For the general good

Good news for us Internet users.

Internet service in the country is expected to significantly improve following the acquisition by Philippine Long Distance Telephone Co. (PLDT) and Globe Telecom of the telecommunications business of San Miguel Corp. (SMC).

PLDT chief executive officer Manuel V. Pangilinan has been quoted as saying that the improvement can be felt in as early as six months’ time.

He said the transaction offers a breakthrough opportunity, not only for the companies involved but also for the industry and the country, as this will enable existing operators to provide significantly improved Internet and data services to the public and to our customers in the shortest possible time.

At the same time, the transaction leaves the door open for new entrants into the industry since PLDT and Globe will cause the acquired SMC companies to relinquish certain radio frequencies and return them to government through the SMC. PLDT said these frequencies to be returned by SMC’s Vega Telecom will be sufficient, together with frequencies already held by the NTC, to allow for a third-party operator to enter the market.

PLDT said that that access to additional frequencies, specifically those in the 700 MHz bandwidth, will help significantly improve Internet speed, quality, and coverage, and will provide better indoor coverage and enable faster rollout in regional and rural areas.

PLDT and Globe will acquire on a 50-50 basis for P52.08 billion a 100 percent equity interest in Vega Telecom, and will assume P17.02 billion in liabilities, for a total consideration of P69.1 billion. Vega owns controlling interests in Bell Telecom, Eastern Telecoms, Cobaltpoint Telecom (formerly Extelcom), Tori Spectrum (formerly Wi-Tribe), and Hi-Frequency Telecom. They will also be acquiring New Century for P691 million and eTelco for P206 million.

PLDT in a statement said that access to these much-needed radio frequencies, especially the 700MHz, is likely to raise PLDT’s capex by $100 million for 2016 and 2017 as the rollout of service on the 700 MHz will be accelerated, allowing PLDT’s fixed and wireless subscribers to enjoy the significant benefits of this frequency at the soonest possible time.

It explained that the additional spectrum will result in wider coverage and more efficient network utilization and that this will enable PLDT to pursue a growth-focused expansion of its network and extend Internet services to a larger number of customers in more areas of the country.

It said that Smart will be able to serve better the regional and rural areas of the Philippines by utilizing the 700MHz spectrum and that in addition, PLDT will also receive supplementary frequencies in the 900MHz and 1800MHz bands which will enhance its current networks and increase capacity, resulting in faster and improved data services.

In looking at this particular deal, the newly created Philippine Competition Council (PCC) chaired by Arsenio Balisacan should consider that fact that these important frequencies were unutilized by SMC for a long time and that finally freeing them up and allowing their utilization by other companies would be good for consumers. After all, isnt’ this what these anti-competition laws are all about?

SMC wanted to be a viable third player via a joint venture with Telstra but talks with the Australian telco firm failed. And then SMC thought of pushing through on its own but decided in the end to just sell to PLDT and Globe, which can put these frequencies to good use.

The just released implementing rules of Republic Act 10667 or the Philippine Competition Act says that prohibited merger or acquisition agreements (or those that substantially prevent, restrict, or lessen competition in the Philippines in the relevant market) may be exempt from prohibition when the concentration has brought about or is likely to bring about gains in efficiencies that are greater than the effects of any limitation on competition that result or are likely to result from the said agreement.

Someone may complain that the SMC telco acquisition will substantially lessen competition. Assuming, arguendo, that it will, both PLDT and Globe promised improved Internet services given the additional frequencies. And even SMC said that this is one of the reasons why it decided to sell, so that the public will benefit.

Balisacan has also clarified that a duopoly, like that of PLDT and Globe, is not prohibited under the law so long as it does not result in abuse of dominant position.

The Philippines has the fastest growing Internet population in the world, consuming 150,000 terabytes of data annually, and the use of these radio frequencies previously held by SMC in the 700 MHz spectrum is the fastest way to speed up internet connectivity without resorting to a massive capital rollout and building new cell sites that could take years to complete.

PLDT’s Smart Communications and Globe have committed to improve their respective Internet connection services in six months’ time with the joint use of these frequencies, which would make broadband signals travel longer distances than the higher frequencies that the two telcos currently have.

As explained by experts, Globe and Smart would require fewer cell towers to reach the same geographic area considering that the coverage of one cell site using 700 MHz is equivalent to the coverage of three 3G cell sites.  Telcos would also find it easier to expand services to outlying islands and remote areas.

Also, signals in the 700 MHz spectrum penetrate walls easily, which is useful in providing better indoor coverage.

Experts say the frequencies in the prized 700 MHz spectrum can deliver speeds of from 50 megabits per second up to 100 mbps compared with the 3G maximum speed of 21 mbps, giving telcos lots of opportunities to offer faster 4G Long-Term Evolution (LTE) services.

Smart, for instance, announced that it will start using this year the five bands it acquired under the co-use agreement to speed up the expansion of a much-improved and faster LTE service.

The co-use agreement between Globe and Smart was approved by the NTC on May 27 subject to several conditions. They must immediately commence and implement the co-use agreement, they should be able to provide higher broadband and internet access speeds within a year; and they should come up with a rollout plan within 60 days covering at least 90 percent of the cities and municipalities in three years to address the growing demand for broadband infrastructure and internet access.

Smart and Globe will be forced to comply with these conditions because one of the provisions of their co-use contract is that the NTC can terminate it in one year if they do not meet their commitments.

The  NTC has reportedly acquired equipment that can effectively monitor internet speeds and quality of service to check if Globe and Smart would meet their covenants under the co-use deal.

Following the acquisition of the frequencies in the lower spectrum, PLDT/Smart and Globe subsequently returned a total of 85 MHz across the 2G and 4G bands. The return of the frequencies was done to allow new players entering the telecoms market to have sufficient frequencies in order to become viable operators.

Together with what NTC already has, who knows, a third player could still be possible.

As they say, all’s well that ends well.

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