China fortifies foothold on PHL’S telecoms

AFilipino-american reader residing in Daly city in california, USA, sent me a long message unleashing a mouthful against the philippine government’s footsie-play with china, despite the latter’s unapologetic grabbing of the country’s islands in the West philippine Sea.

Twenty-two-year-old James Howard, who spent half of his life in Makati City before migrating with his family in 2011, says that “it’s unconscionable for the Philippine government to kowtow to China, knowing fully well its brazen island-grabbing [citing] a fictitious nine-dash line to justify its bully behavior against its Southeast Asian neighbor.”

Excerpts of his message: “Sir, I totally agree with your column [Third telco threat and national security— June 18, 2020] that it’s going to be a national security nightmare for the Philippines to allow [Dito Telecommunity Corporation or Dito] to even set its foot on the country’s telecommunications sector.”

He says that several China-owned tech companies have been banned in the US precisely for national security concerns: “Considering how sophisticated US counter surveillance operations are, I wonder how the Philippines can make do with its antiquated surveillance system to counter China’s cyber spying.”

James is among many Filipinos who mistrust China. The latest SWS survey—done from July 3 to 6, 2020 —showed Filipinos’ trust in it sank to “bad” as it remained “good” for the US, practically giving President Duterte’s preference to Beijing a thumbs down. That nationwide mobile phone survey showed Filipinos’ trust in China fell from “poor” to “bad” with a net trust rating of -36. The figure was down by 9 points from its net trust rating of -27 in December 2019. That trust rating for China was the lowest since the “bad” net trusting rating of -37 seen in April

2016, a few months before Duterte assumed the presidency.

Despite the government’s assurance that it has only the interest of Filipinos at heart, I find it disconcerting that we have allowed a Chinese company—required by its laws to be a partner in cyber intelligence— to have a big chunk of our telecom pie. Worse, we even open the doors of our military facilities for Dito to build its cell towers inside strategic properties. Such act is just like a cuckold husband having this fetish of watching his wife upclose having illicit affairs with other men, for lack of a better analogy.

Dito started its commercial operations on March 8 after passing the first test mandated by the National Telecommunications Commission (NTC) as the third-party telco.

The launch was made possible by the contribution and support of a group of China state-owned businesses starting with China Telecommunications Corp. (China Telecom) and Bank of China, China Energy Engineering Group (Energy China) and China Bester Group Telecom Co. Ltd., all of which work closely with the Chinese government and military. The 2017 National Intelligence Law of China and the 2014 Counter-espionage Law mandate this close working relationship with the state council.

China Telecom, the 40 percent technology partner of Dito, is a Chinese state-owned telecommunication company, the largest fixed-line service and the third-largest mobile telecommunication provider there. Its parent organizations are the Government of China and the

State-owned Assets Supervision and Administration Commission of the State Council.

The Philippine Senate, though, has voiced concerns about the entry of China Telecom into the industry through Dito. By showing appreciation that the Senate Committee on Public Services did right in deferring the renewal of its franchise, Sen. Risa Hontiveros said that “lawmakers must further study the effects of the third telco’s entry considering that China owns a portion of the company.”

Hontiveros expressed concern because of the national security issues that have been raised in the region against China—with many of these issues still to be resolved—and in anticipation of the impact of granting Dito a quarter-of a-century-long franchise.

Sen. Francis Pangilinan also voiced fears that an agreement between the Armed Forces of the Philippines and China-backed Dito could be used for espionage with the latter’s communication facilities placed inside Philippine military camps.

In November 2010, China Telecom was charged by the Us-china Economic and Security Review Commission in its annual report for advertising erroneous network routes that instructed about 15 percent of US and other foreign Internet traffic to go through Chinese servers during an 18-minute stretch on April 8 of that year. An ensuing executive order prohibited US shares in companies, including China Telecom, which had links with the People’s Liberation Army.

Bank of China, another stateowned company involved in the Dito-china Telecom’s business, is the commercial bank where Dito first sourced its $500 million. Further borrowings may have to be concurred with, if not granted, by the Chinese government because of Dito’s staggering $2.5 billion initial commitment. The funding of this up-start venture in that amount on purely commercial grounds could constitute a big financial risk. The alternative is to resort to undertaking activities that may be non-commercial and/or political in nature.

On the technology side, one of

Dito’s Chinese contractors that will help build its network infrastructure is state-owned Energy China. The company was debarred by the World Bank in 2019 in connection with the falsification of public documents referring to its corporate status. Energy China vice president Huang Fei assured the Department of Information and Communications Technology that it was prepared to corner the market and build all 50,000 towers in the Philippines to the tune of $4.4 billion.

State-owned China Bester Group Telecom Co., Ltd., is another contractor of the Dito/telcom China’s joint venture that is into communication technology services, specifically in communication network technology. Its notable client is China Mobile Limited, which provides mobile voice and multimedia services through its nationwide mobile telecommunications network across mainland China and Hong Kong.

In January of this year, the New York Stock Exchange decided to delist trading in China Telecom, China Mobile Limited, and China United Network Communications Group Co., Ltd. (China Unicom) starting November 11, 2021, based on the suspicion that investments in these telcos could be used by the Chinese military for the modernization of its military, intelligence and security apparatuses.

The intrusion of the syndicate of China state-owned businesses through Dito/china Telecom’s sensitive business and operations is viewed by Sen. Pangilinan as a latently organized and systemic approach to Chinese dominance in the Philippines’s industry, investments, and infrastructure in the digital world. He implied that such threats to Philippine sovereignty, security, and human rights may result in debt traps, territorial disputes and cyberattacks.

To many ordinary Filipinos, allowing a Chinese telecom company to compete here is akin to freely giving a third party the password to open up the country’s vault of classified national security secrets.

PLDT Inc. is deploying 125,000 kilometers of fiber optic cables in the country this year—its highest ever deployment for any given year—as it anticipates higher demand for broadband given the current health situation.

Joachim Horn, next generation technology solutions advisor of PLDT, said there are three main reasons why the group is investing heavily in developing fiber lines in the country.

“One, of course, is the very high

number of home installs. Second, is the massive investment and increase in backbone fiber to connect more islands and provide more capacity. Third is the continuous roll out of international capacity,” he said in a recent press briefing.

According to PLDT SVP Menardo G. Jimenez the group expects to “exceed 100,000 monthly average installations” of home fiber solutions this year. “The extensive nationwide fiber rollout in 2020, along with increased installations, helped serve the increasing demand from customers for connectivity for workfrom-home, online learning and streaming. The lockdowns brought about by the Covid-19 pandemic led to unprecedented demand for home broadband services,” he said.

Currently, PLDT has the most extensive fiber network in the country with 429,000 kilometers of fiber optic cables spread across the islands. This network has enabled the company to cover 48 percent of all cities and municipalities in the Philippines.

“PLDT'S massive investment in its fiber backbone, strengthening the connections across the Philippine islands, is a critical enabler for our customers to enjoy the best experience on our fixed and mobile services,” PLDT Head of Network and Technology Mario G. Tamayo said.

In December, PLDT said it plans to spend as much as P92 billion in capital outlays in 2021 to meet the “surge in demand for data” and heed the government’s call to “elevate” the local telecommunications industry and deliver services that meet global standards.

Alfredo S. Panlilio, the company’s CFO and the president of subsidiary Smart Communications Inc., said his group is increasing its capital expenditures (capex) by as much as 25 percent in 2021 to expand both its fixed and wireless networks.