REQUIRING the future third telco player to pay an upfront amount to the tune of P36.58 billion at the very least will not result in any benefit to consumers. Worse, it will only help incumbents strengthen their position in the market.
This was how Eliseo M. Rio Jr., the acting secretary of the Department of Information and Communications Technology (DICT), described the result of a possible auction for the spot of the third telco provider in the Philippines. He said that monetizing frequencies through an auction for the spot will only force the third telco to offer services at higher costs to recover its investment.
“Yes, the highest bidder will put up front 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.
And because the third telco may pass the brunt of the added cost to the consumers, competition—the main reason the third telco selection is being implemented—is unlikely to be spurred. “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,” he said.
Finance Secretary Carlos M. Dominguez III has been vocal about his stance on the selection of the third telco, being the vice chairman of an oversight committee created for the process. His stance has always been this: Bid out the frequencies so that the government will gain money from the transaction.
Dominguez’s argument stems from the fact that in more advanced economies, frequencies are auctioned off.
One of the two draft terms of references (TORs) presented to stakeholders on Friday spells out the rules for the auction, placing a minimum bid of P36.58 billion for a swathe of frequencies amounting to 225-megahertz of frequencies in the 700-MHz, 2100-MHz, 2.5-gigahertz, 3.3-GHz and 3.5-GHZ bands.
The other draft, released days before the auction model draft, places premium on the “highest committed level of service.” Friday’s consultation resulted in a spontaneous market study, with 15 prospective bidders participating in a vote over two drafts (75 percent preferred the first TOR, while 16.67 percent was for the second one and 8.33 percent abstained).
The names of the 15 prospective bidders were not disclosed.
For Rio, the case of auctioning off the frequencies to budding players in the telco market is different from other countries, as incumbents received the initial frequencies from the government for free. Dominguez on Sunday issued a statement, saying he stands by his decision to support the auction model for the selection of a new major telco player. Rio noted he will continue to champion a TOR that puts prime importance on the quality of service over monetary gains.
“The Filipino people will gain nothing from the auction of frequencies, for they will pay for it in the long run, as it will only be passed on to them by the winning bidder to recover the amount it paid. Thus, an auction will not benefit the Filipino people; it will only benefit the duopoly,” he said.
The decision of which draft to adopt still lies with President Duterte.