Tackling the slow Internet service

I’m glad that this year CCCI’s Cebu Business Month aims to tackle the question of slow internet service. Slow internet service in the country is one of the most common complaints of people who depend on the internet for their daily communication and for the access and dissemination of information vital to meeting their work objectives.

I am not an insider in the telecommunication industry but these are what I gathered from the slow internet that we have.

At a glance, “the Philippines has witnessed considerable investment and business activity since deregulation but the market has continued to fall short of its full potential.”

Accordingly, “the country’s mobile market has been particularly energetic with the development of SMS as an effective communications service.”

“Even more significant ultimately has been the recent expansion in broadband internet. Broadband is finally building a healthy subscriber base, boosted by the considerable presence of mobile services in the mix of the various broadband platforms delivering internet access.”

“There has also been good progress in the rollout of optical fibre infrastructure, although not on the national scale envisaged. In the meantime, the larger operators are building IP-based Next Generation Networks. Whilst the global financial problems presented some real challenges for the local telecom market, the negative impact seemed to have been put well behind now.”

“NTC approved a network sharing deal between Globe Telecom and ABS-CBN Corp; the deal was part of ABS-CBN Corp’s plan to become the country’s ‘third telecom player;’ in a relatively low key launch, ABS-CBNmobile started operating as an MVNO.”

“BellTel was making a move in early 2015 to become the Philippines’ fourth mobile operator after PLDT, Globe and ABS-CBN Mobile.”

“The Supreme Court upheld the constitutionality of the Cybercrime Prevention Act.”

“Fixed-line penetration was declining, dropping to just over 3% by early 2015.”

“PLDT expanded its total fibre network to nearly 100,000km by end-2014.”

“Proposed legislation to create a new Department of Information and Communications Technology (DICT) was proceeding in early 2015.”

So what gives? Why the complaint of inefficient telecom service? The slow internet?

It need not be said that the efficiency of the telecom service depends on the overall development of the country’s telecommunication sector. Any development of any sector requires the allocation of resources. Resources being scarce, the telecommunication sector must compete with the need for the same resources of the other sectors of the economy. Within the country, therefore, particularly a developing or emerging one, like the Philippines, its leaders, both in business and government and in the other key sectors of our society, must agree on how best to allocate scarce resources among many competing users to achieve our desired national objective of rapid economic growth that is both inclusive and sustainable.

James Alleman, et al, in a study on Telecommunications and Economic Development: Empirical Evidence from Southern Africa, mentioned that one study they reviewed, The Missing Link, concluded that telecommunications can increase the efficiency of economic, commercial, and administrative activities, improve the effectiveness of social and emergency services and distribute the social, cultural and economic benefits of the process of development more equitably throughout the country. Despite this, however, improved telecommunications has generally not been given sufficient attention for investment in many developing countries.

Alleman also said that studies from the 1960s to the present also documented a strong correlation between GDP per capita and telephone density indicators. Recent studies show that the growth of telecommunications investment or penetration is a significant predictor of economic growth, and vice-versa. Telecommunications is thus both a cause and a consequence of economic growth. Input-output studies of the economic impact of telecommunications also show that it makes substantial contributions to the efficiency of the economy.

So why the under investment in the telecommunication sector?

Alleman said that the answer is multi-faceted, but revolves around issues of control and ownership.  Telecommunications authorities are state enterprises in most countries. As such, they are subject to standard governmental budget practices. Telecommunications must compete for budget allocations from the state along with all other bureaucracies. Funds are not allocated on the basis of economic criteria, as they would be if the telecommunications entities were competing in the market for the funds. In other words, the gains associated with telecommunications investment are ignored, underestimated, or simply unknown.

I supposed this was the situation during pre-deregulation age of the Philippine telecommunication industry. Then there was a government monopoly, more interested in its own existence rather than providing service efficiently. But now the Philippines telecommunication industry is deregulated. Why the poor service continues.

Why the slow internet.

Till next Friday.