• Federalism and the telcos

    Ben D. Kritz

    Ben D. Kritz

    ONE of the significant concerns of the public about the idea of federalism, which may or may not be a serious policy initiative of incoming President Rodrigo Duterte, is that it will simply aggravate the deep-rooted, corrupt dynasticism that governs most of the country below the national level.

    Federalism advocates have never satisfactorily explained how the governance model will overcome that, and so far Duterte hasn’t bothered to even try; being in favor of federalism seems to require a certain arrogant belief that its superiority to other systems is self-evident. The usual rebuttal of the argument that federalism will further entrench the ruling class is that because the system places more authority in local hands, it raises the level of accountability they have to achieve. If the local officials do not perform well, their constituents will be strongly inclined to turn them out of office.

    That presumption is based on a perception of the priorities and critical thinking skills of the average Pinoy voter that I do not believe many people would agree accurately reflects the norm. After all, this is an electorate that decided to take a chance on a new Senator (Pacquiao) based on his demonstrated ability to punch other men in the face really hard.

    And even if Filipino voters epitomized responsible citizenship in a democracy, it is an inescapable fact that civic concerns become narrower and less complex the closer to home they are. As far as most people in this country are concerned, their local officials are performing well enough; as long as basic quality-of-life matters are handled, as long as the trash gets picked up and the streetlights stay on, most public expectations at the local level are satisfied.

    The subtext in the federalism advocacy—that it will result in “better” public officials replacing the local dynasties that have been, in some cases, entrenched for decades—is not necessarily true. Federalism may help to remove the most egregious offenders of civic sensibilities, but the current system is already capable of doing that. And as one reader suggested to me last week, focusing on the system of governance may very well be a case of trying to cure the symptom and not the disease.

    Reader Albert B. suggested that the real problem underlying the dysfunctional system of governance is not political at all, but the country’s dire shortage of infrastructure, which at the national level has typically been approached as a stand-alone issue, albeit a very large one. The lack of infrastructure is felt most acutely in the rural areas, where a large part of the country still lacks even basic necessities like reliable electric distribution or safe and adequate water supplies.

    The lack of infrastructure strengthens local politicians, because virtually every infrastructure project at some point has to pass through the local level. In many parts of the country, local governments—and more often than should be tolerated, individual government officials—have turned permitting of infrastructure work in their jurisdictions into an efficient revenue-generating activity. To build a typical network tower, for example, 10 to 15 permits and licenses are required, and might still involve some kind of off-the-record payment as well. And what makes the issue even more difficult for companies that operate on a national scale is that, even under the country’s current unitary system, processes and policies vary wildly from place to place, making it almost impossible to plan effectively.

    The telecom industry is an excellent example of how local government is actually retarding the development of the very infrastructure the country needs. A long-time technical consultant for one of the two telecom giants pointed out that even under the ‘ordinary’ circumstances of simply maintaining the existing network, the Philippines’ challenging geography, the simple lack of roads or any other access to large parts of the country, careless or malicious behavior from some people, and difficulties dealing with local governments, the job is enormously expensive and difficult at best. Even though we tend to focus on the wireless capabilities of either of the two big networks, the reality is the bulk of the country’s internet traffic is actually carried by cables —cables that cost hundreds of thousands to millions of pesos per kilometer (undersea cable, which is the Philippines’ lifeline to the rest of the world, costs about P5 million per kilometer), and are cut 12 to 15 times a day, whether through carelessness, such as a ship dragging its anchor, or occasionally through criminal acts. Each time the telco needs to make a repair (just as for new construction), arrangements—which are sometimes costly—have to be with the local government for the necessary authorizations.

    This has two results as far as the telecom sector and infrastructure in general are concerned: First, a significant part of the enormous investment both the existing telcos put into their networks each year is simply wasted, and taken together with the other physical and technical challenges this country presents, means that networks are not growing as fast as anyone would like, least of all the telcos themselves. Second, it tends to discourage investors, both foreign and domestic; telecom assets have very high front-end costs, and being advised to add 10 to 20 percent to a capex budget for “fees” is not something that sits well with many boards of directors.



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    1. As shown here, we cannot lay the blame for lack of competition in the telecommunications industry squarely on antitrust fears. An even more deeply entrenched system of corruption and bureaucracy is a large factor. SMC’s almost-partner Telstra complained that its greatest difficulty in expanding to other countries was the different regulatory barriers they had to face in each one.

    2. The incoming president, himself or his aides having mentioned modelling the government after France’s at one point, should see how France, a highly centralized state, is able to deliver the bacon all across the country.

    3. Feder Alis Mo on

      Federalism would put more resources to the hands of local officials. This means added benefits to the constituents but more money to the pockets of those in power. Federalism is silent on how dynasties could be prevented. The more resources these dynasties have to manage, the more tools they have to perpetuate themselves in local offices. The Filipinos, despite the ubiquity of social media, remains the bobotantes of old. Welcome to the Senate Pacman! Better luck next time Alma Moranas!

    4. As part of change the new administration should start using more of our national language Tagalog in communicating like pnoy did to instil nationalism.