A new telco duopoly

DEMAND AND SUPPLY – Boo Chanco (The Philippine Star) – October 8, 2018 – 12:00am

At best, the proposal of Ramon Jacinto, a presidential adviser, to limit the number of telco tower operators to two is misguided. It is a brazen attempt at rent-seeking.

During the public consultations, Froilan Castelo, the lawyer of Globe, also opposed the proposal to prohibit the two telcos from building their own towers. Under Jacinto’s proposal, the two tower companies will enjoy a duopoly advantage. It also means the added cost will be passed on to us helpless consumers. Hmmm… something smells rotten indeed.

We are trying with much difficulty to produce a third telco player to introduce more competition in the telco industry. So why should an official of this administration sneak in something totally against the spirit of President Duterte’s wishes?

Hopefully, it isn’t Jacinto’s wishes that will prevail. DICT Acting Secretary Eliseo Rio should convince the President that a free for all is a better alternative.

Industry watchdogs like the Better Broadband Alliance (BBA) also questioned Jacinto’s proposal. BBA lead convenor Grace Mirandilla-Santos questioned the rationale for limiting the number of participating tower companies. “The tower companies are finding it viable to have more, why are they limiting it to two?”

Others in the private sector who have expressed interest in building and managing such towers raised concern that the proposal would guarantee a money-making scheme for favored companies. Of course it will. That’s what rent-seeking is about.

The Philippine Competition Commission should step in and give DICT the proper advice on how to keep the business of building and managing telco towers competitive.

The Jacinto proposal calls for DICT to accredit the tower companies. The private sector expressed the view that a more open accreditation process ensures a more level playing field and market competition.

But why require government accreditation at all? It should be up to those who want to enter the business to convince the telco companies to sign them up. It should be up to the telco companies to set the standards that they think will best serve their needs.

Building those towers and leasing them to telco companies is like constructing a condominium building. There is the building code that must be complied with, plus the technical requirements of client telco companies.

We now only have 16,500 cell sites and we need at least an additional 50,000 towers to properly serve 113 million subscribers today. The use of common towers is expected to speed up the provision of seamless mobile internet connectivity in the Philippines.

But at least one telco, Globe, doubts if two tower companies can help overcome the bureaucracy in building cell sites. Globe’s lawyer pointed out that the problem they have experienced in building more towers has more to do with government red tape.

“Right now, it takes an average of 25 permits and adding up the time to acquire right-of-way, it will take an average of eight months to build a single cell site. These supposed two private independent tower companies will not be better than us because they will be subjected to the same difficulties we are currently facing,” the Globe lawyer said.

“We do not see how an independent tower company can alleviate or ease the problems we are fixing. They are private companies, the same as us, and they would face the same problems. We do not see any reason how this will help us. If we are going to make this exclusive, we do not know and we do not see how this will speed up the rollout.

“Preventing us from building our own towers is a violation of our contract and with the constitution. What we need right now is the easing of bureaucracy in the government.

“The proposed rule of limiting the entire tower sub-industry again only to two independent, private tower companies is anti-competitive, retrogressive, and against global best practice.

“The main objective should be to build more and augment the efforts of the telcos to densify the country with cell sites,” the Globe lawyer emphasized.

DICT Secretary Eliseo Rio had earlier expressed the view that “More or less, it will be opened for all, whoever is interested.” He added, “we will not choose because we are not the one who will use the towers.”

Rio shares our view that any company can build a common tower without any need for DICT accreditation. He said while the government may assist the firms in getting permits, it would be up to the companies on how to market their infrastructure to telco players.

In fact, Rio revealed they now have “five interested common towers providers that could start putting up their towers before the end of the year.”

If five players are ready to fight it out, why should government limit the field to two? Why should government guarantee the profits of private corporations by creating a monopoly/duopoly situation? In a Facebook message, Sec. Rio assured me his decision carries weight.

But Jacinto can undermine him. Jacinto knew how Sec. Rio feels on this issue, but still went ahead with his rent-seeking proposal. Sec. Rio can be trusted to do the right thing, but Jacinto, who claims to be close to Duterte, can spring a surprise.

Jacinto should not meddle in telecom matters because he has a conflict of interest. He owns broadcast stations with towers a favored company can lease to jumpstart the concept.

The telco industry and consumers should watch the situation closely and give Sec. Rio all the support he needs.

Economic rent-seekers from our traditional elite have kept this country from effectively competing even in our region. This has to stop.

Source: https://www.philstar.com/business/2018/10/08/1858071/new-telco-duopoly