Third telco a dud?
DEMAND AND SUPPLY - Boo Chanco (The Philippine Star) - February 17, 2020 - 12:00am

Frankly, I am not surprised that the third telco is proving to be a dud. From latest indications, it will not be able to meet its committed target to start operation any time soon.

There goes another Duterte promise to drastically improve the quality of telco internet service and bring down rates. The plan was to make the third telco provide real competition to the duopoly of Globe and Smart.

It is not going to happen soon. It may even be difficult for this third telco to provide any semblance of competition within the term of Duterte. They already have an excuse, the same excuse used by the duopoly: tough to get LGU permits for cell sites.

DITO Telecommunity, a joint venture between Duterte crony Dennis Uy and China Telecoms, will most certainly disappoint Duterte. They were originally targeting a September 2019 launch of commercial operations. This was pushed back to July 2020.

Now we are being told they cannot meet their target to build 2,500 cell sites by July. Those cell sites are supposed to cover 37.03 percent of the Philippines with a minimum internet speed of 27 Megabits per second (Mbps).

Dito is blaming their inability to meet commitment to slow tower construction because of the complicated cell tower permitting process. Multiple LGU permits for just one cell site also takes about eight months to process.

I am told that the common tower initiative of DICT Usec Eliseo Rio when he was acting secretary was one of the programs sidelined by Sec Gringo Honasan. Industry sources tell me that work on many DICT projects stopped when Honasan came in because he needed time to study and understand the department’s business.

What I do not understand is why Dennis Uy allowed the problem to delay his launch. Given his closeness to Duterte, he should have made a direct appeal for Duterte to issue an executive order mandating cooperation from LGUs and HOAs. Honasan should have also helped.

But it doesn’t seem like Honasan is interested in the work of the department or he still doesn’t understand what he is supposed to do. Those cell sites constitute the backbone of a national broadband network we badly need.

Right now, we are not even playing catch up. We have the lowest tower density in the ASEAN Region. As a comparison, Vietnam has 70,000 towers compared to our less than 20,000 cell towers and we were years ahead of Vietnam in rolling out our mobile network.

Common towers would greatly improve the situation as common tower providers, not the telcos, will put up, operate and maintain the towers and lease them to the telcos. We need an EO and the strong political will of the President to fast track our telecommunication infrastructure development.

We have to be at least at par with our neighbors. Rio, while he was in charge, was able to attract 24 common tower providers to put up a committed investment of around P150 billion in 2019. Yet, they now face the same problem Globe and Smart have in building their towers.

DICT was supposed to put up a one stop shop and with the Anti Red Tape Act or ARTA, to facilitate the issuance of permits. An EO will also make it clear that telecom infra is as vital to national interest as roads, bridges and other public work projects.

An industry analyst thinks DICT should actively help the third telco get the EO and also get vital legislation passed.

“In the absence of a digital connectivity law like open access that promotes infra sharing and expedites the permitting process, an EO would be the most potent alternative.

“However, an EO needs a government agency championing it in the Cabinet, developing the required completed staff work and shepherding it through Malacañang. DICT is obviously not doing that.

 “But I wouldn’t 100 percent agree that permits for towers is the main issue. That’s been the script/excuse of SMART and Globe for poor service. Considering they’ve been at it for decades, their project management should have already handled and taken into consideration the delays from permits.”

Or, could it be, Mr Uy doesn’t have the cash and China Telecom, like China, isn’t inclined to put money in the country despite Duterte’s expressed love for Xi Jinping and China?

My colleague, Vic Agustin, reports that based on regulatory disclosures, Uy’s Chelsea Logistics and Infrastructure Corp. is seeking “to apply, secure, and obtain the guarantee of Philippine Guarantee Corp. for loans which (Chelsea) may obtain from nominated banks/financial institutions.”

“Because of the unprecedented leveraged expansion,” Agustin reports that “Uy admitted that he had been forced to borrow short-term to finance the working capital requirements of his expanding shipping and logistics empire…

“As to the sought-for PhilGuarantee cover, the government agency is mandated to repay up to 90 percent of outstanding amount for every covered loan in case of a borrower default.”

This sounds and smells like the old trick of the Marcos cronies who bled then government-owned Philippine National Bank, GSIS, PhilGuarantee, DBP among other GFIs with so called behest loans. Losses were absorbed by the taxpayers when Tita Cory’s financial managers cleaned up the Marcos mess.

The situation here is proof of what I have been saying for months: Duterte has no idea what is going on. He is not detail oriented the way FVR was. Policy meetings bore him. So, his Cabinet members go their merry way pretending to be busy.

But eventually, lack of accomplishments cannot be denied. Dito has a commitment in its contract to put up so many cell sites and get the third telco going. Will Dito be penalized for failure or will Dito get a free pass because DICT didn’t provide the promised help? Will Dito be bailed out by PhilGuarantee or other GFIs?

Whatever it is, it is the people who suffers. Fast, dependable and reasonably priced Internet access will continue to be a dream… yet, the taxpayers will be paying the costs incurred by Duterte’s acquisitive crony.

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

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