Rio: Frequency auction to favor PLDT, Globe

Information and Communications Technology Acting secretary Eliseo Rio Jr. issued his strongest views yet against an unpopular frequency auction favored by the Department of Finance (DOF), saying the latter scheme would ultimately benefit incumbents PLDT Inc. and Globe Telecom.

This is the latest in an ongoing row between the DICT and DOF, whose disagreements that were once confined to closed-door meetings have spilled into public view in recent weeks.

At stake are the final form of the terms of reference—a key set of rules and parameters the government will use in selecting a third telco player that President Duterte said would break the PLDT and Globe duopoly.

In a Facebook post on Tuesday, Rio said a spectrum action would hurt the financial prospects of a new player, which would be starting from scratch against the two incumbents that control the country’s mobile market of over 100 million subscribers.

By holding an auction—the first of its kind in this industry in the country—Rio said the third player would be encumbered by billions of pesos in upfront costs, which will be passed on to consumers.

This was said to run counter to the Duterte administration’s main objective of bringing in a new player to improve telco services while lowering costs.

“It will just make the winning telco uncompetitive to the duopoly that never paid the Filipino people for their frequencies. Thus, an auction will not benefit the Filipino people, it will only benefit the duopoly,” Rio said.

The DICT backs a telco selection process that rewards bidders for commitments on coverage, investments and internet speed, which it called highest committed level of service (HCLoS).

The DOF wants a bidding war, with the floor price set at over P6 billion. This model, Finance Secretary Carlos Dominguez III had said, was fair since Filipino taxpayers would reap the financial benefits of state-owned 3G, 4G and potential 5G radio frequencies set to be awarded to the third player.

The President will have the final say on the matter.

The HCLoS model has found strong support among ICT advocates and telcos vying for the third player slot. On Friday, 11 out of 15 interested players favored the HCLoS model while two voted in favor of the auction.

“If the auction results in a high bid price, it is highly likely that the selected third telco would work to recover the cost by passing it on to the consumer,” Mary Grace Mirandilla-Santos, lead convenor of advocacy group Better Broadband Alliance, said in a text message.

“That would defeat the purpose of putting a new player in place who will compete with the duopoly,” she added.

Radio frequencies, which allow mobile services like calls, texting and internet browsing, have historically been assigned to telco operators at no upfront cost. In exchange, they pay the government a yearly spectrum user fee.

Cases where telcos have paid upfront costs for the use of assigned frequencies were private-sector led deals, most recently PLDT and Globe’s P70-billion joint buyout of San Miguel Corp.’s telco assets. This transaction is being challenged by the Philippine Competition Commission before the Supreme Court.