Telcos, Pacquiao and China, by Dr. Jop Yap

Another nice commentary from a friend, Dr. Josef "Jop" Yap, former President of  the PH Institute for Development  Studies (PIDS) and now a UPSE faculty member. He gave me permission to post this.

The Wealthy and Popular are Above the Law

by Josef Yap

July 13, 2016

Two noteworthy events made the news today. The first is the decision by PLDT and Globe to sue the Philippine Competition Commission because of its decision to review the deal between the two telecommunication companies and San Miguel Corporation. The second event is the announcement by Bob Arum that Manny Pacquiao is going to return to the ring later this year.

Both these events show how easy it is for the rich and powerful (and popular) to show disdain for the laws of the country.

Rather than wait for the outcome of the review, the two giant telcos decided to question the legitimacy of the PCC’s authority. There is of course the issue of whether PCC’s legal mandate started before or after its Implementing Rules and Regulations were approved and implemented. But given this gray area, the telcos should have granted the institution proper respect by waiting for the results of the review. After all, if they are confident the deal is above board, they have no reason to be concerned. An imprimatur from the PCC would have only provided more credibility to the transaction.

As it stands, the action of the telcos will cast doubt on the validity of the deal. Even if the courts will side with them—and given the reputation of our legal system, it is likely they will— the PCC will still have the authority to evaluate the degree of competition in the market. If it is deemed that the existing structure is detrimental to consumer welfare, the PCC can impose appropriate measures to correct the situation. It is not farfetched that one measure would be to invalidate the deal with San Miguel.

But what the telcos have done is set the stage for transferring authority from the PCC to the courts. If the telcos prevail in this particular issue, the PCC’s authority will likely be dissipated.  This is an acid test for the future of competition in the Philippine economy.

As for Manny Pacquiao, it was bad enough he neglected his duties as Congressman. Taking a leave from the Senate in order to fight again only makes the situation much worse. Many argue that he is entitled to this privilege because he brings honor to the country. This makes one wonder if this is a legitimate reason to commit a crime. “Your honor, Juan de la Cruz, did murder his wife in cold blood but he should be exonerated because he won the Philippines’ first gold medal at the 2016 Rio Olympics.” Can this really be a valid line of defense? But this is not new in our country. The most recent prominent example is granting bail to Juan Ponce Enrile because of humanitarian reasons, which should not even be possible in the country’s legal framework.

We have argued before that it is not corruption that has been the number one malady in the Philippines. It has always been injustice. These two events show unjust our legal system and society has been.

But wait! There is good news! The Philippines just won the arbitration case against China. Justice after all exists in the world. But despite the cause for celebration, a thought keeps nagging at me. The Chinese have a proverb: “We are a peaceful people, but if someone hits us, we will hit back harder.” Could the massive reclamation projects have been triggered by the filing of the arbitration case? If—and this is a big IF—this is the reality, then the victory of the Philippines is a Pyrrhic one.

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See other papers by Jop here: Welfare Economics: Philippine Institutional Issues, November 14, 2011 Free Trade 33: ASEAN Economic Community 2016, February 16, 2014 Winners and losers in the 2016 elections, by Dr. Jop Yap, May 10, 2016

Telecom Oligoply 3: Viral story against Globe tel

This is Globe Telecom, one of two telecom duopoly in this country of 102 or 103 million people. The other is Smart/PLDT. Nice promise by Globe, no? Happy customers, customers first, keep things simple, nice.

Now here is a testimony by one Globe customer, Sara Pagsibigan, whose story went viral, shared 17,235 as of 10:42pm tonight as I write this.

Globe, Mr. Ayala -- your company should be ashamed of this viral story. Globe should produce a corporate position paper recognizing this lousy service and inform your subscribers what steps have been taken to avoid similar situations. Or you produce a large-scale denial story and show that you were indeed very friendly, very sensitive, very "customer first" in dealing with Ms. Pagsibigan.

