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Internet speeds in the Philippines have long been the butt of jokes. Even today, depending on where you are, loading a website or an image can sometimes be reminiscent of the good ol’ days of dial-up.
More seriously, fast internet can feel like a luxury in the regions. In areas that are hardly reached by the big internet service providers, or where poor communities can’t afford to install their own Wi-Fi at home, people resort to “pisonet” (internet kiosks where you put in coins) provided by local players albeit “under the radar.”
Lack of good internet service drives inequality. During the pandemic, millions of households with no internet access saw their young students struggling to cope, in stark contrast to their richer peers who did their lessons with blazing internet, tablets, and even gaming chairs.
Poor internet access is also a major turn-off for investors wishing to set up businesses here, or even expats contemplating to work remotely from Metro Manila or good beach resorts in the provinces.
In short, internet remains crappy in the Philippines. It’s no longer a laughing matter: it’s slowing down what could otherwise be a much faster, more developed economy.
Enter the Konektadong Pinoy bill, which is now awaiting the signature of President Ferdinand Marcos Jr., who had previously certified the bill as urgent. It aims to fix the many ills of the country’s internet sector, particularly in dismantling the market power of the country’s most prominent internet providers.
You see, it’s no coincidence that slow and inaccessible internet service is provided by just a handful of players: PLDT Home, Smart Bro, Globe Fiber, Converge, and more recently Dito Telecommunity. A basic lesson of economics is that low levels of competition often results in higher prices coupled with lower supply (and in most cases, poor service as well).
Market power in telecommunications arises in many ways: telco towers and cables are often controlled and owned by the incumbents, and smaller internet service providers need to engage in lease agreements just to gain access to such facilities. There are also higher barriers to entry because of the inherently large fixed costs involved, costs that are lower for the incumbents because they already operate at scale, and much higher for small-scale and local internet providers.
Most importantly perhaps, the biggest barrier is that entrants need to secure a multiyear franchise from Congress. And as we’ve seen in the case of media giant ABS-CBN, lawmakers sometimes want to play god so that big companies in need of franchises almost have to grovel at the lawmakers’ feet. Much smaller ISPs find the franchise requirement too prohibitive, and this stifles competition.
Much-needed reforms
Konektadong Pinoy aims to fix all these by, first and foremost, no longer requiring internet service providers to secure congressional franchises. Instead, they need only to register with the National Telecommunications Commission, which is under the control of the President.
The bill also aims to ensure better sharing of infrastructure among big and small players. It strengthens regulators (especially the Philippine Competition Commission) that will ensure greater competition in the telco sector. (Incidentally, one of the biggest supporters of Konektadong Pinoy is Secretary Arsenio Balisacan of the Department of Economy, Planning, and Development or DEPDev.) Formerly the head of the Philippine Competition Commission, Balisacan recently wrote an Inquirer column on the benefits of Konektadong Pinoy.)
By boosting competition in the internet landscape, Konektadong Pinoy aims to bridge the longstanding digital divide and enhance the productivity of many crucial sectors, including micro, small, and medium enterprises (MSMEs), education, and health.
Predictably, there’s been strong pushback from the incumbent telco players. They see the bill as a threat to their market positions, and they are intensely trying to persuade President Marcos not to sign the bill into law.
Ostensibly, they warn against the national security risks that may arise if, for example, foreign gateway and satellite entry are deregulated. They also posit that cybersecurity regulations are unfairly more stringent for the legacy telcos than the newer entrants.
Said the president of the Philippine Association of Private Telecommunications Companies, “We can’t sacrifice the country’s national security. While the Konektadong Pinoy bill has good intentions, it may have adverse effects down the road similar to when the government legalized Philippine Offshore Gaming Corporations (POGO).”
Meanwhile, Manuel Pangilinan, PLDT chairman, said, “We’re prepared to compete, we will not ask for special favors but neither should special favors be given to external operators. All we’re asking is a level playing field when it comes to competition.” But in fact it can be argued that bill aims to do just that: level the playing field that for so long has been dominated by just a handful of players.
The penetration of Starlink in the Philippine market is illustrative. On the one hand, Starlink has proven to be a major boon for Filipinos in underserved areas. Friends in Batanes can now do fairly stable Zoom calls through Starlink — something that wasn’t so doable before. On the other hand, there could be potential cyberattacks from satellites owned and controlled by foreign companies like Starlink. But so far, no such attacks have happened; such risks may be overblown.
Even if it has no congressional franchise, Starlink was allowed to operate and sell their services in the Philippines since it was registered in the NTC as a “Value-Added Service.” But to build and operate satellite ground stations, they will need a full congressional franchise. Overly restrictive regulations like this one prevent market access for newer and innovative players, and that can be the biggest hurdle to good internet access for many Filipinos.
What about the possibility of a Chinese provider that comes into the country and controls our telco infrastructure? Note that the Chinese government already dipped into our utilities: they already own and control 40% of Dito Telecommunity (which got a congressional franchise during the Duterte administration), and PLDT-Smart and Globe seem to have lived with this fact. China, by the way, also controls other utilities like 40% of the National Grid Corporation, but nothing catastrophic has happened (just yet) by way of national security.
At any rate, once it becomes law, Konektadong Pinoy will need strong implementing rules and regulations to ensure baseline cybersecurity and accountability for new internet service providers operators. Just like any new law, it will be just as good as its implementation.
But on balance, I think Konektadong Pinoy is a net benefit for our society, a step in the right direction. Fast and reliable internet is no longer a luxury — it’s a necessity. And without it, entire communities are left gasping for air. Konektadong Pinoy offers a long-overdue breath of fresh air for millions of Filipinos who are still disconnected. – Rappler.com
JC Punongbayan, PhD is an assistant professor at the UP School of Economics and the author of False Nostalgia: The Marcos “Golden Age” Myths and How to Debunk Them. In 2024, he received The Outstanding Young Men (TOYM) Award for economics. Follow him on Instagram (@jcpunongbayan).
