Phl badly needs better broadband services

The Arangkada Philippines Project (TAPP) recently launched a policy brief on Philippine broadband services, discussing challenges and solutions to improve fixed and wireless connectivity in the country. 

The policy brief noted that access to high-speed Internet was a catalyst for development and a tool for the acceleration of economic growth.

A World Bank study has estimated that a 10-percent growth in broadband penetration would increase gross domestic product (GDP) by 1.38 percent.

The Philippines has huge potential to raise its GDP through better access to broadband services, it has been said.

A United Nations report in 2014 showed that the country ranked 57th among 160 countries in household-broadband penetration, with only 23 out of 100 households having access to broadband Internet.

While mobile-broadband penetration rate was at 20.3 percent in 2014 due to the 30-percent smartphone penetration rate in the country, fixed broadband was low at 2.6 percent.

Internet demand for business and education

During the country’s hosting of the Asia Pacific Economic Cooperation (Apec) meetings, member economies were urged to develop and boost digital infrastructure to allow micro, small, and medium enterprises (MSMEs) participate in cross-border trade.

During the Apec-SME Summit, Go Negosyo Executive Director Ramon Lopez noted that access to Internet provided “limitless possibilities” to MSMEs through e-commerce. The digital technology was also deemed the “great equalizer” for MSMEs to connect products and services both in domestic and overseas markets like what large enterprises can do.

MSMEs are also dubbed as the backbone of the Philippines economy, as they comprise 99 percent of the total establishments in the country and more than 60 percent of the total employment. But only one percent of MSMEs are connected to digital platform.

888The Philippines, as one of the top business process outsourcing (BPO) destinations worldwide, has crucial demand for fast, reliable, and competitive price of broadband services.

Bringing the BPO industry outside the metropolis would promote inclusive growth in rural areas.

Broadband Internet is also deemed crucial for the financial, healthcare, governance and other sectors.

Data from the Department of Education also showed that of the total 46,598 primary and secondary schools nationwide, only 21 percent or 9,863 schools are connected to the Internet.

Challenges and binding constraints

“Philippine broadband penetration is limited, the quality is poor, and access is expensive. It has one of the slowest average connection speeds in Asia Pacific and is the costliest in the world,” according to Frank Holz, American Chamber of Commerce of the Philippines (AmCham) ICT Committee co-chairman.

Meanwhile, Akamai’s State of the Internet report in the third quarter of 2015 noted that Philippine broadband speed was only at 2.8 megabits per second (mbps). This was slower than Indonesia’s 3 mbps, Vietnam’s 3.4 mbps, Malaysia’s 4.9 mbps, and Thailand’s 8.2 mbps.

Also, TechInAsia’s survey in 2015 said the price of one gigabyte (GB) data in the country was “very expensive” at $7.10, compared to Malaysia’s $4.42 per 1GB, Vietnam’s $3.58 per 1GB, Indonesia’s $2.84 per 1GB, and Thailand’s $2.74 per 1GB.

“Broadband services should not be expensive luxuries delivered to a few but basic necessities delivered to the entire country,” Holz said.

The policy brief said the slow and expensive broadband services in the country was the result of lack of competition in the local market because of barriers to entry in the telco sector

Only two telcos dominate the Philippine market: Philippine Long Distance Telephone (PLDT) Company and Globe Telecom, Inc.

The first major barrier that hampers the entry of new players in the market, according to the policy brief, was the congressional franchise requirement for a service provider, which is unique to the Philippines.

With the restriction in the foreign investment negative list, foreign companies are only given 40-percent ownership.

The policy brief likewise noted that the challenges in broadband services also involve the anti-competitive practices of telcos, weak and ineffective regulations, inadequate infrastructure and lack of interconnection.

Policies needed for a competitive Philippine broadband

The business groups comprising TAPP urged the government to adopt an “open access model,” which separates physical infrastructure from service provisioning.

“First, this allows sharing of the physical infrastructure across multiple operators, which can contribute significantly to improving cost effectiveness. Open access offers non-discriminatory terms for service providers or equal access and charges for clients across the board,” the policy brief said.

The business groups also recommended the abolition of the telco congressional-franchise requirement as they pushed for the amending of Republic Act 7925 and the Commonwealth Act 146, as well as the enactment of the Department of Information and Communications Technology Act and the passage of the National Telecommunications Commission Reorganization Act.

The government was also urged to update and upgrade the ICT strategy and plan and improvement in managing spectrum.

“There are numerous policy reforms and market-led options that can be undertaken. But the challenge for the next administration is whether it has the vision for and informed appreciation of how broadband technology could influence a country’s development path,” the policy brief said. PNA