We don’t need a third telco

Yes, you read it right. We don’t need a third telco similar to the two telcos comprising our present duopoly. We need an entity using very disruptive technology that could deliver fast broadband connection. That entity does not have to be a telco.

A telephone company is fast becoming a dinosaur in the sense that calling and texting are less and less the reasons we use our mobile phones today. Speaking from experience, I prefer using Viber, Facebook Messaging or Instant Messaging and FaceTime on my Apple device.

Granted that a significant part of the current Philippine consumer market is still on talk and text or 2G, we must move on to our future. Even our OFWs will require a lot more to connect to their families at home that only broadband can provide.

We should stop thinking of the third player as a telco. It could be a stand-alone provider of broadband services. Only digital Neanderthals still think in terms of a phone company. Even Globe and Smart are re-inventing themselves.

Old telcos can be suspected of delaying adoption of new technology because they are heavily invested in the old. The new player does not have to build many of the facilities the old phone companies had to.  

The new player should leapfrog the duopoly in terms of technology. Think in terms of technology to connect us to the World Wide Web through satellites via a network of landbased receiving stations. The last mile connections can be done via some kind of wide area WiFi or WiMax.

Being new, the third player will have no legacy assets to protect. The new entity will be designed to provide 5G when that becomes available or in the intermediate period, the so-called “4.5G” networks (also known as LTE-A) to offer connections that are faster than current 4G networks.

This will dramatically change our “calesa” telecom system and usher us into the world of IoT or Internet of Things through faster speeds and more reliable connections on smartphones and other devices. It will be able to carry huge amounts of data, allowing us to get entertainment, news and do commercial transactions efficiently.

Maybe I am dreaming but I see that as reality every time I visit my children in California. I am just verbalizing a consumer need to keep government decision makers focused on what the entry of a new player should help bring about here.

The threat of real competition should also lead the duopoly to rethink their business models and make the same investments in advanced technology the new entrant will make. In the end I may choose to keep my Globe and Smart subscriptions but only because they will be offering the same cutting edge technology and consumer friendly service the new entrant will offer.

This is why I think Finance Secretary Sonny Dominguez is wrong to insist on the frequency auction method in selecting the third player. It will just delay selection and may even cause this dream project of President Duterte to fail before it is born. 

Sec. Sonny is theoretically correct to say that the frequencies belong to the public and no entity should get these for free. The problem is… the duopoly got their frequencies for free. If the new entity must pay billions of pesos to get the leftover frequencies, that would make them less capable of competing. They need to invest those billions on the drop-dead technologies of the future that we need.

Besides, when the Duterte administration took office, the economic managers including Sec Sonny was critical of the Aquino administration’s policy of auctioning the right to do certain public projects like the NAIA Expressway, Mactan Cebu Airport and CALAX expressway. The Duterte economic managers said the large front end concession fee paid to government only increases the eventual cost the users must bear.

If Sec. Sonny wants to reform the system now, he will have to impose some kind of a tax or user fee on the duopoly that will be equal to what the new player will pay in the auction. The playing field has to be level.

Fairness will also mean they will have to collect a one-time tax on JG Summit, San Miguel and PLDT among many others for profiting immensely on what really amounts to a sale of public frequencies they didn’t own.  But that will be messy, assuming our laws will allow a post-facto imposition of taxes.

The Better Broadband Alliance is correct in supporting Acting DICT Secretary Eliseo Rio on the terms of reference for the New Major Player (NMP) selection process. The BBA recommends the adoption of the Highest Committed Level of Service (HCLoS) draft, which puts a premium on the New Major Player’s ability to expand and improve the quality of services.

The BBA is correct to point out that “requiring a NMP to pay higher spectrum user fee in the first five years is not only anti-competitive, but also violates the equal protection clause of the Philippine Constitution.

“Revenue generation can still be done, but not through an auction in selecting the NMP. If the government wants to increase spectrum user fee, it can issue policy that increases it across the board, not just for the NMP. The government can also conduct an auction for new frequencies.”

The government through DICT can also charge the telcos, including the new player, higher spectrum user fees if they are not efficiently using the spectrum assigned to them.

 But we should not prolong the debate on the terms of reference for the new player. Further delay embarrasses President Duterte who had made a big deal about his political will to get this third player in place last March. Filipino consumers have also suffered long enough and deserve visible evidence of progress. 

Boo Chanco’s e-mail address is [email protected]. Follow him on Twitter @boochanco.