EQUITABLY allocating radio frequencies for mobile use in the Philippines could get a little messy, given the amount of opposition the government may get from current holders, but it must apportion them if the country wants to have new telco players in the market.
Admittedly, there exists a mess in the spectrum allocation and management in the Philippines, electronics and communications engineer Pierre Tito M. Galla said, citing the current structure of the telco market.
Today, the two telco giants hold majority of the rights to certain radio frequencies for mobile use.
Data from the National Telecommunications Commission (NTC) showed that PLDT Inc. holds 400 megahertz (MHz) of radio frequencies, while Globe Telecom Inc. has rights to 325 MHz.
What remains for new telecom players is a mere 140 MHz of frequencies in the 700-MHz, 850-MHz, 2100-MHz, 2500-MHz and 3500-MHz spectra.
This means that a future telco player—or players—may just have to operate without 2G frequencies, which are needed for mobile voice calls and texts.
Spectrum is the real estate on which telecommunication operators develop their respective network to deliver services to customers.
The amount of spectrum assigned to a telco has an impact on the cost to build capacity, overall network performance, ability to offer new multimedia services, and general customer experience of wireless services.
Galla, the cofounder of Democracy.Net.Ph, said potential players in the market will have to fight for the remaining spectrum left in the government’s frequency bank.
“The current scarcity of available spectrum is not simply because spectrum is finite; rather, it is because spectrum is not assigned equitably,” he told the BusinessMirror. “Current spectrum management practices have resulted in an inequitable assignment of spectrum.
For example, Galla said, the entire 900-MHz and 1800-MHz frequency bands are controlled entirely by both PLDT and Globe, hence new entrants would not have access to these frequencies.
“Spectrum can be enough, if equitably assigned,” he said. “By that, I mean frequency bands should be given in more or less equal slices, with some spectrum reserved for the future.”
Conditional allocation
Mary Grace Mirandilla-Santos agreed, saying the government must review its implementation policies on spectrum allocation and management.
Under Philippine laws and memoranda issued by the telco regulator as early as 2006, the government has to tender off spectrum to players in an open and transparent manner.
The practice, however, has always been to allocate these finite—but renewable—real estates to telco players.
Department of Information and Communications Technology (DICT) Director George P. Tardio admitted that spectrum allocation and management in the Philippines is largely based on conditions present at the time of application for frequency bands.
“It’s conditional. If demand exceeds availability, there should be a bidding,” he said in a text message.
To date, there has been no bidding for any frequency band, at least for spectra for mobile use.
Managing spectrum
According to Galla, frequency auction is the best way to manage and equitably allocate spectrum in the Philippines.
“Spectrum must be purposed, classified and allocated with the interest of the Filipino people as the primary consideration,” he said. “The classification and allocation of spectrum, the monitoring and review of spectrum usage, and the granting and revocation of spectrum user licenses shall be done in a transparent manner.”
The information and communications department should also conduct, motu propio, a review of spectrum allocation in order to determine if the government indeed was right in allocating spectrum usage to players, Galla said.
“Such review is necessary in the national interest, or as a result of spectrum utilization monitoring, or required by changing technologies, or necessary to enable the Philippines to comply with international regulations and best practices, or issuances, rules, regulations and recommendations of the International Telecommunications Union, or at least once every three years,” he said.
The review may result in reclassification and refarming of spectrum, hence freeing up bands for potential new users.
Anticompetitive practices
Galla added the government must ensure that spectra are not hoarded by companies, and then sell them at a latter date.
“Another big hindrance to proper spectrum utilization is known as ‘spectrum hoarding’—by which spectrum is licensed to users who do not maximize the utilization of this scarce resource. This issue is solved by periodic review and claw back,” he said.
To recall, San Miguel Corp. held for many years roughly 310 MHz of spectrum on several bands, including the coveted 700-MHz frequency band. It was on the process of setting up its own telco with a potential partner—Telstra Corp. Ltd. of Australia—until it struck a buy-in deal with the two existing players.
The transaction freed up the spectrum holdings of San Miguel, and gave way for PLDT and Globe to hold more spectrum under a co-use agreement, which was approved by the telco regulator.
Galla said the Philippine Competition Commission (PCC) could step in to ensure that, “in mergers and acquisitions, entities shall not treat spectrum user licenses as tradable assets.”
“The PCC shall ensure that, in a merger or acquisition, nonsurviving entities shall return their spectrum user licenses to the government within 30 days after the completion of the merger or acquisition, and that only the surviving entity shall retain their existing licenses,” he said.
The antitrust body should also ensure that, in a consolidation, all spectrum user licenses of the involved entities shall be returned to the government within 30 days of the completion of the consolidation.
“The return of spectrum licenses shall trigger a spectrum auction, as applicable, within 60 days, and the surviving entity of a merger and acquisition or consolidation may choose to participate,” Galla explained.
