Bitter telco rivalry cause of slow Internet service

By Riza Lozada 

Vicious competition is preventing the Philippines’s two major telecommunications firms from interconnecting their broadband networks, which has proved to be a major hindrance to improving Internet connection in the country, Oxford Business Group (OBG) has confirmed.

The global consulting and research firm noted that because of the unhealthy competition between Smart Communications and Globe Telecoms, data communications take a circuitous route – they have to be relayed abroad first before they are rerouted back to the Philippines.

“While around 20 percent of all Internet traffic in the country is local, some 70 percent of this has to be routed outside the country before returning to the Philippines. This slows down connection speeds and incurs an extra IP charge, increasing the cost for customers,” OBG reported.

The World Bank earlier said every 10-percent increase in broadband connectivity results in a 1.3-percent increase in gross domestic product (GDP). OBG said the information technology (IT) infrastructure in the country must thus be improved in speed, coverage to lower the cost.

Incoming President Duterte has already noted the poor Internet service, prompting him to warn the two giant telcos. The warning, in turn, was taken by the Philippine Competition Commission as a go-signal to look into the nefarious rivalry, with the view to vastly improving the Internet service.

The incoming leader said that if current dominant players do not improve their services, he would open the Philippines to foreign telco players that could provide better service.

PCC Chairman Arsenio M. Balisacan, former socioeconomic planning secretary and director-general of the National Economic and Development Authority (Neda) was quoted as having said the incoming President’s “signal” would make his agency’s “job” on the warring telcos easier. He also told of his personal experience with the poor quality of the Internet service, even as he upgraded to a higher-priced subscription.

One of the principal hindrances to a better Internet service, according to OBG’s “The Report: The Philippines 2016,” is the lack of a peering arrangement between the two dominant players in the national telecommunications industry.

“A peering arrangement is the data equivalent of a telephone interconnection agreement,” OBG explained.

The government has launched a “free Wi-Fi” project with budget of P1.4 billion for implementation from 2011-2016, which aims to digitally empower Filipinos. But with the slow Internet connection, observers fear the program would contribute little to interconnection.

Last May 23, President Aquino signed into law Republic Act (RA) No. 10844 creating the Department of Information and Communications Technology or DICT. The Declaration of Policy under the law says that the state recognizes the vital role of information and communication in nation building and ensures the provision of strategic, reliable, cost-efficient and citizen-centric information and communication technology (ICT) infrastructure systems and resources as instruments of good governance and global competitiveness.

With the creation of DICT, the agencies to be abolished and transferred to the new department are the Information and Communications Technology Office (ICTO), the National Computer Center (NCC), the National Computer Institute (NCI), the Telecommunications Office (Telof), the National Telecommunications Training Institute (NTTT), and all operating units of the Department of Transportation and Communications (DoTC) with functions and responsibilities dealing with communications.

The law mandates that the agencies to be attached to the DICT will be the National Telecommunications Commission, National Privacy Commission, and Cybercrime Investigation and Coordination Center (CICC).

OBG has noted that the creation of the DICT will provide the government with the primary entity to promote and help develop the ICT sector.

Oxford said the creation of the National Privacy Commission, which will monitor and enforce the Data Privacy Law that was passed in 2012, has long been awaited, particularly by the business process outsourcing industry (BPO). The NPC will also ensure the appropriate handling of personal data.

Apart from cybersecurity concerns, the country also faces obstacles in IT infrastructure, which needs to improve in speed, coverage and cost.

The Philippines ranks 108th globally in terms of average connection speeds at 2.8 Mbps (megabytes per second), lower than Malaysia’s 4.9 Mbps and far behind South Korea’s 20.5 Mbps, according to OBG, citing Akamai’s third quarter 2015 “State of the Internet” report.

In last year’s fourth quarter, two major Internet service providers, the Philippine Long Distance Telephone Company and Globe Telecom, began offering higher speed services of up to 1 Gbps (gigabits per second), Akamai reported. “Available in more than 1,600 villages across the country, the plans will offer speeds of up to 1 Gbps and may boost peak connection speeds for what has historically been one of the slowest countries in the region,” Akamai, a global leading content Internet provider, said.