• The PCC at the crossroads

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    EFREN L. DANAO

    EFREN L. DANAO

    THE Philippine Competition Commission (PCC) came out with a Preliminary Statement of Concerns on Aug. 25 on the acquisition by PLDT and Globe Telecom of San Miguel Corporation’s (SMC) telecommunications assets. Coincidence or not, it’s strange that PCC issued this document a day before the Court of Appeals (CA) granted PLDT’s motion for a writ of preliminary injunction to stop PCC from reviewing the P70-billion deal.

    Definitely, had the PCC come out with the 16-page document two days later, it would have been sanctioned by the appellate court. By coming out on Aug. 25, they let the public know of their review results without getting cited for contempt of court. The PCC wields strong powers to enhance competition. However, it must not use blinders just to flex its muscles.

    Well, it looks like it has blinders on when it said in its report that SMC’s telco, Vega Telecom, Inc. (VTI), was poised to launch its mobile business under the brand Bell Telecommunications sometime “between the second and fourth quarter of 2016.” I remember that last February, Ramon Ang, the chief operating officer of SMC, said his company was determined to launch a third player in the telecom industry. That was when SMC was holding joint venture talks with Australia’s Telstra, which had promised to invest $1.4 billion for a 40-percent stake. A month later, the talks collapsed. Analysts from Goldman Sachs had estimated that the joint venture would cost $3.5 billion as it would incur huge expenses in building its own mobile base stations and backhaul link in a country of more than 7,000 islands.

    SMC had been trying to launch its telecom venture for years, but it never got off the ground. Before the Telstra-SMC debacle, SMC already ended its venture with yet another foreign telecommunications firm, Qatar Telecom (QTel). SMC was at it for over a decade, but they eventually made a choice to call it quits after incurring P17.6 billion in debt, according to reports.

    And quit it virtually did when it sold VTI’s 700 megahertz band and radio frequencies to Globe and PLDT for P70 billion after its talks with Telstra went nowhere.

    We are giving PLDT and Globe too much credit by charging that they were stopping VTI and blocking any third player from coming in for that matter. It was SMC’s own decision, not anybody else’s, to sell out. It’s not like they had a gun pointed to their head and were forced to give up.

    The 700 MHz band is best at penetrating buildings and at traveling long distances. It can cover wider areas at lower costs. SMC has had it for decades without using it, just like what it has been doing to its 30 percent share of the nation’s radio spectrum before the sale. Had SMC used it, millions of consumers would have benefited.

    Did the PCC or any industry expert complain about the fact that SMC had held all of the precious 700 MHz frequencies and more LTE frequencies than the incumbent telcos did before it sold this resource to its would-be competitors? That was certainly an anti-competitive situation if there ever was one, and a situation where the public was deprived of better internet speed for years. In fact, they should be thankful that these were sold to Globe and PLDT, which could harness their beneficial potential.

    The PCC is supposed to be a game changer. It has the gigantic task of reviewing transactions that are likely to substantially prevent, restrict or lessen competition within the relevant markets in the Philippines. The question is, does the SMC deal with Globe and PLDT fall under this category? And, can it still review what the two telcos describe as “a done deal?

    PLDT and Globe have been at each other’s throats for market share and an increase in revenues. The PCC should consider that in a report last month, international credit rating agency Fitch Ratings took note of the stiff domestic competition in the telco industry, as it expects Globe’s main rival PLDT, to craft an aggressive technique to acquire market share.

    The most important issue in people’s minds nowadays are better service and faster internet speeds, not about frequency, ownership, deals and transactions; it is about when we can all experience better service and faster internet speeds. The PCC can help the public experience these by not allowing one inactive telco to hold all of the 700 MHz + LTE spectrum.

    SMC held on to vital frequencies for over a decade and that it was allowed to do so – the National Telecommunications Corp. should be able to explain that. In deciding to sell, SMC gave PLDT and Globe a better shot at improving services, certainly a better shot than VTI ever had.

    Perhaps the PCC should consider that when they try to fulfill their mandate of making “consumers benefit from more reliable mobile services, faster internet and lower prices.”

    19espiloy47@gmail.com

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    2 Comments

    1. Robert Imperial on

      The last few months have seen intense competition between Globe and Smart — from rolling out the 700 Mhz and other frequencies and even by providing free services such as PokemonGo!

    2. Roralidrakkonis on

      The PCC, which is a holdover of the Aquino administration with its appointees, wanted to go for populist pogi points by the usual interference of Noynoying. Had they succeeded, we’d be back to Square One of poor internet.
      I have to agree with you. The general public is quick to accuse the two telcos for anti-competitive behavior, but don’t explain how the telcos are accomplishing this, other than vague accusations of ‘bayaran’ and pressuring. I suspect this blame is more from lashing out as a result of long frustration over poor service and high prices. The anger is justifiable, but the reasoning (that being a duopoly automatically means they block competition) is flawed.
      SMC had the bandwidth for the longest time but failed to make a go at it even though they already had the beginnings of facilities, even before the telcos filed as case with the NTC for the frequency. The reason SMC could not begin, the reason Telstra held back was that there are just too many fees and requirements for setting up and expanding a telco network. Fitch even stated Telstra’s entry into the Philippine market would have endangered their credit rating, and when the Australian telco pulled out, values of their shares rose, reflecting shareholders’ collective sigh of relief.
      That is the real reason we don’t see competition coming in. Once requirements are relaxed, then we can expect more competition to come in.