More telco issues
DEMAND AND SUPPLY - Boo Chanco (The Philippine Star) - October 26, 2017 - 4:00pm

Now that there is apparently some movement at DICT that promises more competition in the local telco industry, experts are bringing up issues that must be addressed if the DICT effort is to have a chance of success.

In the light of the recent victory of the telcos at the Court of Appeals that now ties the hands of the Philippine Competition Commission, there are those who think nothing much will change, the honest efforts of DICT notwithstanding.

Greg Tangonan, a professor in Ateneo’s Innovation Center whose area of expertise covers telecommunications, thinks more drastic moves are necessary. In a post on Facebook reacting to DICT plans, Dr. Tangonan made this interesting observation:

“Seems the right suggestion from the public interest viewpoint might be for the government to take back the 700 Mhz, say it’s all of 100 Mhz. Split it in four, let the two mobile carriers bid for two 25 Mhz portions. Open the third to bidders (Huawei, Telstra, SoftBank, AT&T willing to come into different regions – Cebu, Davao, MM, Bohol, ...).

“Government can build or provide the fiber access to these new towers connected to new international gateway by new partnerships, allow regional exchanges to prosper. Invite a (foreign) carrier to come in and install their gear (4G – regional WiFi) with local ISP.

“The government can have e-gov services, educational grid, and public network on remaining portion (25Mhz in this example) but in my mind they shouldn’t run it themselves... some new players might run the government net, in my view. So in theory both the government network and the third telco plus ISPs will be on a new and independent fiber based network.

 “Just my notion of a more competitive and equitable move. Even the regional BPO operations would welcome new global connections. Recall also both Smart and Globe offer HomeBro and Globe Home WiFi on their LTE mobile wireless. These will get direct competition from the new telco plus ISPs operating on the perfect band for penetrating into homes – 700 Mhz.”

But wait a minute… take back frequency? That’s radical. Some might even say too radical. Some may raise questions on dependability of government commitments because in granting frequencies to the telcos, the government has effectively guaranteed they can use it and for that reason the telcos made some big investments.

Taking back frequencies and equitably reallocating enough of the right frequencies to allow a third telco to effectively compete with the duopoly is an idea that had been tossed around by advisers to the President. I remember Jose Alejandrino, a presidential adviser, being aghast at the ability of San Miguel to profit tremendously by selling the company that “owned” the desirable frequencies to the duopoly.

Mr. Alejandrino, who was also the presidential assistant for economics under FVR, pointed out that telecom frequencies are public property. Indeed, he thinks we ought to follow international practice of auctioning those resources rather than giving them to private companies for nothing, only for them to sell off at a profit. This is economic rent seeking at work.  

If Mr. Alejandrino is to be followed he would do exactly as Dr. Tangonan recommended: take back everything and equitably reallocate to telcos including a third telco. But as I pointed out, our laws will not allow that to happen. It would take emergency powers for something that drastic to take place.

That is just fine with Mr Alejandrino because he is also the principal author of the idea to give the President emergency powers under a revolutionary government. That will give him powers to change everything from the Constitution to all the laws and to restructure government and its regulations including how to allocate resources like radio frequencies.

Maybe things will be less drastic with the Duterte government supporting the appeal of the Competition Commission all the way to the Supreme Court. A victory of the Competition Commission at the SC will provide the legal and economic basis for the DICT to reallocate the frequencies.

In the meantime, let us hope the simple plans in Gen Rio’s roadmap get implemented smoothly. Dr Tangonan commented that:  “We should bite on the telcos’ bluff that bureaucratic red tape is the reason our mobile broadband is slow. They aren’t building the architecture out to its full capacity and running the latest technology.

“We have LTE Lite at best. So the DICT effort to solve their ‘problem’ probably leaves it up to their investment strategy – cater to the regimes with the best revenue per subscriber with the most investment. That would mean no one is forcing them to upgrade on these new towers.”

The telcos have to show dramatic improvement. It had been over a year after the duopoly got the San Miguel frequencies which they said, will improve service. Hasn’t happened yet. 

How the Duterte administration handles the telco situation with our slow and expensive broadband service will be the litmus test of how much political capital Mr. Duterte is ready to spend to carry out this part of his reform agenda.

On the other hand, if the local telcos know what is good for them, they should dramatically improve customer service and not push their weight too much, leaving their subscribers frustrated and angry.

One thing I am sure of… President Duterte wants a third telco to give the duopoly competition. And he will get it, one way or another. The telcos shouldn’t even try to stop him and anger him more in the process.

Management Man of the Year

Congratulations to John Gokongwei Jr for being named Management Man of the Year by the Management Association of the Philippines (MAP). This is one award that had been very long overdue. Less worthy awardees than Mr. John were honored by MAP over the past few years. What happened?

As in any organization, politics play a part in the granting of awards. It is easy to award each other. It is horrible that they overlooked Mr. John all these years.

I find it ironic that Mr. John was named Management Man of the Year over a decade after he had relinquished active management to his son Lance. Indeed, Lance is just as deserving of the award right now given his performance in managing Cebu Pacific and a number of other JG Summit companies, all major enterprises.

Well, they did give that same award to Tessie Sy-Coson only last year. Maybe the awards committee is finally working to really recognize the most deserving, whoever that person may be.

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

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