Philippine telecoms improving, study says

The Philippines telecommunications industry has progressed from being “underdeveloped” last year to “having high potential” for rapid development this year, according to an annual study conducted by global technology research and consultancy firm Meta Group Inc.

Meta Group’s latest Asia-Pacific Telecom Maturity Model study classifies the Philippines under its “C1” category and groups it together with other countries that are “developing with high potential for rapid evolution.”

With this new ranking, the Philippines, thus, moved two notches up from its “D” (underdeveloped) classification last year.

Based on this year’s results, the Philippines is now ranked in the same category as Malaysia and India, which also improved from its C2 classification last year. Among the Asia-Pacific countries covered by the study, the Philippines made the most significant improvement by climbing two notches higher, said Lauro Vives, Meta Group vice president for Asia-Pacific.

“As early as last year, we knew the Philippines was poised to move to C2. But the recent progress we observed exceeded our expectations,” Vives said in a recent briefing at the Department of Trade and Industry (DTI) where the Meta Group study was presented.

According to Meta’s Web site, countries classified as C1 and C2 have telecommunications industries that are “less deregulated and (have) limited competitive infrastructure” which result in “slow price decreases or basic services unavailability.” Meanwhile, countries under the D category are characterised by the presence of a monopoly in their respective telecom industries. Based on Meta’s study this year, countries under this category include Thailand and Vietnam.

Started last January, the yearly Meta Group study focuses on the telecom industry of each country in the Asia-Pacific region. In the Philippines, Vives noted that various industry players as well as the government industry regulatory body, the National Telecommunications Commission (NTC), were consulted for the study.

Among the factors the study looked into were the degree of privatization of the local industry, degree of deregulation and interconnectivity between industry players.

“The Philippines has a very healthy wireless services industry and improved as well in data telephony brought about by broadband Internet access,” Vives said. The Meta Group official cited the deregulation laws that were enacted during the previous decade which opened up the industry, through the Service Area Scheme (SAS), to other players and broke up the monopoly once enjoyed by dominant carrier Philippine Long Distance Telephone Company (PLDT).

While the Philippines no longer has a telecom monopoly, it still needs to attract more than the current crop of industry players in order to move up further in the Meta Group’s telecom rankings.

“The government should push for policies that increase competition and enhance interconnectivity so that better pricing would follow,” Vives suggested. “There is a lot of potential for other carriers aside from PLDT.” Vives referred to PLDT as the only player, at the moment, that can offer “nationwide” services or services that span the entire country. In contrast, other wireline players operating under SAS only cover specific areas.

While the SAS has generated positive results for the local industry, the Meta Group report mentioned that this business model is now restricting competition as it “lacks unbundling of the local loop.” In short, other players should be able to offer services similar to PLDT’s to bring down rates although this would entail additional infrastructure on the part of competing players.

The Meta Group also recommended that the government introduce industry policies conducive to the entry of foreign investors. These would include the lifting of foreign investment caps and the granting of licenses to foreign carriers.

Compared to India, the Philippines is seen to have a more limiting business ownership rule (60 per cent Filipino and only 40 per cent foreign) in terms of equity that involves foreign investments.

As far as the telecom industry is concerned, Vives said there are more foreign investors in India, including major telco players from the U.S., because of its more liberal policies. “Plus major telcos come in with their existing customers,” he stressed.

Moreover, he recommended that the NTC be made an independent body to give it more power in enforcing policies such as those related to interconnectivity.

If these issues are addressed, the Philippines, according to Vives, has a strong chance of moving up to category “B” and join those countries with “highly developed” telecom industries such as South Korea, Taiwan and Singapore.