THE heads of business and trade groups are rejecting a recommendation to maintain the telecommunications industry as a public utility, warning it will deter foreign investments and widen the digital divide in the Philippines.
The seven leaders objected to the recommendation—proposed by several senators during deliberations on Senate Bill (SB) 2094, or “An Act Amending Commonwealth Act 146, Otherwise Known as the Public Service Act, As Amended”—in an Aug. 9, 2021 joint letter to Senator Grace Poe.
SB 2094 aims to clear the ambiguity surrounding the interchangeably used terms “public utility” and “public service,” and limit public utility to just three services—distribution of electricity; transmission of electricity; and water pipeline distribution and sewerage pipeline systems.
Under the draft bill, excluded from the definition of public utility are transportation, telecommunications, broadcasting, and other public services. Their exclusion will effectively allow 100 percent foreign ownership in these industries as they will no longer be considered public services or be covered by the 60-40 percent ownership principle under the 1987 Constitution.
Joint letter
In the joint letter, the groups said retaining telecommunications as a public utility will further widen the digital divide in the country and limit the entry of investors that can provide the capital needed to build the infrastructure that will close the gap.
The letter further cited government figures showing that 64 percent of barangays in the Philippines currently have no telecommunication power, 88 percent have no free WiFi zones and 70 percent have no fiber optic cable installed.
“If we do not address this, access to education is hampered, and micro, small and medium enterprises and our workforce will have difficulty in participating in the digital economy,” it said.
“Likewise the Philippines becomes uncompetitive since the state of internet access has become a major factor in the decision of foreign investors in considering the Philippines as an investment destination.”
The letter said keeping telecommunications as a public utility “will go against the very definition of a public utility proposed in SB 2094,” a primary criterion of a public utility being that it is a natural monopoly as it is more cost-efficient for the product or service to be produced by one firm.
The telecom industry in the country is not a natural monopoly, with three major players and several internet service providers currently operating and competing in the same service area, it added.
National security
At the same time, the groups said the fear that opening the industry to foreign investors will heighten national security threats is unfounded. Huawei currently has control of the country’s telecom sector, with 80 percent of the hardware used by existing telcos reliant on Huawei technology.
“Hence, we need other players to come in to provide alternate technologies and reduce our reliance on Huawei. Allowing more foreign, non-Chinese investors in the telecom industry will help diversify the risks,” the letter continued.
The groups said liberalization will open the door to foreign investors that have expressed interest in the Philippine market, such as the US-based Space Exploration Technologies Corp. and Japanese telecom operator KDDI Corp.
Having a diversified pool of foreign investors will also minimize the potential risk of losing access to the US internet in the future as the US continues to implement safeguards to its assets and privacy against aggressive intrusions, the letter said.
The position paper was signed by Francisco Alcuaz Jr., Makati Business Club executive director; Calixto Chikiamco, Foundation for Economic Freedom president; Henry Lim Bon Liong, Federation of Filipino Chinese Chambers of Commerce and Industry Inc. president; Aurelio Montinola III, Management Association of the Philippines president; Jeffrey Ng, UP School of Economics Alumni Association president; Benedicto Yujuico, Philippine Chamber of Commerce and Industry president; and Sergio Ortiz-Luis Jr., Philippine Exporters Confederation Inc. president. (PHILEXPORT NEWS AND FEATURES)