While the antitrust body is supportive of the creation of a national broadband blueprint, it cautioned the concerned government agency to be more stringent in crafting the multibillion-peso initiative to ensure a healthy and competitive telecommunications market in the Philippines.
In a position paper, the Philippine Competition Commission (PCC) listed its recommendations to the Department of Information and Communications Technology (DICT) in crafting a National Broadband Plan (NBP) to ensure that the common Filipino will benefit largely from the program. Specifically, the competition watchdog suggested the sharpening of the teeth of the National Telecommunications Commission (NTC) so it can enforce its mandate to review the competition landscape in the telco industry and resolve interconnection issues in the broadband market.
“The NTC should be given sufficient tools to overcome several challenges that hamper its ability to effectively regulate the industry. Among the recommendations include amending Republic Act 7925, which would allow NTC to impose higher penalties on telco players that are violating the country’s laws and regulations,” the antitrust body said.
The Public Telecom Policy Act of 1995, which provides for the development of the telco industry, does not have penal provisions. This has forced the regulator to apply penalties under the Public Services Act of 1936, which sets fines at not more than P200 per day until the violation is corrected.
“When penalties are low and enforcement unlikely, operators will tend to choose to violate rules rather than sacrifice profits,” the competition regulator said.
Break anticompetitive barriers
Aside from this, it recommended the removal of barriers to competition. It identified “three major types of government interventions that restrict competition and facilitate anticompetitive practices.”
First are regulations that reinforce market dominance or limit the entry of new players. These include high cost of franchises and other permits, making it difficult for new players to enter the market.
“As a result, market concentration is high and this allows existing players to dominate the market with less pressure to perform efficiently,” the watchdog said.
Second are regulations that are conducive to collusion or increase costs to compete in the market. These may include the ability of telco players to co-use, which allows them to transfer or share their privilege to use certain frequency bands to another firm.
“This sometimes poses a problem since it limits the government’s prerogative to allocate the essential, but finite, resource in a way that is fair and efficient,” it explained.
And last, the PCC said regulations that discriminate against specific players, distort the level playing field, or protect vested interests should be addressed. These include limiting the entry of foreign equity ownership in telcos, which is capped at 40 percent under the Constitution.
“This effectively protects the existing players from competing with technologically advanced and efficient potential players,” it said.
Interconnection, open access
Likewise, the ICT department should prioritize and “aggressively pursue” the creation of an “effective interconnection regime”. “Interconnection is arguably the most crucial component to enhancing competition within the telco industry. Because interconnection rates and terms are negotiated bilaterally between firms, they are strongly affected by relative bargaining strength,” the competition agency said.
“Operators with fewer subscribers or less extensive networks, for instance, have weaker bargaining power and would have difficulty obtaining favorable terms from their bigger competitors.”
While it agrees with the planned open-access policy within the national Internet blueprint, the antitrust body recommended a few “basic principles to make it more effective”.
“Detailed regulatory guidelines should be provided on critical aspects of interconnection, such as negotiation arrangements, establishment of interconnection rates and technical terms and conditions,” it said.
It added that focus should be given on interconnection obligations for the existing dominant operators since only firms with substantial market power have the ability to establish interconnection terms independent of competition.
“Mechanisms for the identification and resolution of discriminatory interconnection arrangements should be developed,” the competition agency said. “Since the existing dominant players have the incentive to charge exorbitant rates to its smaller competitors, interconnection charges should be regulated to ensure that they approximate actual costs.”
Open access refers to an environment where players are provided with wholesale capacity from existing national backbone network operators under terms that are nondiscriminatory and transparent, and at prices that are cost-oriented and subject to regulatory oversight.
Stop limiting us
Moreover, the antitrust body said it should not be prevented from pursuing its mandate of enhancing economic efficiency and promoting fair and free competition in the market.
“The PCC plays a crucial role in improving broadband services in the country. By implementing the Philippine Competition Act, it prevents firms from exploiting consumers and excluding competitors. Experience has proven that regulation by itself is insufficient to create a robust competitive environment in the telco industry,” it said.
The competition law establishes rules to safeguard the competitive process and its effective application is necessary to assist entry, as well as ensure that competition is maintained.
These, according to the agency, are necessary to ensure that “that all Filipinos will reap the benefits of broadband, address challenges in the sector and accelerate broadband deployment.”
According to the ICT department’s initial draft of the P77.9-billion national
Internet blueprint, the National Broadband Network will focus on the development of internet access in the country-side, particularly in areas where Web access is scarce or very limited.
It specifically outlined key cities and provinces—particularly the rural areas where commercial telecommunications services are absent —where a government-owned broadband network will be built.
These areas are based on the National Economic and Development Authority’s (Neda) National Spatial Strategy for 2017 to 2022 and the National Telecommunications Commission’s (NTC) Fixed and Wireless Broadband Data Survey.
Also included in the draft are key suggestions to promote new media, local content and applications; the development of a rural technology road map; the process by which the government will monitor the development of the plan; optimization of spectrum usage; development of satellite; and the institutionalization of collaborations with other agencies, among others.
The plan was approved by President Duterte earlier this month.