UP Professor Emeritus, Dr. Epictetus Patalinghug together with other three UP professors conducted a research on telecommunications. He explained the result of the research that unless the government will take the cudgels, it will be hard for the Philippines to open doors for new players in the telecom sector.
Crucifying Globe and PLDT is both unfair and illogical says Dr. Patalinghug during his recent speech at the Asian Institute of Management.
The Philippines is not yet ready to accept a foreign telecom company under its presents situation. There are existing laws prohibiting major foreign ownership of a company on the Philippines as well as the very huge capital that requirements in setting up which Globe and PLDT has already built over the past decades.
A third player may have a difficult time attaining financial viability in the short run due to its late-mover disadvantage and the need to penetrate undeveloped areas whose deployment cost is higher than the almost saturated urban markets dominated by the incumbents.
The question is do we need a new player? Looking at Digitel when they were around, they were not making a lot of money. Our analysis is that a third player can enter the market if it is cost insensitive for the next ten to fifteen years. No private firm can afford that.
Dr. Epictetus Patalinghug
Dr. Patalinghug said in his speech “The question is do we need a new player?”. He cited Digitel as an example that they were not making enough money and was eventually sold to PLDT.
Dr. Patalinghug also mention that the two-player-telco-industry is not only present in the Philippines. Myanmar also has the same scenario. India, coming from four telcos, will only have two players in the coming months.
“The only thing is when we have two (players), there is fierce price competition.” Dr. Epictetus Patalinghug
Dr. Patalinghug also revealed that during the mid-90’s the Philippines had eleven telco players.
In 1992 to 1996, we got 11 telco players in this industry. But deregulation has always been followed by consolidation. So Smart was bought by PLDT, Islacom was bought by Globe, Bayantel was bought by Globe, Sun was bought by PLDT, so from deregulation you have some consolidation.
And that pattern exists all around the world, India started with six, India in the next few years will only have two.
A government owned telecommunications company is the only possible solution in having a third player.
“The only realistic third player is the government, but its social value is its cost-insensitive capacity to pour investments in “last-mile” and high costs areas, and to build “last-mile” network that complements with existing networks,” he said.
But still Patalinghug has his own apprehensions: “However, there are historical examples of government failures in direct provision and operation of utility services.”
Meanwhile, the government thru the newly established Department Information and Communications Technology (DICT) will begin to build cell sites in different parts of the country, particularly in remote areas.
But DICT undersecretary Eliseo Rio, Jr. stressed that this is mainly to help address the lack of cell sites in the country and not yet signal the birth of a state-owned telecom company.
“The government will build and then lease these cell sites to small players or to those interested telcos. Our government (will not yet operate these structures), taking from the experience of Telepono sa Barangay, it was not a success, so maintenance and usage of these cell sites will be better off with the private companies,” said Rio.
“The government’s approach is technology neutral, so everything that we can build should give cost effective transmission of communication facilities,” added Rio.