The telecommunications industry in the Philippines is rated generally impenetrable, which, according to an expert, is limiting competition that could spur improvements in the telcos’ services.
Mary Grace Mirandilla-Santos, an independent researcher on information and communications technology and telecommunications policies, said the botched mobile network joint venture between Telstra Corp. Ltd. and San Miguel Corp. clearly showed how hard it is for new players to pierce the telecom market in the Philippines.
She described the process of setting up a new core player as “difficult and frustrating,” given that the two incumbents are ready to “pull commercial and political strings” to stop the entry of a new competitor.
“The failure of the Telstra-San Miguel partnership reflects the terrible state of the Philippine telecoms market when it comes to contestability,” she said in her latest commentary sent via e-mail. “That new players find it very difficult and costly to enter what is clearly a profitable market can only mean there are barriers that help maintain the status quo and benefit existing market players.”
Telstra decided to pull out of the joint-venture negotiations with the Filipino conglomerate, with its chief executive citing high risks, despite a large market of generally unsatisfied consumers.
Still, San Miguel President Ramon S. Ang declared the stillborn telecom company should soon see light. He remains on the lookout for possible partnerships with other foreign telcos.
“Despite being liberalized and some areas deregulated in the 1990s, anticompetitive practices abound in the telecoms sector,” Mirandilla-Santos said. “The policy and regulatory environment also remains unclear and unpredictable, especially for a value-added service, like broadband, where a 20-year-old law on basic telecoms service is being used as basis.”
This pertained to Public Telecommunications Act of 1995, a law that National Telecommunications Commission (NTC) Deputy Commissioner Edgardo V. Cabarios said should be updated in light of the data explosion in the country.
In February a policy brief on Philippine broadband was launched. It dwelled on the idea of better competition as solution to awfully sluggish Internet speeds that consumers get no matter that the service is more expensive than elsewhere in the region.
The policy brief also highlighted other issues, such as barriers to entry, anticompetitive practices, inadequate infrastructure, as well as bureaucratic requirements imposed by both local and national governments when telcos build infrastructure.
Local players PLDT Inc. and Globe Telecom Inc. are more than willing to engage in an aggressive cell-site buildup, but issues pertaining to local government approvals prevent them from doing so.
Also, a clear policy on infrastructure sharing—a practice that has proven effective in limiting costs and improving service coverage—has yet to be put into place.
Mirandilla-Santos added the failure of the regulator to force telcos to interconnect their Internet networks.
“The large telcos, who are also the largest Internet service providers in the country, are able to discriminate who connects to them and to dictate the price and quality. Local IP peering with PLDT is done through bilateral, commercial agreements—unlike 90 percent of peering arrangements globally that is done through a handshake,” she lamented.
The government has been operating an open and neutral Internet exchange called the Philippine Open Internet Exchange (Phopenix).
“PLDT has refused to connect to the exchange until recently due to public pressure. But this happened without any help from the regulator, who has practically made a hands-off stance on anything Internet-related, despite the service being the new bread-and-butter of the local telcos,” Mirandilla-Santos said.
She noted the Internet exchange has facilitated inbound traffic exchanges reaching an average 14 Gbps a month despite the nonparticipation of PLDT.
“Imagine how much more this would be if the country’s largest telco would peer,” the expert said.
Essentially, the peering of Internet protocols allows the exchange of Internet traffic among data-service providers, making possible faster transfer of information from one point to another.
To do this, ISPs have to be linked via an Internet exchange.
Without IP peering, local in-country Internet traffic are routed abroad, instead, and pass through an overseas exchange before reaching its local destination. Enterprises that are IP peered with Phopenix will have cost savings as local in-country Internet traffic exchanged through Phopenix will not count against the use of international network links or backhaul usage.
As local in-country Internet traffic need not transit abroad, service providers will exchange with each other at lower latency —that is, better response times —and deliver faster responses that consumers enjoy.
Lower latency for consumers mean faster, more reliable and more stable Internet connectivity experience, particularly for e-commerce transactions with businesses, financial institutions and government frontline services.
Simply put, IP peering allows consumers to enjoy “more robust, fault- and attack-resistant network infrastructure, which is personally important to consumers in their transactions through the Internet, such as tax filing, banking, e-commerce, Skype conversations with family and friends overseas, among the many uses of fast, reliable and inexpensive Internet.”
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How about the private cable TV operators across the country, if they unite, they can provide the third network we need.