Former DICT chief blames bureaucratic red tape in poor telco infra

Published August 3, 2020, 4:10 PM

by Bernie Cahiles-Magkilat

 Former DICT chief Eliseo Rio Jr. blamed the bureaucratic red tape, especially at the local government unit level, for the Philippines telecommunications infrastructure situation having the lowest tower density and inefficient internet connectivity in the region.

 “We do not lack investments, as these are already available, not coming from government but from the private ICT sector, to fast track the installation of telecommunication infrastructure. The real problem is the red-tape that only government can solve. The government does not need to put up any funds for telecommunication infrastructure. It only needs to facilitate the telcos to provide efficient public services, and not threaten them with expropriation. The ball is in the hands of the government,” said Rio in an FaceBook post.

 According to Rio, by 2019 telcos poured in almost P400 billion in committed investments as per record of the Board of Investments. In fact, he said, this massive amount of investment made it possible for the Philippines to breach the P1 trillion mark of committed investment for the first time in its history.

 So all the investments needed to fast track the roll-out in telecommunication infrastructure was there by 2019, but even the foreign providers started complaining that they had rolled-out ten times faster in other countries, but were slowed down by red tape in our country.

So this red-tape problem is real unlike what some quarters are saying that this is being made as an excuse by the telcos because they don’t want to invest more money on their infrastructure. Aside from the billions of pesos poured in by the telcos for infrastructure, non-telco companies, that were instrumental in putting up thousand of towers and thousand of kilometers of fiber optic cables (FOC) in our neighboring countries like Vietnam, Cambodia, Malaysia and Thailand, are also complaining that they have not encountered so much  red-tape that is drastically slowing them down here in the Philippines.

“The illegal red tape is not so much a problem as they encounter this also in other countries, they say. It is the legal red-tape, numerous permits that requires so many signatures, that is the problem,” he pointed out.

 According to Rio, the Philippines was the first to roll-out mobile networks in the region in 1991, years ahead of Vietnam but Vietnam has now around 70,000 towers pas against the Philippines 22,000 or less than a third of Vietnam.

 Rio shared that PLDT started mobile networks around 1991 with first generation technology or 1G, which was only an analog voice service. When 2G came around 1995, two new telecom companies, Globe and Smart lorded it over with their GSM network because aside from voice service, their networks offered SMS or text messages.

“Unlike the rest of the world that used mainly the voice service, Filipinos became crazy with texting, and we became the texting capital of the world. We were sending around 1.4B text messages or SMS a day, and for this 2G technology, we did not require so many towers,” said Rio in an FaceBook post.

In fact, he said, the huge SMS market in the country only needed around 18,000 towers to send all those billions of text messages daily and this went on till the smartphones came.

Rio said that all telcos that did not have the SMS service, including PLDT, folded up and were acquired by Globe and Smart while all other countries in the region were using voice services much more than texting.  

One needs much more towers to provide voice services because the network has to dedicate a channel for calling parties until their call is finished.  The utilization of towers is on real-time for voice services.

Therefore, the more towers, the more subscribers can make a call. The more subscribers making a call, the more revenue the telcos make. Unlike SMS where a tower can accommodate millions of text messages, for SMS are queued and sent at a very fast rate. So when the killer application was texting, there was no incentive in building more towers as around 18,000 towers are enough to carry the billions of text messages daily.

 When he became the NTC Commissioner in 2001, Globe and Smart were already considered a duopoly. Rio allowed the entry of a third mobile network operator, Digitel’s Sun on 2002. NTC approved the introduction of Digitel’s innovative services like unlimited call and text within its network, which later was also adapted by Globe and Smart and much later became unlimited between networks on promotional basis. This actually brought the cost of mobile telecom services down.

“But the reputation that mobile network operators were raking in revenues much more than other companies because of  texting, made them targets for revenue generation not only by LGUs, but the NPA and some unscrupulous officials. LGUs came up with so many permits and recurring annual fees, the more the better for their revenues. These fees were only passed by the telcos to their subscribers which made our telecom services more expensive than other countries. This is one reason why Sun did not survived long and sold itself to Smart/PLDT,” he said.

 Until around 2012, Rio said, there  were not much complaints from telcos on this “red-tape” because texting revenues was making them profitable even with the small number of towers they had.

But when Smartphones appeared in 2012, and internet content was replacing SMS as the killer application, these red tapes begun to be felt when our mobile telcos started overhauling their networks to accommodate the 3G to 4G technology.

More towers are needed to utilize these new technologies, because internet content requires real-time connectivity like voice services. Other countries using voice services since 2G had already the number of towers to easily shift to 3G and 4G.

“In the Philippines, we were stuck with the number of towers that was good enough for SMS, but very much lacking for services that require broadband and real-time connectivity. Adding more towers got mired because of the so called ‘red tape’ starting 2013, such that by 2016, poor telecom services became an election issue, that helped President Duterte win,” he said.

When he became the DICT Acting Secretary, Rio initiated the entry of a third telco as per instruction of the President, to improve our telecommunication service through strong competition. The selection process was in fact designed to award a winner that can  really challenge Globe and Smart, by using the Highest Committed Level of Service (HCLOS). The awardee must show that it can commit a level of service higher than the incumbent telcos, projected for five years. And they must back up their commitment with a performance bond, the higher the amount, the more points earned in their favor.

Because of this level of commitment backed up by a hefty performance bond, when the third player (DITO) was selected, both Globe and PLDT/Smart put in their biggest capex investments since they started operating more than 20 years ago, starting 2018 increasing those investments yearly in 2019  and 2020. 

“While they may deny it, they are preparing their networks for the competition that DITO will give them when it starts commercial operations in March 2021. This in fact greatly improved our telecommunication services,” he said.

The Philippines internet speed now is around 22Mbps from 10 Mbps in 2016 and the third telco DITO has not even operated yet. DITO committed 27Mbps internet speed when it started commercial operation on March 2021, or else it will lose its performance bond of P25.7 billion.

DITO also committed that by the 5th year of its operation it will have a speed of 55Mbps. Unlike Globe and Smart that has been operating for more than 20 years now without any commitment, we forced the new player to commit a level of service that would make our telecommunication services at par with our more progressive neighbors. Globe and Smart would have to try to achieve this, for if they do not, they will lose competition to the new player. This is why I am quite confident that our telecommunication services would improve, as it has already improved to some extent since 2018 when the selection process for the third telco began.

“Had this Covid pandemic happened 2 years ago, our telco services would have collapsed  due to the sheer volume that our people accessed the internet, as these improvements weren’t in place then as it is now,” he said. To answer the dire lack of telecommunication infrastructure, wherein a third player will not succeed as Sun didn’t if this problem persists, I invited common towers and passive telecommunication infrastructure providers to invest here to fast track this roll-out.