20 years of Philippine internet

07 Apr 2014

I was 20 years old when I first got exposed to the internet. Having come from a family that did not own a computer, I barely knew how or why to go “online.” Right after graduating in 1998, I became a research assistant for a university professor who introduced me to emails.

Being the non-techie that I was, you can only imagine my astonishment when I found out that a computer can “connect” with other computers worldwide. Since then, the internet has pretty much become a part of my research profession.

Today, the internet is a part of everything. The United Nations declared that access to it is a human right. The World Bank has been touting the economic impact of broadband connectivity. And the developed world is abuzz with wonderment about the so-called Internet of Things.

Who knew that the internet would become this big?

Back in 1993, connecting the Philippines to the Internet began as a small “project” proposed by Dr. William “Bill” Torres, former director-general of the National Computer Center, who “discovered” that the internet can be brought into the country as a commercial product.

The government, through the Department of Science and Technology (DOST) under the project administration of Dr. Rodolfo “Rudy “ Villarica, gave an initial grant funding of ten million pesos. This amount was used to buy equipment and pay for the leased line connecting to the United States, with a capacity of 64 kbps costing about $10,000 per month back then.

Both Dr. Torres and Dr. Villarica are now known as the fathers of the Philippine internet.

On March 29, 1994, Philnet (later on, PHNet), which consisted of a bunch of engineers from various universities, connected the Philippines to the internet. And the rest is history.

Twenty years hence, cost has significantly gone down and internet in the country has expanded to government offices, businesses, households, and individual citizens. The Philippines has adapted well to this technology so much so that it has recorded the biggest internet population growth globally over the past five years.

Internet connectivity has spurred a wide new range of businesses, and especially so for the telecommunication sector that had just been liberalized in the mid-1990s. According to the National Telecommunication Commission (NTC), there were 360 registered ISPs nationwide in 2012, up from 93 a decade earlier. Network equipment and value-added services today have a huge demand. A lot of businesses have also ventured, and are thriving, online.

Barely 10 years after the internet was introduced, business process outsourcing (BPO) services emerged. Today, the Philippines is a top location for BPOs whose export revenues hit $13.34 billion in 2013.

Filipinos have discovered in the internet another medium for communication and self-expression. Over the past years, we have been ranked as among the heaviest users of Facebook, photo-sharing, and online videos. This is no surprise because the country is, after all, the texting capital of the world.

But after 20 years, an ecosystem of problems continues to stifle the development of internet in the country.

Unlike mobile phone service that has nationwide coverage and over 100% of penetration, only 36% of the population is able to use the internet; and this is mainly through public access. Home internet use is still low at 20%, albeit growing.

Uptake continues to be restricted by high cost. Post-paid subscription to a 1Mbps fixed broadband connection costs around $22, with a two-year lock-in period. In prepaid mobile connection, the amount of data that one is allowed to consume is regulated. A prepaid mobile connection of 3 Mbps has a data cap of 1GB per day or 3GB per month.

In urban centers, the quality of internet connection tends to be generally poor. The lack of internet infrastructure is most apparent outside the cities where the Internet, if at all present, is available mainly through shared access points, such as schools, internet cafés, and telecenters.

In a recent conference, Dr. Torres, who now works with the National Academy for Science and Technology, says that the country needs to focus and invest in an ICT infrastructure on a national scale, “and it has to be broadband.” The private telcos is the primary provider of ICT infrastructure in the country.

Benjie Tan, one of the country’s internet pioneers and who is now with Globe Telecom, thinks that the cost of data should go down. And to do this, the industry should find a way to offer data separate from voice services, such as through the use of TV White Space.

Another way to bring down cost, according to the Asia Pacific Network Information Centre (APNIC), is by using local internet exchanges. There must be interconnection within the country, and telcos must collaborate to do this.

The right policy environment to promote innovation not just in technology but also in business models has to be in place. And the government has the sole responsibility and mandate to achieve this. Unfortunately, legislation over the past decade seems to have prioritized regulating the internet over nurturing its potential. In internet policy, it would help to remember how the technology evolved. William Yu, president of the Internet Society - Philippines Chapter, emphasized how the internet developed because it was a “permissionless innovation”—unrestricted, unregulated, and growing from the bottom up.

A national broadband plan can be a good start. However, it remains embedded in the Philippine Digital Strategy and efforts to put a more detailed plan in the spotlight have remained in the pipeline for quite some time.

While there are doubts about the government building and operating its own ICT infrastructure, it can and should play the lead role in laying down a vision for ICT infrastructure, crafting the strategy to achieve this, and bringing various players together to achieve a national goal.

The government can initiate a universal access program that bypasses the telcos. The DOST is making headway in this regard. It is promoting and jumpstarting the use of TVWS and, just a few days ago, pilot-tested the technology in Bohol province.

Finally, the government should strengthen regulation that is focused on the protection of consumer welfare. While liberalization has made the telecom market more dynamic and robust, it is critical for government to ensure that the ISPs are providing services as advertised, and that the consumers are well represented and heard.

There are valuable lessons to be learned from the mobile phone success story. More players and an innovative retail payment scheme proved critical to the mobile boom in the country. Today, mobile phones and smartphones are fast overcoming computers as the medium for internet access. It is predicted that the Philippines will be a “mobile-first” country before the end of the year.

The poor state of Philippine Internet can be accounted for by limited competition and choice for consumers. Only three ISPs operated by just two telcos dominate the market: Smart Communications and Sun Cellular, owned by the PLDT Group; and Globe Telecom. These ISPs also offer wireless mobile dongles—the most pervasive, albeit not the most effective, mode of internet connection available nationwide.

While the options for the consumers are becoming more limited, the opportunities for telcos’ business are becoming endless. In recent years, the dominant telcos have been buying out the smaller players. Of course this is not bad, per se. But when there is ineffective competition and fewer options, innovation and consumer welfare tend to suffer.

Twenty years after, it seems like Philippine internet is barely coming out of its adolescent years. It is high time for it to mature and shape up—by having a reliable nationwide infrastructure, a pro-innovation and pro-consumer policy environment, and effective competition that brings affordable and quality services. Hopefully, Filipinos don’t have to wait another 20 years for this and to get the Internet they deserve.

Some information are based on stories and documentation of internet pioneers such as Jim Ayson, Winthrop Yu and Kelsey Hartigan-Go posted online.

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