Galla likewise recommended the adoption of a policy on setting up caps on spectrum allocation. A quarter of the whole spectrum holdings may be allocated to players, he said.
A review on the cap should be done “at least annually.”
Global best practices
Aside from these, Winthrop Y. Yu, who chairs the Internet Society of the Philippines, said the government has to adopt global best practices to better manage and allocate spectrum in the country.
“These include a truly independent regulator, a fixed time period for frequency assignments, and a recall by government of frequencies without the need for any sort of compensation,” he said. “These global best practices certainly can and should be applied in this country, else we will always be falling behind and stay less competitive than our neighbors.”
He said he agreed with Galla on his proposals, as spectrum is part of a nation’s assets, which should be used for public good.
“The basic mindset for best practices in other countries is the principle that first and foremost, spectrum is part of the national patrimony, of which the regulator is the trustee, who then provides operators with temporary usufructuary rights to certain frequency assignments in return for public service. In other words, spectrum is not private property, nor is it alienable public property,” Yu said.
Spectrum road map
Tardio said the government is currently in the process of crafting a blueprint for spectrum allocation and management.
“The DICT has just started developing the country’s spectrum road map to address issues surrounding spectrum management, for example, ensuring equitable and efficient distribution, among others,” he said.
For now, the government will allocate the remaining spectrum to the potential third player, which is expected to come into the picture anytime soon.
“At this time, the available frequencies will be assigned to the new major player, and if awarded, this will be exclusive,” he said.
Infra is important
But for Santos it is also important for players to invest heavily on infrastructure and new technologies in order to make the best out of the spectrum allocation they hold.
“It’s not just a matter of spectrum allocation. Quality service also takes into account the number of cell sites that you build,” she said.
Typically, 2G services do not require too many cell sites. For 3G and 4G services in high-density areas with high-volume usage, more cell sites have to be set up.
“It’s also more challenging since the mobile operators are bundling streaming video into mobile data services—that, plus low number of cell sites will result in congestion,” Santos said.
Hence, the third telco should build its network on the premise that it will have “enough” frequencies to use.
“The third telco has to design its network in such a way that it will optimally use these frequencies for the services that it would choose to offer,” she said.
Entry of third player
These, according to the three experts pooled by the BusinessMirror, should be taken into consideration if the government wants the much-awaited, and highly anticipated, third player to compete competitively with the existing telcos.
The third player is seen helping disrupt the market by lowering price points, while challenging the two incumbents to improve their services.
Consumers have been calling on the government to help in improving the state of the Internet in the Philippines, which is often described as “slow and expensive.”
Philippine 4G speeds continued to lag behind its neighbors in Southeast Asia, averaging at only 9.5 Mbps during a three-month period ending January, data from think tank Open Signal showed.
According to its latest State of the Internet report in the Philippines, the think tank said the country’s 4G connection is well below the 16.9-Mbps global average, ranking second to the last in terms of speed to Indonesia.
LTE speeds in the Philippines were also far below the global average of 16.9 Mbps.
According to Information and Communications Secretary Eliseo M. Rio Jr., the government aims to get the new major player on board toward the second half of 2018.
“We’re planning to release the terms of reference [TOR] for the auction of the rights for the third player around the first week of May,” he said in a text message.
Earlier, President Duterte ordered the creation of an oversight committee for the entry of a new major player in the telecommunications market, taking into account the need for an “integrated and transparent” process.
Administrative Order 11, signed on April 6, 2018, provides that the Oversight Committee is tasked to assist the National Telecommunications Commission in formulating the TOR, oversee compliance of the National Telecommunications Commission (NTC) and other implementing agencies with the TOR provisions, ensure timely implementation according to the timeline established by DICT and NTC, and call upon other government agencies for assistance and exercise incidental powers as may be necessary for the proper exercise of its powers and functions.
The Oversight Committee will be composed of representatives from the following agencies: DICT as chairman; Department of Finance as vice chairman, and the Office of the Executive Secretary and National Security Adviser, members.
The order gave emphasis on the administration’s objective to ensure reliable, inexpensive and secure telecommunications services in the country; and that telecommunications is an essential infrastructure to the country’s economic development and competitiveness.
“The entry of a new major player in the telecommunications market is a matter of paramount national interest, which shall redound to the benefit of the public by ensuring genuine competition in the country’s telecommunications industry,” the order read.
Duterte earlier said he wanted a new telecommunications company operating starting March 2018.
Rio, who is in China with Duterte, welcomed the creation of the said committee.
“It will make the selection process for the new major telco player transparent and objective, taking into consideration the concerns of stakeholders, including other government departments,” he said.
Interested parties in the spot for the third player include Now Corp., Philippine Telegraph & Telephone Corp. and Converge ICT Solutions Inc., among others.
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