Telcos air concern over lower linkup charges

MANILA, Philippines - The country’s top telecommunication firms have asked the National Telecommunications Commission (NTC) to study carefully a plan to lower interconnection charges as this would result in huge revenue losses.

An NTC draft memorandum circular will cut interconnection charges on inter-network (same network) call and text messaging from the prevailing P4 per minute on voice calls and 35 centavos per text message to P2 and 25 centavos, respectively, on the first year of its implementation.

These rates will further go down to P1 and 15 centavos, respectively, on the third year of implementation.

Interconnection charges, the NTC said, were last cut by half in 2003.

Smart Communications regulatory affairs head Roy Ibay said the NTC proposal will significantly impact the telecom firms’ revenues and may affect their investments on telecom infrastructure.

“We are appealing that maybe they should give this a second look and sit down and study what are the costs involved here,” Ibay said.

The NTC earlier said Philippine Long Distance Telephone Co. (PLDT) and wholly-owned subsidiary Smart are earning a combined annual revenue of P1.5 billion from other telecom firms as access charges since Smart has a bigger subscriber base than its rivals.

Globe Telecom corporate and legal affairs head Froilan Castelo meanwhile said the new rule will be “a big hit on revenues.”

“The NTC should also look at how to cushion the impact on the telecom industry so that it could remain as viable, productive and efficient in pricing,” he said.

Accepting that lowering access charges is bound to happen, Castelo proposed that the implementation of the draft order be set next year to allow them to prepare for this change and that a more flexible rate setting be included in the draft rule.

For his part, Digitel Mobile senior vice president and legal head William Pamintuan said the draft order will adversely affect the industry.

“We would like to request to also look at the actual cost of providing the service to have economic basis on the effort to lower the interconnection rates,” he said.

Pamintuan assured the regulator that the Digitel Mobile is “fully supportive” of the NTC’s effort to ensure that reasonable charges are served.

NTC Commissioner Gamaliel Cordoba said despite an outright decrease in revenues due to lower rates, expected increase in usage brought by cheaper services will offset the decrease in pricing.

“We will collect all their positions on the issue and we will consider all of them for a second draft of the MC,” he said.

Consumer group TXTM8 asserted that the draft rule, which it described as a long overdue move of the NTC, will lower the barrier of entry for small and new operators and will improve market efficiency.

“The end results of both are lowered costs and improved services,” TXTM8 president Mars Veloso said.