Challenges to telcos in the digital age

(Speech delivered by Pangilinan at the 6th annual Internet and Mobile Marketing Association of the Philippines Summit held at Rockwell Powerplant Mall on August 24).

I had thought twice before accepting your invitation because I must admit I’m not a digital native or a certified techie. In fact, my first encounter with technology was with the telex machine and the IBM electric typewriter.

But on reflection, I am more digital than I had imagined—that my day-to-day life is enveloped by digital technologies.

On August 6, during the height of Habagat, Nash Racela, assistant coach of the Under-18 National Basketball Team, posted on Twitter pictures of the SGS Gym in Araneta under water. That started a conversation online, in which Nash described the team stranded at the gym. The next day, Nash tweeted that the team was still marooned and had run out of food and water.

At about 8 a.m. of August 7, Coach Chot Reyes “texted” Nash asking how they were. Nash answered by text: “Trapped pa rin.” Chot replied: “OK. Coordinating w/MVP. Standby.”

At about that time, Sonny Barrios, executive director of the Samahang Basketbol ng Pilipinas, “texted” me, asking if we could get food and water to the team. Sonny sent the same SMS to Al Panlilio of Meralco, who dispatched a Meralco crew—which reported, however, that lagpas tao ang tubig.

At that point, we got in touch with TV5 president Ray Espinosa and TV5 News head Luchi Cruz-Valdes to send a rescue team with rubber boats.

At 11:28 a.m., Coach Chot tweets: “Tell d boys help is on d way” and at 11:44 a.m., Olsen Racela, head coach of the team, texted Coach Chot: “They’re here already, Coach.”

Paolo Bediones of Rescue 5 then posts a tweet: “Coach, everyone accounted for. All safe and sound but a little wet. Glad to be of service!”

Ang galing ‘no? Nag-umpisa sa Twitter, nagpalitan ng text at nagtawagan sa Smart at Talk ‘N Text—sumali ang Meralco, TV5, PLDT—hangga’t dumating ang saklolo.

Digital is here

The digital universe is something to behold—1.8 trillion gigabytes in 500 quadrillion files were exchanged two years ago—more than doubling every two years, according to Terra Data Magazine, June 2012 edition. That’s the video equivalent of you watching your HDTV for 22 million years. John Gatz of International Data Corp. described these bits of information in the digital universe as numerous as all the stars in our physical universe.

That is the power of digital at work today. The exceptional is becoming normal—in fact, the “new normal.” And it has become much of a part of my life—as it has yours. Even my humor has gone digital. You’ve heard about pickup lines, right? Well, you might have heard this one:

Google ka ba? Bakit?

Kasi nasa iyo lahat ang hinahanap ko!

Pero meron din ako:

Twitter ka ba? Bakit?

RT mo, e!

Uy, natawa kayo ha. Isa na lang:

Instagram ba kayo? Bakit?

Kuhang-kuha niyo e!

If you folks are going to tweet about that, please don’t forget to put the IMMAP hashtag.

Our strategic response to this “digital tsunami” is to embrace, rather than resist it. We all know that the worlds of telecom, Internet and media are converging. We want to be at the heart of that convergence, because that is precisely the space where new and exciting opportunities lie.

This represents the first point of our convergence—and underlies our investments in media—TV5, Cignal TV, Philippine Daily Inquirer, Philippine Star and Business World.

Challenges

The challenges to PLDT emerge from two fronts: First, the need for the continuous upgrade of our networks to supply unlimited bandwidth to our customers; second, the threat from over-the-top players like Facebook, Twitter and YouTube.

As a telco, our first priority is to ensure that our delivery infrastructure is updated digitally, is I/P-enabled and capable of delivering boundless broadband. We know that the mobile space is the future—that LTE or 4G is the future —as are data centers, cloud computing and business analytics.

Smart, for example, has just overhauled its entire mobile network to make it easily upgradeable to LTE and HSPA+. Tomorrow, 25th of August, Smart will fire up its 4G network for commercial service, capable of delivering data wirelessly at 42 megabytes per second. Access to high-speed mobile Internet will therefore become more widely available all over the country. PLDT is turbo-charging its 54-thousand kilometer domestic fiber optic network, and raising the capacity of its international undersea cable systems up to 100 gigabytes per second. We’re also expanding our cloud infrastructure to lead the hundreds of millions who have become addicted to cloud-based social media and e-mail services.

