DoF ‘not surprised’ by rejection of auction for 3rd-player selection

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Carlos G. Dominguez III
Finance chief Carlos G. Dominguez III — REUTERS

THE DEPARTMENT of Finance (DoF) said it will await the formal report from a public consultation that appeared to reject its preferred method of selecting the new entrant to the telecommunications industry, though the department’s head said the rejection came as “no surprise.”

“Why should anyone reject something offered for free?” Finance Secretary Carlos G. Dominguez III told reporters in a mobile phone message, referring to the selection method preferred by participants at the consultation, which is known as highest committed level of service (HCLoS).

Mr. Dominguez was referring a feature of the HCLoS method of selection, which will permit an applicant to become the so-called “third player” in the telecommunications industry without paying for frequency spectrum. Winning under an HCLoS selection process involves scoring the highest under a defined points system based on service commitments, broadband speed, and investment levels over five years.

Mr. Dominguez prefers an auction of frequency spectrum. An auction, he has argued, would ensure that the government gets a fair return for allowing a private entity to use the frequencies, a government asset which the department values in the billions of pesos.

The DoF sits on the committee that is deciding the third player selection process, and its preference for an auction has put it at odds with the Department of Information and Communications Technology (DICT), which favors HCLoS.

The DICT said last week that it has the sole responsibility to decide which mode of selection to adopt regardless of the DoF’s position.

Telecommunications firms will pay more under an auction, pressuring their returns and making entering the market as a third player less financially attractive. Consumer groups have also noted that the incumbent telcos paid nothing for their frequency, which could be disadvantageous to a third player if it is made to pay.

Asked what the next move might be, Mr. Dominguez said: “The issues that have to be resolved in the telecom industry are: availability of frequency for new players, access to the government-owned dark fiber, interconnection charges, access to telecom towers. Unless these are resolved, how can a third player compete effectively?”

Dark fiber refers to a fiber-optic network that is not used for traditional telecommunications applications. An example of dark fiber is the network operated by the National Grid Corp. of the Philippines (NGCP).

The DoF, DICT, Office of the Executive Secretary, and the National Security Adviser met in May to work out selection issues for the third player, which is being positioned as a competitor to the incumbents PLDT, Inc. and Globe Telecom, Inc.

The DoF-backed draft of the terms of reference requires a minimum bid of P36.58 billion, which would serve as the spectrum usage fee.

The DICT has set a target of September or early October for selecting a third player. — Elijah Joseph C. Tubayan