Hard tasks ahead for 3rd telco

After a year and a half since President Duterte vowed to allow a third telco player to break the existing duopoly, Malacañang last week gave the permit to operate to Mislatel Consortium, now named Dito Telecommunity Corp. While many feel that the event called for a celebration, the awarding of the certificate of public convenience and necessity (CPCN) actually signals the start of more difficult tasks ahead.

For starters, Dito Telecommunity must cover at least 37 percent of the Philippine population by July 8, 2020—exactly a year after it was given its radio frequencies and license to operate. This is among the third telco’s promises that led the government to award to it a slot in the industry now dominated by PLDT Inc. and Globe Telecom.

Dito Telecommunity, a partnership between presidential friend and Davao-based businessman Dennis Uy and China Telecom, also promised to deliver a minimum average internet speed of 27 megabits per second (Mbps) on its first year, going up to 55 Mbps in the succeeding years.

In contrast, current internet speed averaged 19.31 Mbps in the first quarter of 2019, according to speed test reports by Ookla, the global leader in internet testing, data and analysis. Mobile broadband speed averaged 14.71 Mbps in the first quarter of 2019.

Despite the improved speeds from the year before, however, the Philippines’ global ranking slipped a notch to 104th in mobile broadband internet speed, and by seven places to 108th in fixed broadband internet speeds.

Dito Telecommunity likewise committed to spend P257 billion over the next five years and cover 84 percent of the Philippine population within such a short span. Failing in this, the company risks losing the P25.7-billion bond it posted in order to get its CPCN and frequencies. The agreement calls for its forfeiture in case Dito Telecommunity breaches its commitments to the government.

It also cannot go the way of Sun Cellular, which was launched by the Gokongwei family in 2003 only to be sold to PLDT in 2011. Under its agreement with the government, Dito Telecommunity will have no avenue to sell out unless it returns its frequencies to the government. These frequencies are the bread and butter of telco companies.

And, of course, there is the expected obstacle from the incumbent players. Why would Globe and PLDT roll out the red carpet for a competitor? There could arise issues on interconnection similar to the problems that persisted between the two existing players when they were fighting for market share.

On the plus side, the third telco player can benefit from the new government policy on cell tower sharing. Dito Telecommunity can simply tap third-party providers with existing towers instead of constructing these from the ground up. Last week, Now Telecom Co. Inc., among the companies that submitted a bid for the third telco player last year but withdrew after it lodged a case before the Court of Appeals to stop the government from enforcing certain provisions of bidding for a new major player, announced that it was open to a possible partnership with Dito Telecommunity.

The number portability scheme now being implemented by the government can also benefit the third telco player, as it allows subscribers to shift providers without changing their mobile number, thus avoiding the cost and hassle of switching to new numbers (for example, the need to update all your contacts and official records about your new mobile number).

A lot of risks and challenges indeed await the third telco. But, given the financial muscle of China Telecom and the Filipino partner’s closeness with the government, Dito Telecommunity may well be in a position to overcome all these and become the third major player in an industry plagued by complaints of slow internet and erratic service. Ordinary consumers can only hope it will live up to its chief promise: to provide the Filipino public with fast and reliable internet service, at a cheap price.