Obstruction

The Philippine Competition Commission (PCC) is intended to help make our economy more market-friendly and hence more conducive to investment activity.

In its first major case, however, PCC presented itself as a new obstacle to business activity, another layer to the exasperating bureaucratic tangle that drives away rather than draws investments in. By retroactively opposing the mega deal between Globe and PLDT/Smart on one hand and the San Miguel Corporation (SMC), the PCC adds uncertainty to concluded contracts and prevents consumers from enjoying the use of idle broadband capacity that would immensely improve the accessibility of faster Internet services.

The deal involves the sale of much coveted 700 MHz bandwidths to the two telecoms giants by a company controlled by SMC. These bandwidths are more efficient in handling data transmissions using 4G technologies.

For the two telecoms giants, acquisition of these bandwidths is indispensable to improving data transfer speeds to meet their commitment to government to improve Internet services to regional standards. By insisting on putting the deal on hold until they are done with their review (which is indefinite), the PCC sacrifices both consumer interest and the potential benefits to the economy of better Internet access.

A World Bank study demonstrates that for every 10 percent increase on penetration of broadband services, the domestic economy grows an additional 1.3 percent. This is because better Internet access reduces the “digital divide” in economies and improves health, education and social mobility. In sum, better digital access is now the key to inclusive growth.

When the sale of SMC bandwidths was concluded, with the blessings of the National Telecommunications Commission (NTC), consumers celebrated. Part of the agreement with the NTC was improvement of digital services in six months. Otherwise, the two telecoms giants will face heavy fines from the NTC.

Those prospective fines for delays in rolling out their 4G services drove Globe and Smart to seek judicial relief from the obstructionism of the PCC. The two telecoms giants filed separate petitions at the Court of Appeals (CA) seeking an injunction against the PCC.

At the end of August, the CA granted the petitions, issuing a temporary restraining order against the unwarranted probe the PCC wants to conduct. Industry analysts agree that the injunction against the PCC puts primacy on consumer interests.

Since the deal transferring the 700 MHz bandwidths to the joint use of the two telecoms companies was approved by the NTC, the petitioners were worthy of protection against the PCC’s intended review. The NTC is the principal, if not the only, regulatory authority overseeing the telecoms industry.

False premises

In opposing the petitions filed by Globe and Smart, the PCC begins from false premises.

The PCC holds up the phantom argument that the transfer of the 700 MHz bandwidths from SMC to Globe and Smart forecloses the possibility of a third player entering the industry. That is a false argument.

To begin with, there are enough bandwidths across the spectrum ceded to the NTC to enable a third player to enter the market. The bandwidths the two telecoms providers purchased from SMC are all within the 700MHz range.

SMC did try to enter the telecoms market in partnership with Telstra. The partnership failed, daunted by the challenges posed by the domestic market. The plan to set up a new telecoms company based entirely in the 700 MHz bandwidth was scrapped, leading to the bandwidth being put up for sale.

At the moment, there is no potential third player in the industry to protect. The bandwidths in SMC’s possession, without the deal, would have remained idle – to the chagrin of Filipino consumers. Internet service would have remained poor and the digital divide would have widened. The domestic economy would have underperformed.

If, in the future, new technologies become available to encourage a third player to enter the market, then there will be enough bandwidth across the spectrum the NTC could make available. Today is not the time to intercept the full utilization of the 700 MHz bandwidths to the advantage of our consumers who stand to benefit not only from faster but also from cheaper data services.

Cheaper data services will do wonders for making our economic growth more inclusive. It will allow small companies to access market information to compete – which is actually the purpose for which the PCC was conceived.

The other argument advanced by the PCC against the petitions filed by Globe and Smart is even more pathetic. The PCC argues that the two telecoms companies have no ground to file for injunction because they do not need protection by the court.

In their May 30 agreement with the NTC, the basis for approval of the sale of the SMC bandwidths, the Globe and Smart committed to submit a 4G roll-out plan in 60 days and provide the advanced service to all towns and cities nationwide by the end of the year. For each day of delay after the deadline, the two companies will pay the regulator a heavy fine.

The prospect of financial losses due to fines should be enough reason for the two telecoms companies to seek judicial relief from the PCC’s unwarranted muscle flexing.

The PCC, to be sure, has a lot of worthwhile roles to play in helping our economy achieve more inclusive growth. But it should guard against bureaucratic smugness and a penchant for toying abstract and academic possibilities.

Competitiveness is a means to an end. The end the PCC should constantly bear in mind is enhancing consumer value for price.