Jack Ma would have been shocked at our telecoms industry

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Kazakhstan, Kenya and Cambodia have better telecoms

CHINESE mega-billionaire Jack Ma the other day told an audience that included executives of PLDT and Globe Telecoms, the two firms that make up the telecom monopoly in our country: “Your internet service is not good here.”

Ma, whose wealth—mainly from his e-commerce behemoth alibaba.com—wouldn’t have been possible if not for his country’s developed telecoms sector, would have fallen off his seat in shock if he had been told: “The two firms that control our telecoms sector are majority-owned and -controlled by private companies from Indonesia, Japan, and Singapore.”

After the shock wore off, Ma would have told his companions—of course, beyond hearing distance of his hosts:
“These Filipinos must be crazy or stupid for allowing foreigners to own public utility companies that are natural monopolies.”

DUTERTE’S NEW FAN? The billionaire at the Palace the other day.

Ma’s Alibaba has become the world’s largest retailing company, surpassing even the American Walmart. It is the planet’s biggest internet company, bigger than Amazon.com and Ebay.com. Alibaba would not have grown to a global company if not for the phenomenal growth of China’s telecoms industry, particularly its worldwide web infrastructure.

In 2001, only 3 million Chinese had internet service (or 0.3 per 100 people); by 2016, 323 million Chinese were being served, or 23 per 100 people. By comparison, only 5.5 per 100 Filipinos have internet service.

Among other things, the biggest and most stark difference between the structures of the Chinese and Philippine telecoms industry is the following.

All state-owned

The three Chinese firms that developed and run the country’s huge telecoms industry—China Telecom, China Unicom and China Mobile— are all state-owned. There is competition as different state enterprises own each of these firms.

The firms’ priorities have not been profits but the expansion and improvement of their services. Profits either go the state (which increases its money to better serve the nation) or are used for the development of their infrastructure.

Ma would be shocked as it is so clear, if not for the neoliberal brainwashing of Filipinos (especially of our economists), that nationals — the state or its citizens — must own and control public utilities, not foreigners.

Yes, capital from abroad is good, but public utilities like telecoms that exploit the industry’s monopoly features (these have captive markets) as well as natural resources (like the radio spectrum) should be reserved for nationals.

The neoliberal champion in the country, economist Bernardo Villegas, keeps harping that China and Vietnam have opened up to foreign investments. What he doesn’t say is that they have not done so for public utilities, especially the telecom sector.

State ownership of public utilities in fact has been the policy and the practice of all Asian nations.

NTT, SK and Singtel

Nippon Telegraph and Telecommunications (NTT) of Japan, SK Telecom in Korea, Singapore Telecoms (Singtel) in Singapore were all state firms monopolizing their telecoms sectors. Only when they had grown to be global conglomerates—after they had taken advantage of their captive market in their countries and the limited natural resource that is the radio spectrum—did their governments allow foreign companies to come in, which to this day have only very small shares in their markets.

Compare that to the situation in our country, really the exception in the region.

The biggest owners of Philippine Long Distance Telephone Co., according to its 2016 report to the US Securities and Exchange Commission, are the Hong Kong-based First Pacific Co. Ltd., controlled by the son of strongman Suharto’s biggest crony, Sudono Salim, and Japan’s state-controlled behemoth, the NTT conglomerate.

Salim’s First Pacific and NTT together own 47.6 percent of PLDT, way past the 40 percent constitutional limit.
Add the 9.6 percent in American Depository Receipts held by US investors through J.P. Morgan Hong Kong Nominees Ltd. and the 19 percent held by foreigners in the Philippine stock market. and total foreign ownership of the country’s biggest telco is 76 percent.

It is astonishing—or maybe not, given their owners’ 100 percent Spanish-American blood—that Ayala Corp. has acquiesced to become just the second biggest investor (with 30 percent shares) in Globe Telecoms. Singtel, owned by a firm of the Government of Singapore, is Globe’s biggest stockholder (and allegedly in total control of the firm) with 47 percent. Together with 17.4 percent held by foreigners through the stock market, Globe Telecom – the second member of the duopoly in our telecom sector – is 64 percent held by foreigners.

It’s a long story how we have come to such a sad situation, which I detailed in my book, Colossal Deception: How Foreigners Control our Telecom. The book’s subtitle points to how these happened: “A Case Study of Corruption, Cronyism and Regulatory Capture in the Philippines.”

“I don’t care who owns our telcos as long as I get good service.” That’s a response I have not rarely received.

But the logic there is a bit like not caring what kind of animal guards your henhouse, even if it is a fox just waiting for his leash to arrive.

However, the proof of the pudding indeed is in the eating.

Our foreign-dominated telecoms sector has become the laggard in the region. According to statistics of the International Telecommunications Union, we have fallen from being ranked 95th in 2008 in the body’s information and communications technology index to 107th in 2016. We have even been overtaken by war-ravaged Vietnam. Malaysia and Thailand are now way ahead of us.

As the accompanying table shows, Akamai’s State of the Internet report for the first quarter of this year shows we are ranked 100th (in a list of 140), with our average 5.5 mbps internet speed, slower even than Vietnam and Indonesia. Note in the table that countries whose telecom sectors are controlled by state firms are those with the fastest Internet speeds.

The situation depicted in the second table, from data of another internet firm Ookla (which runs the very popular speedstest.com) is even darker. Countries poorer than us or which have been severely damaged by war have faster mobile or fixed broadband speeds than what PLDT and Globe give us, among them, Vietnam, Kazakhstan, Kenya, Mongolia, Nicaragua, Honduras, Cambodia, Sri Lanka, Bangladesh and Bosnia.

I’ll bet that many readers of this column will even deny that they ever get the average Internet speed here reported in these figures, 12 Mbps for mobile and 13 for fixed broadband.

What’s shameful is that both PLDT and Globe take Filipinos for fools, telling outright lies. Globe in the materials it distributed for its recent stockholders’ meeting made the preposterous claim that the Philippines is ranked 1st in Asia and Pacific for mobile internet connection speed with its 14 Mbps speed, based on Akamai’s 4th Quarter Report.

But that Akamai report noted that that figure referred to less than 24,000 mobile internet users, a fraction of the over 1 million mobile-internet users. My guess is that perhaps Smart and Globe officials are given super-fast speeds.

PLDT spokesman Ramon Isberto, on the other hand, claimed that his firm is improving its services so that it can now provide 4G LTE speeds of 11 Mbps. The guy’s an ignoramus: the poor countries I just mentioned have speeds of at least 14 Mbps.

Next week, I will explain the mechanisms why the present structure of the telecom industry, as dominated by private foreign monopolists, can never develop it to world standards.

Telecoms in the 21st century is the major economic base for economic growth. We have to take back our public utilities, which the past three administrations gave to foreign monopolists.