By Lara Climaco | FilAm Star Correspondent
communications industry, not just the entry of a third player, is the long-awaited solution to poor connectivity in the country, according to the American Chamber of Commerce of the Philippines (AmCham Philippines).
“The view of AmCham is that the sector should be open as much as possible to foreign investment and that more competitors in this very important sector should result in better service and lower cost to consumers,” John Forbes, senior advisor to AmCham Philippines told FilAm Star via email in reply to a query on whether the entry of a Chinese operator as a strategic telecoms player would be beneficial to the country.
“The three largest telcos in the PRC [People’s Republic of China] are all units of state-owned enterprises and, while among the largest in the world, are not known for being the most innovative or efficient,” he observed.
Forbes also cited barriers to market entry: the need for a legislative franchise, which often takes several years to acquire, and the 40 percent cap on foreign investment, meaning the Chinese telco would have to find a local partner with deep pockets.
“Partnering with the government itself might be an option that does not need a franchise,” he said.
This seems to be what the Duterte administration had in mind when it trumpeted the imminent end of the duopoly in the Philippine telecommunications industry. Presidential Spokesperson Harry Roque Jr. revealed on November 20 that President Rodrigo Duterte had invited China to “operate the third telecoms carrier in the country” during bilateral talks with Chinese Premier Li Keqiang.
A few days before Roque’s pronouncement, the Bases Conversion and Development Authority (BCDA) and the Department of Information and Communications Technology (DICT) had signed an agreement that would usher in digitalization in the country.
Described by government officials as a game changer, the Luzon Bypass Infrastructure is a high-speed internet infrastructure to be built by BCDA that would link Baler, Aurora and Poro Point, La Union. These would be the landing points for a submarine cable system connecting the United States and Asia. Under the landing party agreement entered into by BCDA and DICT with Facebook, the Philippine government will receive 2 million megabits per second of bandwidth from Facebook in exchange for providing the terrestrial bypass route.
“This union is based on mutual trust and capitalization on each other’s strengths: BCDA’s capacity to build the bypass infrastructure, DICT’s technical capacity to operate and maintain it and of course, Facebook’s access to international links,” DICT OIC-Secretary Eliseo Rio Jr. said in his speech during the November 14 event.
The landing party agreement gives DICT a 25-year tenure, renewable for another 25 years, over the terrestrial bypass route and allows the agency to maintain related facilities and provide last-mile connectivity throughout the country.
Nico Roehrich, Facebook’s sourcing manager who signed the landing party agreement for the social networking service, spoke of the company’s efforts to build out a global network infrastructure and the significance of the Luzon Bypass Infrastructure.
“This is one of those projects that fit perfectly into what we’re trying to accomplish. The intent of this project is to provide diversity from the Luzon Strait and as OIC Rio has indicated, this has been a trouble spot for submarine cables for a long time. By coming through the Philippines and utilizing this bypass infrastructure, we’re significantly increasing the diversity and resilience of the global internet infrastructure, particularly in the Asia-Pacific. So we’re very excited to be part of making the internet in the region and particularly the Philippines, significantly better,” he said during the signing event.
Asked to comment on any potential risks with the entry of a foreign player in the Philippine telecoms scene, Forbes replied: “People seem concerned that a foreign-owned telco could shut down service or privacy of communication would be compromised. This risk is lower than the risk of poor service. With adequate competition and number portability, consumers can easily shift to alternative providers. In respect to privacy, there is none now. Unless encrypted, our use of voice and the internet is already compromised.”
The oldest American chamber abroad and the first in Asia, AmCham Philippines is part of the Philippine Business Groups-Joint Foreign Chambers alliance seeking the relaxation of foreign equity restrictions in the Philippines. It has likewise been active in pursuing telecom industry reforms.
“AmCham favors removing the 60-40 rule in the telecommunication sector and encouraging more firms — domestic, foreign and joint ventures — to provide services in an increasingly important market,” Forbes said.
In a related development, Malacañang directed the National Economic and Development Authority Board to exert utmost efforts to ease foreign restrictions on eight investment areas including public services. This could pave the way for further liberalization in the telecoms industry.
The Luzon Bypass Infrastructure is expected to be completed by 2019.
It is unclear whether the deal with Facebook means DICT would no longer pursue negotiations with the National Grid Corp. of the Philippines (NGCP) about piggybacking the government broadband backbone on the latter’s transmission facilities.
NGCP, which is partly owned by the State Grid Corp. of China, maintains and operates the Philippine power grid. DICT officials had earlier said a tie-up with NGCP would drastically cut the cost of deploying a broadband network, which could hit PHP 240 billion, and allow the agency to complete a nationwide backbone within a year.