WHILE President Duterte signals further opening the telecommunications industry, a lobby group is urging the government to go slow.
Mary Grace Mirandilla-Santos of Better Broadband Alliance said policies on the equitable assignment of radio frequencies to telecommunications companies operators should be in place before a new core player enters the market. Santos said doing so would ensure it can survive in the sector that is dominated by only two telcos.
“If we expect the third telco to effectively compete with the two dominant players, then the only way is to do a comprehensive spectrum review and put in place a policy to ensure equitable distribution of spectrum,” she said when asked how a new comer can effectively compete with a duopoly.
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 the build capacity, overall network performance, ability to offer new multimedia services and general customer experience of wireless services.
Data from the National Telecommunications Commission (NTC) showed that existing telcos hold majority of the said real estate to date.
PLDT Inc. holds 400 megahertz (MHz) of the total holdings, while Globe Telecom Inc. has rights to 325 MHz.
“The remaining frequencies that we [civil society groups] are aware of comprise of 3G and 4G only,” Santos said. “There is no 2G frequencies, which means the new player can’t offer mobile voice calls and SMS.”
What remains for budding 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 there are no more 2G frequencies—used for text and calls—available in the market, hence newcomers will have to make do with offering voice and text services via 3G, according to the NTC. “So, if the new player would like to offer mobile services, it will have to invest, develop its business model and build its network around 3G and 4G frequencies,” Santos added.
Services offer via the 3G and 4G frequencies revolve around mobile data of varying speeds.
However, Department of Information and Communications Technology (DICT) Officer in Charge Eliseo M. Rio said the frequencies left are “enough” for a third player to compete with the existing operators, as text and calls are expected to be a thing of the past in the next half a decade.
“But we have to qualify that they’re enough for a new player to start offering 3G and 4G,” Santos emphasized. “However, this is based on what’s available now.”
The government has plans to reform and reallocate frequencies that are unused in certain areas.
Both existing players have noted that they have been using the frequencies allocated to them “thoroughly and actively.”
“For the new telco to grow its network and build its subscriber base, there needs to be a more equitable assignment of spectrum among the market players,” Santos said.
Rio noted the DICT is “suggesting a new concept of awarding frequencies other than beauty contest or auction.”
“We call it reverse bidding,” Rio said. “The contender must be a consortium of small telcos with franchises and local investors that will support them, with a foreign telco partner that will bring in 40-percent investment and that can commit the highest five-year financial investment shall be the third major player in the telecommunications industry.” The committed investment shall be indicated on a yearly basis starting this year.
“The investment shall be those directly related to the installation, operation and maintenance of fixed—wired and wireless—networks, mobile networks and national and international telecommunications services,” Rio added.
The new player will be required to deposit with the designated bank specified by the Department of Finance (or bank guarantee) the committed investment of the first year within 30 days from the award, Rio explained.
Thereafter, the newcomer shall deposit the succeeding year’s committed investment within the same period from the anniversary date until the fifth year, he added.
The company shall then be permitted to draw from the deposit for payments through letters of credit mechanisms to implement its rollout only for capital and operational expenses directly related to the installation, operation and maintenance of fixed networks, mobile networks and national and international telecommunications services.
“Any unused deposits at the end of the fifth year shall be forfeited in favor of the national government,” Rio said.
In a regular auction, the frequencies are awarded to the highest bidder.
“The winner has to cough up cash to the government up front that has nothing to do with its rollout plan,” Rio explained. “In this reverse bidding or auction, the highest bidder commits the amount to his rollout plan, and after five years whatever balance that will remain goes to the government.”
This, he said, will prevent the duopoly from once again acquiring the budding player, as what they did with San Miguel Corp., Bayan Telecommunications Inc. and Digitel Mobile Philippines Inc.
May 2018 is the new deadline for the new telco player to come in. Interested parties include Now Corp., Philippine Telegraph & Telephone Corp. and Converge ICT Solutions Inc.