MY guess is that this will come as a surprise to precisely no one, but according to data from the International Telecommunications Union (ITU) and the World Bank, along with having some of the world’s slowest and most expensive internet service, the Philippines is also saddled with the highest cost of cellular phone ownership in the Asean (Association of Southeast Asian Nations).
According to ITU, the monthly cost of owning a cell phone (excluding the phone itself) in the Philippines in 2014 was 3.76 percent of per capita GNI, the highest percentage of monthly income spent of any of the 10 Asean countries except Cambodia, where cell service costs a whopping 8.62 of per capita GNI.
Because of the differences in income between the two countries, however, nominal monthly costs are still considerably lower in Cambodia, averaging about $6.82 per month, whereas the Philippines’ cost is about $10.24 per month. Vietnam and Laos, at 3.12 percent and 3.11 percent, respectively, are the only two countries even close to the Philippines; the lowest cost, not surprisingly, is in Singapore, where cell ownership cost is just 0.19 percent of per capita GNI (a nominal average cost of about $8.63 per month).
The Philippines’ thoroughly uncompetitive mobile communications sector is the most obvious source of the great disparity in costs between the Philippines and its regional neighbors. Two large telecom providers have such an iron grip on the market that they can dictate the kind of service provided (which is virtually identical across the various brands the two conglomerates maintain as an illusion of consumer choice), as well as the regulatory environment.
We saw a glaring illustration of Philippine telecoms’ virtually invincible regulatory toward the end of last year, when the public greeted the rumor of the potential entry of Australian telecom Telstra into the market with wild enthusiasm, which was emblematic of consumers’ deep frustration at the current crappy state of affairs. Almost immediately in moves that were almost entirely kept from the public (they were reported by Australia’s Sydney Morning Herald just before Christmas, and completely ignored by our local media), both Globe and PLDT acted to prevent the interloper from even gaining a toehold, filing petitions with the National Telecommunications Commission demanding the break-up of San Miguel Corp.’s —Telstra’s would-be local partner —90 percent share of the 700 MHz broadcast spectrum, an asset which made the proposed joint venture possible. The Manny Pagilinan-led PLDT, which for various reasons has the most to lose by the introduction of another telecom provider, reacted particularly ferociously, threatening legal action against SMC, Telstra, the NTC, and anyone else who would dare try to get in its way. Interviewed by Fairfax Media, PLDT’s head of regulatory affairs Ray Espinosa even went so far as to boast that the company would lobby President BS Aquino 3rd directly, implying that the company’s clout was such that SMC and Telstra should probably just give up the idea.
The overall problem, obviously, is the lack of competition; market forces work faster and better than anything else to force companies to offer products and services of actual value, provided of course the market forces are allowed to work with a minimum of intervention.
Starting from a terrible position like the Philippines is in with respect to its telecommunications market, there are really only two options for attempting to increase competition in the sector, neither of which could be considered ‘minimum intervention:’ Either breaking up the two existing giants, in the same fashion as the breakup of Bell Telephone in the US several decades ago; or placing restrictions on market share, which can be done in a variety of ways.
The simple answer that has been preferred by trade and investment interests in the Philippines, i.e., loosening restrictions on foreign investment, is not an answer at all.
Indonesian interests largely control PLDT, and a significant part of Globe is in the hands of Singaporean investors, and in terms of actual entry in an ownership role, Telstra would have encountered little difficulty. The difficulty, instead, lies in trying to overcome obstacles to actually operating here, obstacles that are designed, intentionally or not, to reserve virtually the entire sector to the two incumbents.
Even if the next government has the wherewithal to force major changes in the telecom sector, it will be years before the Philippine market can experience anything even close to being on par with our better-developed neighbors. But starting late is better than never starting at all.