Our telco duopoly

I must confess I was disappointed when I heard the news that San Miguel threw in the towel on its telco and whistled happily all the way to the bank instead. Somehow, silly ol’ me believed Ramon Ang’s passionate promise to disrupt the telco industry soon by offering lower prices and better service. It is almost as if I still believe in Santa Claus and the tooth fairy.

Then again, Mr. Ang has his responsibility to San Miguel stockholders like me. The stock price had been horribly less than what we bought it for some years ago and had been languishing there. I was happy to learn that the stock price kicked up with news of the telco asset sale to PLDT and Globe.

So there I am… conflicted by the news. The consumer in me is very disappointed that Mr. Ang did not live up to his promise. The San Miguel shareholder in me is happy at the prospect that I may see some upward action in the stock price sooner.

The national interest in the sale is something else. Broadband service is now like electricity and water, a basic necessity in our lives. And the broadband service we get from the duopoly of PLDT/Smart and Globe leaves many of us angry and frustrated.

To those of us who are old enough to experience the PLDT under the Cojuangcos, the service we get today is heavenly. We know how bad a monopoly can be, which PLDT was in the bad old days.

 FVR deregulated the industry and half a dozen new players bloomed. But we still ended with a duopoly. It offers a hint of competition but as we are now experiencing, not good enough to make our broadband service comparable to our ASEAN neighbors.

That explains why many of us were apprehensive with the news that the duopoly has bought the assets of what could have been a third player who promised us they would disrupt the market. Of course both Globe and PLDT promised noticeable improvements within three to six months but we are understandably skeptical when politicians and business titans speak.

Some of us are looking at the newly created Philippine Competition Commission (PCC) as potentially our savior. But it appears that the PCC’s Implementing Rules and Regulations are not yet in effect. As such, deals like this will squeak through with what amounts to a pass through approval.

I am afraid that we are being presented with a fait accompli. Even the throwaway assurance of Globe’s Ernest Cu that they will return some frequencies to NTC so that a third telco can still happen is not even a credible consuelo de bobo.

The barriers to entry for a third telco have just become insurmountable. If the fearless Ramon Ang had to give up when he had the coveted 700 MHz spectrum and his often claimed formidable financial war chest, who will now risk good money to prove Mr. Ang was not gutsy enough?

A new entrant will have to deal with the entrenched duopoly as well as the difficulties of setting up a network in our country. Even Globe and Smart have had real problems dealing with LGUs that hinder a smooth rollout. All sorts of permits and fees, both legal and not are being charged. There is also the NPA and their demands for revolutionary tax or the telco loses their towers in their area.

The Duterte administration must ask some LGUs to stop looking at telcos as milking cows. The resulting delays in the improvement of telco services adversely affect the public. But the LGUs now feel more empowered with a Duterte administration that wants more powers brought down to the local level.

Perhaps, the only thing PLDT/Smart and Globe can do is to come up with a schedule of their expansion activities and explain why there are delays in some areas. Perhaps, they can skip areas where the LGUs insist on extorting from them. Make the people know their services will remain crappy because their officials are greedy and corrupt.

As for a third telco, the only way it can compete with the duopoly is through a radical technological breakthrough. I am thinking of the possibility of a satellite based system that will make all the land based cell sites obsolete. I am not sure if this is even technically possible. I think Google has plans along this line. The cable television industry is also being disrupted in this manner.

As for this new deal, the only bright side I can see is the promise of Manny Pangilinan to improve service within three to six months. That’s better than the one year NTC is giving them. I have known Manny to be marketing oriented and the fact that he is carrying out a tough revamp of PLDT operations shows he is unhappy with the current state of affairs too.

Maybe this deal will indeed bring us better broadband service faster than if we waited for San Miguel to disrupt the market. Now that the duopoly has control of the 700 MHz spectrum they have been crying about, there is no more excuse.

I would even say a prolonged period of getting regulatory approval will work against the prospects of having better broadband service sooner. Maybe the PCC should give this a conditional pass subject to the duopoly’s performance in the next six months.

But the lawyers will have their say. Here are some observations from a respected lawyer specializing in digital concerns:

RE PCC OVERSIGHT. PCC has oversight. This is clear in the law — deals over P1B are subject to PCC review. Besides, the PCC already said they will review the deal.

SPECTRUM OWNERSHIP. Spectrum is not owned, it’s merely assigned by the NTC for a small fee. What they do is they sell the company to whom the spectrum has been assigned. Technically, it wasn’t assigned — just a change of ownership.

CONGRESSIONAL INPUT. The Public Service Law requires NTC approval if the entity that holds the franchise changes ownership. What they do is layer the ownership. You don’t buy the SMC company but the company that owns shares in the SMC company. This way, there’s no change in the ownership of the entity with the franchise (and therefore, no need to secure NTC approval).

THIRD PARTY PLAYER. With the spectrum already split between the duopoly, this means no third party can possibly enter the market.

Let us see what happens in the next few days. I suspect they got prior clearance with president-elect Duterte because it would be foolish to go ahead without it. Mr. Duterte already said he will go after the telcos and he had to be reassured this is the fastest way to deliver the civilized broadband service people are clamoring for.

Still, we have grown jaded with promises of better service not just from telcos but from other essential service providers. To see is to believe. December, or the end of the sixth month, can’t come soon enough.

 Boo Chanco’s e-mail address is [email protected]. Follow him on Twitter @boochanco.