The Need For Better Broadband Services In Philippines

The Arangkada Philippines Project (TAPP) 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 is a catalyst for development and a tool to accelerate and sustain economic growth.

A World Bank study estimates that a 10-percent growth in broadband penetration increases gross domestic product (GDP) by 1.38 percent.

The Philippines has huge potential to raise its GDP through better access to broadband services.

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

While mobile broadband penetration rate is at 20.3 percent in 2014 due to the 30 percent smartphone penetration rate in the country, fixed broadband is 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 are 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 provides “limitless possibilities” to MSMEs through e-commerce. The digital technology is also 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 Philippine economy as they comprise 99 percent of the total establishments in the country and more than 60 percent of the total employment. However, only 1 percent of MSMEs are connected to digital platform.

On the other note, the 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 will promote inclusive growth in rural areas.

Broadband Internet is also crucial for the financial sector, healthcare, and governance, among others.

Data from the Department of Education also show that, of the total 46,598 primary and secondary schools nationwide, only 21 percent or 9,863 schools are connected to the Internet while the remaining 79 percent or around 36,735 schools are disconnected to the Internet.

Challenges and binding constraints

“Philippine broadband penetration is limited, 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,” American Chamber of Commerce of the Philippines (AmCham) ICT Committee Co-Chair Frank Holz pointed out.

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

TechInAsia survey in 2015 said price of one gigabytes (GB) data in the country is “very expensive” at USD7.10 compared to Malaysia’s USD4.42 per 1GB, Vietnam’s USD3.58 per 1GB, Indonesia’s USD2.84 per 1GB, and Thailand’s USD2.74 per 1GB.

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

The policy brief mentioned that the slow and expensive broadband services in the country is due to lack of competition in the local market because there are barriers to entry in the telco sector

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

First major barrier that hampers the entry of new players in the market, according to the policy brief, is 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 also noted that the challenges in broadband services also involve anti-competitive practices of telcos, weak and ineffective regulation, inadequate infrastructure, and lack of interconnection.

Policies needed for a competitive Philippine broadband

The business groups urged the government to adopt an Open Access Model which separates physical infrastructure from service provisioning.

“First, it 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 explained.

The business groups also recommended to abolish the telco Congressional franchise requirement and push for the following legislative agenda: amending Republic Act 7925 and the Commonwealth Act 146 as well as enactment of the Department of Information and Communications Technology Act and passage of the National Telecommunications Commission Reorganization Act.

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

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