The importance of access to affordable, fast broadband

In this age where advanced technology and high connectivity have essentially turned into basic commodities, it has become increasingly important to provide quality and affordable telecommunications services to the public.

Various studies have also identified broadband internet access as a tool for inclusive economic growth especially for developing countries. Yet, as of 2015,  the Philippines has the second slowest broadband service in the Asia Pacific with an average download speed of 2.8 Mbps (slowest is India) and the second most expensive retail internet service out of 62 countries.

If the Philippines is to achieve its economic goals congruent to the 10-point economic agenda of this Administration, this miserable state of telecommunications services must be addressed without further delay. 

We believe that there are two things to be done:  first, put the current service providers to task by requiring them to improve their services; second, open the market to new players, both domestic and foreign, to allow for competition.

With respect to the first, we are happy that the President has issued express directives to the main industry players to improve their service, here and now.  We certainly hope that the National Telecommunications Commission and the Department of Information, Communications, and Technology will follow through on this directive to ensure that the two main providers take concrete steps towards this end.

On the second point, we strongly believe that opening up the market to new players and competition is key to improving services at affordable prices. The Philippine telecoms market isconsidered a duopoly dominated by two huge companies and small players are either bought out or subjected to anti-competitive practices.

This view is reinforced by the recent joint acquisition by the main industry players of significant 700Mhz band from what would have been a potential third player. This Acquisition has raised serious concern on the viability of any new market entrants. 

Experts say that 700 MHz band is a crucial frequency for expanding access to low-cost mobile broadband technology. The band’s wide propagation capabilities can facilitate improvements in mobile broadband coverage, as well as better indoor coverage in more densely populated areas. It covers a larger cell size and infrastructure cost is lower as better propagation means fewer base stations (network infrastructure is 7x higher if wireless operators use 3.5GHz compared to 700 MHz).

Prior to the Acquisition,the potential third player held 90 MHz of the total 100 MHz on the 700 band, which made it a viable market entrant.  However, this precious spectrum is now in the hands of the two dominant players, in addition to the 800MHz and 900MHz already held by Philippine Long Distance Company and the 900MHz held by Globe Telecoms.

What therefore remains with the Government for auctioning off to a potential third player are 20 blocks of 700Mhz, 10 blocks of 800MHz, 5 blocks of 1800MHz, and 55 blocks of supra 1 GHz.  Analysis shows that these would be insufficient to make a new entrant viable, i.e. only 30 blocks of sub 1 GHz spectrum and 55 blocks of supra 1 GHz spectrum.

Thus, it would appear that the Acquisition has badges of a horizontal deal between the two dominant players that is potentially violative of the Philippine Competition Act and forecloses competition. 

We are therefore of the opinion that said Acquisition should be subject to full review by the Philippine Competition Commission.  This is very important for us on two accounts:  (1) safeguarding the interest of consumers in having quality services at affordable prices; and (2) giving effect to the Philippine Competition Act and allowing the Philippine Competition Commission to exercise its mandate. 

The market must be kept open for a third, fourth, fifth player in order to promote competition that will redound to the benefit of the public. We believe there is scope for new players who can provide better services needed by businesses such as BPOs/KPOs.  Suchplayers could carve out a market that requires higher capacity and data rates, which is a trend of the future. We must allow the PCC to do its job and ensure that this possibility remains open and in a level playing field.