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THE
country’s largest mobile-phone operator warned
regulators over the weekend that industry players will
be forced to cut back on investments in
telecommunications services if a price cap on
interconnection charges for voice and short-messaging
service (SMS) is imposed.
Smart
Communications Inc. spent over P12 billion last year to
fund the operation of its text-messaging network. Eighty
percent of its total network capacity utilization is
associated with SMS usage. Additional investments, it
said, are necessary to expand the network and
accommodate the surge in SMS traffic.
But the
cellular firm seems apprehensive rack up huge costs and
expenses to maintain and enhance services, including SMS,
because of a proposal that the government seems
determined to implement.
“The cap
on interconnection charges will discourage further
investments in the industry as telcos and investors
cannot expect a reasonable period of time for the return
on investments. Dictating lower access charges by
imposing rate caps, while adopting the existing
interconnection model, does not provide equitable
returns to the network provider for its investment in
facilities. The substantial decrease in revenue
resulting from the implementation of the circular will
discourage further network expansion project,” Smart
said in its position paper submitted to the commission
last week.
Smart
pointed out that interconnection is a voluntary
commercial transaction in other countries. As such, each
party is expected to benefit, or the nonbeneficiary will
not make the deal. It offers no benefits to the
unwilling company if the transaction results in returns
less than the cost of capital which makes the investment
economically inefficient.
“It
should be the goal of regulation to encourage
economically efficient investment to promote the
long-term interest of end-users. If regulation is used
to compel cellular operators to engage in involuntary
transactions, which results in lower returns on capital
employed or economically inefficient investment, both
practical (end-users will suffer) and legal and
constitutional (unlawful taking of property without due
process of law and violation of the rights to contract)
issues will arise,” Smart said.
Besides,
the National Telecommunications Commission (NTC), it
stressed, cannot simply dictate or impose on
interconnecting parties the interconnection charges
between them. This is in recognition of the parties’
freedom to contract which is guaranteed under the
constitution by prohibiting any law which impairs the
obligation of contracts. The law also allows the NTC to
intervene only when the parties fail to agree on the
interconnection charges between them.
Interconnection or access charges are the rate paid a by
carrier for every minute of call or for every text that
passes through the network of another carrier. The
current access charge for SMS is P0.35 per text and P4
per minute for voice calls between cellular networks
with separate networks.
About 21
percent of the cellular firms’ operating revenues are
from interconnection charges. The NTC said Globe Telecom
earned about P14 billion while the Philippine Long
Distance Telephone Co. Group roughly made P17 billion in
2006.
The NTC
believes that if access charges are further brought down
then the retail price of voice and text messaging will
be lower and much lower if the call or text is within
the same network. Or, the retail price for SMS within
the same network may almost become free if the
interconnection rates are set.
If the
NTC is successful in implementing the proposed cap on
access charges—P0.15 on SMS and P1.50 on voice call—the
SMS retail rate is estimated to cost anywhere between
P0.40 to P0.60 per text. |
