Stiffer fines mulled vs inept telcos

    2002

    Telecom regulator the National Telecommunications Commission (NTC) plans to issue rules that will penalize telecom companies for internet network outages due to negligence and unpreparedness to address sudden spikes in traffic volume.

    With the pandemic, internet use has shifted from mobile to home broadband to support the demand for connectivity in work, online classes and entertainment.

    A few hours of internet downtime could result in delay and even suspension of classes, business and work.

    With this, Edgardo Cabarios, NTC deputy commissioner, told Malaya Business Insight in a phone interview the agency is planning to issue rules that will further clarify the responsibility of telcos in times of network outages and that telcos should be penalized if the network interruptions were not due to force majeure events.

    Cabarios added network outages were caused by lack of back-up, data center failure and power supply issues, among others fall within a company’s negligence and should therefore be penalized.

    Cabarios cited as an example the recent network interruption of Converge ICT Solution Inc. which was caused by power outage and could have been prevented if the company had back-up and redundancy.

    Last week, Converge’s 24-hour network downtime affected both its residential and corporate customers nationwide.

    Converge engineers have identified the problem as power related. This resulted in service interruptions in North, South and Central Luzon and in the National Capital Region.

    Despite the extent of the impact of the network outage, Cabarios said Converge will only be fined P200 based on the existing law, so NTC is supporting the Senate proposal to increase the penalty for telcos from P200 to P2 million.

    At present, the NTC has no rules that mandate telcos to deliver a minimum or maximum internet speed to consumers as internet services remained a value-added service, Cabarios noted.

    Congress has proposed the Better Internet Act endorsed by the Senate Committee on Public Services for approval. The bill mandates the threshold for internet speed in the country.

    Meanwhile, rising demand for connectivity at home has increased the competition in the home broadband market.

    Cabarios said the country has only three mobile telecom players but on the internet side, there are more players competing to address the rise in demand.

    As the home broadband penetration is still relatively low at less than 50 percent of the market, there is room and opportunity for growth for all the players.

    According to the Department of Information and Communications Technology (DICT), the National ICT Household survey in 2019 showed that 17.7 percent of households in the country have their own internet access at home, majority of which use the internet for social media and communication. This is equivalent to 2.2 million households.

    The DICT added that 24 percent of households have communal cellphones but only two out of 10 have communal computers.

    The number of households with internet services is relatively low compared to around 82.7 percent of households which have a television at home.

    Incumbent telcos PLDT Inc. and Globe Telecom Inc. anticipate competition at the home broadband market to be more intense in 2021 given the aggressive network rollout of the four major players.

    Telecom competition has shifted from mobile to home broadband where the players are expected to compete on network rollout, internet speed and quality of product offers to keep and gain market share.

    As of end-September 2020, the country had 151 million mobile subscribers, of which PLDT had 72.4 million and Globe, 78.2 million.

    However, in the broadband space, there is huge opportunity for growth as the two incumbents have a combined 9.2 million subscribers only, of which PLDT has 5.7 million and Globe, 3.5 million.

    Global credit watcher Fitch Ratings projected that PLDT‘s P70 billion and Globe’s P50 billion capital expenditure (capex) this year will increase by at least 20 percent by next year, driven by regulatory pressure and looming competition from a new entrant.

    Fitch expects the incumbent operators’ free cash flows to stay negative, albeit steady, as the resumption in growth in earnings before interest, tax, depreciation and amortization, and the normalisation of the cash-conversion cycle following the pandemic relief measures offset capex expansion.

    New telco Dito Telecommunity Corp. aims to cover at least 37 percent of the national population over the next six months. Fiber broadband provider Converge and fixed-wireless service provider NOW Telecom Inc. presently have niche target markets. Nevertheless, Fitch said it expects competition to intensify in the medium term as the new entrants expand coverage.