Duterte backs 3rd player that provides best service quality, affordable prices

President Duterte renewed his call for more competition in the telecommunications space—a sign that the third telco initiative remained a priority for his government despite recent delays.=

Mr. Duterte, who in the past had criticized industry incumbents PLDT Inc. and Globe Telecom for their service quality and cost, managed to give the initiative a much-needed push during his third State of the Nation Address on Monday.

In his speech, the President said the selection rules for the third telco player will be finalized soon.

“The terms will be fair, reasonable and comprehensive,” Mr. Duterte said. “It will be inclusive so it will be open to all interested private parties, both foreign and local.”

Up until last Friday, the chances that even the selection process itself would get off the ground were uncertain.

The final terms of reference, which would outline how a new major player would be chosen, had stalled given differing views within a government oversight committee established last April.

On one hand, Eliseo Rio Jr., acting secretary of the Department of Information and Communications Technology (DICT), had championed a set of rules that would choose a new player based on population coverage, investment and internet speed. The rules were called the highest committed level of service (HCLoS) model.

He was at odds with the Department of Finance, which had wanted an auction where the minimum bid was set at over P6 billion.

Last Friday, most of the oversight committee members voted in favor of the HCLoS model, however, certain conditions were set.

The process could move faster given that Mr. Duterte, during his address on Monday, also appeared to endorse the HCLoS model of the DICT.

In choosing a new player, the President said his sole condition was that “the chosen entity must provide the best possible services at reasonably accessible prices.”

Mr. Duterte also spoke of supporting a market environment that was more “conducive to competition.”

He said the third telco initiative “would be rendered futile if we do not improve its odds of success in an industry that is long dominated by a well-entrenched duopoly.”

Earlier this year, PLDT and Globe have responded to the specter of new competition, both committing to spend over P100 billion this year to boost their mobile and fixed-line services. PLDT alone is spending a record P58 billion for 2018.

According to the DICT, the company or group chosen to become the third telco will gain access to a coveted set of 3G, 4G and potential 5G radio frequencies. These will allow it to provide a slew of mobile services such as text messaging, voice calls and internet browsing.

Under the draft HCLoS rules, the minimum annual standards were set at 30 percent in terms of national population coverage, 5 Megabits per second for internet speed and P40 billion in capital and operational expenditure per year over a five-year commitment period.

Bidders can offer better terms in each of those metrics to score more points in the selection process.

Rio said last week he was still targeting to wrap up the selection process before the end of 2018.

Among the conditions set on Friday was the resolution of a long-running legal case over a set of 3G frequencies. Rio said they were working to secure compromise agreements with the petitioners.

Other factors previously cited by the oversight committee included the formulation of a common tower policy, a final agreement between stakeholders of the government’s power transmission assets over its dark fiber network, and lower interconnection rates.

During his address on Monday, Mr. Duterte said interconnection rates would be lowered.

This was announced by the National Telecommunications Commission last July 19. The NTC issued a memorandum circular ordering the reduction of the voice call interconnection rate to P0.50 per minute from P2.50. For short messaging services, the rate was lowered to P0.05 per message from P0.15.

With lower rates, the NTC hopes these savings will be passed on to consumers and make it easier for price-conscious subscribers to move between telco providers, including a third player.

Earlier this month, the common tower guidelines that outline a policy on infrastructure sharing were released.

A number of companies vying to become the third player have also recently started to seal agreements to use the spare fiber assets of the National Transmission Corp. and private concessionaire National Grid Corp. of the Philippines.

The DICT has put up additional safeguards to ensure that government’s interests are protected. It said spectrum user fees, some of which have not been reviewed since 1998, will be increased.

In the case of a third telco, it will be required to post hefty bonds and deposit payments.

A key provision under the draft rules stated that a third telco would be barred from merging with a company with a market share of at least 40 percent. That definition covers incumbents PLDT and Globe.

Doing so will force the third telco to return the frequencies to the government “without condition”, the rules showed.

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