Critical industries

Last year, there was a proposal from the Senate to amend the 33-year old Public Services Act or Commonwealth Act 146, in particular the definition of what a public utility is.

As proposed under Senate Bill 1754 which at that time was already endorsed for plenary deliberations by the Senate committee on public services chaired by Sen. Grace Poe, the term public utility will now be limited to three, namely, transmission of electricity, distribution of electricity, and water works and sewerage systems.

The bill will define public utility as the direct transmission or distribution, and delivery through a network, if a commodity or service of public consequence.

Under the old law, public utilities include water and power utilities, transportation, telecommunication and mass media.

According to Poe, while the bill recognizes that public service is the umbrella term under which public utility falls, the latter should be different from the term public services.

Poe admitted that the distinction between the two carries with it some huge ramification in terms of constitutional restrictions such as foreign equity and meaningful competition, among others.

She said that only public utilities are to be treated as natural monopolies, whose ownership should be restricted under Article 12, Section 11 of the 1987 Constitution, which limits foreign ownership of said utilities to 40 percent.

Poe emphasized that the new definition would result in the freedom of industries not listed as public utilities from constitutional restrictions on foreign ownership, equity and operation, and thus pave the way for more competition.

In particular, she said that the entry of a third player in the telecommunications industry will be more viable with the proposed amendment.

The counterpart bill, House Bill 5828 was approved on third and final reading by the Lower Chamber in September of last year.

Under Art. 12, Sec. 11 of the Constitution, no franchise, certificate or any other form of authorization for the operation of a public utility shall be granted except to citizens of the Philippines or to corporations or associations organized under the laws of the Philippines at least 60 percentum of whose capital is owned by such citizens.

Under the same provision, it is also required that all the executive and managing officers of such corporation or association must be citizens of the Philippines.

Art. 12, Sec. 17 allows the State, during national emergency when the public interest requires, to temporarily take over or direct the operation of any privately owned public utility while Sec. 18 provides that the State may transfer to public ownership utilities and other private enterprises to be operated by government in the interest of national welfare or defense upon payment of just compensation.

Under CA 146, no public service shall operate in the Philippines without a certificate of public convenience or certificate of public convenience and necessity. CPCs and CPCNs can only be issued to citizens of the Philippines or corporations at least 60 percentum of the stock or paid-up capital owned by Philippine citizens.

What are the repercussions of removing water, transportation, telecommunications and mass media from the definition of public utility and treating them as mere public services?

The most important is that they can now be 100 percent owned and managed by foreigners.

While this means more investments and increased competition in these vital industries that are being proposed to be classified as mere public services rather than public utilities, critical and highly sensitive industries such as telecommunications are better left in the hands of Filipinos.

Democratizing opportunities

Publicly listed information and communications technology industry firm NOW Corp. has launched a program that will democratize business opportunities in the sector by partnering with small and medium-sized businesses and even entrepreneurial individuals.

The company is partnering with local entrepreneurs and local government units, initially in Northern and Southern Luzon, to bring NOW’s technology to a particular area whether for horizontal deployment such as for barangays and wide area network, or for vertical deployment such as for office buildings.

Dubbed as NOW Virtual Network Operator (NVNO), NOW’s business partnership model gives exclusive distributorship rights to the company’s broadband service to a local partner over a particular area, or preferably in one of the 35 priority cities in North and South Luzon which NOW has identified.

An NVNO is a mobile operator that does not own its own network but instead leases wholesale capacity from an existing mobile operator and its network infrastructure and resells the bandwidth to its own end-clients. It is a proven formula to propagate telecommunications in other countries,  including the US.

NOW Corp. president and CEO Mel Velarde emphasized that they are aiming to inject renewed energy to the failed NVNO attempts by its predecessors and will seek to correct the shortcomings. To do this, Velarde said they vow to adopt a transparent cost structure, adopt a shared vision as well as technological and execution risks, and a clear shared wealth through revenue sharing.

In late 2015, NOW Corp. and its telecommunications arm NOW Telecom launched Fiber in the Air, a fixed wireless broadband internet service that provides guaranteed broadband internet for enterprises with a capacity of 2.4 gbps. Since then, NOW Corp. has forged partnerships in Mega Manila with more than 200 building properties with a two-kilometer radius area coverage.

According to Velarde, fixed wireless connectivity is the way to go not only here but worldwide. In fact, US companies such as Verizon, AT&T and even Google Fiber are pursuing wireless deployment, he noted.

He explained that unlike traditional fixed broadband which requires companies to run cables to individual homes, offices, or buildings, fixed wireless uses radio waves to beam internet connectivity to multiple locations from a single site, thus allowing data delivery in a more cost-efficient way as well as faster end-user connection.

NOW Corp. has chosen to adopt fixed wireless as its initial mode of deployment in penetrating Mega Manila. Velarde stressed that Metro Manila is around 622 square kms and given the density of the area where electric poles and underground fiber optic are a logistical nightmare.

The business partnership is exclusive for five years with a revenue-sharing model that provides the partner with a healthy return on investment. The business partner will select the area, hire and manage sales people in order to sell the product, take care of selling and marketing the service, install the service to end-subscribers, assist NOW in identifying a possible hub where broadband capacity can be terminated, and ensure on-time payment by the subscriber,

Meanwhile, NOW will provide the business model, over-all sales and marketing support on the national and local levels, sales training, and will also provide collecting and billing as well as state-of-the-art devices to deliver broadband internet solutions.

A major requirement in selecting business partners is that the latter must be a resident of the chosen territory, must have a business in the area, and must have strong local influence.

Velarde also noted that local governments may also utilize fixed wireless to deliver broadband connectivity to public spaces as a form of public service. NOW can install its equipment in any government-owned building such as hospitals or city halls and distribute the broadband capacity to each building.

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