Chance to do right with 3rd telco

With the country taking stock yesterday of President Duterte’s campaign commitments two years ago, it bears remembering that delivering faster and cheaper internet and better mobile phone services was one of those key promises that resonated deeply with the public.

And while Malacañang’s order to have the so-called third telco player up and running by early 2018 was unrealistic, it signaled to policymakers and the private sector that the President was serious about breaking the current duopoly in the local industry.

Unfortunately, with that mandate, too, came a slew of unscrupulous businessmen who saw the changing landscape as a chance to make a quick buck using dormant congressional telecommunications franchises held by their moribund companies.

All of a sudden, there were at least four parties vying to be the anointed third telco firm, and possibly more working under the radar. Without any technical and market expertise, or even a tiny fraction of the estimated $6 billion needed to seriously compete with the telecommunications giants, these would-be players are said to have been plying their wares in recent months to any potential foreign partner willing to provide the cash, while the local businessman provides the license and the connections. It’s the classic formula for “tubong lugaw,” as they say in Filipino: Large returns made on the smallest of investments. Easy money.

It is this issue which is at the root of the disagreement between the Department of Information and Communications Technology (DICT), which is spearheading the government’s effort to establish the third telco; and the Department of Finance (DOF), which is responsible for vetting all the transactions of the government that will impact on its financial resources.

The DICT wants to choose the third telco player on the basis of the highest committed level of service, which means the company that promises the best service to the end user will bag the deal. The DOF, on the other hand, wants to auction off the radio frequencies to prospective bidders, an exercise that would cost the new entrant an estimated P36 billion up front.

The DICT’s democratized selection process aims to settle on the one party that will commit the best quality of service. The DOF believes, however, that the auction scheme is the best method to divine the commitment of applicants and pick out the superior choice.

Both methods have their merits. But Philippine economic history is replete with examples of shady businessmen and incompetent companies that have won bids based solely on what they promised to do. And when they failed to meet their service commitments, they simply sought and received performance waivers from regulators. Many didn’t even have the chance to miss their targets, as they simply sold their licenses to third parties soon after receiving the government mandate. These examples must not be repeated.

An auction, or any other financial exercise that will compel a would-be third telco player to put its money where its mouth is, is a key screening mechanism that will separate, in one neat move, companies that are committed and able to deliver these critical services from the unqualified bidders
waiting in the wings.

The current situation affords the Duterte administration a once-in-a-lifetime opportunity to change the country’s economic landscape. Policymakers should break from the past and do it right this time around. Promises to deliver better internet services are good. But the best promises are those backed up by the demonstrable ability to execute them.