Frequency auction mode to benefit duopoly — DICT

MANILA, Philippines — The auctioning of frequencies in selecting the new major telecommunication company (telco) would only be beneficial to the existing duopoly in the market as it would lead to more expensive services to Filipinos, the head of the Department of Information and Communications Technology (DICT) said.

In a social media post yesterday, DICT Acting Secretary Eliseo Rio said the highest bidder will need to put upfront billions of pesos to be awarded the frequencies, the cost of which may be eventually passed on to its customers.

“Yes, the highest bidder will put upfront billions of pesos to be awarded the frequencies but, from whom shall the winning telco recover this auction expense that has nothing to do with rolling out its infrastructure and nothing to do with improving telecommunication services? From the Filipino people, of course,” Rio said.

He said this will, in effect, make the Filipino people pay for it in the long run.

“It will in fact just make telco services more expensive than when the frequencies were awarded free. It will just make the winning telco uncompetitive to the duopoly that never paid the Filipino people for their frequencies,” Rio said.

“Thus, an auction will not benefit the Filipino people, it will only benefit the duopoly,” he added.

The DICT, as well as some stakeholders, earlier opposed the Department of Finance-backed auctioning of frequencies, as this will entail the new player to put up a huge amount to qualify for the bidding process.

“Who will be interested to go in and compete with the two giants when they have to pay something that has nothing to do with their rollout of their infrastructure, that has nothing to do in improving their communications services?” Rio earlier said.

In a consultation last week, potential bidders voted for the highest committed level of service (HCLoS) formula as the best method in selecting the third telco player.

Among the 15 franchise holders and potential investors asked to submit their vote during the consultation, 75 percent expressed preference for the HCLoS selection, while only 16.67 percent chose the highest bidder or by auction method.

“The 15 telcos are the franchise owners who could be the Filipino partners of the foreign firms. Right now we have about five foreign (companies) interested so they can choose among the 15,” Rio earlier said.

Results of the general public voting, meanwhile, showed 96 percent chose HCLos, while the remaining four percent prefer the auction method.

Under the HCLoS method, selection of the third telco player will be based on the committed level of service, particularly on the population coverage, broadband speed, and investment within five years.

The participant with the highest CLoS will be the new major telco player based on the criteria on the terms of reference.

In contrast, under the auction method, the floor price as well as minimum obligation on the level of service will be set by the government. The participant with the highest bid price will be the new major telco player based on the criteria on the terms of reference.

National Telecommunications Commission (NTC) commissioner Gamaliel Cordoba earlier said the minimum bid price under the draft rules has been significantly slashed to P6.28 billion from the previously reported P36.58 billion.

Rio said the outcome of the stakeholder consultation is an indication of what the potential participants prefer. He said the DICT will collate the results of the consultation and will present it to the oversight committeee.

“The legal process will require NTC to publish the final version and then this will be subjected to another public hearing. It will again improve the terms of reference until it becomes final. Once the public hearing is completed then we can have it effective, then that will start the bidding process,” he said.

Rio said if everything goes well without any further delays, the third player will be awarded by September or early October this year.