But we must also cast a careful eye on the layer above us—the OTT players. To ignore them is perilous; but to surrender their space is unsafe. We must therefore find a balance where we can partner with OTT suppliers and evolve our business model in an independent yet cooperative way. This is the second point of our convergence—merging telcos as a delivery system with OTT players as content suppliers.

We can gain from such a cooperative business model. OTT players actually generate more demand for network bandwidth and capacity. PLDT stands to benefit from greater requirement for broadband services, and if we actually provide OTT services to our customers, we realize additional revenues as well. Moreover, if we enable our customers to see those services in relation to each other, this will raise our relevance to them—and they will pay for those services. We must be mindful that proprietary content and information are valuable—so they must be paid for.

We welcome smartphones and tablets as they make our customers more engaged with our products and services. Apple has succeeded because their devices put context with the customer, especially with the application universe, which makes Apple devices more interesting—supplying users with unlimited access to entertainment, business solutions, and information with a single touch and from a single device. Would you believe there is even an app called “toilet tracker.” Talk about emergency cases—I believe this app is sponsored by Imodium.

Finally, customers can benefit if we add media services as part of our bouquet of product offerings. If we can supply streaming services universally: Local playlists, local music, local video—great! This is an OTT service which can change the business model of TV5 itself.

Internet mobile marketing

Let me now turn to IMMAP.

Clearly, the trinity of new technology—mobile broadband, social networks and online access—is crucial to IMMAP.

We all know that social networks have become attractive to brands as distribution platforms, enhancing the reach and effectiveness of your ad campaigns.

But user analytics is now emerging as the game changer for digital marketing. In this regard, our group of companies is in the best position to catalyze the development of user analytics in a way that is different from how other countries are doing it.

Meralco will start building up, by the fourth quarter this year, a smart grid on top of its power distribution layer that will deliver prepaid metering service, demand response and outage management. The advantage to the consumer is that he will be empowered to manage his electricity consumption better. The benefit to Meralco is a better understanding of the consumer—his preferences, demand profile and actual behavior—thus providing Meralco with a better tool to serve him.

Maynilad Water is moving in this same direction—as our tollways, hospitals and, of course, PLDT itself.

At the end, each of our companies is enabled by user analytics to tailor fit its products, services and messaging to the individual customer, because it now knows him better.

Bridging the digital abyss

Let me now conclude by saying that whilst all of these are new and interesting, we must remind ourselves that many Filipinos are still cut off from the digital world. They live at the outskirts of thriving Web-connected communities —looking from the outside in, separated by a deep digital abyss.

It is important for the future of our country that we bridge this divide as quickly as we can. As a 2009 World Bank study points out, broadband Internet is not just an infrastructure. It is as well a general purpose technology that can fundamentally restructure an economy. So far, broadband has helped the Philippines rise to the top globally in industries like business process outsourcing. But it has done painfully little to raise the productivity of our farmers. Unlike India, we’re unable to supply our farmers with real-time online weather and crop-raising information. We have so few farming applications here, despite the banks of knowledge deposited with Philippine-based organizations—like the International Rice Research Institute.

Ideaspace

This brings me to Ideaspace—our nonprofit incubator/accelerator fund designed to stimulate innovation and promote technology-based entrepreneurship in this country.

What brought us to conceive Ideaspace?

We, at PLDT, are confident we can upgrade and build the bandwidth you all require. Been there, done that.

But the content and services provided over our infrastructure layer are almost all provide by non-Filipino OTT’s. Why can’t the next Instagram or Google be Filipino? This innovation void defines precisely the rationale behind Ideaspace.

We’re launching a national competition very soon to find and select the 10 best technology-based ideas to be incubated in our program. With a funding commitment from our group companies aggregating P500 million over five years, we’d like to give these start-ups the sunlight opportunity of succeeding.

But I don’t want to end on such a serious note. So, let me provide a more powerful argument why we should shift to digital. Simply put—digital adds more fun in the Philippines.

Just monitor what’s trending, at makikita natin mga artista at mga media nagsasalpukan sa YouTube. Saya, ‘di ba?

Tuloy, this has led to think— that for my heart to be truly digital, it’s time to act like a digital native. So let me finish by saying: “Hey, I just met you—and this is crazy. But here’s my Twitter—Follow me … maybe?”