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Will the third telco save PH Internet? Part 2

Continued from Part 1

While the selection of a third telco for the Philippines is a positive step moving forward, ICT advocates believe that simultaneous reforms in the policy and regulatory environment will result in longer term benefits and greater impact.

Reforms in Philippine internet should (1) bring in much-needed competition—not only from big telcos but from a diverse set of service providers (including small players, such as ISPs, cable TV operators, community networks) and (2) provide clear and predictable rules and regulations that will make broadband network deployment more efficient and less costly for all players.

Back in February 2016, I wrote a broadband policy brief for the Arangkada Project, which outlined key problems in Philippine Internet and potential solutions, based on a consultation with stakeholders from the industry, government, academe, and civil society.

In October 2018, I co-wrote a report, “From Analog to Digital: Philippine Policy and Emerging Internet Technologies,” together with Jonathan Brewer and Jaime Faustino. The report was managed under The Asia Foundation, in partnership with the Better Broadband Alliance, and with funding support from Google.

Although almost three years apart, both reports point to the same problems.

Policy and regulation applied to broadband services are telco-centric.

In the Philippines, only a telco with a franchise (a law) given by Congress and an authority from the regulator is allowed to build and operate a network, whether wired or wireless, whether for telecommunications or for broadband services, whether for wholesale or retail service, as long as it is for commercial purposes.

It is more confusing for wireless networks. Regulation, which is based on a 1931 law, provides that spectrum for “outdoor use,” i.e., using radio equipment that emits more than 250mW of effective radiated power, can only be licensed to a telco. Hence, Wi-Fi is license-free only when used indoors but not when offered outside one’s premises.

Even a broadband provider that wishes to access satellites for internet connectivity needs a telco license to do so, even if the international satellite does not belong to a local telco.

The existing legal framework is outdated and anchored on the bygone era of fixed telephone lines.

The Public Telecommunications Policy Act requires network operators to be telcos offering basic telecoms services. Mobile service and international gateway facility operators, according to law, need to roll out a few hundred thousand landlines. So, technically speaking, if a new player wants to be an LTE- or 5G- service operator offering data services only, it has to prepare to invest in landlines as well.

Foreign ownership in telecommunications is still restricted to 40%. Existing laws “vaguely” classify telecommunications as a public utility. I say vaguely because the definition of what constitutes a “public utility” is ambiguous and often interchanged with that of “public service.” As a public utility, telecommunications is subject to limitations on foreign equity ownership and foreign management. For an industry that can benefit from fresh new capital and technical and operational knowhow, these restrictions are shooing foreign investors away.

Radio spectrum is in the hands of a few.

According to the Philippine Competition Commission, only 12.8% of usable spectrum is available to the third telco. The two dominant telcos argue that they have more spectrum assignments compared to their counterparts in Asia because they have difficulty acquiring cellular sites. While partly true, it can also be argued that the management of scarce, valuable resource should not suffer because of inefficiencies in network rollout, whether within or beyond the control of the network operator and the industry regulator.

Finally, rules on permits, right of way, and fees for network deployment are inconsistent and arbitrary.

 

There are a whole host of fees and approvals such as for local permits and fees related to fiber installation, tower build, and pole attachment that are part of the cost of doing business. These can lead to slow, inefficient, and unnecessarily more expensive network rollout for new and starting wired and wireless service providers, including the third telco. This goes back to the argument of the incumbent telcos that more spectrum is needed due to the lack of cell sites. If the third telco is not able to acquire new sites, will the incumbents share their existing sites? Otherwise, should the government start recalling spectrum and redistribute them to now include the third telco’s network?