Government seeks ways to lure telcos in ‘missionary’ areas

The Department of Transportation and Communication (DOTC) and the National Telecommunications Commission (NTC) are currently studying strategies to lure telephone companies (telcos) to install lines in so called ‘missionary’ or less profitable areas after government’s service area scheme was declared a failure.

The failure of the service area scheme is being cited by the telephone companies as a reason why they cannot install the number of lines which they committed to roll out for a period of three years beginning in 1995 in their respective service areas.

NTC common carrier authorization department head Edgardo Cabarrios told The STAR right now, only 54 percent of the different towns and cities have telephone lines as against their target 85 percent coverage under the service area scheme.

The service area scheme was implemented sometime in 1993 under Executive Order No. 109 to address the growing backlog in telephone services and acute lack of telephone lines. The additional demand for lines at that time was placed at two million lines.

Government‘s idea was for those engaged in more profitable businesses such as international direct dial services and cellular phones to provide telephone lines to certain areas in three phases for three years ending in 1998. The first phase will cover areas considered as profitable areas such as central business districts; the second phase, the less profitable areas; and the third phase, the missionary areas or non-profitable areas.

"But what happened is that, since their compliance is based on the number of lines they install, may companies installed lines under phase 1 and 2 or the more profitable areas much more than the number of lines they committed to put in this area – neglected phase 3," Cabarrios said.

Whether this is an acceptable mode of compliance, he said, is a legal question that is being discussed by the NTC.

And because many of the companies installed their lines in the same profitable areas, there is an overcapacity in these areas. Of the 6.8 million lines installed, only a little over three million is subscribed.

The telephone companies, however, cannot be completely blamed, he said. the idea under the service area scheme was for the telcos to subsidize the installation of lines in unprofitable areas from their more profitable IDD business.

But in 1996, the United States came out with an order which in effect reduced the IDD charges from $1 a minute to only 38 cents per minute by this year.

"This threatened the profitability of international service since at that time, the companies were earning as much as 500 percent per minute," Cabarrios said. This, he said, also threatened the ability of international service to subsidize local services.

Right now, he revealed that telephone companies are not making money from their landline services. Instead, their cellular phone service is the one making money and is in effect subsidizing the landline service.

Cabarrios said that since the telephone companies already poured in huge investments in their telephone network, they are now charging rates that are just enough to cover cost. This is the reason why companies like the Philippine Long Distance Telephone Co. (PLDT)is offering huge discounts of up to 50 percent of installation charges.