To nationalists and socialists in this country -- this is one more proof that economic nationalism, protectionism and anti-global capitalism is wrong. When you limit competition to only one player (monopoly) or two players (duopoly) or a few players (oligopoly), you also limit choice and freedom of the people.

Here now is Ms. Pagsibigan's story, posted in her facebook wall last January 21, 2016, 3:20pm.
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I am writing this post because businesses such as Globe Telecom should be accountable for their system glitches and bad customer service. I was not angry at the start. I made a simple inquiry as to why my bill was showing a huge overpayment amount. However, the series of events after this inquiry was an absolute nightmare that has left me feeling helpless and victimized.

The hotline and the Globe store managers told me that the huge overpayment amount on my bill was a double charge and that the money would be returned to my bank. The Store Manager showed me the details on his computer, wherein the first charge for my handset was done on December 13, 2013 for P39,120 and the double charge was done on December 16, 2013 for P39,419. He took my credit card details and said that he would process the bill refund. I called the hotline and went to the Globe store several times for 4 agonizing months (July – October 2015). A Store Manager repeatedly told me to check my bank because “the issue was resolved and the charge back was done”.

I tried to follow up through all the channels – HOTLINE, STORE, TALK2GLOBE CHAT, TWITTER, EMAIL, and FACEBOOK to no avail. Going back and forth the store, repeatedly calling the hotline for 4 months to ask for an update, and chasing managers for updates was time consuming and frustrating. Most of the time there were no updates at all. There were times when my call was not documented. I had to repeat myself in every single call. Hotline representatives were unable to see all the cases and escalations for this single issue. I was promised updates but nobody ever followed through. There were often no managers to talk to when I called the hotline. I requested for hotline managers to call me and even raised a case specifically for a manager to call me, but I never got a call. And during a rare instance wherein I was able to speak with a few supervisors and a manager, they said that their hands were tied because it is the backend that should contact the client once the case has been logged on their end. This backend department did not give me any update for 3 months in spite of all the escalations I have raised. This shows how disconnected the departments are and how limited the service is on the hotline’s end. The original case that was opened by a Store Manager was closed without my knowledge and without any update.

Different information was provided on different channels. A Store Manager assured me that the issue was fixed and that I should check my bank because the charge back was done, while someone from a different department called me saying that it was a technical error and that no money would be returned to my bank. The Store Manager always provided late updates and I had to be the one to follow up. She always had an excuse for not getting back to me. She even called to say that she confirmed that the chargeback was done. I asked for names of the heads of departments as I wanted to address them in my escalation letter but they never gave me this information nor responded to my escalation. She completely stopped providing updates and ignored my escalation letters. The escalation letter addressed to her boss did not reach her boss nor did I get a response. This was absolutely rude and downright offensive. 

Telecom oligopoly 1: Smart takeover of Sun

Last year, I made 3 foreign trips, all sponsored by the respective organizers of the conference that I attended. Chicago, USA in May, Sydney, Australia in September, and Jakarta, Indonesia in October. I was amazed by the greetings by the various telecommunication companies (telco) in those areas. Like these below (I'm a Globe Telecom pre-paid subscriber by the way, so these firms below should be Globe's foreign partners):

1. 5000: Welcome to Rogers Wireless! To call our customer care simply dial 211 as you do at Home. Enjoy your stay in Canada! (Detroit, 5/19/2010)

Nope, I did not go to Canada. After my conference in Chicago, I visited a Filipino friend in Michigan, his place is near Detroit, and he toured me around the Motor City. I didn't know then that only a river separates Detroit and the Canadian city of Windsor. There were greetings from US telcos I guess, but I deleted them already.

