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Smart and Globe’s schemes to maintain their duopoly and prevent a free market

Two schemes by the two foreign-owned companies that have total control of our telecom industry — PLDT’s subsidiary Smart and Globe Telecom – have prevented us, consumers, from enjoying a free market in this sector and made us suffer their poor, expensive service.

Unless the Philippine Competition Commission — the National Telecommunications Commission (NTC) is useless and has become the telcos’ “captured” regulator — orders the two telcos to end these schemes, there wouldn’t be any real competition in this sector, and any third telco that enters the market would only bite the dust in a few months.

The first scheme involves the fact the telcos do not allow what’s called in the industry worldwide as mobile number portability. This enables cellphone users to retain their telephone numbers when switching subscriptions from one network carrier to another.

Imagine what could have happened if San Miguel reached a deal with Telstra and the Australian telecom firm entered the local market, offering a 20 percent discount to its new phone service customers moving from Smart or Globe? Counter-intuitively, there wouldn’t be a rush for San Miguel-Telstra’s service.

This would be because many cellphone users, especially those with post-paid accounts, wouldn’t want to face the prospect of being unable to keep their existing telephone numbers if they switched, and would, instead, have to undertake the tedious work of informing their friends, clients, and business contacts of their new numbers.

What’s the use of, for example, Globe Telecom offering you prices lower than Smart’s if you’d have to change your number and suffer the hassle of having to inform your contacts, even risking becoming incommunicado for a while, or forever, to your business prospects? How many times have you been misinterpreted as ignoring somebody just because you’ve been failing to receive and respond to his text messages since the time you changed your number?

Several studies have found that the biggest hindrance to a new telco entering a market controlled by a monopoly, or a duopoly as in our case, is the fact that the existing players are not required to have mobile number portability. Mobile number portability has become a standard feature in most countries in the world, except, of course, countries known for their elites’ capture of regulatory bodies.

When I was ambassador to Greece, which is nearly 10 years ago now, I changed my mobile carrier thrice, and still retained one number. And that was Greece. Most Asian countries, and almost all of Europe, in fact, require carriers to allow mobile number portability. Singapore, which is dominated by Singtel – the biggest stockholder of Globe Telecom – has mobile number portability.

Japan, South Korea Thailand, Malaysia, Hong Kong, India, and even troubled Pakistan, all have mobile number portability. Why can’t we?

A monopoly in disguise

That Globe and Smart constitute a monopoly in disguise, which have their agreements on sharing the market, and on what aspect of the industry they’d be competing (or pretend to compete) is obvious in the fact that you haven’t heard of them talking about mobile number portability.

The utter uselessness of our NTC, or its complete capture by Globe and Smart, is obvious in that it has not made any move to require the two telcos to offer mobile number portability to customers. (A lifestyle check on their top officials should be undertaken by the Duterte government.)

The telcos’ second insidious scheme for hostaging their customers: lock-in periods for post-paid subscriptions of as long as two years. If the subscriber can’t meet his monthly payment, or is disappointed with the service, he can’t just cut his service: the penalty is as much as the amount of six monthly payments.

A friend was ecstatic that PLDT’s fiber optic-based broadband service became available in his area, which had been promoted as featuring internet speeds of as much as 50 megabits per second. A few days after he got his broadband service, a PLDT employee called him up to confirm his subscription, and in a by-the-way manner said the lock-in period for the service was 30 months!

Now I’m starting to understand why San Miguel gave up on its project to set up a third telco with the Australian Telstra. Even if they did set up state-of-the-art equipment and offer services at lower prices, the joint venture would have to wait for probably at least a year for the locked-up customers of Smart and Globe to be freed.

On the surface, to our legislators’ credit, a bill was passed in Congress in 2015 to end such insidious practice of our telcos, authored by, curiously, Francis Gerald Abaya, and supported by the committee on information and communications technology, which was dominated by Liberal Party members.

I say curiously, since he is the brother of then DOTC secretary Joseph Emilio Abaya, president of the Liberal Party who, with his political clout, could have asked the NTC to end the telcos’ lock-in requirements. The bill was passed by the House of Representatives in June 2015 and then referred to the Senate, where it stood stuck until the 16th Congress, which ended June 30, 2016. Was it just, as many bills really are, a fund raising project?

The Securities and Exchange Commission (SEC) has failed us by not stopping the operations of these two companies, which have been violating the Constitution by exceeding the 40 percent limit on foreign capital in public utilities.

The NTC obviously has failed us in practically giving in to all of the two telcos’ wishes.
Perhaps it would be the Philippine Competition Commission (PCC), with its broad powers, that could finally require these firms to lessen their greed, engage in real competition, and provide us with efficient and inexpensive communications services.
I don’t think the PCC chairman, Arsenio Balisacan, would risk ruining his integrity as a truth-seeking academic by declaring that Smart-Globe are not functioning as a monopoly, which it obviously is.

The best thing that could happen to our telecom industry would be for the PCC – and the new Duterte administration – to reject the purchase by Smart and Globe of San Miguel’s right to a part of the 700 megahertz band, crucial to mobile telephony now.

The government should require SMC to bid it out to other prospective new telecom players, so at least we would get a viable third telco to instill real competition in this crucial industry.


This Post Has 7 Comments

  1. renato irlanda

    we thought all the while that the bad guys were the rotten generals of the pnp.
    alas it turned out that the elite ( they are inherently bad ) were controlling and has transformed the top brass of the ntc and the sec ,particularly into their zombies. the tables were turned, instead of controlling pldt and globe, ntc and sec became the controlled ones

  2. mangcosme

    Are they (Globe and Smart) still covered by the PCC rules insofar as this deal with SMC is concerned? I heard they agreed on it a few days before the RR of the Competition Law were rolled out, suspiciously skirting the provisions. SMC was reportedly ready to offer products and services disruptive of these two carrier’s onerous practices. I hope that the deal can be negated and the 700 MHZ band could really be re-bid. We need a real competitor to both carriers. Our internet speed is too slow yet very expensive.

  3. barks barks

    it was telstra who pulled the plug on san miguel after they realised they were being conned

  4. M C

    SMC could have offered free iphones, portability, partnered with Koreans which have the fastest internet speed in the world and rationalized their rates so that students get half rates and call charges goes on a diminishing scale the longer the call. That could have weaned customers from those two telcos but alas, they seemed to lack mathematicians to design the proper scaling rates. But for me, they may have been instructed by the real owner of SMC to “sell” to the other company which he also owns. There are so many tell tale signs that the money supposedly coming from Salim were just disguised to appear as such but the assets are really part of the pie that was held for safekeeping in other countries and destined for use for our country at the proper time – and the time maybe now that beneegno is gone.

    1. jack reacher

      hmmmm .. interesting
      “…instructed by the real owner of SMC to “sell” to the other company which he also owns…” which other company — the one with japanese or the one with singaporean partners

  5. Josie

    I think these government executives of the SEC, NTC and whatever else, who are responsible for these constitutional violations should be kicked out of their positions and brought to justice.

    We are tired of these shenanigans. Kick them out, I appeal to the President to investigate these anomalies.

  6. Driggs Matabaran

    Agree. We need to have more players to bring the mobile phone and internet rates more affordable. Since NTC failed, the only hope we have is for PCC to act on this important issue…

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