[OPINION] Are PCC, NTC fit to handle 3rd telco player?

Two major government agencies – the Philippine Competition Commission (PCC) and National Telecommunications Commission (NTC) – will play big regulatory roles on the much ballyhooed entry of the still unidentified third telecommunications player in the country.

Broadly, the PCC will have to address the competition issues confronting the third telco player, while the NTC will have to ensure that the new entrant will meet the required regulatory and corporate issues before it could penetrate the market and go full blast in its operations.

Questions: Are the PCC and NTC fit enough to fulfill their regulatory mandates under the law? Could they thoroughly evaluate the soon-to-be identified third telco player?

Rush for entry

Department of Information and Communications Technology officer-in-charge Eliseo Rio Jr said the Duterte administration would announce either by late May or early June 2018 the winning bidder to become the third telco player. That is after accepting the bid documents from the telecommunications firms on or before March 27.

Displaying optimism, Rio said the third telco player could commence operations within 4-6 months from the date of announcement, or either in October or December 2018. Rio did not explain how the third player would commence operations. Neither did he indicate the infrastructure requirements to start.

Presidential Spokesman Harry Roque said President Rodrigo Duterte had earlier offered to the Chinese government the entry of the state-owned China Telecoms to the country. The local partner of China Telecoms was not immediately known, although it was said the PT&T group lead by businessman Salvador Zamora has the upper hand.

From their statements, it could be surmised the Duterte administration was rushing the entry of the third player. Considering the unparalleled magnitude of the investments the third telco player would have to sink to compete against the two giants – the PLDT Group and the Globe Telecom Group, the rush to complete the deal or circumvent the usually tedious and burdensome regulatory processes is surprising, or mindboggling.

For instance, Rio was quoted as saying the government, through the NTC, is inclined to grant radio frequency spectrum and the license to operate by end-May of 2018, or a month after the announcement of the third telco player.

Rio’s statement indicated the Duterte administration was willing to accommodate the entry to the domestic market of the joint venture firm of the state-owned China Telecoms and its local partner in the soonest time possible even to the extent of cutting corners and railroading the regulatory processes. 

Competition policy

The country’s economic life is enhanced by competition and the existing competition policy. Competition leads to a market driven economic environment, where economic players compete to provide the best products and services to the consuming public at the lowest possible prices. The competition policy maintains, enhances, or even strengthens the competitive environment.

The competition policy is embodied in laws, state policies, and regulations that seek to establish and enhance competition. It includes measures to keep, promote, and ensure competitive market conditions by the removal of controls and restrictive practices.

As a rule, the promotion and protection of the competitive environment and processes ensures market stability and efficiency to avoid market failures and trigger higher economic growth. Essentially, the competition policy addresses issues of monopoly, mergers, restrictive, and anti-competitive practices, state entry barriers, consumer protection, and policies on liberalization, deregulation, and privatization

Republic Act 10667, or the Philippine Competition Act of 2014, puts in place the nation’s overall competition policy and establishes PCC mainly to promote the state competition policy. It empowers the PCC to review economic and administrative rules to determine their relevance to market conditions.

The law empowers PCC to stop abuses by dominant players, which include uncompetitive acquisitions, mergers, selling goods and services below cost, tie-in sales, predatory pricing, among others.

As the chief implementer of RA 7925, or the Public Telecommunications Service Act of 1995, NTC, on the other hand, is empowered to pursue the state policy to provide the people with “viable, efficient, reliable, and universal telecommunications infrastructure using the best available and affordable latest technology.”

It is mandated by law to pursue fair interconnection among service providers, provide telecommunications services to unserved and underserved areas, assign frequency spectrum to service providers, and ensure the private sector’s participation in the country’s telecommunications sector.

As the administrator of RA 7925, NTC, a quasi-judicial body, is mandated to conduct a thorough evaluation of prospective telcos and other service providers to determine their economic fitness, technological capacity and capability, and financial muscle to enter the Philippine market, perform full blast operations, and offer efficient and cost effective telecommunications services.

It is empowered to impose fees and penalties to erring service providers, protect consumers from predatory pricing and other market manipulations, and decide on revenue sharing among service providers.

Balisacan’s case

Although PCC was created only in 2014, its first chief, development economist Arsenio Balisacan, is not new to public service. Balisacan was director-general of the National Economic Development Authority (NEDA) and concurrent socio-planning secretary, when then president Benigno Aquino Jr named him its first head.

His stint at NEDA was somewhat tarnished by recent Commission on Audit’s (COA) findings, showing Balisacan as having received what was considered unlawfully granted incentives casts. COA has asked Balisacan and other NEDA officials to return to the government P73.64 million in employee incentives unlawfully granted from 2010 to 2012. 

This order is contained in a 6-page decision, where COA directed its prosecution and litigation office to forward the case to the Office of the Ombudsman for investigation and the filing of appropriate charges. COA has no prosecutorial powers.

The COA order seems to cast doubt over his authority to head the PCC, particularly his moral ascendancy to lead aggressive, high-profile attacks against what he deems as “anti-competitive” behavior by corporations.

COA said NEDA’s grant of the cost economy measure award (CEMA) – a reward for personnel who propose time-saving measures – was not reviewed by the Department of Budget and Management.

“All told, the grant of CEMA is not clothed with authority, considering that it lacked review by the DBM and the eventual approval by the President. Hence, its disallowance is proper,” the decision said.

Besides the failure to secure the DBM and the President’s authorization, COA noted that NEDA Office Circular No. 03-2005 did not even set the criteria for entitlement to the incentive. While NEDA said it managed to meet or exceed its target accomplishment despite only having 64% of the manpower requirement, COA said it did not specify or quantify how man-hours and costs were saved with enough evidence.

Regulatory capture

In his paper presented during the 2017 Telecommunications Summit, Dr Epictetus Patalinjug, a scholar on economic and business issues, cited the consultative document on competition policy that recommended that NTC assume what he had described as a proactive regulatory stance on competition-related issues.

Patalinjug also cited a World Bank study that concluded NTC has limited capacity and resources to set and implement spectrum management policies. This lack has led to a largely passive mode of regulation.

Such institutional passivity in NTC’s official regulatory functions could be a factor in the long-standing perception of regulatory capture, where NTC appeared to have kowtowed to the wishes of the big guys in the telecommunications sectors, including the two biggest conglomerates – PLDT and Globe Telecom.

Hence, its institutional lack of official capability to appraise service providers could be aptly used to railroad the entry of the third telco player. – Rappler.com