Third
FIRST PERSON - Alex Magno (The Philippine Star) - October 27, 2018 - 12:00am

In about two weeks, the Department of Information and Communications Technology (DICT) is scheduled to name the winning bidder for the third telecommunications company allowed to operate in the country. We are not sure a third player will actually emerge, however.

The process was delayed many months by disagreement over the precise parameters by which the bid will be conducted. Now the award could be delayed yet again. A disgruntled bidder has taken its issues to court, trying to obtain a restraining order against the bidding and awards process.

About nine companies have acquired the costly bid documents. That does not mean all of them, upon review of the conditions, the requirements and the financial hurdles, will eventually place their bids. In the worst case, it could be no one actually places a bid.

NOW Telecom, after paying for the bid document, went straight to court to seek a TRO against the bidding process. They complain that the Terms of Reference put out by the DICT were “onerous, confiscatory and potentially extortionary.”

Those Terms of Reference do set up incredibly high financial barriers for those seeking to be named the New Major Player (NMP). They call for the winning bidder to put in a “performance security bond” of about P24 billion (about $458 million). This is on top of a participation security of P700 million and a non-refundable appeal fee of P10 million.

Just to get the paperwork moving, the winning bidder needs to plunk in over half a billion US dollars into the pot. Then it must worry about raising the capital to get a new network going.

Then, to actually set up a functioning telecommunications enterprise, the winning bidder needs capital conservatively estimated at about $2 billion. That does not yet include building thousands of communications towers that some bright kibitzer at the DICT wants to be separately awarded to only two providers. That could stall the new major player for a financially unsustainable amount of time.

The winning bidder must be swimming in cash to satisfy the Terms of Reference. If the winning bidder has that much cash lying around, it might be wiser to invest the pile in some other enterprise. The telecommunications business, after all, is simply too risky. It is heir to rapid changes in technology and prone to disruption.

It is odd enough that government, rather than the private sector and the market, should be presiding in choosing who could play in the telecommunications sector and who could not. In most other cases, it should be the market that decides that and private enterprise, looking at the configuration of opportunities, to decide if they want to risk investing.

But government does hold the ace, so to speak. Government has the bandwidth to give out to its player of choice. It has the prerogative to dictate the terms for awarding the scarce resource.

The desire to have a third major player is a politically dictated one. From the start, a political decision was taken to foster a third player to break the “duopoly” perceived to be inflicting inferior but expensive services on our consumers. That decision is not guided by studies about the capacity of our market to support another player. It is not guided by technological insight into how telecommunications will be like in a matter of a few years from now.

Recall how, in the early nineties, government encouraged new players to take up concession areas. When wireless telephony emerged, that previous policy became a disastrous failure.

At the onset, our telecommunications companies provided only basic wireless telephony using analog technologies. What we called “cellphones” transmitted only voice and not text. In a mater of a few years, digital technologies killed analog.

Now we have “smartphones” in our hands, with the computing power of the most powerful laptops and with artificial intelligence to boot. We do not know where this truly disruptive technology will take us in a matter of years, what new breed of service providers we will require and what new economy we will create in the process. 

Will any brave investor really want to plunk in $2 billion (or maybe, more feasibly, $5 billion) to compete with the existing telcos at exactly the same technological level they are at?

It might have been wiser to set a higher technological standard for any new player, such as requiring them to come in with 5G capabilities or exploring the use of orbiting satellites instead of those ugly communications towers that have to fight for scarce land and wrestle with those infernal right of way issues. 

Instead of asking the bidders to demonstrate financial muscle, we could have asked them to demonstrate technological reach. Instead of asking them to provide us the same service at a lower price, we could have asked them to provide superior service at a competitive price.

But that is not how the bureaucracy thinks. Later on I will write on why the implementing rules and regulations for the national ID system require the lowest technological quotient and not the best. That abomination is another matter and will be tackled at another date.

In the meantime, let us sit back and see how this process of choosing a third telecoms plays out. It is a process that was never intended to produce a revolution in our telecommunications backbone, and so it will not.

For all the effort our bureaucrats put in, we must hope a third player does emerge although innovation was never on the agenda.

DEPARTMENT OF INFORMATION AND COMMUNICATIONS TECHNOLOGY
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