Politics of envy in telecoms

In societies where political and economic policies are driven by envy, there is both explicit and implicit hatred when companies become very big, when some people become very rich. This politics of envy states that “People and companies should not become very big and very rich in poor countries; there are so many poor people, jobless and unemployable people. We are a pro-poor government, so we will confiscate as much revenues and income from those very rich companies and give to the poor.”

In such a situation, the “guardians” of the pro-poor government are always on the look-out which sectors of the economy are prospering faster than the average sectors and macro-economy. After they have gathered some data, they will come to propose, if not directly enact, measures that will put more regulations, more taxation, in the “richer” sectors.

One of the “richer” sectors in the Philippines is the telecommunications sector. Only three companies (Smart, Globe and Sun) are providing telecoms service to 40+ million subscribers. That sector is indeed very profitable based on several indicators – annual gross and net income declared, huge spending in advertising, and so on.

So this sector is always getting the attention of government regulators like Congress, National Telecommunications Commission (NTC), and Commission on Information and Communications Technology (CICT). Late last year, there was a strong pressure to force the 3 telecomm companies (telcos) to make their text messages (or SMS) to the public free, and they will collect only on voice calls. Currently, the charge is Php1 per text message, but due to some competition among the three players, they all provide certain promos, like unlimited text for only Php20 at particular hours of the day (or night). In my case, I buy the Php500 pre-paid card for only Php490, and there are 85 free texts. So I pay Php490 and get Php585 worth of call and text load, that’s around 20 percent discount.

That pressure by NTC, Congress, the Office of the President (OP) and other government agencies and some consumer groups did not prosper. I myself was not in favor of such move. Because that would mean the current two billion texts per day on average will become four or eight billion texts per day as people will resume sending unlimited jokes or other less important messages, the cell sites will be swarmed, and the old problem of messages either delivered late or not delivered at all, affecting the important messages, will come back. So telcos will be compelled to put up more cell sites to back-up existing ones, but with little revenue as people will reduce their voice calls and send free texts, telcos will have less money to build new cellsites. And the problem of late message delivery or undelivered messages will become permanent. Then the public will have little or no moral ascendancy to complain. If someone asks you to deliver xx kilos of rice or fish to his relative about five kilometers away and he pays you nothing and he's not even your friend or relative, can he complain if you don't do his "request"?

Recently, the NTC, CICT and some Committees in the Philippine House of Representatives are proposing two measures: (a) peg the text messaging fee to only Php0.50 per text, and (b) telcos will pay “broad spectrum fee” of Php0.05 for every transaction (text message, voice call, etc.) to the NTC, and the latter will use such collections to buy a metering device, said to cost US$30 million, to monitor the telcos’ actual revenue streams.

This is another proposal driven by envy. Look, there are only three major telecom players in the country serving more than 40 million subscribers (out of 91 million population. Singapore with only four million people (and perhaps three million subscribers) has about five competing telcos. Why will various Philippine government bureaucracies pounce on three telcos, instead of deregulating the industry so that there will be six or more competing telcos in the country? Invite Verizon and AT&T of the US, Orange of UK, many other big telecomm firms abroad, to come and provide more attractive services to the Filipino telecomm consumers. More competition almost always means cheaper price, wider options and better services to the consumers.

But I think those big telcos abroad know that the Philippine telecomm industry is heavily regulated, it is difficult to come in without political patronage, and there are plenty of taxes and fees to pay on top of “regular” taxes like income tax and VAT. Such additional taxes and fees are franchise tax, supervision and regulatory fees (SRFs), spectrum users fee (SUF), among others.

The politics of envy always results in a monopolistic or oligopolistic industry structure in a given economy. Sometimes there can be “monopolistic competition” industry structure, but the number of players in a particular sub-industry is generally few. This immediately narrows the range of option for consumers.

I myself want the cost of text messages and voice calls to become lower, I am a consumer. I do not want “free” text messages because that might result in bad services (like undelivered important messages due to crowding of cell sites’ capacity), nor do I like high costs for such services. A Php0.25 or Php0.50 per text message on average (assuming all existing promos will be abolished after such price cut) is fine with me. But I believe that such will be made possible only by having more competing telcos, and not government limiting the industry to only three players then squeeze their hands to obey the envious and parasitic desires of the State and its bureaucrats.