Gov’t role in ICT

The important role that government plays in telecommunications development is undeniable.

Acting as a regulator, government can make or break private sector investment in telecommunications. Take the case of the Philippine Competition Commission (PCC) and its insistence to review PLDT and Globe Telecom’s recent acquisition of San Miguel Corp.’s telecom assets despite the absence of legal basis to do so. Had the acquisition been considered “deemed approved” under the PCC interim rules, then PLDT and Globe should have been able to utilize the frequencies that used to be owned by SMC to benefit Filipino consumers.

What would happen if PCC disapproves the deal? PLDT and Globe cannot return the assets to SMC. Neither can the two utilize the valuable 700 MHz radio frequencies that form part of the acquired assets. Such a waste of limited resources.

Waiting for a third viable telecom player to arise is more like wishful thinking on the part of government. In the meantime, what government should do is invest in digital infrastructure, starting with a national broadband network (NBN) that would complement the existing telecoms backbone already set up by the private sector.

Studies have shown that increasing public spending in the telecoms sector would lead to a corresponding hike in the rate of economic growth. Every 10 percent increase in the number of broadband subscribers (broadband penetration) corresponds to a 1.23 percent rise in gross domestic product, while doubling data connection speeds increases the GDP by 0.3 percent.

As the economy expands and incomes rise, more and more people would be able to purchase smartphones and tablets to connect to the Internet, thus, further increasing the already huge demand for broadband services.

But aside from investing heavily in infrastructure to improve wireless connectivity, government should make it easy for telcos to secure the needed permits, encourage investments in the telecoms sector by relaxing the 40 percent foreign ownership limit in the Constitution, among others.

To encourage telcos to set up more cell sites, government agencies should cut red tape in the applications for permits. At least 25 government permits are needed to put up a single cell site, not to mention the fact that many private subdivisions refuse to host these cell sites.

Another measure that could improve telecommunications services in the country is the proposed lifting of the 40 percent foreign ownership limitation under the Constitution.

Foundation for Economic Freedom president Calixto Chikiamco noted in a media report the importance of relaxing the foreign ownership restrictions in attracting foreign investments in strategic industries, where they are now presently barred from entering and providing competition.

Also, setting up its own digital backbone will not only provide the government with a secure network, but would also give private telcos a tough competitor that would prompt them to further improve their services.

Private telcos would be left with no choice but to pull down subscription costs and increase data connection speeds to be able to compete against a more affordable, government-subsidized broadband service.

Internet Society of the Philippines chair Winthrop Yu was quoted as saying that a national broadband network is critical, as it frees the government from dependence upon the telcos, and it opens the possibility of government as a third player.

Our regional neighbors have started establishing their respective NBNs.

The Thailand government has invested $114 million to improve its Internet service and access, while Malaysia has spent $4.5 billion over a 10-year period to lay fiber-optic lines to service every home in the country’s urban areas. In Vietnam, two of the three largest telecom companies are owned by the government.

Yu said setting up an NBN in the Philippines does not require large upfront budgets because it is possible to build it via “short, even separated or redundant segments, then “tie it all together” later.

Thailand is expected to jack up its spending in information and communications technology (ICT) by $19.8 billion this year to fund its hard and soft infrastructure projects that would support its “digital economy” program.

Indonesia shelled out $22.1 billion through public-private partnerships to provide affordable Internet service to its people. Cambodia is also allocating $18 million to strengthen its digital infrastructure.

Singapore meanwhile is investing $530 million to provide at least 1 gbps speeds at only SGD$15 or a little over P500 a month for residential users and SGD$50 or less than P2,000 a month for business subscribers. It’s $7-million Digital Inclusion Fund stands to benefit 8,000 low-income households.

Other developing economies like Myanmar obtained a $31.5 million credit from the World Bank to fund its Telecom Sector Reform Project while Bangladesh borrowed $44 million from the Islamic Development Bank to help pay for its contribution to the construction of a submarine cable.

South Korea has invested $24 billion for its public Internet backbone and provided low-cost loans worth $1.7 billion to spur the construction by private companies of access networks for homes and businesses.

China is spending a staggering $190 billion for Internet service while Hong Kong invested $7.2 billion to provide free wireless internet access in 400 locations.

Aside from investing in infrastructure, other countries have also revised their foreign ownership schemes to bring in more capital to the telecoms industry.

Vietnam allows 100 percent foreign ownership in companies and plans to eliminate investment caps in many companies listed on its stock exchanges.

India has also given the go-signal to allow 100 percent foreign ownership in the mobile telecoms sector, which could bring in an additional $10 billion in investments.

Our government cannot be a mere regulator in an industry as important as ICT. It needs to beef up infrastructure for broadband, because faster Internet connection and speed is a social service that it cannot be left to the private sector to provide.

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