help from numerous people in the United States government to enforce the terms of CAFTA. He asked U.S. Sen Rob Portman, also of Ohio, who was one of the proponents of CAFTA for help. Portman went to the trade representative, said Kister.

Several weeks ago, an official at the U.S. Trade Representative called Kister and told him that the company would get its license within a week by presidential decree, he reported. Officials in the United States or in Costa Rica would confirm what occurred that would allow DatZap to get a license.

“There was some kind of process through the UCTR, but they’re like the Men in Black,” said Kister.

“The details of how it came together involve backrooms, cigars and guys with masks,” Kister speculated in jest.

The sudden announcement that the firm would get the license found both VSAT Systems and Datzap without equipment or staff in Costa Rica, but a press release from the company said that the subsidiary is authorized to begin selling its services immediately.

Kister added that his firm is the first that will be competing with ICE, which will benefit all types of Costa Rican consumers. The government also said that Claro also received some type of license although it is unclear if the existing cell telephone company would be involved in the Internet.

“Competition ultimately lead to a better product for the customer at a cheaper cost,” he said. “This is a very important breakthrough for Costa Rican telecommunications.”

Although many foreign companies have had problems with operating here under provisions of the free trade agreements, Kister and his firm are the most outspoken by means of their chronology and press releases about their troubles with the government.

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