PLDT-Digitel mega-deal violates law

THE PLDT/SMART-DIGITEL mega-deal is a private transaction between two private companies? Wrong. It is a transaction that concerns the public, and the government should act quickly to protect the public.

When a giant telecommunications company like PLDT/Smart buys out a smaller telecom company like Digitel, it is not just one company buying out another company.

Because the frequency of electromagnetic radiation in the range at which radio signals are transmitted, the government has to regulate who gets them. Thus, Congress has to grant franchises to operators to prevent any one operator from having a monopoly of telecommunications.

When PLDT bought Digitel, it went around this limitation. It bought, along with Digitel’s assets and equipment, its franchise. We should not let this pass. Franchises are given only by Congress. It cannot be bought and sold. PLDT can buy Digitel’s assets and equipment but not its franchise. The franchise will go back to the state and it will be Congress that will have to give it out to another deserving operator.

What will happen if we let the PLDT-Digitel deal go through? PLDT can buy out Globe, Sun and other smaller telecom operators, and PLDT will again have a monopoly of the telecom industry. Do you still remember the dark days of the PLDT monopoly when applicants have to wait many, many years to have a telephone connection; and even when they have telephones, they have to wait hours to get a dial tone; and even when they succeeded in dialing a number, they have to wait more hours to get a hole in the busy signal?

Then Prime Minister Lee Kuan Yew of Singapore made a joke of the situation when he was visiting the Philippines during the term of President Fidel V. Ramos. “In the Philippines,” Lee Kuan Yew jested, “95 percent of the population has no telephone, while the remaining 5 percent are waiting for that dial tone.”

It was a joke, but it was true.

Stung to the quick, President Ramos let loose a series of legal issuances meant to de-monopolize and liberalize the telecommunications industry.

This was followed by Republic Act 7925 (New Telecoms Policy Act), which was enacted to veer away from the monopoly of the dominant carrier PLDT that constricted and stifled, instead of led, the growth and expansion of public telecommunications services in the country.

Sen. John Osmeña, in his sponsorship speech of Senate Bill 11, which became RA 7925, said that to facilitate entry into the provision of telecommunications services, we have to abandon the so-called “prior-operator rule (an abused monopoly principle and tool of the dominant carrier), which is nothing more than the business equivalent of the ‘equity of the incumbent’ in politics. The barriers to entry must be removed. We must allow more competition to occur.”

The recent acquisition by PLDT of Digitel undermines and strikes at the very heart of RA 7925, whose principal purpose is to liberalize and de-monopolize the telecommunications industry. With so much clout, significant market power and influence now consolidated in the PLDT group, free competition is threatened again and the public good is ultimately placed at risk.

The threat alone to free competition, and ultimately to public service, even before monopolistic powers can be consummated, suffices for the National Telecommunications Commission to enforce and implement both the letter and spirit of RA 7925. Now.

The NTC must start leveling the playing field now in the name of free competition or risk a return to the monopoly of old.

Further, Congress must enact a new anti-trust law to strengthen and give more teeth to the present anti-trust laws. In this new anti-trust law, the concept of a monopoly, or a dominant position or significant market power, must be spelled out in greater detail.

Going back to telecommunications, NTC should issue a memorandum circular defining a monopoly, or a dominant position carrier, such that when any one telecommunications carrier or group controls at least 50 percent of the market in a single service sector, that single group shall be branded as a dominant or monopoly carrier and will be subject to sanctions or restrictions by the government. This will protect market rivals and allow the latter to compete evenly with the dominant carrier in a fair and free competition.

We can see that now happening in the downstream oil industry which was deregulated precisely to allow free competition. There should have been a transition period, with price controls before full deregulation, to allow the new competitors enough time to set up business and compete with the established oil companies. Other countries that also deregulated their downstream oil industries have open-ended transition periods. Not until the new competitors were competing significantly with the established giants did full decontrol begin and were price controls abolished.

But what did we do? Congress put a very short transition period in the law and President Ramos made it even shorter to a few months (maybe due to the lobbying of the established oil companies). So what do we have now? A deregulated oil industry with the same Big 3 oil companies dominating the market, and many small competitors that are not real competitors but, as a matter of fact, customers. Some of these new competitors are actually buying their supplies from the Big 3 and retailing them at prices dictated by their suppliers. So how can they compete with the Big 3?