The pressure to regulate PH internet

17 Dec 2014

“Internet in the Philippines sucks.” This seems to be a sentiment shared by many Filipino internet users. It does not matter that only 37% of the total population is online. This small group of netizens is very active on social media. Not a day would pass by without seeing a complaint about crappy internet speed, unexplained data caps, and poor customer service by ISPs.

The outcry has become so loud and consistent that government is now paying more attention. The Senate has so far conducted three public hearings to investigate why Philippine internet is slow and expensive. The National Telecommunication Commission (NTC) held a public consultation in November to update its rules on minimum broadband speeds. And the Department of Justice has issued two advisories this year alone (September and December) warning telcos about misleading “unlimited” internet ads while imposing fair use policies through data caps.

Philippine ISPs almost never provide the maximum download speed advertised. Basic mobile broadband plans tested by LIRNEasia in Q1 2014 showed the best performing ISP delivered broadband service (>256 Kbps) only half of the time, and a measly 11% of the advertised “up to” speed at that.

Retail broadband service is expensive, at around $20.20 for 1 Mbps of fixed broadband, compared to Indonesia’s $16.94, Malaysia’s $10.30, Singapore’s $2.50, and Thailand’s $2.30 (based on latest Ookla value index).

Public clamor for better internet service has reached a tipping point such that some now advocate to make the internet a basic service so that government can step in. The NTC itself supports the idea, arguing that they can’t do much right now because internet is a value-added service (VAS).

But one might ask, how can broadband, which is slowly becoming the bread-and-butter of telcos, still be considered just a VAS?

The paradigm shift in the telcos’ investment is very telling. Millions of dollars targeting broadband infrastructure point to the fact that internet is practically a core service of telcos. The growing demand for internet services and the declining legacy revenues from non-data services, like wireless voice and SMS, indicate that the internet, while just VAS, is keeping the telcos financially happy these days.

The issue is that there are only two major ISPs that directly provide internet service to Filipino consumers. And these same ISPs are the two telcos that control the landing stations and backhaul—two critical infrastructure categories where all other ISPs servicing the last mile connect to. And since the third telco was bought out by PLDT in 2011, and 100% foreign-owned telcos are not allowed to participate in the market, these two ISPs remain unchallenged.

A number of experts have suggested changing the Philippine Constitution to allow foreign competitors into the telecom market. Some say the Public Service Act (1936) needs to be amended. Others say the Public Telecom Policy Act (1995) pre-dates the commercialization of the internet and thus needs to be updated.

While these policy changes all need to happen at some point in time, there is also a more immediate, simpler solution: Government must regulate where and when it should. Because when regulation is not meted out at critical conjunctures, what you get is a telecom market where 70% is controlled by one telco and a telecom infrastructure with prohibitive pricing.

There is no need to redefine the internet as a basic service just so that consumers can enjoy their right to get internet service that they paid for. The Consumer Act already guarantees this, whatever the product or service may be. There is no need to make ISPs into public utilities just so that the NTC can monitor quality of service. The Public Telecom Policy Act already mandates the NTC to do so.

The last thing the telecom sector needs is more government intervention. Because when the government believes that it needs to devote more resources to regulation, enforce stricter rules or, when all else fails, get into the business of running a telco, this means taking away resources from other equally important things. This can also justify more control over any or all aspects of the internet, including access and content.

What the Philippine telecom sector needs is a breath of fresh air. It needs a business environment that allows new players to participate, and to bring in fresh capital, innovation, and ideas. It needs a government whose primary role is to protect consumer welfare and the public interest. Finally, it needs real, effective competition where market players make profit because of good products and a sound business model, and not because of sheer dominance or customers who are left with no choice.

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