The World Bank’s recent Policy Note on the Philippines’ Internet connectivity paints a grim picture of our digital landscape. With low investment in telecom infrastructure, the country has become synonymous with expensive broadband services, sluggish speeds, and a shocking statistic: half of Asean’s population without mobile broadband services. It is a concerning revelation that demands immediate attention from policymakers and industry leaders.
The World Bank said the country’s annual investment in telecom infrastructure has fallen below 1 percent of GDP, reaching a mere 0.44 percent in 2022. This has had a direct impact on the costs of broadband connections, which now account for 11 percent of the country’s Gross National Income per capita. This figure stands in stark contrast to the costs in other Asean members, where broadband services are far more affordable. Additionally, mobile broadband costs in the Philippines stand at 2 percent of GNI per capita, 1.5 times higher than regional counterparts.
The report highlighted the loss of growth opportunities, the perpetuation of a digital divide, and a grim future job prospects for our workers. It is evident that the cost of inaction is simply too high for the Philippines to bear.
To achieve inclusive growth through digitalization, urgent reforms are imperative. The first step is to update policies and regulations, placing a renewed emphasis on promoting competition, encouraging investment, and upgrading broadband infrastructure. By fostering a competitive environment, we can drive innovation, improve service quality, and reduce broadband costs.
Increased investment in telecom infrastructure must become a national priority. To bridge the digital divide, the government should allocate a more substantial portion of the GDP towards improving Internet connectivity. This investment will not only enhance economic growth but also ensure that Filipinos are equipped with the digital skills necessary for the jobs of the future.
The urgent attention required is underscored by the World Bank’s latest assessment indicating a substantial annual investment shortfall of $2 billion (P110 billion) in the nation’s broadband infrastructure. According to the report, the Department of Information and Communications Technology’s budget of P5 billion allocated for this year falls short in bridging these gaps.
To effectively address this issue, alternative solutions must be explored. One potential solution proposed by the World Bank is the maximization of spectrum user fees (SUFs). These fees, which are paid by spectrum holders based on per frequency and base station, have shown promising growth in recent years. The National Telecommunications Commission witnessed a significant increase in SUF collection, nearly tripling from P2.4 billion in 2017 to over P6.7 billion in 2022, reflecting the industry’s growth.
However, despite this substantial increase, the revenue generated from spectrum fees remains minuscule compared to other countries in the region. The report said the Philippines has the lowest spectrum revenue rate among its peers, such as Malaysia, Indonesia, and Thailand. To rectify this disparity, the government should consider implementing policies that align with international standards to ensure fair and adequate revenue collection.
The report also highlighted several binding constraints that hinder the country’s progress in broadband infrastructure. Barriers to market entry and an “unlevel playing field” pose challenges, particularly for small Internet Service Providers (ISPs). Addressing these issues by promoting fair competition and eliminating discriminatory practices will create an environment conducive to investment and growth.
Furthermore, the country’s outdated spectrum policy framework is a significant hindrance to progress. The report noted that existing laws governing radio spectrum management are based on analog-era legislation enacted almost a century ago. Modernizing the spectrum policy framework is crucial to ensure efficient spectrum allocation, prevent fragmentation, and enhance government revenue collection.
The World Bank said the Philippines stands out from other nations by permitting assignees to possess spectrum indefinitely without any service obligations. However, the procedures for spectrum recall and reassignment lack clarity, and the assignment and usage of spectrum remain non-transparent. These factors contribute to spectrum fragmentation, scarcity, and a decrease in government revenue collection.
The Philippines has immense potential, and unlocking it requires a concerted effort to bridge the digital divide. By taking swift action to update policies, increase investment, and promote competition in the broadband sector, we can ensure that all Filipinos have access to affordable, reliable, and high-speed Internet services. This will not only drive economic growth but also empower individuals, bridge social inequalities, and propel the country towards a prosperous digital future.