I national broadband program, recently approved by President Rodrigo Duterte, is aimed at improving internet speed in the country and providing more Filipinos with access to the Internet.
This supposedly will be achieved through a nationwide network that will link previously unconnected rural areas.
Department of Information and Communications Technology (DICT) Secretary Rodolfo Salalima said in an interview that the national broadband network is needed not only by the public but by the private telecommunication firms or telcos as well in order to expand the reach of their services to the countryside.
Salalima added that compelling the telcos to do business in the countryside that is not viable will entail significant costs that will have to be shouldered by their subscribers.
“We need the national broadband network as a way to lower costs and help out in rendering services to the public,” he told The Manila Times.
An academic research paper by University of the Philippines Professor Emeritus Epictetus Patalinghug, et al. entitled Assessment of the Structure, Conduct and Performance of the Philippine Telecommunications Industry coincided with the DICT’s position by saying that the only realistic third player in the Philippines is the government, and that the government must build a ‘last-mile’ network that is not financially viable for private operators to build.
A private third player, the paper finds, may have a difficult time attaining financial viability in the short run because of its late-mover disadvantage.
It will also need to penetrate undeveloped areas whose deployment costs are higher than the almost saturated urban markets dominated by the incumbents.
The market realities of capital intensity, sunk costs and economies of network size therefore prevent a realistic entry of a private third player, according to Patalinghug.
The paper showed that in 2015 alone, PLDT and Globe’s capital expenditures already amounted to 29 percent of their total service revenues.
This ranked second only to China’s 36 percent globally.
In contrast, telecoms firms in the US spent only 14 percent of their revenues on network improvements in 2015.
Salalima said in his meeting with President Duterte in October, he recommended that the government build and manage the network, and then allow private companies to lease it.
This would be beneficial to the telcos, which lack the necessary broadband infrastructure in far-flung or “missionary” areas.
“We hope to lay the groundwork, so the telcos can come in and begin to offer much-needed internet services to the residents there,” Salalima said.