Duopoly
CHANGE IS coming. But apparently not in the telecommunications sector where public complaints continue to mount against the high cost of internet service, which is so bad that it ranks among the world’s slowest. Consumers had been awaiting the launch of a third telco player by diversified conglomerate San Miguel Corp. since last year. Hopes ran high when SMC chief executive Ramon Ang announced a possible joint venture with Telstra Corp. Ltd., Australia’s biggest telco.
But last week came the news: SMC sold its Vega Telecom Inc. to the PLDT-Globe duopoly for P69.1 billion. Vega is the holding company of SMC’s telco assets, including Eastern Telecoms, Liberty Telecoms, BellTel and Extelcom. PLDT and Globe’s apparent target was SMC’s valuable radio frequencies, particularly the 700 megahertz spectrum, which is capable of covering a wide area at a much lower cost.
The entry of a third telco would have resulted in real competition among the service providers, unlike the current duopoly where one firm only has to follow what the other is doing. Competition is proven to benefit consumers. Such was the case in 2003-2011 when the Gokongwei group’s Digitel launched Sun Cellular. It disrupted the market duopoly by offering unlimited 24/7 voice calls and SMS for P250 a month and lowered the cost of international calls, such that it breached the 1-million-subscriber mark after only a year of operation.
Smart and Globe filed a complaint at the National Telecommunications Commission about Sun Cellular’s alleged predatory and discriminatory pricing, but the NTC dismissed this. To finally stamp out the competition, in 2011 PLDT acquired the Gokongwei family’s Digital Telecommunications Philippines Inc. in a P74-billion swap deal. While PLDT promised the NTC that it would continue operating Sun Cellular, nobody hears anything about it anymore. For all intents and purposes, Sun Cellular is gone and the duopolistic monopoly is back.
This time around, PLDT and Globe launched a massive PR campaign seeking to get part of the coveted 700 MHz spectrum owned by SMC. They threatened a court suit in order to force a redistribution of the frequency. This was a major factor in Telstra’s decision last March to back out of the planned joint venture with SMC.
To avert potential public backlash from the deal, PLDT and Globe have promised that the newly bought assets would translate to faster mobile internet services as early as before Christmas, but they gave no assurance that prices would be lowered. Globe’s CEO was more to the point. Even with the added frequencies, he said, consumers should not expect prices to dip soon. He said mobile browsing rates here are already at par with the region and prices could go down in the near-term only if the incoming administration would assist in removing certain fees imposed by local government units, like so-called tower fees and social acceptability fees.
To soften possible regulatory action against the deal, PLDT and Globe have also promised to return some of the acquired frequencies to the government, enough for a third player to come in. But Globe’s president believes otherwise. Even as other markets need competition, he said, keeping the telecommunications sector “healthy” means that two players are enough. The Philippines, he went on, is different from other markets given its combination of huge capital spending, bureaucratic red tape in dealing with LGUs, and the need to maintain profit margins, all while consumers demand lower prices.
The public can now rely on only two possible things. One is for the incoming administration to appoint as NTC head someone who has the consumers’ welfare foremost in heart and mind. The other is for the newly minted Philippine Competition Commission to look objectively at the deal and see if consumers will truly benefit from it through improved service at a lower cost. SMC’s feasibility study has shown that it can be done.
As for PLDT and Globe, which appear to have bullied a potential third player and game-changer into giving up, we can only wait if their promise of faster mobile internet service will happen. We cannot, of course, expect it to be cheaper. The duopoly did not spend nearly P70 billion just so it can provide the public with faster internet service at a lower cost. It has to recover that investment, which cannot be done by lowering the charges for using its networks. These are hard-nosed businesses we are talking about, not NGOs.
