A competitive telco player?

S I have written in three previous columns, spectrum is patrimonial. It is owned by all Filipinos just like our seas and the seabed. It is part of Philippine territory.

Unfortunately, nothing has been done about spectrum management by the National Telecommunications Commission (NTC). There is no inventory of actual use; hence, valuation cannot even be computed to gain more for hoarding, or just sitting on the frequencies doing nothing and earning from it later. Why is valuation important? “If values are too low, operators risk not acquiring spectrum that could have created value for their shareholders. If values are too high, operators risk destroying value by paying more than the value they can create.” Spectrum valuation is therefore “highly risky, especially as auctions example) and receive a high degree of publicity. Correctly valuing spectrum has always been challenging and it is not getting any easier.”

Spectrum valuation essential

The basic principles of spectrum valuation are simple: “The value of a block of spectrum is the difference between the value of the business with the spectrum (often referred to as the ‘with spectrum case’) and the value of the business without (the ‘no spectrum case’). The values of the business ‘with’ and ‘without’ forecasts that often match the duration of the license. A further basic principle is that we assume that the business always adopts the value maximizing marketing and technology strategy in each business case.”

It becomes doubly hard to do honest- to- goodness valuation of spectrum when you have spectrum lords, or “rentiers of the digital age, sitting atop hundreds of billions of dollars’ worth of prized spectrum space, which many plan to use not only for traditional broadcasting but for new, non- broadcasting, high- tech services like wireless phones and computers, or which they plan to sell to the highest thirdparty bidders.”

Where does that leave the real owners of Philippine spectrum? We are left with a duopoly which gives us lousy service for 25 years and given another 25 years because Congress will not put some science to its grant of franchises. The burst in the granting of franchises occurred in those who were granted a congressional franchise sat on the expensive resource and leveraged it to sell it to the highest bidder.

Reform should begin with Congress by coming out with clear guidelines on the grant of franchises by limiting the period of spectrum use to 5 to 10 years or less, with provision of clawback if unused, or non-payment of spectrum user fees. Congress, via oversight, should review and reform spectrum assignments every three years; and it should provide a valuation guide for regulators to use. NTC should do periodic inventories on actual users and rentiers so that it can aid and assist Congress re policy on tenders and auctions of assigning and reforming assignable spectrum and pursuing a policy of reasonable percentage of assignable channels for future competition.

In February 2017, the NTC revealed that dormant spectrum is being held by: Sears Telecoms - anta Inc. ( TNRI) and Twilight - ic Zone Authority, Uniden Philippines, Inc., Liberty Broadcasting Network Inc. (LBNI), Worldwide - - munications Philippines Inc., AZ Inc., Broadband Everywhere Corp; - In addition, the DICT said that a number of these firms— specifi RBC, Uniden, LBNI and Worldwide Comms— have unpaid spectrum user fees. The then DICT Secretary Rodolfo Salalima warned that unused and unpaid frequencies would be taken back. But Salalima was given the pink slip, and nothing has come out of that warning.

Frequencies lock- out by duopoly

Without cleaning our frequency house, any third or fourth telco player can’t be competitive since both the “workhorse” and “mobile internet” frequencies are locked out in favor of the duopoly: PLDT/ When unique cell sites data are distorted by regulators, how can one even presume that they can handle frequencies. And yet, government offers to build additional sites for lease these duopoly masters forever?

Rio, Jr., is a consistent problem solver. He has not been stamped by issues affecting the ICT sector. He has the audacity to speak to duopolies and offer solutions and this DICT and give him all the support to make real your order for a third telco

Cognizant of the lock-out, Rio suggested for the new entrant to - vices, where the duopoly is weak, with only 17 percent establishments, access. The third player can use the last mile infra of the electric companies that would partner with it. In densely populated urban areas, there are now technologies that offer residential customers high-speed Internet access through the air. The service is a fast and affordable al download and upload speeds to homes.” OIC Rio should be aware that it is not data but legacy voice traffic which limits the ability to re- farm and this is where the challenge arises.

I would even venture further, the third or fourth telco player should treat the whole country as 81 areas of operation, 81 hubs with different needs. They can wire the last mile as proof of concept that the last mile is a viable business proposition and they can do radial coverage from the last mile to the nearest cities in the 81 provinces. Such a web-like approach would give way to device diffusion and the availability of VoLTE. Imagine the last mile being the best mile? That would create a change in market behavior. Think of business location. Think of economic dispersal. Think of technology diffusion. Think of rural PH.

Valuing spectrum for spectrum auction participation is vital. Having this in place before the entry of a third or fourth telco player is necessary. Three of the most sig to take account of future substitute spectrum awards; how to identify the value maximizing re-farming strategy; and the importance of VoLTE device diffusion assumptions on the ability to re-farm.

Then we have complementing options like that of the Transco and the Luzon Bypass Infrastructure and the Wi- Fi spots nationwide. And of course, there will be the Zamoras and the Villars. But if we are able to put some order to our spectrum and deploy new generation devices, we may just get quarter this year sustained towards any technology used in a business is that automation applied to an automation applied to an inef our allocation and management. PRRD has to be told that a third or fourth player can’t be competitive The duopoly ensures that.