Keep expectations low

SAN FRANCISCO – I note from comments on Facebook that many are getting their hopes high that a third telco player will be able to effectively compete with the duopoly to produce some benefit for subscribers. They may be disappointed. It isn’t as simple as President Duterte himself apparently thinks.

It is probably easier for President Duterte to call the incumbents to Malacañang and tell them he wants respectable internet speeds by this year or else he will use his vast coercive powers to force them. Expecting the third player to deliver relief to subscribers through market competition will take time.
The most important consideration is the playing field. Any new player must deal with a duopoly that already controls approximately 70 percent of available frequency, otherwise known as the playing field

Democracy.net.ph published figures on social media that provides a measure of the duopoly’s advantage. According to Democracy.net.ph, PLDT/Smart holds 41 percent of frequencies used by telcos; Globe controls 34 percent; others share 12 percent and NTC is still hanging on to just 13 percent that it can still assign. No wonder Sec Rio admitted in one of his Facebook posts that available frequencies for the new player would be limited.

But Sec. Rio is not advocating a reallocation of frequencies as is often suggested. He is, however, also not ruling it out. For now, he is suggesting an approach that will not threaten the duopoly.

Sec. Rio does not want the new player to compete in mobile internet where the duopoly has a big headstart and court advantage. The third player, according to Sec. Rio, should compete initially in the fixed services where the duopoly is weak, with only 17 percent of establishments, homes, and offices having internet access.

The acting DICT head doesn’t think the new player is doomed to fail just because the duopoly controls 70 percent of frequencies. In Metro Manila and other densely populated urban areas, Sec Rio points out that there are new technologies that could offer residential customers fixed high-speed Internet access through the air.

The service is a fast and affordable alternative to cables and fixed lines being used by the duopoly. This new system, Sec Rio explains, could give symmetrical 100 Mbps download and upload speeds to homes. And frequencies are available for this.

Sec. Rio thinks this non-confrontational strategy will give DICT time to devise policies to bring about more equitable frequency allocation “para maging patas ang laban sa mobile services among the three players.”

Sec. Rio said he was just being realistic. “Surely, the duopoly will not give up the frequencies that are allocated to them or even share these, without a fight that will bring us to the courts. This will take years, time that the third player doesn’t have.”

The logic of his alternative approach is simple: “Why insist in being connected to mobile access services when we are at home, offices and establishments where we spend around 80 percent of our daily activities? Why not use a fixed access when this can be faster and less expensive than mobile access?”

But Sec. Rio assure, the government would not limit the third player’s area of operation or the type of services they can provide their subscribers, using any technology that would make them competitive.

“However, the fact remains that initially, with the limited available frequencies that can be allocated to the third player and that it has no infrastructure as a mobile service provider, the third player must not confront the duopoly, at least not initially.

“In the beginning, it should compete with the duopoly, where Globe and Smart are weak, even in urban areas, and that is in the fixed line access to the internet, direct to homes, offices and establishments. That would give time for the 3rd player to roll out their wireless network…”

The Secretary sees the new player eventually getting more frequencies. Sec Rio also promised that “DICT will come up with more equitable frequency allocation policies for more efficient use of the spectrum, which is a limited natural resource of the country.”

Sec. Rio also sees the third player acting as the common tower provider of telcos, including itself. The mobile industry needs at least 67,000 towers just to compare with Vietnam, from its present 20,000 or so cell sites. The new player can then lease these towers to Globe and Smart, who will then put up their respective cell site equipment which they will backhaul to their core.

In addition, Sec. Rio sees the new player going into a business model where it becomes a telco of telcos. In the towers it constructs, the third telco will put up all the cell site equipment and backhaul this cellsite to the core of Globe and Smart using frequencies assigned to the two.

“So at absolutely no last-mile cost to them, Globe and Smart will immediately increase their services to their subscribers in more areas than what they have before. For this service, the third telco can split the revenue generated by its cell sites with Globe and Smart, on maybe a 75-25 percent ratio in favor of the third telco.

“So even if the third player will not have much frequencies to start with, it will be able to quickly improve ICT services in the country. The third player will not have to worry about its International Gateway Facilities (IGF) and nationwide backbone. The government will take care of this.”

I can understand Sec. Rio’s careful approach. But even if it works as he had planned, we won’t feel it until about two or more years down the road.

Unfortunately for Sec. Rio, people expect the Duterte administration to produce immediate relief and to show tough political will in dealing with the incumbents. In the meantime, keep expectations low.

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