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 Oligopoly 4, Smart bro's inefficient service

Friday, 6am.

I bought a Smart bro prepaid pocket wifi in late December 2015. Earlier it was good. Then about 3 week ago, April, I experienced service interruption despite having a load. I reported it to their Ayala office, the lady asked several questions, I answered them, then said something like I reached the data cap because I used frequently some data-heavy sites like youtube, fb, etc. Then said that the service will resume after about 12 hours. The problem was indeed solved that time when I reloaded my pocket wifi number.

Then two days ago, Wednesday, I  experienced the same problem, first at around 1pm, which I managed to solve after several frustrating attempts at logging in, failure, success, failure, etc. Then around 11:30pm, the problem re-appeared. After tinkering with the settings like what I did earlier that  day, for about 30 minutes, nothing happened. It looks like this.

But when I visit any website, the IP address would re-appear and ask for a login, and when I re-login, this message would appear.

Repeated endless times. What the ???? Yesterday morning when I  woke up, I relogin again, went to settings again, several times, no success. I went to the office to have internet access there and reported my problem at Smart Communications fb page, then followed it up via pm, gave my pocket wifi #, 8:50am Thursday. I added in my pm that "Frequent service interruption is bad publicity, even if you get more revenues, there are also more dissatisfied customers. thank you."

Smart replied via pm at 9:17am that day:

Got it, Nonoy. Send us the following details for proper coordination:

• Location(City & Barangay)

• Last successful data connection

• Latest date of reload

• Have you reached zero balance prior to latest reload?

• Device model

• Website last accessed

• Alternate contact number

I answered all of their questions at 1:32pm, then  asked “Now that I gave all info that you want, when can you possibly restore my web use? thank you.”

No reply until now, 6am Friday, and the problem is still  not solved. What's the problem, Smart?

Problem with duopoly. I also hear and read from some friends their problem with Globe Tatoo. Both Smart and Globe have their own system of inefficiencies and customer inconvenience. This is something that we customers have to endure.

Will update when Smart would finally reply and give any update.

Friday, 9:30am (Update)

I just checked my wifi at 9am, it's now working, thanks Smart.
Earlier, before 7am, I posted this blog article at (a) Smart's fb wall, (b) Smart fb pm, and (c) @LiveSmart twitter account.

Mabilis pala ang aksyon when you publicize your complaint. Nonetheless, credit where it is due, thanks for the action, Smart.

But here's one lesson for me. I will expect that this problem will re-appear and resurface. So I will buy a Globe pocket wifi. Load Smart unlisurf P250 for one week, stop for one week and instead load Globe unlisurf  also for one week. So that means reduce revenues for you, Smart.

Then I will compare which of the two duopoly will give me more reliable pocket wifi service, and blog again.

Saturday, 9am (Update 2)

The problem was back last night, around 10:30pm. After one hour of login, relogin, Settings, changing passwords, etc. I gave up. When I woke up today, the problem  is still there. I reported this to Smart fb wall  and fb pm.

SMART, grrrr! Why? What are the reasons why this problem keeps coming back? How to avoid this from coming back?

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See also:
Telecom oligopoly 1: Smart takeover of Sun, April 02, 2011
Telecom oligopoly 2: Slow internet in the Philippines, April 13, 2011 
Telecom Oligoply 3: Viral story against Globe tel, January 23, 2016

Telecom oligopoly 2: Slow internet in the Philippines

Where there is lack of competition, there is generally lousy service and/or expensive prices. A monopoly (single producer) or oligopoly (few producers) have little incentive to really improve their service or bring down prices. Consumers have little or no option anyway but buy from them, so why spend big money to innovate hard?

There's a good article by a friend, Harry Santos, in his blog today, Why is the Internet Slow in the Philippines. I went to his primary data source, netindex.com and here is the ranking of 170 countries covered as of April 11, 2011. Click on the picture to get a large image.

South Korea has the fastest internet connection all over the world with a whooping 36.64 Mbps. It is followed by Sweden, Lithuania, Aland Islands, Romania, Latvia, Netherlands and so on.

Among other Asian countries, here are their ranks and internet speed, in Mbps:

16. Singapore, 16.48; 17. Japan, 15.94; 23. Taiwan, 13.58;
45. Vietnam, 7.99; 48. Macau, 7.60; 65. Thailand, 4.97;
72. Mongolia, 4.60; 74. China, 4.38; 93. Malaysia, 3.00;
95. Brunei, 2.96; 124. Nepal, 1.98; 125. Philippines, 1.98
129. Cambodia, 1.83; 137. Pakistan, 1.54; 139. India, 1.53;
144. Indonesia, 1.41; 150. Sri Lanka, 1.28, 153. Afghanistan, 1.17;
156. Laos, 1.07; 164. Bangladesh, 0.78.

So one will naturally ask, Why are internet speed in S. Korea, Singapore and Japan, much faster than in the Philippines? Aren't we supposed to have fast internet connection because we are gunning to be no. 1 worldwide in business process outsourcing (BPO) business?

Harry said that S. Korea has 29 competing internet service providers (as of 2002) fiercely competing with each other. The Philippines has only 6 major players, 3 of which are owned by the Manny Pangilinan group -- Smart, PLDT and now SUN. See my related article, Telecom oligopoly 1: Smart takeover of Sun.

I've been suspecting that Pangilinan and his companies are now the new cronies of the past and present administration. Our economy is structurally allergic to fierce competition due to the 1987 Philippine Constitution that disallows the entry of foreign investments and players in many sectors of the economy, and the legislative franchising system for utilities and media. Then add the strong protectionist lobby by various local vested interests, from business groups to NGOs and media, business cronyism is not difficult to happen.

For NGOs, other civil society groups and academic institutions that seek corporate funding for many of their activities, be wary when those corporate interests that thrive on cronyism will be asking for certain "favors" from you later on.

Related article will be UN bureaucracies -- too many, part 2, it's about the plan of some bureaucrats and bureaucracies at the UN to regulate the internet.

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.