Liberalization poses problems for telcos

Although the partial liberalization in the telecommunications industry has its benefits, including lower telephone rates, it has also posed problems, especially for many service providers who are now losing money.

According to National Telecommunications Commission (NTC) chief Eliseo Rio, there are now 76 local telephone service providers, who are addressing the needs of 50 percent of the cities and municipalities in the country covering 75 percent of the population. In 1994, only 20 percent of cities and municipalities was being served.

Rio, during yesterday’s opening of CommAsia 2002, noted that the country’s teledensity has improved slightly to 4.1 percent (4.1 subscribers per 100 inhabitants), but this is still low compared to its neighbors, especially in the region.

The country’s biggest telecommunications company remains Philippine Long Distance Telephone Co. (PLDT). Other local telcos are Digitel, BayanTel, Globe, PT&T, and Philcom.

PLDT is also still the biggest domestic long distance telephone service provider (DLDS) accounting for 40 percent of the market as well as the largest international long distance service (ILDS) provider with 50 percent share.

The NTC chief said the number of service providers increased to 500 last year as against less than 50 in 1994. Local exchange lines have, likewise, gone up to seven million compared to one million.

Following the implementation by government of the service area scheme (SAS) which required holders of cellular and international gateway facility (IGF) licenses to install 400,000 and 300,000 landline phones, respectively, there are now 6.5 million telephone lines, of which 3.4 million are unsubscribed due to a glut, especially in highly profitable areas.

Rio said this has caused problems for many telephone companies that had to borrow billions of pesos to put up the necessary infrastructure, only to find out that there are not that many takers of landlines, especially with the inroads made by mobile phones.

Among the public telecommunications entities (PTEs) that encountered financial difficulties as a result partly of the SAS implementation was Lopez-owned Bayan Telecommunications (BayanTel), which borrowed heavily in dollars at a time when the peso-dollar exchange rate was only around P26: P1. BayanTel is now working on a debt restructuring program with its creditors and hopes to convert some of its loans into equity.

While many PTEs have not fully complied with the SAS in terms of the number of landlines that need to be installed, Rio said government found itself in a fix, because of the existing overcapacity.

"We cannot force them to put up the landlines. That is why we are modifying the SAS by looking at alternative modes of compliance so as not to aggravate the oversupply situation," he emphasized. One such mode is by accepting the installation, say of cellsites, as a form of SAS compliance and identifying their equivalent in number of landlines by looking at the cost involved.

Also during the forum, Rio said the NTC is now redrafting the rules on voice over the Internet (VoIP) to address the concerns of public telecommunications network providers as well as Internet service providers (ISPs). VoIP allows Internet users to make calls through the Web, but telephone service providers are concerned that this will translate into lost revenues for them.

Meanwhile, there are now seven mobile communications service providers, of which five (Globe, Smart, Piltel, Islacom, and Extelcom) are operating. Rio said one (Digitel) is expected to be into commercial operations for its cellular business by mid 2002 while the other (BayanTel) may start operations next year.