2. Vodafone: Welcome to Vodafone in Australia. To call home, dial (+)(country code)(number) or (0011)(country code)(number). For emergency services, dial 112. *charges apply. (Sydney, 9/27/2010)

3. SIM-WELCOME: For FREE wireless internet surfing at Wireless@SG hotspots, dial *186 for free account. Dial *777 for other visitor services. (Singapore airport, 10/06/2010)

4. Maxxis: Maxxis welcomes you to Msia! The current FOREX rate at 06-10-2010 is 14.0593 PHP = 1 MYR. If you need help, you can always call embassy at +60321484233. (Singapore airport, 10/06/2010)

5. Axis: AXIS welcomes you to Indonesia! Enjoy the best 3G services including data access and BlackBerry service with AXIS. To call home, simply dial +. Have a pleasant stay with AXIS. Dial 838 for AXIS Customer Care. (Jakarta airport, 10/06/2010)

6. 62811: Welcome to Indonesia! Dial 211 for your Customer Care, the same way as you do in the Philippines. Have a pleasant stay with Telkomsei. (Jakarta airport, 10/06/2010)

7. INDOSAT: Dear Globe customer, welcome to Indonesia. Thank you for choosing Indosat. Dial 001 or 008 for international calls. (Jakarta airport, 10/06/2010)

That's 5 greetings from 5 different telcos from 3 countries in 2 Asian airports in 1 day. Cool!

The reason why I also got greetings from a Singaporean and Malaysian telcos was because the conference sponsor in Jakarta booked me in Singapore Airlines. So my route was Manila-Singapore-Jakarta and back, Jak-Sing-Mla.

If one is a Smart telecom (in Manila) subscriber, one would also receive similar greetings from different telcos in Singapore, Malaysia and Indonesia.

My Filipina friend who works for a foreign publication and frequently goes to Jakarta says that telco competition there is dynamic, it's a lot cheaper to call a callphone in Manila from Jakarta than from within Manila. She also noted that most media people in Jakarta have Blackberry or Iphone or other wifi-enabled phones.

And this points us to the lack of sufficient telco competition in the Philippines. Before, there were only two players, Smart telecom (by PLDT head Manny Pangilinan group) and Globe telecom (by the Ayala group). Then Sun telecom (by Gokongwei group) came in. From duopoly to oligopoly. The latter is better than the former, and many Filipino individuals and companies shifted to the 3rd player while the original 2 players introduced various promos to retain their consumer base.

This week though, Sun-Digitel was bought by Smart. So the already no. 1, the already big Smart becomes even bigger. There were fears of the dangers of going back to a duopoly. Some sectors proposed to hurry up the creation of a Fair Trade Commission (FTC) for the government to regulate big, few players in utilities.

I am not a fan of creating a new government bureaucracy to impose another set of bureaucracies and regulations supposedly to encourage competition. What we will end up ultimately if we do that, is less competition and more regulations.

There are two BIG killers of competition in telco in this country. The first is the Constitution. For utilities, foreign equity is limited to 40 percent maximum to "protect local industries." Some sectors though have zero foreign equity allowed by the Constitution. So big, successful foreign telcos cannot come in unless they partner with other companies in the top 10 which are not controlled by the Pangilinan and Ayala groups.

The second killer of competition in local telecom is Congressional franchising. For utilities, they need to get a legislative franchise, a law from Congress, granting them a 25-years franchise to operate. This system is institutionalized monopolization of certain sectors. I heard that big time extortion happens there if a company wants to get a franchise, or if it wants to renew its expiring franchise.

There is a third but minor killer of competition, and that is certain regulations by the National Telecommunications Commission (NTC) and the Department of Transportation and Communication (DOTC). A fourth but also minor restriction are the local governments (provinces and cities), which have the power of granting (or denying) permits for construction of cell sites, among others.

So add up those four levels of regulations and it is not easy to understand why a 4th or 5th player in local telecom is almost impossible to come in. So if we put up the FTC, that will be the 5th layer of bureaucratic regulations.

Meanwhile, I am hoping that after the Gokongwei group has given up in the telecom sector, to use the money to expand on their other businesses like Cebu Pacific (airline) Robinsons (malls and real estate), etc., some really big investors will come in to become at least the 3rd player.

Government, oh government. Always playing double talk on competition when all they want actually is more regulation and more monopolization.