Give NTC 'more teeth' for better Nat'l Broadband Plan – PCC

MANILA, Philippines – Raising penalties for errant telecommunications companies and removing outdated policies would go a long way toward making the promise of cheaper and faster internet a reality, according to the Philippine Competition Commission (PCC).

The Department of Information and Communications Technology (DICT) is currently working on the National Broadband Plan (NBP) which aims to, among others, upgrade the quality of broadband services in the country, widen its reach, and link all government units through the internet. (READ: What is the National Broadband Plan?)

In support of the initiative, the PCC released a position paper on Thursday, March 30, recommending several measures to give regulatory bodies like the National Telecommunications Commission (NTC) "more teeth" to enforce its mandate.

One key proposal is amending Republic Act (RA) No. 7925 to allow the NTC to impose higher penalties on telcos violating the country's laws and regulations.

The PCC noted that RA 7925, which was passed in March 1995 and provides for the development of the telco industry, does not have penal provisions.

Because of this, the NTC applies the penalties provided under the Public Service Act of 1936, which sets fines at not more than P200 per day until the violation is corrected.

"When penalties are low and enforcement unlikely, operators will tend to choose to violate rules rather than sacrifice profits," the PCC said.

Removing barriers to entry

Beyond this, the PCC noted the need to remove regulations that create barriers to competition, including the high cost of franchises and other permits which make it difficult for new players to enter the market.

"As a result, market concentration is high and this allows existing players to dominate the market with less pressure to perform efficiently," the PCC explained.

The anti-trust watchdog also took issue with regulations that give telcos the ability to co-use, and allow them to transfer or share their privilege to use certain frequency bands to another firm.

"This sometimes poses a problem since it limits the government's prerogative to allocate the essential, but finite, resource in a way that is fair and efficient," the PCC said.

Finally, the PCC pointed out that the restriction on foreign ownership, which is capped at 40% under the Constitution, is another hindrance.

"This effectively protects the existing players from competing with technologically advanced and efficient potential players," it said.

Pushing for interconnection

The PCC is also pushing for effective interconnection, which it said "must be prioritized and aggressively pursued."

Interconnection in telcos is the linking of a carrier's network with another firm's network for mutual exchange of traffic.

"Interconnection is arguably the most crucial component to enhancing competition within the telco industry. Because interconnection rates and terms are negotiated bilaterally between firms, they are strongly affected by relative bargaining strength," the PCC said.

"Operators with fewer subscribers or less extensive networks, for instance, have weaker bargaining power and would have difficulty obtaining favorable terms from their bigger competitors."

The PCC also agreed with the proposal under the NBP to create an open access policy where players are provided with wholesale capacity from existing national backbone network operators, such as Globe Telecom and PLDT. The terms would be non-discriminatory and transparent, and prices would be subject to the NTC's regulatory oversight.

This would help lower costs for new players since they would not have to invest in physical infrastructure – for instance, laying down more cables when there are existing ones.

In line with this, the PCC noted that there should be detailed regulatory guidelines on critical aspects of interconnection such as negotiation arrangements, establishment of interconnection rates, and technical terms and conditions.

"Focus should be given on interconnection obligations for the existing dominant operators since only firms with substantial market power have the ability to establish interconnection terms independently of competition," the PCC said.

"Since the existing dominant players have the incentive to charge exorbitant rates to its smaller competitors, interconnection charges should be regulated to ensure that they approximate actual costs."