NTC okays Innove‘s bid to install telephone lines nationwide

Innove Communications, a wholly-owned subsidiary of Globe Telecom, becomes the country’s second nationwide local exchange carrier (LEC) with the approval by the National Telecommunications Commission (NTC) of its year-long application to install telephone lines all over the Philippines.

With an estimated total capital expenditure of P5 billion, Innove which is Globe’s landline business subsidiary, will roll out an initial 145,000 lines in regions where it believes there is demand from business and residential subscribers.

The company estimates that there will be an initial demand of 50,000 lines in the NCR; 35,000 lines in Region 4; 20,000 in Region 3; among others.

The project is expected to generate P331 million in the first year growing to P1.5 billion in year five and P1.8 billion in year eight.

Innove’s application for a certificate of public convenience and necessity (CPCN) to establish, install, operate, and maintain a LEC service, particularly integrated local telephone service with public payphone facilities and public calling stations in areas nationwide, specifically in areas not yet covered by its existing CPCN, was filed last year.

The application was opposed by the Philippine Long Distance Telephone Co. (PLDT) which has a nationwide LEC license, Bayan Telecommunication (Bayantel) whose LEC license already covers most of the country, Philcom, PT&T, and 35 others, mainly on the ground that its approval will result in ruinous competition.

The regions applied by Innove are: NCR (50,000 lines), CAR (2,500), Region I (10,000), Region II (10,000), Region III (20,000), Region IV (35,000), Region V (10,000), Region 9 (2,500), Region 10 (2,500), and Region 11 (2,500).

Innove cited the low telephone density rate in the targeted areas, ranging from 1.29 percent in Region 9 to 22 percent in Metro Manila.

At present, Innove provides LEC and wireline data services in Makati, Mandaluyong, Marikina, Pasig and San Juan in the National Capital Region; and in the provinces of Batangas, Cavite, Mindoro Oriental, Palawan, Lanao del Norte and Lanao del Sur, North Cotabato, Sultan Kudarat and Maguindanao. It also operates in Regions VI, VII and VIII. It has 341,877 subscribers as of the first quarter of 2005.

The project, to be financed by internally-generated funds, is expected to generate revenues of P331 million in the first year alone, growing to P1.5 billion in year five and P1.8 billion in year eight. Operating expenses are projected to reach P184 million in the first year, increasing to P577 million in the fifth year to P677 million in the 10th year.

Innove proposed to charge the same Monthly Service Fee (MSF) and call rates currently charged by the existing operators in the affected areas.

The NTC’s common carrier authorization department (CCAD) recommended the approval of Innove’s application "in order to provide universal access in unserved and underserved areas, and ensure efficient competition in local access services."

It added: "The local access networks are the bottlenecks in the telecommunications market. In the past, they are considered natural monopoly because of the notion that cost per subscriber decreases as the number of subscriber lines increases. The decrease in the cost however has its limits. A further increase in the subscriber lines after reaching a point would not result to a further decrease in the cost. This point is much less in wireless access networks than in fixed line networks. Because there is virtual monopoly in local access lines, interconnection access charges are set by the local access network operators. In order to decrease the power of these network providers to influence interconnection access charge negotiations, multiple local access networks should be allowed."

Thus, in its previous decisions, the NTC has allowed up to three LEC operators in a local service area.

Before being given a CPCN by the NTC, Innove was first awarded a provisional authority (PA) by the commission to establish, install, operate and maintain an LEC service, particularly integrated local telephone service with public payphone facilities and public calling stations in all areas across the nation that are not yet covered by its existing CPCN and to charge monthly rates at par with the approved rates of the LEC operators in the area.

The PA will initially be valid for 18 months unless otherwise revoked or cancelled by the NTC.