The anticipated entry of a new core player in the telecommunications market in the Philippines—with initial investments pegged at $2.5 billion—is expected to boost the country’s GDP in 2016, as the endeavor is seen filling in the gaps in the highly untapped broadband sector.
In theory, the entry of Telstra Corp. Ltd. should help the economy expand at faster pace, given that broadband penetration—seen as a key growth driver for the services sector—should soon trend higher with intensifying competition, National Telecommunications Commission (NTC) Director Edgardo V. Cabarios said.
A third player, he continued, will shake up the market by bringing prices down and service quality up—thereby increasing the access to the Internet, which is the main backbone of the e-commerce industry.
“A study conducted by the United Nations showed that for every 10 percent in broadband penetration, a country’s GDP will grow by at least 1.35 percent,” he said. “Telstra’s entry in 2016 will definitely help us with that, as there are only 7.5 million fixed line subscribers to date, relatively smaller compared to our population of 100 million.”
The country’s local output averaged 6 percent in the third quarter, slower than the 6.3-percent forecast made by several economists. This, according to Cabarios, will likely be boosted, once a third player comes into the scene.
However, this might not be enough, at least on his end, as the government also needs to play a key role in developing the telecommunications industry, as in other nations.
“If you look at other countries, they took the study seriously. Their governments intervened because they wanted to help their micro, small and medium enterprises to make them globally competitive in the e-commerce market,” he said.
In Thailand, for example, the government has invested $114 million to improve the Internet service or availability. The fund is part of Bangkok’s economic policy framework.
Vietnamese government, on the other hand, owns two of the three largest telecommunications companies in Ho Chi Minh City. Investments come mainly from the government.
Malaysia has now spent a total of $4.5 billion over a 10-year period to make available fiber optic lines to every home in the country’s urban areas.
Other developing and developed economies are investing billions of dollars to improve Internet access in their countries, Cabarios added. “We also have to look into that prospect,” he said.
Government initiatives revolve only around regulatory endeavors. So far, the government has invested a billion-and-a-half pesos to provide free Wi-Fi access in public places.
This is not enough, according to Cabarios. What needs to be done, he added, is for the government to invest in infrastructure to develop the sector to provide lower Internet costs and better quality to consumers.
“If your investments are purely private, the cost of infrastructure is high, and companies will need to see returns. If the government invests, it’s an economic return that it will wait for,” he said.
Private investments over the past 10 years, estimates show, would have reached more than P600 billion.
For next year, Fitch Ratings said the incumbent telecommunications companies in the Philippines will invest P85 billion and aggressively roll out high-speed mobile and fixed-line broadband networks to offer better services. This year Philippine Long Distance Telephone Co. and Globe Telecom Inc. have programmed a combined capital of P83 billion.
“Prices may go down with competition, but if we leave it to purely to the private sector, we cannot achieve the same level of speed and quality as Singapore has. The government really has to intervene,” Cabarios said.
The main hurdle to this, however, is funding.
“Under the existing laws, we do not have a so-called universal access. The law only states that we have to give priority to the development of infrastructure in unserved and underserved areas, but it did not specify how,” he said.
The proposal of the commission is for the fund to come from 1 percent of the total government revenue.
“We need that to deploy broadband in unserved areas and help small and medium enterprises to compete,” Cabarios said.