Falling short on telecoms policy
THERE’S MUCH more to our being a laggard in telecommunications than our slow and unreliable internet. We fall short of emerging world standards in telecoms regulatory policy as well. A recent assessment of what it would take for the Philippines to meet the requirements of membership in the Trans Pacific Partnership (TPP) shows that we have quite a way to go if our telecoms policy environment alone is to qualify us for joining the group. One might regard TPP standards as indicative of emerging world standards in trade, investment and regulatory frameworks in this 21st-century world of highly interconnected economies across the globe.
TPP is the new “mega trade deal” among 12 countries spanning both sides of the Pacific. Its governing agreement was signed last February, capping seven years of negotiations by the founding countries that include four Asean members. It covers 30 chapters on topics that go well beyond reducing or eliminating trade tariffs among its members, the focus of traditional trade agreements. Not a few doubt if TPP will even push through at all, as the two top presidential contenders in the United States—the group’s foremost member—both profess opposition to the pact that is key to President Obama’s “pivot to Asia” foreign policy. But most analysts believe that America simply cannot afford to set the TPP aside given geopolitical realities in the Asia-Pacific, now considered the fulcrum of the world economy. The United States would otherwise yield the driver’s seat to China in shaping the region’s trade and economic future, especially with progress now being made toward forging the “rival” Regional Comprehensive Economic Partnership (RCEP), the China-dominated mega-deal being forged between Asean and the six major partners with which it has free trade agreements, namely Japan, Korea, Australia, New Zealand and India, apart from China.
Be it TPP or RCEP, the Philippines needs to assess how ready it is to take part in these “new generation” agreements, in a situation where nonmembership seems a nonoption given what we stand to lose if we stay out. In the area of telecoms policy alone, there is much homework for our policymakers to do before we can satisfy the standards being set in these agreements. A recent assessment by lawyer Krystal Uy and economist Bela Villamil finds that our current telecommunications regulatory framework falls short of what the TPP agreement requires. In particular, we would need to change prevailing policies on interconnection, unbundling, cross-subsidization, number portability, and the powers of the National Telecommunications Commission (NTC).
An entire chapter of the TPP agreement is devoted to the telecommunications sector, and requires that interconnection agreements of major providers be filed with the country’s telecommunications regulatory body and made available to the public. But our telecoms service providers have refused to divulge details of their interconnection agreements on the argument that these contain trade secrets—and the NTC is not about to force them to do so. Hence, no one outside of these companies knows the particulars about the interconnection agreements between them, other than general terms that do not reveal costs and other key considerations. Spectrum allocation and access arrangements, among other provisions, remain undisclosed.
The TPP also requires members’ telecom regulators to possess the authority to compel major suppliers to offer access to network elements on an unbundled basis. This way, suppliers need not pay for network components or facilities not required for the service to be provided. But while the NTC does have guidelines on unbundling, agreements in force continue to be on a bundled basis. The NTC has reportedly not enforced unbundling as it has yet to establish rates and settling procedures, arguing that these are extremely difficult tasks due to complexities related to common costs. It also claims to lack the power to compel the telecoms firms to submit the necessary information.
Also required by TPP are measures to prevent anticompetitive cross-subsidization. But the existing Public Telecommunications Policy Act (Republic Act No. 7925) expressly allows cross-subsidization of unprofitable local exchange areas, to widen access to basic telecom services. But whether such policy’s anticompetitive impact is outweighed by its actual effect toward meeting universal service goals has been suspect and debatable. Number portability, or the ability of a customer to transfer from one provider to another without having to change numbers, is still another TPP prerequisite. This reduces the cost to the consumer of shifting across providers, hence enhancing competition, whereas
nonportability is a barrier to exit that allows incumbent operators to exploit monopolistic or dominant power. The NTC has been unable to require number portability in the face of strong opposition from incumbent operators.
But what remains the biggest impediment to the Philippines’ consistency with TPP telecom standards is the constitutional provision limiting foreign ownership to 40 percent in public utilities, which under current law includes public telecom networks. Lack of domestic players with deep enough pockets to contest the PLDT-Globe duopoly has led to our current woes in telecoms and internet services.
TPP provides yet another instance where compliance with a trade agreement would push us to do the right things for the greater good of Filipinos. It would thus not surprise me if our telecoms players would be among the strong resistors, openly or otherwise, to our seeking TPP membership once the doors are opened.
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