Telecom foreign opening seen improving pandemic response
A TELECOMMUNICATIONS industry more open to foreign participation is expected to improve the Philippines’ efforts to contain the pandemic and stimulate a recovery, economists said amid hearings in the Senate on amendments to the Public Service Act (PSA).
“The pandemic has revealed the gaps in telco services as Filipinos became more reliant on internet services during the pandemic. Essential activities in commerce and education, as well as accessing government services like vaccination and financial assistance require access to telco services. We need foreign investment to come in to ensure that Filipinos get the services that they need,” economist and former Finance Secretary Margarito B. Teves said in a statement.
Mr. Teves noted that continuing to restrict foreign investment in the telecommunications sector has had the unintended effect of protecting oligopolies.
The chamber is hearing arguments on the amendments contained in Senate Bill No. 1441 seeking to alter the Public Service Act or the Commonwealth Act No. 146, which limits foreign ownership in telecommunications companies to 40%.
The National Economic and Development Authority estimates that 64% of barangays do not have telecommunication services, 88% have no free WiFi zones, and 70% have no fiber optic cable. The International Telecommunication Union ranks the Philippines in the lower 40% in terms of access to the internet in the Asia-Pacific region.
“Telecommunications is a capital-intensive sector. All our current local telco companies have foreign partners because domestic capital is inadequate to fund the needed infrastructure. There is also the matter of technology transfer to consider,” Mr. Teves said.
According to the 2020 Digital Quality of Life survey, the Philippines was 66th out of 85 countries. The study attributed the poor showing to expensive, low-quality internet and the need to upgrade infrastructure.
John Paolo R. Rivera, an economist from the Asian Institute of Management, said in a Viber message that more foreign involvement could greatly “improve communications and enhance the Philippines’ digital capacities.”
If amendments to the PSA are approved, Mr. Rivera said he expects heightened competition in the industry, which tends to improve services, facilitating productivity gains for their users.
“On the consumer side, everyone just wants better and seamless services. Regulatory frameworks should ensure competition is fair for all players (and that) consumers benefit from reasonable prices. The last thing we want is squabbles and/or collusion among players that makes the industry inefficient,” he added.
Economist Calixto V. Chikiamco expressed support in a separate statement for the amendments, arguing that telecoms cannot be considered public utilities because of the absence of a natural monopoly.
“There are currently three telco companies that are profitably operating in the same area here in the Philippines, Globe, SMART, and DITO. This goes to show that several telecom firms can operate in the same area without leading to higher costs and economic inefficiency,” Mr. Chikiamco said.
The co-sponsor of the bill, Senate Minority Leader Franklin M. Drilon, has said that based on the proposed definition of public utilities in the amendments, only natural monopolies will be considered public utilities.
Natural monopolies are industries in which the most efficient number of companies providing the required service is one.
US company Space Exploration Technologies Corp., which uses satellite technology, has expressed interest in investing in the Philippine market, along with Japanese companies KDDI Corp. and Softbank Telecom Corp. Australian company Telstra Corp. Ltd. also attempted to invest in the Philippine telco industry, but partnership talks with the San Miguel Corp. collapsed in 2016. — Alyssa Nicole O. Tan