DICT releases 3rd telco selection rules

The Department of Information and Communications Technology (DICT) released on Tuesday the draft rules for the selection of a new major telco player that the government hopes will challenge industry giants PLDT Inc. and Globe Telecom.

Delayed for months now, the said terms of reference (TOR) will determine how a valuable set of 3G, 4G and potential 5G radio frequencies will be awarded to a so-called third telco player. The frequencies will allow the new player to provide an array of mobile services such as calls, text messaging and online video streaming.

The release of the TOR is viewed by observers as the start of the third telco selection process, which DICT acting secretary Eliseo Rio Jr. hopes to wrap up within this year.

The release of the TOR this week was widely anticipated after Rio said the third telco initiative would proceed following his talk with President Rodrigo Duterte during the National ICT Summit in Davao City last week.

“The release of the TOR demonstrates the administration’s resolve to increase competition in the telecommunications space,” Pierre Galla, co-founder of ICT advocacy group Democracy.Net.PH, said on Tuesday.

“Public participation in the consultation stage will be necessary for the success of the third telco initiative, and we hope that the TOR is properly finalized, and the bid to finally happen,” he added.

This is the second draft released by the DICT. Its contents, crafted with the help of experts from the United Nations’ International Telecommunication Union, will still undergo public discussions.

Among other items, the TOR includes the third player’s qualifications, the frequencies to be awarded, the scoring system the government will use as well as other obligations to be imposed on the new major telco player, and penalties for its failure to comply.

To participate, an interested company or group must have a congressional franchise that is “not a related party” to dominant players, which in this case are the PLDT Group and Globe.

The company or members of a consortium must also have a paid-in capital of at least P10 billion.

The main technical qualification is for at least one member to have experience in “provisioning, delivery and operations” of a telco service for the last five years.

Under the TOR, up for grabs are a set of frequencies in the 700 Megahertz, 2100 MHz, 2.5 Gigahertz, 3.3 GHz and 3.5 GHz bands.

A set of 2100 MHz frequencies tied under litigation before the Supreme Court will also be awarded to the new major player after the case is resolved, the TOR noted.

In choosing a third telco, a selection committee will mainly consider nationwide coverage and proposed investment (each with a weight of 40 percent) over a five year period. The remaining 20 percent was set aside for broadband speed.

The minimum level set per year was 30 percent in terms of national population coverage, 5 Megabits per second for internet speed and P40 billion in capital and operational expenditure.

The spending requirement also suggests that a new major telco player must invest at least P200 billion over a five-year period.

The TOR noted that participants can score higher in the selection process if their offer exceeds the minimum terms. For example, for every P2.25 billion that a participant offers on top of the minimum P40 billion per year, a participant will receive an additional point under the government’s scoring system.

The selection committee will be chaired by a representative from the National Telecommunications Commission. The committee will have up to four members.

A unique aspect in this process is a commitment by the new major telco player to amend its articles of incorporation to bar it from merging with a dominant telco, or any player with a market share of at least 40 percent.

Should it become a related party with a dominant player, it must voluntarily return the assigned radio frequencies to the NTC “without condition.”

This was to prevent so-called spectrum hoarding, or when companies acquire frequency holdings only to sell access to these to private interests later on.

Other commitments include a performance security equivalent to either 10 percent as a cash bond or 30 percent as surety bond of its annual budgeted capital and operational expenditure commitment.

The new major telco must also deposit 20 percent of its annual capital and operational expenditure with Land Bank of the Philippines. This deposit can only be withdrawn after the telco player has spent at least 30 percent of its committed budget for the year.

The DICT said earlier these guidelines were put in place to ensure that a new major telco had the financial clout to compete with PLDT and Globe.

If the new major player commits a breach of its commitments and it remains noncompliant for at least six months, the penalties include forfeiture of its performance security and the recall of its radio frequencies. /je