Competition Issues in Philippine

Telecommunications Sector Challenges and Recommendations

Mary Grace Mirandilla-Santos 1st National Competition Conference

December 9, 2014, PICC

PH Telecom and ICT

ICT Statistics per 100 inhabitants (ITU, 2013)

Mobile-cellular subscriptions 104.5

Fixed (wired)-broadband subscriptions 2.6

Mobile-broadband subscriptions 20.3

Individuals using the Internet (%) 37

0.0 10.0 20.0 30.0 40.0 50.0 60.0

Philippines

Viet Nam

Indonesia

Thailand

Broadband subscriptions per 100 inhabitants

Fixed Mobile

PH Fixed and Mobile Telecom (1992-2013)

0.0

20.0

40.0

60.0

80.0

100.0

120.0

1992 1993 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Subscribed Fixed Line Teledensity (per 100 people, ITU) Subscribed Mobile Teledensity (per 100 people, ITU)

Interconnection crisis brewing

EO 59 EO 109

RA 7925

GSM tech introduced; SMS offered

Prepaid introduced

PLDT/Smart & Globe sign interconnection

agreement

Estrada calls PLDT & Globe to a

meeting

Sun Cellular enters, offers

“Unlimited Call/Text”

Sun subscribers skyrocket to

1M

Smart & Globe start to offer

"bucket" plans

PLDT buys Smart

Globe completes share-swap w/ Islacom

NTT (Japan) raises stake in Smart/PLDT

Smart absorbs

Piltel

Globe merges w/ Clavecilla; partners

w/ Singtel

New mobile players enter; Congress

grants franchises

PLDT buys Digitel (Sun Cellular)

• More players = better service, lower price, innovation

• Mergers and acquisitions not harmful as long as there’s real competition

Internet Access Value Chain

International connectivity : Connecting users to the wider internet (submarine cables)

National backbone : Delivers to national aggregation points (IXPs), and to submarine cable landing stations (optical fiber or microwave)

Middle mile: Infra that carries traffic from telephone exchanges or mobile base stations to central switching locations

Last mile : Final link from the network to the user

Source: (2013)

PH Internet is a different story

• No real competition in the market – Only two major players control infra, therefore pricing

– Smaller players being bought; 100+ ISPs in 1997, >10 in 2014

• High barriers to entry – Congressional franchise + license (CPCN)

– Negotiating LGUs’ “territorial connectivity”

– Telecom is a vertical, monolithic whole

• Lack of interconnection among ISPs – Local traffic between two ISPs gets sent abroad to be

exchanged and then routed back!

– Each data “hop” costs time and money.

PH Internet is a different story

• Inadequate infrastructure vs. demand – Extremely limited copper distribution (landlines)

– Wireless/mobile technology is only way to expand, but: • Towers expansion is expensive

• Base station requires users to be within 0.5km - 2km radius

– Rolling out fiber is expensive; each telco has to: (i) dig up their own utility corridor and (ii) deal with LGUs

– DepEd: Of 38,569 elementary schools, 83% has no Internet access in their area, wired or wireless.

• Outdated laws and interconnection rules – Weak regulator, with poor record in consumer protection

– No anti-trust law to check on big business

Very expensive!

• Wholesale: Business-grade bandwidth (1 Gbps)

• Retail: 2nd most expensive out of 62 countries

Manila $25 to $45 per Mbps

Cebu $70

Australia/NZ $6

Hong Kong $5

USA 35 cents to $2

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Philippines $20.35 per Mbps

Indonesia $16.83

Malaysia $10.29

Singapore $2.56

Thailand $2.29

Viet Nam $2.25 So

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Poor Quality = Low Value for Money

Philippine ISPs vs. Select South Asian & Southeast Asian ISPs

0

50

100

150

200

250

300

0800 H 1100 H 1500 H 1800 H 2000 H 2300 H

Airtel 3G (4Mbps)-Bangalore,IN

Tata (3.1Mbps)-Chennai,LK

Airtel (4Mbps)-Delhi,IN

Airtel LTE (4Mbps)-Bangalore,IN

Ooredoo Data 99 (7Mbps)-Male,MV

Dhiraagu Data 200 (1Mbps)-Male,MV

Ncell (7.2Mbps)-Kathmandu,NP

PTCL Evo (9.3Mbps)-Karachi,PK

Etisalat (7.2Mbps)-Colombo,LK

Telkomsel Flash Ultima(3.6Mbps)-Jakarta,ID

SMART Bro Starter Plug-it (7.2 Mbps)-Manila,PH*

Globe Tattoo Tattoo Stick (3.6 Mbps)-Manila,PH*

Sun Broadband Plan 799 (3.6Mbps)-Manila,PH

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Way Forward to Better Internet (1)

• Amend RA 7925: Structural separation – Separate, individual segments can be provided by non-

franchise holders because they don’t serve public directly (e.g., landing stations, towers, and fiber optic cables)

– More providers of carrier-neutral, non-discriminatory services

• Pass the Fair Competition/Anti-trust Law – Public interest is better served when there is real competition

– Framework for government to intervene “appropriately”

• Push for legislation that promote innovation – Magna Carta for Philippine Internet Freedom (MCPIF)

– Convergence Law

– Department of ICT?

Way Forward to Better Internet (2)

• Local IP peering: Keep local data within national border – In 2011, 15-23% of internet traffic was domestic – Promote efficient use of international bandwidth – Ensure security of local data, especially of government

• A.O. 39 (2013) requires government offices to ensure their ISPs are peered through the Philippine Open Internet Exchange (PHOpenIX)

• Shared infrastructure for telcos and ISPs – Tower co-location:

• Telcos can save up to 75% of capex and 60% of opex

• New business and incentives for 3rd party, especially for LGUs

– Shared utility corridor: • Neutral 3rd party to set up conduits in civil works, railways,

transmission lines where all utilities can connect

Way Forward to Better Internet (3)

• But under present laws, NTC can:

1. Regulate ISPs for quality of service • Consumer welfare protection mandate under RA 7925

2. Broadband QoS testing and infrastructure audit • Monitor service performance standards for internet

services under existing (and updated) NTC rules

3. Determine penalties for violation of industry • No need to amend CA 146 Public Service Act

• NTC has the mandate to ensure competition and protect consumers.

THANK YOU.

Mary Grace Mirandilla-Santos Independent telecom and ICT policy researcher

Research Fellow, LIRNEasia

gmirandilla at gmail dot com