By Lenie Lectura
Reporter
HOUSE Resolution 190, which asserts that broadband assignments should be bid out and asks the National Telecommunications Commission (NTC) to nullify the bandwidth contracts it awarded last year, has put mobile telephone firms under great pressure, but this has abated somewhat with the resignation of NTC chief Ronald Solis.
His successor, former AFP communications unit head Abraham Abesamis, is expected to handle the resolution of the matter, and has asked the telcos to submit written comments on the congressmen’s views.
Those awarded 3G licenses without bidding include Smart Communications, Inc., Globe Telecom, Digitel Mobile Philippines Inc. (DMPI), and Connectivity Unlimited Resource Enterprise, Inc. (CURE)
The House resolution said in part: “Conduct a bidding or an auction as the mode for allocation of 3G spectrum using an upgraded spectrum users fee to be set by the NTC as the minimum bid price, and allow the payment equivalent to 40 percent of the bid price with the balance to be amortized annually over the duration of the franchise.”
A copy of the House resolution was transmitted to the NTC on November 8. A week ago, the NTC formally informed the four mobile telephone firms of the official transmission.
The 3G firms were given a reprieve when Solis announced his resignation last week. Turnover is scheduled Monday.
As part of the commission’s consultation process, the 3G operators were asked to comment on the House resolution, but the firms have yet to submit their comments. It seems some are waiting for formal instructions from the new NTC chief while others are confident their regulator would back them up.
“It is really up to the next NTC commissioner. He may or may not cancel the 3G licenses that we awarded last year. I hope the 3G operators would still hand over their comments because that will help the new NTC chief weigh things,” said Solis last week.
A decision of the Board of Investments (BOI) not to provide 3G firms tax incentives already disappointed Smart Communications Inc., and it may, it said in September, be forced to scale down spending on its 3G mobile phone network on which it has so far invested $60 million out of the P33- billion planned capital expenditure (capex) in six years.
Based on Smart’s five-year roll-out plan, a total of 1,611 first class to 6th-class towns and cities will all benefit from the 3G project when its nationwide roll-out is completed. This is why, it said, it needs tax incentives to accelerate its project, especially in less-developed areas where the expected returns are lower.
On the other hand, Globe stole a march on everyone by being first to apply for a 3G bandwidth, and was granted pioneer status by the BOI before the decision not to give incentives was made.
That is apparently why Globe said three months ago it will not scale down its investments in the capital-intensive 3G technology and was maintaining its capex spending of about $100 million in the first two years of its 3G operations. With a pioneer incentive status, the company is expected to save up to P2.5 billion in tax payments spread over a six-year period from its P5.5-billion investment.
Of the four 3G firms, only Smart and Globe have started operating their 3G networks. Under the NTC rules, the 3G firms have one year to start their roll-outs.
DMPI has kept mum about its 3G plans. CURE of the Ongpin family said it will start the roll-out of its 3G network before the year ends.
The NTC had already told Congress that while there is a provision in the law which states that radio frequency spectrums should be auctioned off, the commission said that this only applies when there is a deadlock between two or more applicants in terms of qualification and if the number of applicants exceeds the number of frequencies. Under Section 15 of RA 7925, a public bidding for frequencies will take place when demand for specific frequencies exceeds availability.
However, in the same law, Section 4 also rules out an open tender for frequencies since the same shall only be granted to the best qualified, taking into account the service providers’ proposal to utilize the spectrum efficiently and effectively to meet public demand.
“While at first glance it may seem that there is a contradiction between Section 4 and Section 15, the NTC maintains that both provisions complement each other and that the latter provision does not negate the primary method of assigning frequencies to the best qualified service providers. In other words, Section 4 must be construed as the principal rule and Section 15, the exception.
“This contemporaneous construction of both statutory clauses is not without basis since the Commission, as the principal administrator of RA 7925, is clothed with sufficient authority to interpret the seemingly conflicting provisions and harmonize the same into a comprehensible and logical set of rules that are to govern the award of frequencies,” said the NTC in its position paper.
Under the NTC award of the bandwidth, the firms have paid a total of P245 million in spectrum users fee (SUF). In addition, the 3G operators have to pay SUF for the microwave radio links estimated to be P100 million a year for the 3G base station transceivers.
An additional SUF of P1 million is required for every additional 100,000 registered subscribers after reaching a base of 4 million subscribers. The licensees continue to pay yearly spectrum user’s fee throughout the lifetime of their authorizations.
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