Why PH gov’t can’t be 3rd telco player some think it would now be

In Business by Jose Bimbo Santos0 Comments

Just to immediately get this out of the way, this is not meant to belittle the landmark Luzon Bypass Infrastructure (LBI) project for what it truly is — a milestone initiative that undoubtedly would help bridge the Philippines’ yawning digital divide with the help of Facebook.

And this is thanks no end to sustained government efforts that started from the now-defunct Department of Information and Technology (DICT) predecessor, DOST-ICT [Department of Science and Technology-Information and Communications Technology] Office headed by Louis Casambre, and now finally finalized by DICT officer-in-charge Eliseo Rio.

Watch this video published by News5 if you want to know more about the Luzon Bypass Infrastructure project

But I think some degree of qualification should be in order with respect to how the public may misconstrue the LBI project — of government now stepping up to the plate as “the third player.”

To an extent, it could in as much as it will substantially enhance the existing function of DICT — carried over from DOST-ICTO — of providing a dedicated public-sector backbone and of serving missionary areas.

But will it go head-to-head against incumbents PLDT/Smart Communication and Globe Telecom? I don’t think it can, nor should it.

SEE ALSO: PLDT vs Globe vs Converge vs Sky: Fiber-internet plans available

Actually, this project will also ultimately be beneficial to the duopoly in the long run by nurturing demand in areas where it does not make business sense for the private sector to invest now. They’re the so-called underserved and unserved areas, which are targeted as main beneficiaries of the DICT’s National Broadband Plan, besides the public sector.

I don’t see a future scenario where retail consumers could now select the government as the third option over PLDT/Smart and Globe. What is optimal, as is the stated goal of the DICT, is to enter and serve areas where there is no option at all.

I don’t see a future scenario where retail consumers could now select the Philippine government as the third option over PLDT/Smart and Globe. What is optimal, as is the stated goal of the DICT, is to enter and serve areas where there is no option at all.

Indirectly, the project can empower small internet-service providers and cable operators, as they can eventually lease cheaper bandwidth in bulk from the LBI and package it to end-users as a mobile virtual-network operator (MVNO).

But whether a provider can successfully mount a nationwide operation as an MVNO may be a difficult proposition at this point (a far easier territory to operate as a standalone MVNO is Singapore as shown by Circles.Life). As these initial LBI off-takers are likely to be small, their deployments may most probably be targeted in select areas, not at the level that could make the incumbents quiver in their well-heeled boots.

READ ALSO: Globe vs PLDT vs Converge ICT: Our experience so far

One area that some say could be carved out is the public-sector portfolio of the telco incumbents. That may be true, though I think not in totality.

Regional government offices in untapped areas of course would be best served by the new infra, but national government agencies still have to put up redundancy measures to their connectivity. Also, enterprise services of telcos have now gone far beyond mere access, with its host of bundled ancillary services — like data-center solutions, cloud-application services, and content, among others — that would be challenging to compete against for a small player.

SEE ALSO: Being a first adopter doesn’t always suck: Our case with Smart and Globe

So I guess my point is that there will be vastly different roles for the private and public sectors to play in this space, but not as competitors. The closest analogue I can think of in terms of relationship is Napocor’s missionary electrification program through small power utilities group or SPUG, whose sole mandate is to provide power to off-grid areas. As Casambre said, “The LBI is a small piece of a large puzzle.”

Regional government offices in untapped areas would be best served by the new infra, but national government agencies still have to put up redundancy measures to their connectivity. My point is that there will be vastly different roles for the private and public sectors to play in this space, but not as competitors.

Of course, one of the best solutions to our anguished lament for better services is to have another private-sector player that could compete at scale. But considering that San Miguel Corporation — flush with cash, had consolidated the needed spectrum assets, and had a considerable foreign partner — opted out at the 11th hour speaks volumes about the current balance of opportunities and risks in the telco space.

It also pays to remember that the industry was populated before by at least half a dozen players, all with nationwide aspirations, until the industry’s ruthless calculus narrowed it down to two.

We need a third player. But does a third player want us?

Disclaimer: For what it’s worth, lest this gets thrown at me, let me just state that I’m a TV5 employee, indirectly making me a part of the duopoly. But of course, I am also a consumer who likewise yearns for services to get much better and cheaper and, at least I would like to believe, a fair-enough reporter.

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Jose Bimbo Santos

Contributor: Jose Bimbo Santos is a journalist covering technology, science, and business beats for Bloomberg TV Philippines, TV5, and InterAksyon.