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n the latest efforts to deal with an impending economic recession in Puerto Rico, the insular government has decided to exercise its option of selling its minority stake in that island’s telecommunication system, Puerto Rico Telephone (PRT), to the Mexican company, Telmex. The Mexican telecommunications company also agreed just months before to purchase Verizon’s majority stake in PRT.
PUERTO RICO FOR SALE
As a perpetual colony, Puerto Rico’s assets and resources have always been traded by US and foreign companies in exchange for protection and financial dependency from the US government. Luis Muñoz Marín thought that by signing a deal in 1952 with the US government to create the “Commonwealth” relation, Puerto Rico would soon attain independence and regain control of its assets and resources. That day never came. This image was found on eBay. An actual vintage certificate began bidding for $9.95 but you can buy it now for $12.00. Just recently, a small town in California was sold on eBay. Puerto Rico cannot be far behind.
Upon approval and completion of all deals, Telmex would own 80% of Puerto Rico’s land and wireless communication infrastructure, ending a century and a half old legacy of Puerto Rico and the US controlling that Caribbean island’s communication system. Although Puerto Rico has never been known for innovation in telecommunications, wired communication has existed on the island since 1858.
Most if not all of PRT will continue to operate under Puerto Rican labor laws and by Puerto Rican workers but will be subject to Telmex shareholder and management direction.
As a colonial possession of the United States, the Puerto Rican insular government, as well as Verizon, must wait for approval from the US Federal Communications Commission (FCC) before the deals can go forward. In addition, the FCC would continue to regulate the operations of PRT as it does with all private telecommunication operators in the United States.
According to the Associated Press (AP), the Puerto Rican government will use the sale of its 28% of PRT, valued at approximately $500 million, to offset deficits in the Government Retirement Systems Administration.
WHAT THE HECK IS “PORTO?”
The detail reads, "The name of this corporation has been changed to PUERTO RICO TELEPHONE COMPANY." Apparently, Spanish as a Second Language (SSL) never caught on after the US invasion in 1898. Although Anglos eventually figured out the proper spelling of “Puerto Rico,” language continues to be a contentious issue between the US and Porto...I mean, Puerto Rico. Ironically (or not), “Porto Roc” is a slang term for Puerto Ricans among the youth in the United States.
Puerto Rico’s governor, Aníbal Acevedo Vilá, told the AP that should the FCC approve the sale he would also give his blessings.
''We only have 28% of the shares. That doesn’t give us the power to decide anything at PRT,” Acevedo Vilá said.
Since 1999, the PRT shares have produced a 4.3% average growth rate according to Alfredo Salazar, President of the Government Development Bank of Puerto Rico. Salazar added that the cash from the PRT sale could be used for better performing investment instruments. The Retirement System, for example, has yielded a 9.8% growth by comparison.
Wired communication in Puerto Rico began in 1858 when Samuel Morse introduced the telegraph into the island. Morse had a daughter living on the island, in the beach town of Arroyo. She was married to a Danish merchant, Edward Lind, who worked a few towns away in Hacienda La Enriqueta. Morse connected his son-in-law's hacienda to the house in Arroyo that year with a wired telegraph system. The Spanish colonial government formally registered and authorized the telegraph lines the following year, on March 1, 1859. On that day Morse transmitted the prophetic lines, "Puerto Rico, beautiful jewel! When you are linked with the other jewels of the Antilles in the necklace of the world's telegraph, yours will not shine less brilliantly in the crown of your Queen!"
The visionary inventor and artist (he was a painter as well), ironically enough, was an open supporter of slavery. He even argued that it was sinful to oppose slavery and he recommended that churches excommunicate anyone who committed the 'sacrilege' of promoting the abolition of slavery. It is not known whether Ramón Emeterio Betances, an abolitionist, considered father of the Puerto Rican nation, ever met Moore. That would have been bar brawl, guaranteed.
With concessions to various entrepreneurs, the Spanish colonial government continued to build telephone service infrastructure throughout the island. By the time the United States invaded Puerto Rico in the Spanish-American War of 1898 (when the Queen lost a few of those jewels in her crown), San Juan, Ponce and Mayagüez were already linked by telephone lines.
Brothers Sosthenes and Hernando Behn founded the Porto Rico Telephone Company in 1902 after the US War Department transferred the established phone system to the insular government. Anglos took a while to learn the proper name of their colony but eventually they figured out that 'Porto' was not the same as 'Puerto.'
Infrastructure continued to develop throughout the island at a meager pace compared to the United States. By 1955, the telephone and telegraph system was upgraded to serve close to 60,000 customers, although the population was over 2.2 million. Poverty and trade limitations under colonial rule were mitigated by economic dependency through social programs, the US military and foreign investment. However, the divide between the poor masses and the small middle and upper class population created a sparse demand for expensive telecommunication services. Although private US investment helped modernize the phone system, the insular government could not make it affordable to operate.
In 1990, then-Gov. Rafael Hernandez Colón attempted to sell PRT to BellSouth International, but the deal was struck down by labor unions, as well as a law that required PRT to be sold for at least $3 billion and prohibited the buyer from firing any employees for 18 months. In 1992, the insular government went to the auction block again with PRT, this time for just a trimming. Eighty percent of Telefónica Larga Distancia de Puerto Rico, the long distance arm of PRT, was sold to the Spanish telecommunications conglomerate, Telefónica, for $140 million.
In 1997, Puerto Rico’s legislature re-wrote the phone book and enacted Act 54 in order to privatize PRT. The following year, just months before the centennial of the US invasion of Puerto Rico, then-Gov. Pedro Rosello announced a deal to sell a majority stake of PRT to a private consortium led by communications and US military contractor GTE and Popular, Inc., the Puerto Rico based bank holding company. The reaction by labor unions and citizens across the colony was dramatic. On July 7, 1998, Puerto Rico was practically shut down because of a general strike. Although the strike was a spectacular display of solidarity, which lasted two days, it was just that, a display. Rosello even made blunt statements regarding the strike as “of no concern.” He and his administration gambled that the reactions by the people would never escalate into anything that would jeopardize the deal or cause any significant shift in the political and economic status quo. They were right.
Although the PRT workers remained in strike for 41 days, the “fight” against privatization of the PRT eventually fizzled out. Union leaders backed off or were allegedly given deals in exchange to pulling out. By March of 1999, a controlling share of PRT was sold to GTE for $2.25 billion. Two years later, Bell Atlantic (which had merged with NYNEX) bought out GTE and became Verizon. In April of 2006, Verizon agreed to sell 52% of PRT to the Mexican company, Telmex.
Although the average income earned by individuals in Puerto Rico is about half of the United States per capita GDP (according to U.S. Bureau of Economic Analysis and Puerto Rican Planning Board data), Puerto Ricans pay about the same for communications services (and many other products and services) as customers in premium markets like New York, Los Angeles and Miami. In addition, broadband Internet service is still not available in many parts of Puerto Rico outside of urban districts. In fact, although Puerto Rico has been under the protection of the United States since 1898, problems in delivering basic services to all communities of this small island in the Caribbean continue to exist in some areas. Just the other day, Jorge Rodríguez, president of the Authority of Aqueducts and Sewer Systems, promised to deliver clean and reliable water service to all the citizens of the Commonwealth by 2010.
Can you hear me now?
RAFAEL MERINO CORTÉS