Tweak the telecom duopoly

IF THE statements of incoming President Rodrigo Duterte are to be believed, there is light at the end of the tunnel in the country’s slow, unreliable and expensive Internet service.

He has called on the telecommunication duopoly of PLDT and Globe Telecom to improve their services or face competition from foreign players.

In a survey conducted last year by Ookla, the global leader in broadband speed testing and web-based diagnostic applications, the Philippines ranked 176 out of 202 countries in terms of broadband speed.

The global average is 23.3 Megabits per second (Mbps).

Among the 22 Asian countries, Singapore had the highest household download speed at 122.43 Mbps, while war-torn Afghanistan was slowest at 2.52 Mbps.  The Philippines was in the 21st slot, or second from the bottom, at 3.64 Mbps.

Vietnam, Cambodia, Laos and Myanmar ranked higher at 17.70 Mbps, 9.04 Mbps, 6.92 Mbps and 6.54 Mbps, respectively.

Despite the snail-pace speed, however, the average cost per Mbps in the Philippines was a whopping $18.18, compared to the global average of $5.21.

Bottom line, PLDT and Globe Telecom are laughing their way to the bank despite their lousy broadband service.

Executive orders

The incoming administration need not wait for Congress to enact new laws to improve the country’s Internet services.

Judging from past experience, the lawmakers cannot be expected to act expeditiously on matters that do not directly affect them or their pockets unless pork barrel funds or other financial incentives are dangled before them.

Besides, the telecom duopoly know its way around Congress to be able to block any attempt to pass legislation that may adversely affect its ability to rake in profits at the expense of its hapless customers.

Instead, the Duterte administration can take a leaf from the strategy used by then President Fidel Ramos to break the erstwhile PLDT monopoly in telecommunications and of the cable TV industry by politically connected cable TV operators.

He issued executive orders that, among others, required the speedy interconnection of telephone companies, gave incentives to companies to put up facilities in economically depressed areas, and liberalized the grant of licenses to cable TV companies.

With the forceful implementation of those orders, telephone facilities became available, mobile cell phones boomed and cable TV became more affordable.

Creativity

For starters, Duterte’s technical and legal advisers can undertake a comprehensive study of local Internet service operations to determine the real cause of the poor service and prohibitive cost.

The review can figure out the areas where improvements can be made (or ordered) through regulatory action so the proper executive orders can be issued for that purpose.

Direct executive intervention is necessary because waiting for the National Telecommunications Commission (NTC) to spearhead the action would be an exercise in futility.

There are certain areas in the telecom industry that the NTC seems loath to tread on for fear of being sued in court by the telecom duopoly’s highly paid lawyers or is unsure about its authority to undertake certain actions.

To aggravate matters, many of the laws from which the NTC draws its regulatory authority over telecom companies are outdated and not in sync with modern technology.

Thus, for example, the Office of the President can issue executive orders to compel PLDT and Globe Telecoms to share certain facilities or infrastructure, or enter into arrangements that will ensure the smooth flow of digital traffic in the country.

The proceedings of the Senate investigation in 2014 on the country’s poor Internet service can provide more information about the areas where executive orders may be issued to give the needed relief.

Regulation

The government has the clout to make the telcos set aside their differences in specific areas of operation to provide the public with fast and reasonably priced broadband service.

Experience has shown that when the President invokes police power in the issuance of orders that affect private companies, the latter quickly comply because they know they cannot fight City Hall.

If this approach does not produce the intended results, the government may, as threatened by Duterte, bring in foreign players to make up for the inadequacies of the duopoly.

No doubt, the affected companies will contest the validity of this action on constitutional grounds. But that should not be a cause for concern because there have been instances in the past when nationality rules in the telecom industry were tweaked to accommodate foreign investments and were still considered constitutional.

Thus, PLDT and Globe Telecom were able to get foreign investments that skirt the 60-40 rule on capital ownership through the Global Depositary Receipts scheme where foreigners were allowed to buy their stocks in the guise of depositary receipts without (at least officially) breaching nationality rules.

A similar approach can be taken in the entry of foreign players in the Internet business in the country. Through some creative legal craftsmanship, a novel corporate mechanism can be created to justify this arrangement.

If the Department of Justice does not interpose any objection to the stretching of the nationality rules, it shall be considered valid and effective unless otherwise set aside by our courts.

It has been said that necessity is the mother of invention. This dictum definitely applies in the search for solutions to the deplorable state of the country’s Internet service.

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