By Lorenz S. Marasigan
Second of three parts
The entry of Telstra Corp. Ltd. into the Philippines will prove to be a game changer in the country’s telecommunications landscape, as it will usher in reforms in the duopolistic market that has been receiving complaints of bad service from its stakeholders.
From being a market that capitalizes on calls and texts, the telecommunications sector is now making money out of the Internet. Data, according to experts, is now the new gold, and traditional services are now a thing of the past.
This, however, led to the spike in complaints on the “dismal Internet services” in the Philippines, with the country being pronounced as the nation with the second-slowest Internet speed in Asia.
According to studies conducted by Ookla, an Internet metrics provider, the Philippines has the second-slowest average download speed among 22 countries in Asia with an average speed of 3.64 Mbps.
It ranked 176th out of 202 nations around the world. It is eight times slower than the global average broadband download speed of 23.3 Mbps.
In a separate report, Cloud services provider Akamai Technologies said that, while the Philippines might have improved its connection by a percentage point, its overall ranking in Asia still remains at No. 13 out of 15, or the third-worst connection in the region.
Filipinos, according to the first-quarter report of Akamai, enjoyed an average download speed of 2.8 Mbps during the period under review. Trailing behind are India and Indonesia with 2.3 Mpbs and 2.2 Mbps average speeds, respectively.
“We now see a shift in the telecommunications industry from traditional voice and text services to data. We have seen a significant increase in the number of complaints on the broadband services of our telcos as opposed to the traditional ones. Even our telcos’ network-development strategies are now toward the development of the Internet,” National Telecommunications Commission (NTC) Director Edgardo V. Cabarios said.
The foray of Telstra into the Philippines will definitely make an impact on the market as a whole, he said, adding that the regulator expects services to be better and prices becoming more competitive as competition intensifies.
“The more players you have, the better for the consumers,” he said. “Competition drives players into innovation and, thus, better services.”
For Mary Grace Mirandilla-Santos, an independent researcher on information and communications technology (ICT) and telecommunications policies, the partnership between San Miguel Corp. (SMC) and Telstra will prompt the incumbents to offer better services, given that the new entrant’s arsenal is quite enormous.
“We can expect the level of competition to improve as a result of a Telstra-SMC partnership. Telstra owns Pacnet, which operates the only telco-neutral submarine cable that lands on Philippine shores,” she said.
Telstra recently acquired undersea cable company Pacnet Ltd., the operator of a 28,000-mile submarine network in the Asia-Pacific region.
The food-to-infrastructure firm, on the other hand, has been acquiring small telcos and have Eastern Telecommunications Philippines Inc., Bell Telecommunications Philippines Inc., Liberty Telecoms Holdings Inc. and Express Telecommunications Inc. under its wings.
“This means they have the backhaul infrastructure and middle-mile network to deliver services to the last mile,” Santos, who is also a fellow at ICT policy and regulation think tank Learning Initiatives on Reforms for Network Economies (Lirne) Asia, said.
With this, International Data Corp. (IDC) Philippines analyst Alon Anthony D. Rejano said the soon-to-be new telecommunications provider will prove to be a threat to Philippine Long Distance Telephone Co. (PLDT) and Globe Telecom Inc.
“If Telstra will bring in connectivity from Australia, there will be lower traffic in our local network. This is a threat to the vendors,” he said.
Democracy.PH Founder Pierre Tito Galla added that Telstra will also help increase the Internet-penetration rate in the country, noting that hopes are high that the new entrant would develop a network that is on a par with global standards.
“A new player in the ICT space will lead to more competition that we hope will result in better services, more reasonable costs, and greater penetration and access,” he said. “We also hope that this heralds the possibility of faster, more reliable, and cheaper Internet and network services to the public.” According to the World Bank, Internet penetration in the Philippines is currently at 37 percent.
Galla added: “We also hope that the government will take measures to encourage the participation of more players; not just players for the local last mile for consumers, but also for the Philippine middle mile and the international backhaul to improve services for everyone.”
Democracy.PH is a group that pushes for the development of the Magna Carta for Philippine Internet Freedom.
‘We are preparing’
Fitch Ratings noted that, while intensified competition will not come in a snap, companies like PLDT and Globe will have to device cushioning mechanisms to lessen the impact of the new entrant on their market shares.
“Telstra Corp. Ltd.’s impending entry with San Miguel Corp. will intensify competition over the longer term,” Fitch Ratings Primary analyst Janice Chong said.
Local analysts, for their part, said providing better services at a minimum cost will require telecommunications companies to invest more into new technologies and programs.
Juanis G. Barredo, chief technical analyst of online brokerage COL Financial Group Inc., said he expects the capital requirements of both PLDT and Globe to remain elevated with the entry of Telstra into the Philippines.
“Their capital requirements are already rising,” he said in brief.
Intense competition in the digital space has forced the dominant telecommunications provider to revise its capital requirements this year to P43 billion. Globe, for its part, is spending roughly P38.9 billion for its capital in 2015.
Alexander Adrian O. Tiu, senior equity analyst at AB Capital Securities Inc., agreed, adding that the two companies must also intensify their marketing efforts to continue flourishing in the telecommunications market.
“They need stronger marketing. The advantage of both PLDT and Globe versus Telstra, however, is that they are more established with their current subscribers,” he said.
Globe President Ernest L. Cu said his company is ready to compete in a more intense telecommunications battlefield, vowing to continue pouring more money into its network-modernization program.
“With or without a third player in the industry, Globe Telecom will continue to focus on its strategy of providing superior customer experience and being the purveyor of the Filipino digital lifestyle,” he said. “To execute well, we will continue to invest on our network so we can upgrade our services, and have the capacity to serve the growing needs of our customers especially in data. This strategy has obviously worked for Globe, currently the leader in mobile in the Philippines.”
For his part, Manuel V. Pangilinan, the chairman of the dominant telco in the country, said his company will have to wait and see for Telstra’s next move, and start forming strategies from there on. “We just have to deal with it when they come,” he said.
His spokesman, noted, however, that the company will continue investing in technologies that will enhance the company’s market position and improve customer experience.
“In any event, we are doing what needs to be done to enhance our competitiveness in whatever scenario actually emerges. We are investing heavily in our network infrastructure, strengthening its resiliency, broadening its reach, and bolstering its data capabilities to meet the needs of a fast-growing digital economy. We are building upon what is already the country’s most extensive and powerful network infrastructure,” PLDT Spokesman Ramon R. Isberto said.
Don’t celebrate just yet
Consumers in social media are rejoicing with the announcement of Telstra’s entry into the market. Responding to the BusinessMirror’s analysis (See PLDT, Globe ready to battle with Telstra, September 9, 2015), they expressed high hopes that the industry will soon be ushered into a better era.
But consumer group Txt Power Inc. President and Founder Tonyo Cruz said consumers must not celebrate just yet.
“The prospective new entrant enters the same deregulated and liberalized market. The laws and regulations favor it as much as they favor PLDT-Smart and Globe,” he said. “End-users, big and small, should, thus, manage their expectations.”
He explained that there are no built-in protections for end-users under this regime, hence, consumers are “left at the mercy of business decisions of company owners.”
“The involvement of Telstra is not surprising. PLDT-Smart has NTT as foreign partner, while Globe is with Singtel. Sun Cellular used to have Telia Sonera as partner. These foreign partners are usually limited to safe cash or credit investments—which reap dividends,” he said.
Cruz added: “So far, the Philippines has been deprived of world-class quality of service, infrastructure, peering and interconnection. There are no indications yet that Telstra would veer far away from the norm.”
To be continued