SLOW internet connection in the country is one of the issues that the government needs to address by shelling out the required average investment of P800 billion.
“The approach must be comprehensive,” National Telecommunications Commission (NTC) Director Edgardo Cabarios told reporters on Tuesday. “You can’t just let the private sector address the problem—it cannot.”
“A P60-billion a year capex [capital expenditure]won’t do. The estimate is that just to provide 2Mbps [Megabits per second] for 80 percent of the households, you need P800 billion.
“If the rate is P60 billion a year in broadband for the households, it would take more than 10 years if there is no government investment.
“It’s in the Philippine Digital Strategy (PDS) that by 2016, 80 percent of households would at least have 2Mbps of internet speed . . . The problem with the PDS is that you have a target, but how do you achieve it?” he said.
Left unresolved, poor internet connection speeds and quality limit the success of e-commerce in the Philippines, said an earlier report of BMI Research, a unit of the Fitch Group.
“We expect the success of e-commerce in Philippines will be limited by poor internet connection speeds and quality, which are below the regional average. A recent comparison study done by TechinAsia found that fixed broadband speeds in the Philippines were the slowest amongst 20 Asian countries,” the research firm said.
The recent investment by Philippine Long Distance Telephone Co. (PLDT) to strengthen its broadband network complements its digital business, the report noted.
In 2014, PLDT allocated P34.8 billion to expand its fiber network. It plans to spend P39 billion more in 2015 for a total of 114,000 kms of fiber optics, and between $50 million and $100 million in a second Asia-America Gateway (AAG) submarine cable system to improve connectivity in the Philippines.
“Taking into account that in 2014, mobile broadband penetrations stood at 18.3 percent, while fixed broadband penetration was just 6.2 percent, we believe that the bright spot for online start-ups will be in mcommerce [mobile-commerce]. PLDT observed growth in smartphone ownership to 30 percent in 2014 with usage increasing by 167 percent from 2013,” BMI said.
A large proportion of prepaid subscriptions in the Philippine market indicates that the population is price-sensitive, and using a mobile platform for online transactions is the preferred choice, it said.
“A 2014 survey by MasterCard shows that 34 percent of Filipinos have made a purchase using their smartphone, a share we believe will increase,” it said.
Potential for mcommerce
“Furthermore, PLDT’s strategic acquisition of Paywhere to strengthen its digital business will be supported by the operator’s investment in improving the quality and connectivity of its data networks. Although dismal broadband speeds will limit the viability of online shopping platforms, we believe there is strong potential for mcommerce growth in the Philippines,” the research firm said.
PLDT earlier agreed to acquire the Singaporean start-up Paywhere through subsidiary Voyager Innovations for $5 million.
“We believe that the Philippines’ large population, together with rising data consumption and household incomes, will provide a favorable environment for data-heavy services such as e-commerce to take off in the next five years,” BMI said.
“In 2014, 82 percent of internet users in the Philippines were also online shoppers and we expect ecommerce to grow rapidly in Southeast Asia. Popular fashion e-marketplaces Lazada and Zalora launched in the Philippines in recent years and have recorded strong user growth,” BMI noted.
Last year, amid mounting complaints about slow internet service in the Philippines, the major telcos PLDT and Globe Telecom said they are investing heavily in network expansion and technology upgrades to provide better and faster service.
This comes after a lawmaker urged telecommunication companies to look at ways to improve the country’s poor internet connectivity which is crucial to economic growth.
Globe said that today’s consumers are actually embracing technology at a much faster than before. Because of that, Globe has invested so much in making technology more accessible and at prices that are affordable to the majority of consumers.
The Ayala-led company is spending $700 million to finance its network modernization program.
A lawmaker earlier called on the telcos to explain why the country’s internet service was slow but expensive.
Sen. Bam Aquino, chairman of the Senate committee on trade, commerce, and entrepreneurship, is seeking an inquiry to find out if consumers are getting their money’s worth from the telcos.
The senator cited reports saying that the Philippines had the lowest average internet speed in Southeast Asia.
Based on Asean data, the Philippines’ internet speed (3.6Mbps) lags behind Laos (4.0Mbps), Indonesia (4.1Mbps), Myanmar and Brunei (4.9M), Malaysia (5.5Mbps) and Cambodia (5.7Mbps).
Vietnam hosts speeds of up to 13.1Mbps and up to 17.7Mbps for Thailand. These are the only two other Southeast Asian nations joining Singapore (61Mbps) at Internet speeds above the Asean average of 12.4Mbps.
In the past year, PLDT has also invested significantly in technology upgrades to bring high-speed wireless broadband services to Filipino homes.
PLDT said it is increasing its capital expenditure this year, the highest in the telco’s history.
Meanwhile, Globe used up P11.4 billion in capital expenditures in the first semester of the year to support a growing subscriber base and demand for data.