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Competition in telecommunications

/ 01:08 AM November 09, 2015

IF PLANS do not miscarry, a third major player may soon challenge the duopoly of PLDT and Globe Telecom in the country’s lucrative telecommunications market.

Telstra, Australia’s largest telecommunications and media company, recently announced that it was in talks with San Miguel Corp. (SMC) for a joint venture to engage in mobile and Internet service in the country.

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Following the Constitution’s ownership requirement on the operation of public utilities, Telstra is limited to 40 percent ownership or capitalization in the planned joint venture.

Telstra’s CEO had said that, based on its initial discussions with SMC, its investment could amount to “less than a billion US dollars.”

For a company that, per its website, has assets of close to $28 billion, that investment is not much.

Aside from Australia, Telstra operates telecommunications networks and provides, among others, entertainment products and services in the United States, China, India and Singapore.

Clearly, it has the technical expertise to go toe to toe, in conjunction with SMC, with PLDT and Globe in meeting the connectivity requirements of the country’s business organizations and increasingly tech-savvy population.

With PLDT and Globe beset by complaints of poor service, misleading advertisements and inadequate infrastructure, the possible entry of Telstra in the Philippine has drawn widespread favorable reaction.

Unlimited

Until 2011, when PLDT bought Sun Cellular from the Gokongwei family, three mobile telephone operators, including Globe, operated in the country.

Because of its then limited facilities, Sun Cellular was considered good only for businesses or people who needed to communicate among themselves.

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It became the butt of irreverent jokes by PLDT and Globe cell phone users.

Then, sometime in 2005, Sun Cellular launched its “unli” plan where, in consideration for a fixed amount and within a specific period, its subscribers can make unlimited calls or send text messages within its network and to other networks.

That move became a game changer in the industry.

Sun Cellular’s subscriber base grew exponentially at the expense of PLDT and Globe. Why pay P1 per text message or P5 for a one-minute call when for, say, P50, you can text and call to your heart’s content for two days.

The “unli” program showed that the two networks were overcharging their subscribers.

If Sun Cellular can sharply reduce the costs for the use of its network and still earn handsome profits, then PLDT and Globe were either gouging their subscribers, operating their facilities inefficiently, or using outmoded business models.

To stop the exodus of their subscribers to Sun Cellular, PLDT and Globe were forced to adopt similar “unli” programs and priced down their services to match up to the competitor they earlier thought was a pushover.

Competition

Had Sun Cellular not come into the picture, the “unli” program would not have become the norm in the cell phone market and the public would probably be stuck today with expensive cell phone bills.

Too bad, the otherwise healthy competition among the three cell phone operators ended when PLDT, for supposedly strategic business reasons [read: get rid of the competition], acquired Sun Cellular.

PLDT said that, in spite of the buyout, the two companies will maintain separate corporate structures and independent mobile network infrastructure. Meaning, they will not operate as a monolithic organization but will compete with each other for the patronage of the subscribers.

But if you look closely at the promotional activities, services and charges of the two supposedly separate entities, it is apparent their operations are in sync with each other.

Nothing wrong with that. It makes a lot of business sense and no law is violated.

With PLDT’s takeover of Sun Cellular, the country came under the duopoly of PLDT and Globe.

The 2007 attempt of SMC to link up with a Qatar-based Internet service provider, that could have provided an alternative to the duopoly, failed to materialize due to technical reasons.

Through slick promotional activities, PLDT and Globe have given the impression they are engaged in competition with each other to give the public the best services at the least cost possible.

Persistent complaints about slow connectivity and poor customer services, however, belie this illusion.

But why should they bother to improve their service when they have the market all to themselves and the subscribers have no choice but choose [no matter how painful] between them.

Alternative

Hopefully, the planned joint venture between SMC and Telstra gets off the ground—and soon. The country needs honest-to-goodness competition in the telecommunications industry yesterday.

The duopoly simply cannot cope with the burgeoning demand for mobile cell phone and Internet connection

The National Telecommunications Commission has reported that, as of March 2015, of the country’s 101.1 million population, 44.4 million are active Internet users, 42 million are active social media users and 114.6 million have mobile cell phone connections.

These figures are expected to go up as the national economy further improves. Indeed, there is more than enough room for another service provider in the telecommunications industry.

No doubt, PLDT’s and Globe’s subscriber base (and in the process, their profits) will be adversely affected if the SMC-Telstra joint venture materializes. They have to shape up to meet the challenge of the potential new service provider.

It will be in their and the country’s interests not to unnecessarily put legal or regulatory obstacles to the operation of the proposed joint venture. If they do, that would be the height of corporate social irresponsibility. For comments, please send your e-mail to “[email protected]

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TAGS: Business, competition, Globe, Internet, phone, PLDT, Sun, Telecommunication, Telstra
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