PLDT says Globe wants 'special privileges'

MANILA, Philippines - Though it claims to be asking for a “level playing field” by opposing Philippine Long Distance Telephone Co. investment in Digital Telecommunications Phils. (Digitel), Globe Telecom is actually engaged in a campaign to secure for itself “special privileges” from the government, according to a senior PLDT official.

“By raising the false issue of monopoly, Globe wants the government to give it radio frequencies for free – at the expense not only of PLDT but also other telecom players,” according Ray Espinosa, PLDT director and head of regulatory affairs and policy.

Espinosa was reacting to the opposition to PLDT’s investment in Digitel filed by Globe during a hearing of the National Telecommunications Commission (NTC) Monday.

Globe filed with the NTC a motion to intervene in the application for the sale and transfer to PLDT of an initial 51.55-percent equity in Digitel. The case refers to the joint application of PLDT and Digitel seeking regulatory approval for PLDT’s purchase of Digitel.

In its motions, Globe questioned the alleged lack of transparency of the PLDT-Digitel deal since to date, the transacting parties have yet to furnish industry stakeholders with a copy of their sale and purchase agreement.

“Plainly, without the actionable document, there is nothing to be approved. Too, evidence suppressed raises the strong presumption that said evidence is adverse to the suppressors,” Globe said.

Globe pointed out that in relation to their transaction, PLDT and Digitel have only submitted press releases that in very broad strokes, discuss purchase price and conversion of shares, bonds, and certain debt covenants. “However, no details are provided. As public utilities, PLDT and Digitel are imbued with public interest, and their transaction at hand should be subject to thorough scrutiny. Without the sale and purchase agreement, the public is kept in the dark, and begs the question, ‘What are PLDT and Digitel really up to?” it said.

In its formal motion to oppose, PLDT said that Globe asked the NTC to take 22 MHz of radio spectrum currently assigned to PLDT and Digitel and to reassign these frequencies to Globe.

“That is what all this noise is about. Globe’s opposition to the Digitel investment is not based on principle or out of concern for consumer interest. They want to hold hostage the Digitel deal so that they can get for free radio frequencies that PLDT and Digitel are already using to serve their customers. These frequencies are being used properly and efficiently to serve millions of subscribers,” Espinosa said.

To “level the playing field”, Globe seeks now to degrade the quality of services to millions of subscribers currently being served by PLDT and Digitel. Globe wants the government, through the NTC, to step in and fix Globe’s inefficiencies and thereby restore its competitiveness – which it lost by reason of its own inefficiencies and the superior services offered by its rivals. What Globe seeks therefore is contrary to well known principles of competition and free market.” Espinosa added.

He added this will undermine the objectives of the Digitel investment which include optimizing investments in new technologies like LTE or fourth generation mobile technology that will help bring broadband Internet services faster to more areas of the country, he said.

“Through this substantial investment in Digitel and through its accelerated capex program, PLDT is committing considerable resources in order to make good its pledge to bring better services to more Filipinos,” Espinosa said.

The motions filed by Globe urged the NTC to ensure a level industry playing field in the spirit of fair competition. Globe had previously written the NTC, warning that the consolidation of PLDT and Digitel is riddled with potential threats to industry sustainability and consumer welfare.

It said the NTC must pro-act to guarantee equitable distribution of spectrum, the lifeblood of cellular operators.

“As it stands for 3G resources alone, without government intervention, the PLDT-Digitel deal will already result in unfair proportioning of radio frequencies – 4.5 to one in their favor versus Globe. Threatened further by monopolistic tendencies to be exacerbated by more market power post-merger, industry must be guaranteed the enforcement of interconnection rules, mandated by law, but still elusive after all these years. Further, Globe urged anew development and implementation of policy for Internet Protocol (IP) peering, similar to traditional interconnection though now specific to the internet space,” it noted.

In another development, Sealand Telecommunications Co. Inc. is asking the NTC to impose stricter or heavier regulatory provisions on PLDT and Digitel,

In its comment to the acquisition of PLDT of a majority stake in Digitel, Sealand said imposing greater obligations on PLDT and Digitel as compared to those imposed on other carriers as a competitive policy will help protect the industry and consumers.

“PLDT’s acquisition of Digitel will create a public telecommunications entity which, despite PLDT’s avowed intent to keep operations separate, will effectively control a commanding 70-percent share of the telecommunications market, as compared to the mere 30 percent held by its nearest, not to mention only remaining, competitor,” Sealand said.

It added that, with its acquisition of Digitel, PLDT effectively adds Digitel’s 42.5 MHz of radio frequency spectrum to the 112.5 MHz that it already holds or controls, thus giving it a total of 155 MHz, which is 84 percent of the total usable radio frequency spectrum.

Because of this, Sealand said the acquisition would create an industry with imperfect market competition since PLDT-Digitel will have market power that can be exercised to the detriment of consumer welfare and overall industry performance.

It said imperfect competition gives rise to an market failure which can often result in a monopoly that can result in predatory pricing, low quality of calls (especially to other networks), slow innovation of technology and inefficient delivery of products and services, and other similar behavior that reduces consumer welfare.

Furthermore, by having an overwhelming market share of mobile subscribers, the new PLDT-Digitel entity will be able to dictate terms and conditions that can effectively restrain competition such as by increasing interconnection rates which would render other carriers incapable of offering competitive prices for their own services.

To prevent this, Sealand proposed that the NTC require PLDT-Digitel to: provide detailed performance monitoring reports to competitors and regulators regarding the performance of their networks and operational systems; negotiate with other carriers and under the supervision of the NTC, performance standards and enforcement mechanisms covering all major aspects of OSS operation and network performance; allow operator-to-operator operational systems (OSS) testing in response to competitor requests, with a further obligation of providing evidence to the NTC that OSS functions could meet demand for resold services and unbundled network elements; and offer interconnection, unbundled network elements and transport and termination services at rates based on reasonable and mutually-agreed upon forward-looking economic cost;

It also asked the NTC to require both companies to comply with such one-time conditions and on-going requirements that would curtail or minimize anti-competitive behavior as commission may impose; divest a portion of their assigned frequencies to be reallocated by the NTC; and divest some of their overlapping operations, products and/or services.