In limbo: Reorganisation of oversight agencies creates questions

The regulatory structure of the telecoms sector entered into a state of flux in 2011, a reflection of the dynamic market that the government is tasked with overseeing. This uncertainty is rooted in the reorganisation of the Commission on Information and Communications Technology (CICT), to which the primary regulator, the National Telecommunications Commission (NTC), answers. Under a bill passed by the House of Representatives in December 2011, the power and responsibilities of the CICT will be bolstered and the entity will be revamped to form the new Department of ICT.

MIXED MESSAGES: While the industry lauded efforts to create a more robust authority, the future regulatory landscape is uncertain due to the signing of a seemingly contradictory executive order in early July 2011 by President Benigno Aquino III that downgraded the role of the CICT. The order stipulated that instead of being given a stronger role as a fully functioning department, the CICT would be diluted and given a reduced role under the Department of Science and Technology (DoST) and rebranded as the ICT Office. The NTC and postal service would remain under the president’s office while the National Computer Centre, and the Telecommunications Office would report to the DoST.

In early 2012 the Senate also passed a bill supporting the creation of a distinct Department of ICT, though it was unclear if and when it would become law. Regardless of which authority the NTC reports to, the commission will retain its mandate as the organisation responsible for ensuring fairness in domestic competition with the telecommunications sector.

CUTTING COSTS: The NTC addressed the issue of high interconnection charges in October 2011 by mandating a reduction in fees. Under the new framework, the NTC calls for SMS interconnection fees between networks not to exceed P0.15 ($0.003) per SMS. This will have the effect of reducing cross-network rates to P0.20 ($0.005) per SMS from current rates of P0.35 ($0.008). According to the NTC’s commissioner, Gamaliel Cordoba, the new scheme would bring rates within the norms established under the country’s Public Telecommunications Policy Act, which seeks “the establishment of fair and reasonable interconnection among public operators and other telecommunications service providers at reasonable and fair cost”. However, resistance from operators meant that the fee reductions had not taken effect as of early 2012.

This move came after another NTC proposal floated in June 2011 seeking to gradually reduce interconnection fees for mobile voice calls over a period of three years. During the first year of implementation, charges would be mandated to be no higher than P2 ($0.05) per minute, decreasing to a maximum of P1.50 ($0.03) the second year and P1 ($0.02) from the final year onward. According to the NTC, one minute of cellular voice calls cost customers an average of P6.50 ($0.15), with telecoms firms charging P4 ($0.09) for interconnections. Under this graduated reduction scheme, the cost of these calls would be reduced by P3 ($0.07) to P4 ($0.09) during the first year, P2 ($0.05) the second year and P1 ($0.02) the final year. This compares favourably with other countries in the region, such as Malaysia and Thailand, where comparable fees range from P1.24 ($0.03) to P1.70 ($0.04). The Department of Transportation and Communications proposed a similar plan during the previous administration, but, it was eventually scrapped due to opposition from the sector and fears that it would reduce tax revenues.

FEE HIKE: Telecoms companies are now preparing to absorb another potential financial hit should a June 2011 proposal by the NTC come into force to increase its administration fees for telecoms and broadcasting firms by 20-40%. According to the NTC, the suggestion was spurred by rising inflation and is being considered for implementation in 2012. Currently, the regulator collects P500m ($11.35m) annually from sector firms.

Although the industry has made progress towards market liberalisation, key aspects that still need to be addressed include number portability and tower sharing, neither of which existed as of the end of 2011.