Review of Telecom Competition Policy Sought

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Free market is not working in a small telecommunications market like the Philippines and the government should revisit its strategic competition policy for sector and Third Generation (3G) services.

Philippine Long Distance Telephone Company (PLDT) Chairman Manuel V. Pangilinan raised this concern "to avoid the wasteful cycle of deregulation followed by consolidation" when he addressed the recent 43rd Annual Meeting Of Philippine Economic Society (PES) at the Asian Institute of Management, Makati City.

"Instead of free and open competition, an enlightened competition policy may be more appropriate for franchised industries where market size is dependent on mass market spending, where capital requirements are large, extensive and sustaining, and where there isnat space for too many players if you want them to be profitable," he explained.

The PLDT Chairman cited Malaysia for its policy of granting just three 3g cellular licenses. Hong Kong, at one time, had only 3 cellular providers and all of them were profitable.

"When government further deregulated by granting 3 more licenses in 1997 a" the industryas fortunes reversed with 6 players. Now, the industry is consolidating and the participants are down to four," he expounded.

First world countries, including the U.S.A., are following this same trend of this consolidation today. However, the Philippines, with its meager resources cannot afford to go through this wasteful cycle of deregulation followed by consolidation, he reiterated.

The PLDT Chairman maintained that mixed blessings came after the government deregulated the telecommunication sector.

"The service-area scheme covering the buildout of new fixed lines was conceived with noble intentions about 15 years ago. This policy required telcos to install fixed lines even in rural areas so that universal service can be achieved," Pangilinan said.

However, "The economics of the scheme were suspect. …