economics

Will Jack Ma’s Visit Shame Telecoms into Action?

Published October 30, 2017 by Carl De Luna
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Alibaba Group founder and executive chair Jack Ma recently visited the Philippines for a lecture in one of the country’s premier universities, De La Salle University, in Manila. He was invited to talk about technopreneurship and the digital economy, in recognition, he was conferred a Doctorate of Science for Technopreneurship Honoris Causa. His lecture was full of quotes and inspiring lessons. Perhaps his most damning statement was when he tried to test the speed of the Philippines internet. He found out as most of us already know; that it was no good. This statement created ripples in the news and across Facebook and Twitter. Ma’s statement was swift but brutal and painful for executives of the country’s duopoly, PLDT and Globe Telecoms. The two have controlled the internet service and have provided high cost but slow internet service to internet hungry Filipinos.

ASEAN business advisory chair and presidential adviser on entrepreneurship Joey Concepcion said in jest that Smart and Globe should be blamed for the slow internet. However, Ma clarified that it is unfair to blame anyone, and he shared Alibaba’s experience of suffering slow internet speeds in China, saying that the speed is much worse than what the Philippines has. Though, he added that this should not be an excuse for mobile companies.

Globe Telecoms immediately blamed it on the tedious government processes in the development of telecommunications infrastructure. Globe Senior Vice President for Corporate Communication Yolanda Crisanto noted that there is a lot of room for improvement in internet services but Ma should recognize the need for the government and the private sector to work hand-in hand to improve internet services. Crisanto added that they have been calling for the implementation of the National Broadband Plan to enhance fiber and cell sites and urged the Philippine government to invest in the internet superhighway. The nation’s two companies have been adamant in easing the processes of building new cell sites, as certain places such as subdivisions bar the construction of cell towers inside their premises.

There have been plans to institute improvements in the country’s internet via a National Broadband Network. A deal was struck between the Philippine Department of Transportation and Communication and Chinese telecommunications firm Zhong Xing Telecommunications Equipment Limited (ZTE) for the NBN project worth $329 million USD. The broadband network was aimed at establishing a “seamless connectivity of land line, cellular and Internet services in all government offices nationwide. It would also cut the cost incurred by the government due to communication between different agencies. However, these plans went nowhere. Thanks to allegations of corruption and overpricing, the deal was scrapped by then President Gloria Macapagal-Arroyo.

Current President Rodrigo Duterte approved a new national broadband program. President Duterte wants “to develop a national broadband plan to accelerate the deployment of fiber optics cables and wireless technologies to improve internet speed.” He also ordered the creation of an inter-agency body named the Info Tech Review Committee to suggest proposals to improve internet access in the country. President Duterte also signed the Republic Act 10929 or the free Internet access law. The law would push for free Wi-Fi in public areas like schools, plazas, hospitals, government offices and transportation terminals. The current government forced the resignation of Department of Information and Communications Technology secretary Rodolfo Salalima. President Duterte said that he asked the former chief legal counsel and senior advisor of Globe Telecoms to quit for favoring his former employer. His temporary replacement Eliseo M. Rio Jr. seems more proactive than his predecessor. He has already identified key areas for improvement. He noted that there is a shortfall of about 50,000 cell sites, a far cry from the necessary 67,000 to provide better internet services to Filipinos. He also said that the government will invest in providing free Wi-Fi services across a period of roughly 5 years. Their targets for this year is 5,000 access points and hopefully before the end of President Duterte’s term in 2022, there will be 250,000 access points. Rio described the plan with the government initially subscribing to local Internet service providers for the first 3 years, with the service connected to its core network, with the aim of weeding out inappropriate usage. At the same time, the government will build cell towers and deploy fiber optic cables throughout the country, especially in the countryside. He estimates that within 3 years, the government can migrate to its own network.

It is up to the private players such as Globe and PLDT to step-up their game. However, they have never had any incentive to do so. The dynamics of the telecommunications industry is not what it seems. Other nations have a state firm controlling the telecom sector, but the Philippines has no such firms. Globe and PLDT are both privately run and by somewhat shady corporate owners. Globe is owned by the Ayala Corporation, founded and run by owners which have Spanish-American heritage. But they are not the majority owners as Singapore’s SingTel owns 47% of Globe in addition to 17.4% held by foreigners via the stock market. PLDT on the other hand is much worse. It is owned by First Pacific Co. Ltd, a company controlled by the son of Indonesian dictator Suharto’s largest crony, Sudono Salim and Japanese state firm, NTT. Combined they hold 47.6% of PLDT with the 9.6% held via the American Depository Receipts of US investors via the J.P. Morgan Hong Kong Nominees Ltd and 19% held by foreigners via the stock market. Both are guilty of violating the 40% constitutional required towards foreign ownership and have operated without any government questions to this day. Both have some of the highest profit margins in the telecommunications industry which explains why they crowded out the potential entry of Australian firm Telstra and their local partners, conglomerate San Miguel Corporation. The failed entry of the third player meant that the powerful 700-MHz band would be given to PLDT and Globe. Philippine anti-trust body Philippine Competition Commission deemed that the sale was “cartel-like behavior”. The PCC elevated their petition to the Philippine Supreme Court to lift the injunction against its review of the PLDT and Globe acquisition of San Miguel Corp.’s telecommunications assets.

Jack Ma’s visit should serve as a wake-up call to all stakeholders to do their jobs in improving the internet services of Filipinos. The government should not stop in its own initiative to create its own broadband network to lessen its dependence on telecom networks. However, budget constrains may hinder its goal and thus must seek assistance from funding agencies if necessary. But the government must show its fangs with its anti-trust body, the PCC. It must act to restore competition in the telecoms sector and others which have gone unregulated throughout the years. The government must decide if the duopoly is best serving the people and become more efficient in processing permits for the cell sites and fiber cables. PLDT and Globe on the other hand should invest more on its infrastructure to ensure that better services are provided to their customers. They should also be proactive and smart in the ways to build cell sites and fiber cables. If they invest more in their network, maybe there will be less complaints from their customers. They should value customer feedback and provide them the best service.

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