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New draft rules propose auction of frequencies for 3rd telco player

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THE Department of Information and Communications Technology (DICT) released on Friday another set of draft guidelines for the selection of the third major player in the telecommunications industry, this time proposing an auction of the frequency spectrums.

The latest draft joint memorandum circular reflects the preferred selection process of the Department of Finance (DoF), wherein the highest bidder for the five-year commitment period will be be selected as the new major player.

A minimum bid of P36.58 billion was set.

“Please note that the minimum bid amount is pegged from the Spectrum User Fees (SUFs) being paid by existing telecommunications companies and does not yet consider the inputs/recommendations of experts from International Telecommunication Union (ITU) and best practices from other countries, and hence, is in no way final,” the DICT said in an e-mailed statement.

“Further, while there is a minimum bid amount, in this mode of selection, there will be no cap on the bid amount as the participant who submits the highest bid shall be selected as the New Major Player,” it added.

The latest draft terms of reference, as well as an another version released earlier this week, will be discussed during a public consultation on July 6.

“Both will be subject to public discussion on July 6, Friday. But after one is selected, this will undergo the legal process for becoming the MC (memorandum circular) for the selection process,” DICT Acting Secretary Eliseo M. Rio, Jr. said in a mobile text message.

The DICT on Tuesday released a draft of the terms of reference, which used the Highest Committed Level of Service (HCLoS) as the basis for selecting the third telco player.

Based on the criteria for selection, a 40% weighting was assigned to the bidder’s ability to serve a percentage of the population, with another 40% of the score to be given to its capital expenditure commitments. It also assigned a 20% weighting to an applicant’s commitment to certain broadband speed levels.

The bidder’s capital spending plans, including operational expenses, are subject to a minimum of P40 billion.

Mr. Rio earlier opposed the DoF’s proposal to hold an auction for the frequencies, instead backing the use of the HCLoS as basis for selection instead.

“The DoF wants to auction the frequencies, and the third player will be the highest bidder. We think this is anti-competitive because the incumbent telcos never bought their frequencies from the government,” Mr. Rio earlier said. “It will put a big burden on a new player by (forcing it to) put up a huge amount up front that has nothing to do with putting up an infrastructure and improving telecommunications services.”

Both versions of the terms of reference require participants to have a Congressional telecommunications franchise that is not related to the two dominant players PLDT, Inc. and Globe Telecom, Inc., as well as a paid-up capital of at least P10 billion.

Participants should also have at least five years’ experience in the delivery and operations telecommunications services.

The third player must also be able to provide its services to at least 30% of the country’s population on its first year of operations, and must provide a minimum broadband speed of 10 Megabits per second (Mbps). After its first five years, it said the new major player must have covered at least 50% of the population.

The DICT is targeting to name the third telco player before the year ends.

Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has a majority stake in BusinessWorld through the Philippine Star Group, which it controls. — Denise A. Valdez