PLDT-Smart, provincial phone operators agree to cut interconnection rates

Private telephone operators and the Philippine Long Distance Telephone Co. and Smart Communications Inc., signed yesterday two landmark agreements that will result in lower calling rates for both landline and mobile telephone users, promote call traffic and boost the financial viability of provincial network operators. The agreements take effect May 1.

Under the first agreement, a call from a local exchange carrier (LEC) to a Smart mobile phone and vice-versa will now cost only P9 per minute, or similar to the rate of calling from one Smart cellular phone to another. The old rate was P13.65 to P14 per minute.

In the agreement between Smart and the Philippine Association of Private Telephone Companies Inc. (Paptelco), the share of provincial fixed line operators from revenues generated by calls from their networks to Smart cellular phones has been increased three-fold, or from P1.25 to P3.75 per minute.

Paptelco, which has about 48 member companies providing basic telephone services in the provinces, had sought the assistance of the National Telecommunications Commission (NTC) in seeking an adjustment of current revenue-sharing arrangements between local exchange carriers and cellular mobile telephone operators.

Of the total revenues made from every call from an LEC (provincial landline operator) to Smart or vice-versa, the LEC used to get only 10 percent while PLDT which is the interconnection carrier gets 30 percent and the CMTS which is Smart gets the bulk of 60 percent.

Under the new agreement, the share of the LEC will increase to 40 percent, while that of PLDT will decline to 25 percent and Smart, 35 percent.

Smart head for legal and carrier relations Rogelio Quevedo said they expect the volume of call traffic to increase as a result of the rate reduction, thereby offsetting any revenue loss on the part of PLDT and Smart that will result from the lower sharing. "When you reduce the rates, you encourage people to call. This will also make provincial operators viable and they will have an incentive to promote calls from their landline to Smart CMTS," Quevedo said.

If the call originates from Smart going to an LEC member of Paptelco, the LEC gets P2.75 of the P9, while PLDT and Smart CMTS get P1.25 and P5, respectively. If the call is from Paptelco to Smart, Paptelco gets P3.75, PLDT P1.25, and Smart, P4.

PLDT and Paptelco also signed yesterday an agreement that will effectively lower national long distance toll charges on calls originating from provincial operator’s networks.

PLDT and Paptelco have agreed to revise the existing revenue sharing arrangement for national toll calls in order to adopt access charging and include transit traffic settlement arrangements between other carriers and Paptelco via PLDT IXC.

For calls originating from Paptelco and terminating to the PLDT system, Paptelco will pay PLDT an access charge of P1 per minute plus a hauling charge of 50 centavos per minute for short haul calls (if made within a region i.e within Luzon) and P1.25 per minute for long haul calls (i.e. Luzon to Visayas). For calls originating from PLDT going to Paptelco, PLDT will pay Paptelco an access charge of P1 per minute.

PLDT first vice president for interconnection services Ramon Santiago explained that under the original revenue-sharing scheme, of the total charge of say P1, PLDT gets 30 centavos if the calls originates from it, then gets another 40 centavos for the use by Paptelco of its hauling facilities, while Paptelco gets 30 centavos.

"There will be a significant reduction in the total rate to the consumer since we are bringing down our cost of hauling. But at first while it may seem that PLDT will be earning less, experience in both national and long distance has shown that lowering rates results in more calls," Santiago said

But while the access charge will be a flat rate, it will be up to the LEC to determine how much it would charge its consumer in the provinces. "We have asked the LECs not to charge too much since we have already lowered our hauling cost. When this happens, then the call rates will definitely be lower," he said.

The agreement also provides for revised terms in case of transit traffic (via PLDT), or the accommodation of PLDT to other LEC operators that do not have direct interconnection with each other.

For calls originating from Paptelco and terminating to other LECs transiting through the PLDT system and vice-versa, Paptelco or the LEC (the originator) shall pay PLDT the transit charge of 50 centavos per minute for short haul calls and P1.25 per minute for long haul calls.