Gov’t strengthening connectivity as telecoms search for a third player

BY KRISTA ANGELA M. MONTEALEGRE

CONSUMERS have long been clamoring for a third player to break the duopoly in the telecommunications market plagued by poor service quality and slow Internet speeds.

President Rodrigo R. Duterte has threatened to open up the sector to foreign competition if incumbent operators PLDT, Inc. and Globe Telecom, Inc. do not improve their services. But having a new entrant in the mature market is easier said than done given the massive financial resources needed to be able to mount a competitive stand against the two major players.

With the bandwidth-hungry public becoming more impatient by the day, the government is doing its share to boost Internet connectivity across the country, especially in far-flung areas. Could the government become that elusive third player?

“It’s not an impossible dream especially if the government would use creative solutions to bringing Internet connectivity. The mind-set that Internet service can only come from a telco needs to change,” said Mary Grace Mirandilla-Santos, lead convenor of the Better Broadband Alliance.

The Department of Information and Communications Technology (DICT) plans to offer free wireless Internet service in public areas such as national and local government offices, schools, hospitals, airports and parks, among others. This forms part of a broader government initiative called the National Broadband Plan aimed at accelerating the deployment of fiber and wireless technologies to increase Wi-Fi speeds and bring down the cost of Internet connection.

GAP IN THE MIDDLE MILE

The free Wi-Fi initiative is envisioned to enable the public to get better access to services in education, health, agriculture, and other sectors. It bridges the digital divide, allowing those who cannot afford to subscribe to broadband service get into the digital bandwagon from an education and business standpoint.

The Pipol Konek program entails the installment of an estimated 250,000 hot spots nationwide in six to seven years — a seemingly tall order considering that the project has only reached more than 800 sites as of early October.

The slow progress could be traced to the gap in the middle mile, or the domestic backhaul that brings bandwidth from the landing station where consumers get most of their capacity to the provinces and municipalities before it reaches the access network, said Ms. Mirandilla-Santos, also the vice-president for policy at the Internet Society – Philippines Chapter.

“Even in first- and second-class municipalities where you would expect good connectivity (due to proximity to the urban centers, population density, and relatively high income of residents), plug and play was not possible as the telcos’ presence did not translate to enough capacity required to connect the public Wi-Fi,” she said.

DICT Undersecretary Eliseo M. Rio attributed the sluggish start to the birth pangs of the project and manpower issues, noting that the agency can now go full blast on its implementation after President Duterte signed into law Republic Act No. 10929, or the “Free Internet Access Program” in August.

The government is bidding out contracts to put up free Wi-Fi hot spots covering specific areas using the technology of their choice, Mr. Rio said. The service will have an average speed of “not less than 10 megabits per second.”

Aside from PLDT and Globe, the free Wi-Fi project has attracted smaller players like AZ Communications Network, Inc.; Converge ICT Solutions, Inc,; and We Are IT Philippines, Inc., providing an opportunity for third players to make an impact in the market.

“If the government is by your side at least the barrier to entry for third players [that have] technology but who may not have the capital has been eradicated. It opens an opportunity for these third players to come in,” said Rens V. Cruz II, analyst at Regina Capital Development Corp.

Analysts have said the free Wi-Fi program may force the telcos to level up and offer higher value services to keep their subscribers.

GOV’T AS THIRD TELCO PLAYER?

For the DICT, the government should not be seen as a competitor, but a partner that will enable the telcos to expand their services and subscriber base.

Unlike in other jurisdictions, the private sector owns most of the country’s telecoms infrastructure. Many remote areas have had difficulty securing Internet service because providers cannot justify the cost of building out infrastructure to areas with few people to serve.

“It’s like [the whole Philippines], [our] roads are privately made and charge tolls [that’s why] telecom services [are expensive]. The analogy is the government must make roads for its citizens,” DICT’s Mr. Rio said.

The government, however, has had a terrible track record in building and operating telecom networks, the latest of which is the National Broadband Network deal with ZTE Corp. of China that fell through due to corruption allegations.

“If we considered these factors – high capital requirements, economies of scale, and sunk cost – as the only givens in network infrastructure, government would indeed be the best candidate to do the job. But these are not the only things that need to be considered. The government’s capacity, track record, and performance in similar initiatives (e.g., MRT) cannot and should not be ignored,” she said in a blog entry for Telecom Asia.

With the free Wi-Fi program still at the early stages, the government is relying on existing infrastructure to deliver free Wi-Fi in select locations. PLDT and Globe have joined forces to provide free Wi-Fi in transportation hubs such as airports, train stations, and seaports. They are also behind the free Wi-Fi on EDSA, the country’s major thoroughfare.

PLDT Chief Revenue Officer Eric R. Alberto admitted that while the program may cannibalize its offerings, they are complementary.

“You’d find that data use will be a fixture in your habit and by the time that happens — we hope that happens sooner than later — there will be propensity for you to top up,” Mr. Alberto said.

“Nothing is free so when you log in, you’re giving me your data. By opting in, it tells us you’re allowing us to perform analytics to serve you better in the digital world,” he added.

Aside from being the largest supplier of bandwidth for the project, the telcos’ own mobile broadband service can be offloaded to Wi-Fi hot spots through interconnection agreements with community wireless ISPs that will deploy the Wi-Fi networks in their respective areas. This will allow the telcos to serve their subscribers in areas where they would not have any signal otherwise, Ms. Mirandilla-Santos said.

FREE WI-FI TO IMPROVE CONNECTIVITY

The presence of another connectivity option could allow mobile base stations to breathe especially during peak hours, thus, improving the quality of service of mobile data in areas where both services are available, she added.

“In the long run and the government’s plans around free public Wi-Fi and improvement of connectivity expected to improve the digital milieu in the country, the telco incumbents should recognize the long-term return or benefits to their businesses once the entire country picks up and embraces digital transformation in a few years time,” IDC Philippines Country Head Jubert Daniel Alberto said.

IDC Philippines welcomed the strategic ICT push of the government to improve technology adoption from an overall perspective.

However, the government should review its policies, followed by rules on peering and infrastructure sharing among telco incumbents, and explore areas where the government can partner with them for a more holistic view.

“If the implementing agencies succeed in identifying key options for this project and coaxing telcos into long-term partnerships, we may well see improvement in the next five years,” IDC Philippines’ Mr. Alberto said.

Krista Angela M. Montealegre is the national correspondent of BusinessWorld.