Cellular firms buck government plan on frequencies

The country’s leading cellular companies will oppose plans by government to bid out frequencies needed to engage in third generation (3G) mobile telecommunication, a much sought after technology worldwide.

The National Telecommunications Commission announced last Tuesday government’s plan to bid out 3G licenses sometime during the third quarter of next year, but plans to limit it to only two or three bidders.

Officials of Globe Telecom, the country’s leading mobile phone provider, told The STAR that bidding it out will only increase the cost of offering 3G, making it unaffordable for many Filipinos.

"We expect that the floor price will be around $1 million per megahertz, based on the prices we see in other countries. If we are talking about at least 10 Mhz per operator, then that is immediately P500 million. How can we possibly recover that amount, if we don’t pass it on to subscribers," Froilan Castelo, Globe assistant vice president for regulatory affairs, said in an interview.

In Europe for instance, telecommunications companies paid $120 billion for 3G licenses earlier this year and will spend another $80 billion for infrastructure. When news about the level of investments involved went out, the stock prices of these companies went tumbling down, due to investor worries that the companies might not be able to recoup their investments.

Although 3G will only be commercially available in 2002, this early, telecom companies all over the world are betting as to its commercial success. Right now, what is being offered is second generation (2G) or what is known as GSM (global systems for mobile communications). Next year, local cellular companies will start offering the 2.5 G (in between the second and third generation) known as GPRS or general packet radio service which allows one to engage in mobile Internet without the need to dial-up, unlike the problematic WAP (wireless application protocol).

3G takes GPRS one step further, in the sense that it sends and receives data faster (up to two gigabits per second) and allows wireless video transmissions.

NTC Deputy Commissioner Nestor Dacanay said that they are looking at a 2x30 megahertz bandwidth in the 1950-1980 and 2140-2170 Mhz band. "If we decide on two operators, it may be 2x15 Mhz and if three operators, 2x10," he said.

However, Castelo said that according to the presidential executive order which directed the NTC to bid out frequencies as part of government’s move to raise funds for its own telecommunications projects, frequencies can only be bid out if demand exceeds availability.

"In this case we still do not know the extent of demand. What we know is that this frequency, which is still untapped, is a very important frequency. We still do not have any idea as to its uses. So before anything else, government first has to decide whether this frequency will just be for cellular or not to avoid speculation," he told The STAR.

Deciding on the use of this frequency before any bidding can be undertaken, according to Castelo, is crucial since Internet service providers (ISP) may also want that frequency. "As I said, this frequency is very important. Many will want to acquire it and not use it yet for leverage. And this is dangerous since it will only dried up prices for the frequency unnecessarily," he said.

Castelo noted that there had already been cases in the past when companies acquired the frequencies and then sold it.

He also emphasized that since there are only two companies that are planning to offer 3G, there is no need to bid it out since then it can easily be divided.

There are currently seven licensed cellular phone companies in the country. These are Globe Telecom, Smart Communications, Isla Communications, Inc. (bought by Globe), Pilipino Telephone, Inc., (bought by PLDT-Smart), Express Telecommunications, Inc. Digital Telecommunications Phils. Inc., and Bayan Telecommunications, Inc.