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Gov’t paves way for entry of 3rd telco player

/ 05:03 AM January 30, 2018

(Conclusion)

In a packed hotel ballroom in Quezon City last Jan. 24, DICT officials told industry stakeholders that a third player would be barred from selling out to the duopoly.

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“What we don’t like is after we award frequencies, in a few years, the third player will just be bought out by Globe and Smart,” DICT acting secretary Eliseo Rio Jr. said.

After all, a new telco challenger will compete against powerful incumbents, which have been consolidating the industry since the late ’90s.

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By the year 2000, PLDT had acquired Smart and Pilipino Telephone Corp. while Globe merged with Isla Communications Co. as part of their respective mobile strategies. Sun Cellular itself was bought by PLDT in 2011 amid the price war it started and as a new heavy investment cycle was ongoing for 3G technology.

Around this time, more Filipinos were accessing the internet through mobile handsets and smartphone prices were dropping fast. This, in turn, cut into the telcos’ legacy services such as long-distance calls and traditional text messaging.

3rd player advantage

Consolidation continued and by 2015, Globe had acquired Bayan Telecommunications Inc. The following year, PLDT and Globe joined forces to buy out conglomerate San Miguel Corp.’s telco assets and gained control of its underlying radio frequencies, including a big slice of LTE spectrum.

The country’s antitrust body sought to review the SMC transaction but the effort was blocked in the Court of Appeals.

The situation today is vastly different with the government ready to provide its support to give a third player a fighting chance.

Multiple avenues are being pursued to cut capital and operating costs for a third player, and to speed up the permitting process for telco infrastructure.

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The DICT also wants to come up with a potentially controversial policy to reallocate scarce radio frequencies, most of which are held by PLDT and Globe.

Moreover, new technologies like 5G are seen to play a bigger role once standards are finalized next year.

Facebook partnership

Facebook launched a submarine cable project called Pacific Light Cable Network that will connect Los Angeles and Hong Kong to serve its massive data requirements.

But it wanted to avoid the Luzon Strait, the body of water between Taiwan and the Philippines, which has a history of undersea cable damage due to earthquakes and typhoons. That concern led to the conceptualization of the Luzon Bypass Infrastructure, to be built and operated by the Philippine government.

The bypass facility will have two landing stations on either side of Luzon in Baler, Aurora, and in Poro Point in San Fernando, La Union. Facebook’s submarine cable will link to both landing stations and data transmissions will travel 250 kilometers over land in Luzon.

In exchange for using its facility, which will open toward the end of 2019, the Philippine government will get 2 terabits per second (Tbps) of international bandwidth “free of charge.” That’s about 170 standard-definition movies or over 50,000 songs every second.

The DICT hopes to use this bandwidth to support its free Wi-Fi program, and provide inexpensive internet to small service providers and even a third player.

This will help a new challenger close the network gap against PLDT and Globe, which have built and control their own international gateways.

Infrastructure fast-track

The government will release by February its first-ever common tower policy to address the shortage of cell sites.

Under the plan, third-party tower operators will finance and build “independent” facilities and then lease these to PLDT, Globe and a third player.

This will free up expenses for a telco challenger, since the DICT estimated that the Philippines needs another 50,000 cell sites, valued at around $5 billion. PLDT and Globe control almost 20,000 cell sites in the country today.

Moreover, DICT’s Rio said President Duterte would issue an executive order paving the way for the approval of telco infrastructure permits within a week instead of the prevailing average of eight months.

It would also solve right-of-way issues as operators seek to lay down more fiber lines for homes and businesses.

Regulatory reforms

The state-run National Transmission Corp. is also being eyed to support a nationwide telco backbone for a third player to utilize.

Mary Grace Mirandilla-Santos, lead convenor of advocacy group Better Broadband Alliance, said these policies would help a third player get off the ground, but it was regulatory reforms that would sustain more competition.

She cited the need to amend the 80-year-old Public Service Act and the two decades-old Public Telecommunications Policy Act.

She also called for an open access scheme. This would allow other players, even those without a congressional franchise, to build and operate physical infrastructure as well as offer services to the public.

Moreover, it would spur activity in remote areas currently unserved or underserved by the incumbents or even a third player, she said.

“The only way new competitors can survive is if you put in policy and regulatory reforms,” Santos said in an interview. “We have to change these laws to have a framework that is relevant to the internet age.”

Duterte effect

Telco operators around the world have taken notice since the Philippines’s call to China. DICT’s Rio said there was also interest coming from Japanese and Taiwanese operators.

Philippine Telegraph and Telephone Corp., which is vying for the third player slot, is negotiating with several foreign groups, including South Korea’s LG Uplus, company chair Salvador Zamora II said in November last year.

Within industry circles, there is talk of Filipino businessmen with deep pockets quietly organizing themselves into consortiums to attract foreign telco partners. Given limitations set by the 1987 Constitution, a foreign partner can only own up to 40 percent of a telecommunications provider.

The duopoly is also gearing for battle.

PLDT is setting aside more than P50 billion in capital spending, said to be a “historic” amount, while Globe is allocating about P42 billion for 2018.

Even under threat of competition, there is a silver lining, said Gil Genio, Globe’s head of strategy, technology and information.

“I get asked: Are you threatened by a third player? Because things will be easier for them now,” Genio said, referring to the government’s readiness to address right-of-way and permitting issues. “Sure, it’s easier for a third player but there’s a benefit for us, too.”

Jocelyn, who runs a stall alongside several identical outlets in the busy Greenhills Shopping Center in Metro Manila, is a small but essential part of the telco industry’s distribution network.

She is looking forward to another day of strong sales with her shop displaying the latest smartphones armed with more powerful selfie cameras.

An active consumer of social media, she is less excited about the prospect of a third telco player entering.

“I’ll believe it when it happens,” she said.

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