News Analysis Telecoms

Broadband and narrow funds

The Philippines National Telecommunications Commission (NTC) is seeking financial assistance from the Asian Development Bank to develop the outgoing administration’s new five-year National Broadband Plan.

The blueprint, being drawn up by the NTC, the National Economic and Development Authority and the Information and Communications Technology Office, aims to boost the country’s struggling telecoms and broadband infrastructures which are among the slowest, most unreliable and most expensive in the world. The plan is scheduled for delivery before the new administration takes office on 30 June.

The outgoing Aquino government’s previous initiative – the Philippine Digital Strategy 2011-2016 – fell far short of meeting its goals, such as providing an Internet download speed of at least 2 Mbps to 80% of households across the country this year. Lack of investment, both public and private, was the main reason for the failure.

According to the NTC, Philippine telcos, collectively, invest just US$1.3 billion annually in their effort to broaden their coverage. At that rate it would take 10 years to meet the target. NTC estimates that funding in the region of US$17.2 billion would be needed to reach the country’s 20.17 million households. Thus, massive government subsidy and private-sector cash will be needed if the Philippines is to have any hope of getting anywhere close to its Asian neighbours in providing a reliable digital infrastructure for its people and its businesses.

Here’s what it’s up against:

Indonesia. In 2014, through a public-private initiative, the Indonesian government allocated US$23.2 billion for implementation of its 2014-2019 Digital Network proposals that will give most of the country access to affordable Internet. Funding comes from Telkom Indonesia (52% state owned) – it allocated the majority of its 2015 capex budget to the scheme – 10% will come from the public purse; the rest from the private sector. After China and India, Indonesia is the Asia Pacific’s largest mobile-subscriptions market.

Malaysia. The Malaysian government and national telecoms provide, Telekom Malaysia, outlaid US$4.5 billion over 10 years to lay fiber-optic cable to every home in the country’s urban areas. Earlier this year, they partnered to sign deals worth US$785 million, to enhance the country’s high-speed broadband Internet connections.

South Korea. This country provides the benchmark for digital infrastructure, established through South Korean government-driven initiatives which have facilitated further development of wireless broadband technologies. And it continues. Multi-service operator, KT Corp., is investing US$3.9 billion to introduce an internet service which it claims will be 10 times faster than existing technologies.  The Ministry of Science and Technology is investing US$1.5 billion to roll-out 5G wireless service (1,000 times faster than 4G). The country boasts the highest average Internet connection speed and has the most available Wi-Fi locations of anywhere in the world. In 2015, 95% of South Korean householders were broadband subscribers.

Thailand. In January, the country’s military government  announced it will investing US$1.1 billion to build-out Internet services across the country and increase data speeds by 400%. It is also to expand 4G services in Thailand. This follows late-2015 spectrum auctions for the 900-MHz and 1.8-GHz bands.

None of these governments could have developed their broadband networks and digital capabilities without the full backing, financial and technical, of each country’s large telecoms providers – a fact not lost on the NTC.

The Commission is now proposing legislation that would require Philippine telecom companies to remit a portion of their earnings to the government to fund broadband infrastructure in un-served and under-served areas. Entitled, An Act Institutionalizing a Universal Access Fund (UAF), the draft bill calls for the companies to set aside one-fourth of 1% of gross revenues which would be collected and “automatically appropriated by the UAF”.

Given the scale of the task in hand, though, that would not go very far. In 2014, the country’s two largest public telecom providers reported combined gross revenues of US$5,657,311,440 – Philippines Long Distance Telephone (US$3,535,819,652); Globe Telecom Inc. (US$2,121,491,790). A quarter of 1% of that is just US$14.1 million.

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