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Groups welcome move to break telco duopoly

/ 05:11 AM November 22, 2017

President Duterte signaled this week that he remained displeased with the services offered by PLDT Inc. and Globe Telecom and that a new player, likely from China, would break the telco duopoly in the Philippines.

The announcement, made through presidential spokesperson Harry Roque, offered no details, except that China was considered because of its technology and proximity to the Philippines, a reference to both the relatively small physical distance between both countries and their warming ties under Mr. Duterte.

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Industry experts interviewed by the Inquirer were thus left to speculate how exactly a new player would enter, and what could be done in terms of revisiting old regulations to help competition succeed.

What was agreed on, however, was that new competition was good for the Philippines as consumers still complain about “slow and expensive” internet, a segment that is seeing exploding demand the way text messaging changed the telco landscape starting in the late ’90s.

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“The President’s announcement is an exciting development,” Mary Grace Mirandilla-Santos, an independent researcher and lead convenor of advocacy group Better Broadband Alliance, said on Tuesday.

“This shows that he recognizes that there’s a serious problem in Philippine telecommunications. He sees the lack of competition as part of the reason for poor telecom and internet services, and he’s willing to invest his time and political capital to find a solution to the problem,” she added.

The Philippines’ telco sector was whittled down to two major players through years of consolidation.

The last 10 years alone saw several major deals: The acquisition of the operator of Sun Cellular by PLDT, Globe’s takeover of Bayan Telecommunications and the joint buyout by PLDT and Globe of San Miguel Corp’s telco assets.

Pierre Galla, cofounder at ICT advocacy group Democracy.Net.PH, said in an interview that the most direct route for a new player was through a joint venture with an existing Filipino company with a congressional franchise to operate a telco.

Philippine Telegraph & Telephone Corp. is in talks with foreign groups, including state-owned China Telecom, that country’s third-largest telco, its chair Salvador Zamora II said last October. The Villar family’s Streamtech Systems Technologies is also seeking a congressional franchise.

Galla noted that big barriers in the Philippines were the congressional franchise and the 40-percent foreign ownership cap.

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Galla said another entry point was for a Chinese telco to provide services through a business-to-business deal. He said a Chinese telco could help build the connection between a planned Philippine government international gateway to last mile links to homes and businesses.

He was referring to the Luzon Bypass Infrastructure, which will be operational by 2019. It will consist of two landing stations in Luzon that will be connected to a submarine cable to be built by social media giant Facebook.

That plan, along with components of the National Broadband Project, is seen to entice the entry of more small internet service providers and provide better and more inexpensive internet to the public.

Santos noted that she was also hoping for an amendment of the Public Service Act to remove “telecom” from the definition of public utilities.

This will effectively lift the foreign ownership cap for various sectors, including telecommunications, creating a “window of opportunity” for foreign telcos to enter in a more significant manner.

Santos said such reforms were needed to help introduce and sustain fresh competition in the Philippines.

“If the President is seriously looking at introducing competition to the (Globe-PLDT) duopoly, I think he’s going to get these important policy reforms in place,” she said.

As for Mr. Duterte’s offer to China, the head of a technology company said it was a strategy to invite all foreign investors.

“Every time he invites the Chinese, the Japanese come big, then Americans move, the Koreans are rallying fast, the Aussies might come back to life,” said Mel Velarde, CEO of Now Corp. —WITH A REPORT FROM JOCELYN R. UY

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