Smart and Globe’s schemes to

maintain their duopoly and prevent

a free market
BY RIGOBERTO D. TIGLAO
JULY 08, 2016

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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.