More popularly referred to as the KP bill, it proposes to allow the entry of new players in the telco broadband business — without requiring a Congressional franchise and with less-than-usual supervision from the National Telecommunications Commission (NTC).
While the incumbents are still required to undergo the process of renewing their franchises through Congress and remain subject to the stringent regulations of the Department of Information and Communication Technology and the NTC, the same obligations will not apply to new entrants under the KP bill.
So do we really need another legislation like this?
New players and the incumbents
In its supposed move to improve connectivity in the country, the Duterte administration paved the way for the entry of a third mobile player — Dito Telecommunity. Much hype ensued as competition from a third player was expected to push incumbents Globe and Smart to improve their service quality. Dito was also anticipated to offer more competitive pricing to attract subscribers.
The pandemic also saw the rise of Converge fiber broadband, effectively competing with PLDT and Globe in the fixed broadband market.
While some pundits may say that the entry of new players has led to some improvements in service quality, at least in the mobile business, Dito has yet to make a significant impact in the mobile sector. Globe and Smart are still lording it over in what remains effectively a two-player market. Globe and Smart remain far ahead in terms of infrastructure, national footprint and subscriber base, especially so in a very mature market.
Converge, on the other hand, had great success in the fixed broadband space with its purely fiber offering — unlike PLDT and Globe, which still maintain legacy subscribers on antiquated copper infrastructure.
While PLDT and Globe were locked in migrating their subscribers from copper to fiber, Converge was scoring net subscriber adds through its fiber-only model without any encumbrance of a legacy subscriber base. However, the segment of the country’s population—roughly 25 percent—that can afford postpaid fiber broadband has now reached saturation, which is not good news for Converge.
Connectivity gaps persist
So where are we now in terms of connectivity after the entry of these new players? The so-called industry observers opine that it is still much to be desired.
The moral lesson of the story is that simply adding new players does not necessarily solve the supposed problem. A look at our neighboring countries will show that the success of their telco industries is largely driven by the government subsidies given to the telcos — through tax incentives, loan grants, right-of-way priority and exemption from bureaucratic red tape.
This is true because telcos are doing a public service — one that should have been the government’s responsibility to deliver.
Here in our country, the telcos are among the most-taxed sectors, burdened by all the regulatory fees and permits imposed by national government agencies and local government units. Instead of assistance and subsidies, the government has enacted legislation and issued regulations that restrict and undermine telco operations — like this so-called KP bill.
It is a grave concern that pockets of the country remain unserved and underserved by telcos. These are the so-called geographically isolated and disadvantaged areas or GIDA areas. These areas do not only lack telco service, but also other basic utilities such as power, water, and the likes. Suffice it to say that mobile and the internet can only be had in those areas when there is power supply. Satellite service? At the most basic at P3,500 monthly, that is still way beyond the reach of a family in subsistence living in those areas.
Subsidies needed
Succinctly, that is where the government and subsidies should come in. It is sound economics to recognize that once an area gets connected, social and economic development will soon follow.
There is no more point to allow new entrants in the country’s urban and commercial areas, which are already well served. The issue now is in-building solutions.
Tersely speaking, this country has more mobile phones than people. It is highly doubtful whether new entrants can build their own infrastructure and secure the financial backing needed to match the incumbents and compete effectively in record time. Attempting to do so may only lead to ruinous competition.
Besides, it will do nothing to address the principle of universal access — that is, internet service for everybody.
Aside from its constitutional infirmities, the KP bill raises more questions than it answers. President Ferdinand Marcos Jr. has, on several occasions, vetoed economic bills when their consequences were deemed more harmful than beneficial. The KP bill should be one of those.
(Disclosure: The author is the president of the Philippine Chamber of Telecom Operators)
General Counsel of the Globe Group and president of the Philippine Chamber of Telecommunications Operators
