Sunday, July 17, 2016

Only the ‘Man Without Fear’ can get PLDT and Globe to provide faster and cheaper internet

By Art Villasanta and Peter Galace

THE ONLY REALISTIC WAY to cut the cost of Internet access and improve Internet speeds and service is for the administration of President Rodrigo Duterte to strictly enforce the 2014 Philippine Competition Law that penalizes uncompetitive behavior.

The government must also build a separate Internet infrastructure in which up to three Philippine satellites will ensure the cheap and fast Internet service we now crave. The Philippines doesn’t have a single satellite in orbit and this disadvantage is one reason why the satellite internet access that can help drop internet access prices isn’t viable here.

PLDT and Globe Telecom, which are not Filipino-owned companies, have consistently proven their ability to stall or stifle moves by past administrations to get them to improve the quality of their internet service. Filipinos know the Philippines has the worst internet service in Asia and we have PLDT and Globe to thank for this humiliating epithet.

Turn the screws on PLDT and Globe
The duopoly of PLDT and Globe will only be goaded into improving their internet services by a competitor it fears. That competition was to have been San Miguel Corporation, which last year made loud noises its joint venture with Australian telecom giant Telstra Corporation would deliver faster internet speeds at lower prices. Telstra said it was prepared to invest up to $1 billion in the business.

San Miguel’s braggadocio failed in the face of opposition by PLDT and Globe -- and government indifference and ineptitude.  The result: SMC last March called-off its partnership with Telstra, ending the promise that Filipinos might soon be delivered from the hellish internet service of PLDT and Globe.

SMC then sold its broadband frequency assets (including its 700 megahertz spectrum) to PLDT and Globe Telecom. With the sale, both Globe and PLDT promised to provide faster Internet within three to six months. Really?

More ominously, San Miguel’s defeat virtually eliminates the possibility a third private player might soon compete in the Philippine internet market. To begin with, any new player won’t have the spectrum needed to provide fast and cheap internet service. PLDT and Globe now have a stronger lock on this spectra with their purchase of San Miguel’s broadband assets.

Real competition is the key
This means the only competitor PLDT and Globe really has to fear is the national government.

The Duterte administration should, on its own, develop a separate government-run internet infrastructure by investing heavily in it and by strictly enforcing the Philippine Competition Law that penalizes the uncompetitive behaviors of PLDT and Globe such as predatory pricing and collusive behavior.

The Philippine Competition Commission, the country’s anti-trust body, should reject the sale of SMC’s frequency assets to the duopolists since it will only cement the Globe and PLDT duopoly in the telecoms industry.

The sale of the frequency assets of SMC to PLDT and Globe is detrimental to the future growth of the internet. It will also impede the future growth of the broadband sector.

PLDT and Globe are a true duopoly, which is defined as a market form where only two companies have dominant control over a market. In a duopoly, the two dominant players collude to reduce competition and charge consumers higher prices. This type of uncompetitive behavior is penalized under the 2014 Philippine Competition Law.

The administration’s goals in providing cheap and fast internet via its own infrastructure are simple: provide 70 percent broadband Internet penetration with speeds of at least 5 megabits (Mbps) per second covering around 85 percent of the whole country. This will hit PLDT and Globe where it hurts the most.

Delivering 5 Mbps or up to 10 Mbps of Internet to Philippine subscribers will kill the goose (the mobile business) that lays the golden eggs for PLDT and Globe. Philippine satellites will play a key role in realizing the aim but we have to make plans to build and launch these satellites plus the infrastructure they require.

It’s obvious PLDT and Globe protect each other’s mobile business by keeping the Internet slow and unreliable. The Philippines’ overall telecom infrastructure remains inefficient, unreliable and poor despite both firms making billions of pesos each year.

Should the government compete against the duopolists, subscriptions to PLDT’s Smart/Talk-N-Txt/Sun and Globe Telecom’s mobile services -- their gold mines -- will be drastically reduced. Further eroding this revenue stream is the ever expanding popularity of apps such as Viber, WhatsApp, WeChat and all other Internet apps that allow you to call and text worldwide using your mobile phone for free!

The government should come in as the third player and initiate policy changes that will chart the future internet growth of this country. This option has been taken by a number of countries.

Congress and the new Department of Information and Communications Technology should actively initiate policy directions and enact new laws that foster competition. Both Globe and PLDT should be made to follow and participate in government plans.

 They should not be made to stymie government moves to foster competition similar to what they did to SMC and Telstra.

South Korea: world’s fastest internet
South Korea is the world’s internet speed leader and boasts the world’s swiftest average broadband speed at 22 Mbps. Last May, the government said it will upgrade the country's wireless network to 5G by 2020, making downloads about a thousand times speedier than they are now.

Backed by strong government support, South Korea has one of the world’s most advanced telecommunications and information technology infrastructures. It’s a global leader in broadband penetration (97 percent), and a world leader in average peak connection speed (20.5 Mbps) in the third quarter of 2015, according to Akamai Technologies.

In addition, 97 percent of South Korean households have an internet connection while 81 percent of its population of 54 million are regular internet users. South Korea recently launched commercial “Giga internet” supporting speeds of 1 Gbps and 500 Mbps.

How did Korea do it?
South Korea began by dismantling the government monopoly in its telecommunications sector in 1981. This led to liberalization and encouraged a competitive telecommunications environment. In 1994, the government realized that “information superhighways,” or fiber optics networks operating on a national level, were crucial to its growth.

The Korean government funded the Korean Information Infrastructure that built a backbone to connect government and public facilities. By being the first customer, the government eliminated the start-up risk private industry would not have been able to fund.

The pattern of government support continued with the Broadband Convergence Network and the IT839 through which the Korean government provided $70 billion in low-cost loans to broadband service providers to build high-speed broadband networks. Broadband providers invested an equal amount.

The South Korea government also enacted regulations and provided incentives to private companies to build networks. It also launched a number of successful efforts to spur broadband demand.

Along with South Korea’s superfast Internet came substantial reductions in internet prices. South Korea charges only $22.13 for 10 Mbps (Unlimited Data, Cable/ADSL Monthly), said the website

In contrast, we in the Philippines pay $44.77 (if it’s available). For Singapore, that’s $31.14; China, $16.74; Thailand, $17.31; Vietnam, $11.13; United States, $50.89; Bermuda, $136.83 and the UAE, $86.25.

Other countries are boosting broadband internet
In 2015, U.S. President Barack Obama created the Broadband Opportunity Council to produce specific recommendations to increase broadband deployment. The 28-member country European Union considers the development and extension of broadband coverage a major priority project.

The EU now aims to provide broadband above 30 Mbps by 2020 while 50 percent of the EU should be subscribing to broadband above 100 Mbps by 2020.
Similar recommendations are being encouraged by the 34 member states of the Organization for Economic Cooperation Development (OECD) countries that spans the globe. OECD said its “Policy makers should aim to create a favorable environment for investment and innovation and ensure a predictable legal and regulatory environment for market participants.”

So, what must the Philippines do?
It’s obvious countries with fast, cheap Internet connections tend to have more competition. The duopoly of PLDT and Globe hardly shows any semblance of competition.

There is a formula for the Philippines to vastly improve its internet service: build a government-run internet infrastructure (including internet satellites); get the private sector involved in a competitive environment; enforce the Philippine Competition Law and enact new laws and policies that will chart the internet direction of this country.

Pres. Duterte -- the Man without Fear -- can show his toughness by facing down PLDT and Globe.  And the Philippines will applaud him.