Philippines' slow and costly internet puzzle

24 Apr 2014

Barely a month after the Philippines celebrated—with much pizzazz—the 20th anniversary of its first internet connection, the ASEAN released an infographic showing the country having the slowest average internet speed (3.6 Mbps) in the region.

Isn’t it ironic? No, it’s just embarrassing.

The infographic has since gone viral. And being the social media capital of the world, many Filipinos who have long been suffering from slow internet took to Facebook and Twitter to rant about the problem.

Isn’t it ironic? No, it’s paradoxical.

Mainstream media soon caught up, with all major dailies reporting on the story state of the Philippine internet compared to its neighboring ASEAN nations. Many were quick to point out that the country fared even worse than Laos (4.0 Mbps) and Myanmar (4.9 Mbps) whose economies lag behind that of the Philippines.

Isn’t it ironic? No, it’s sort of pitiful.

A recent Internet Corporation for Assigned Names and Numbers (ICANN)-commissioned report ranked the Philippines a very low 53 out of 65 countries in terms of infrastructure, which measures “fixed- and mobile-broadband connections, bandwidth speeds, pricing as well as the number of networks, Internet service providers (ISPs), and Internet exchange points (IXPs).”

The same report shows the country ranked much worse when it came to internet bandwidth per capita (54th), international internet bandwidth per capita (55th), and consumer broadband penetration (57th). In fixed-broadband pricing, the Philippines was ranked 8th most expensive among 65 countries, while mobile pricing was the 24th cheapest.

Isn’t it ironic? No, it’s just a little weird.

Why does the Philippines have slow and expensive internet connection? Here is an initial look at the “slow and costly internet” puzzle, and some possible solutions.

Nature actually plays a part in the problem. It is very challenging and expensive to connect an archipelagic country like the Philippines. But geography is just one piece of the puzzle. The rest of it has to do with competition, infrastructure, spectrum, as well as policymaking and planning—things that can be controlled.

No barrier should be too difficult for innovation to hurdle. But when the players are too few and their power remains unchecked, experts argue that this effectively stifles innovation and removes incentives for progress. The business of broadband is down to two major players, and the growing demand shows a need for a third service provider.

Infrastructure is another piece. With more subscribers, the capacity of telecom networks should increase. Using the same logic, if capacity is not improving, then the number of subscription should also be checked. Otherwise, the networks will suffer from overcapacity.

Both PLDT/Smart and Globe have invested in massive modernization programs to increase their network’s capacity. PLDT completed in 2012 its two-year $1.6 billion capital expenditure program for modernizing its network, and this year set aside 29 billion pesos, 25% of which will be spent for fiber optic rollout and about 65% for broadband. Meanwhile, Globe completed in 2013 the first phase of its $790 million modernization program geared towards improving mobile and internet services. All these are in anticipation of a growing demand for data services.

However, it has yet to be seen how these investments in infrastructure would translate to better internet services, especially for the low-end internet market. The BPO industry and other high-end broadband users stand to gain from these network upgrades and expansion. Disappointingly, even the LTE services of both telcos are slow compared to those offered in other countries.

Spectrum poses another limitation. McKinsey points out that the traditional means by which operators meet the demand in voice-centric mobile networks (i.e., modernize networks, acquire and use new spectrum, and build macro cellular sites) should be different when dealing with mobile data. Government needs to update spectrum policies and key stakeholders need to acquire more spectrum assets, share network and spectrum assets, and re-farm existing spectrum assets, among other things.

Finally, the country needs to update ICT-related policies and craft a national broadband plan. There needs to be a law that promotes and enables universal ICT access, internet-related innovation in various sectors, while safeguarding both internet freedom and cybersecurity. The bill on the Magna Carta for Philippine Internet Freedom has all these components. It is also necessary to have a national broadband plan that would lay down the vision and strategy of how to fully and effectively connect the country. This plan should serve as a detailed roadmap for policymakers, government agencies, regulators, and various market players on how to expand and improve broadband connection in the coming years.

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