At least three factors that can create a telecom monopoly


12:03 AM July 14th, 2011

July 14th, 2011 12:03 AM

In discussions on the imminent buyout of Digitel by Smart (incidentally taking place simultaneously but independently with a similar buyout also involving telecom firms in California), it would seem that the victims of a resulting monopoly are only those companies cut out from the deals, which would be Globe in the Philippines, and reportedly Sprint in California. Overlooked and almost never mentioned in the debates is the sector, actually the most vulnerable, sought to be protected by government regulatory agencies from the harmful effects of a monopoly – the customers.

In the Philippines they are the small-scale businesses that thrived after costs were lowered and new telecom products were introduced following the breakup of the telecom monopoly in the 1990s. Related to this, in recent news reports and discussions, a question is invariably asked: “Why is it alright for Globe Telecom to buy Digitel, and not for PLDT to buy Digitel?”

A little basic arithmetic on the market shares of each party will clarify the matter: had Globe with its current 30-percent market share succeeded in buying Digitel’s 17 percent, it would be holding still a smaller market share – only 47 percent against PLDT’s 53 percent. But with PLDT buying Digitel, the former would corner an enormous 70 percent of market share.

Similarly, in the year 2000 when Globe, with 40-percent overall market share, acquired Islacom’s 2 percent, it ended up holding a total of only 42 percent – still less than the biggest telecom’s then overall market share of 45 percent.

But market share is only one factor; there are allegedly at least two other more important factors that could lead to the possible creation of a monopoly. One of these is the distribution of radio frequencies. Globe claims it has to serve 27.3 million subscribers using only 99 MHz, while PLDT-Digitel will serve 60 million with a grossly disproportionate 372 MHz. In many other countries, it is claimed, no single telecom owns more than 35 percent of the frequency bands.

The other factor is the ease of interconnection and cost of access for each telecom firm. Some believe this factor to be the most critical. A research on actual cases that arose from this matter and called for the intervention of the National Telecommunications Commission or the courts, (since the breakup of the telecom monopoly in the 1990s) and on the present state of interconnection among all telecom companies should easily reveal the varying degrees of willing compliance by every telecom firm.

In the Philippines, it is hoped that the regulatory agency consider all these three factors in making assessments and decisions, to forestall the creation of a monopoly—for the sake of the customers.

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