Globe Telecom backs NTC plan to lower interconnection charges

MANILA, Philippines—The government’s new proposal to cut charges for consumers making calls and sending texts outside their respective networks will cost local telecommunications firms billions of pesos in revenue losses, further cutting profits of an industry already under heavy price pressures.

But Globe Telecom, the country’s second-largest industry player, considers the lowering of interconnection charges as inevitable, saying it has to be done considering that call and text rates in the Philippines are among the highest in the Asia-Pacific region.

The Ayala-led firm formalized on Monday its support for a National Telecommunications Commission (NTC) draft circular to lower interconnection charges, which are paid for by consumers when trying to reach users in other networks.

“We agree with the findings of the NTC that charges in the country are the highest in the region. There’s a lot of pressure to lower this,” Globe counsel Froilan Castelo said, adding that cutting charges would be impossible to avoid.

The NTC wants interconnection charges for voice calls lowered to P1 per minute from the current P4 in three years. Charges for text messages will also be lowered to 15 centavos from the current 35 centavos per message. These are in line with the average charges of countries in Southeast Asia.

Castelo said this would mean a massive reduction in revenues for local companies. “Interconnection fees are a big source of income for companies,” he said. “In this regard, we would like to work with the NTC to find a way to help cushion the blow on our income.”

He estimated that the reduction in company revenues would reach “billions” of pesos if the lower interconnection fees were implemented.

Castelo said the company would ask the NTC to defer the implementation of the proposed rules and would submit its position paper in a week’s time.

Leading carrier Smart Communications questioned the NTC’s methodology in coming up with the lower rates.

Smart counsel Roy Ibay said it was not right for the NTC to compare rates in the country with others in the region due to the different cost structures of companies in different markets.

He said costs in the Philippines have always been higher because local firms usually imported most of their equipment, while other companies in the region produced their own.

Consumer group TXTM8 Consumer Group Tayo Inc., meanwhile, said lowering of interconnection charges had long been overdue.

“The regulation of the rate of interconnection will benefit the industry and the public in at least two ways: It will lower the barrier to entry for small and new operators… and improve market efficiency, which will lead to innovation,” the group said in a statement on Monday.