Philippines: Competition law, policy hope to curb monopolies, cartels
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Philippines: Competition law, policy hope to curb monopolies, cartels

Last week, the Center for Media Freedom and Responsibility held a forum about the Competition Law and Policy at the Korean Case Room, Asian Institute of Management, Makati City.

In its invitation, the CMFR notes:

For the past few decades, the Philippines embarked on a process of market liberalization that included removal or reduction of tariff and non-tariff barriers, privatization, deregulation, and encouragement of foreign direct investment. As in other developing countries, these reforms were designed to promote economic growth and welfare.

However, the potential for increased benefits from these reforms may not be realized if business and investment conduct prevents a level playing field and fair competition. Some trends have raised the need for an effective competition law and policy.

Various laws (criminal and civil) and regulations in the Philippines, among them affecting specific industries contain elements of competition policy. But the implementation of these laws is hampered, among others, by the inadequate technical expertise of the implementing agencies in enforcing them.

During the multisectoral portion of the forum, I gave the following remarks, which I extended for this blog post, in my capacity as president of consumer group TXTPower:

I wish to thank the CMFR for spearheading this event and for inviting us to speak on this important issue gripping the citizens of what many have described as the world’s texting and social networking capital.

Now, allow me to make a few key points on today’s topic.

Since its founding in 2001, TXTPower takes a look at issues from three perspectives – as consumers, as netizens and as citizens. And we do so again as we attempt to make sense of the Competition Authority formed by President Aquino, the competition bills filed in both houses of Congress and in the face of the reemergence of a monopoly in the telecommunications sector.

Remember PLDT monopoly practices? Under a long-running monopoly until the mid-1990s, Filipinos were made to endure years or decades of waiting for the installation of telephone lines, and another long waiting time for the dial tone. Long distance services, especially international calls, were so expensive and we had to line up at the nearest PLDT office and calling center. Under a monopoly, only the monopolist prospers and the rest of us experience stunted growth.

There was no other way for the Philippines to improve its telecom sector then than to dismantle the PLDT monopoly.

Initial changes and reforms under Republic Act 7925 propelled competition in the telecommunications sector as far as establishing a number of high-capital companies, especially in the cellular mobile telephone system (CMTS) and the wired landline systems.

It would take several years for the public to benefit from RA 7925 in the form of the introduction of prepaid cellular phones, prepaid cards, prepaid IDD, the elimination of national IDD via cellular phones, the introduction of prepaid phone reloading, the introduction of unlimited call and text services. It is easy to laud the telcos for these benefits, but a closer inspection would reveal that many of these “benefits” accrued to consumers after they themselves for and demanded them.

After telcos cashed in on the deregulation policy unleashed by RA 7925 in the form of unregulated windfall profits, the mergers and buy-outs started, and consumers again funded these corporate actions as well as a number of bad business decisions made by the corporations. Globe Telecom, would buy Islacom, the country’s first GSM provider. Today, the PLDT network has under its wings Piltel, Smart, Cure and, of late, Digitel/Sun Cellular. In the case of Smart, consumers reportedly subsidized its migration from the failed ETACS to GSM.

Monopolies and any other anti-competitive business formation are bad for consumers, if only for the simple reason that they mean less number of choices in the market. If and when a monopoly emerges or reemerges, the first victim is the consumer.

To clarify, consumers are not against mergers and acquisitions as these are facts of business activity. We however raise serious questions on the legality of the transactions entered into by telcos among themselves. For even as they merge and acquire, consumers still reel from such practices as the charging of arbitrarily-set interconnection fees for calls and texts made across telcos. The problem persists up to this day, driving up the cost of calls and text.

A monopoly captures the market not by providing superior products but by the capricious use of the monopolist of his immense resources and prerogatives to monopolize the market.

The existence or reemergence of monopolies is even made more scandalous as we see it in the telecommunications sector. It is important to stress that telecommunications is not just a commodity or a business. It is a public utility that is imbued with public trust, makes use of publicly-owned resources and ultimately aims to become an enabler of the progressive goals of the public.

This public utility nature of telecommunications is formally expressed by the telcos’ application for and grant of franchises by the Congress of the Philippines. Without such franchises, no company may enter into the telecommunications business. Franchises are granted, in theory, only to majority Filipino-owned companies which have the vision and the means to “roll out” telecommunications services.

Globally, regionally and nationally, there is a continuing rejection of all sorts of business monopolies. Opposing monopolies is not bad for business. The opposite is true.

Monopolies are bad for business. Monopolies tell companies, especially small ones, that they cannot aspire to be as big; the latter’s destiny is to swallowed whole or in part by the rampaging monopolist beast.

Technologically and business-wise, the concentration of ownership of telecommunications infrastructure and franchises under a powerful monopoly poses a number of real and perceived threats and disadvantages to the majority of citizens. From violations of the right to privacy to the wholesale “purchase” of patents, to exclusive contracts to acquire telecom equipment, to the use of closed systems – the list seems endless – and these problems are made worse when they are perpetrated by monopolists.

The President would do well to boost consumer and business confidence by including in his priority legislative measures the enactment of an anti-monopoly and anti-trust law, or a competition law.

The absence of such a law has been misinterpreted by some as a blanket license to corrupt the telecom sector, in particular, and Philippine businesses and industries, in general. The situation does not serve the interests of the Republic of the Philippines.

All we have now is a hodge-podge of disparate laws that offer no stiff protection to Filipinos in the face of new and reemerging monopolies, or abusive companies, in the telecom sector and beyond. Addressing this situation will send a message to domestic and international investors that the Philippines offers fair opportunities, and does not play favorites, especially to big, moneyed and influential businessmen.

Please also allow me to address issues raised earlier – I was following the tweets – especially the need for a genuine consumer movement, a consumer union that goes way beyond handing out hao shao awards. We agree. But consumer rights and welfare consciousness is a difficult task. we face so many hindrances — contempt for complaining and complainants is deep-seated and embedded in schools, and reinforced in media.

In the case of the PLDT buyout of Digitel/SunCellular, we saw most of the media swallow hook, line and sinker the lie or spin that it was/is a done deal. Coverage was largely one-sided and shallow. That doesn’t help and also illustrates the overarching power of economic elites and monopolists viz. media. These are hindrances and stumbling blocks – and it would take much persistence, patience, grit, and united action by consumers to be able to form and propel their union and movement.

What we want to see, moving forward, in the telecom sector are: (1) a clear vision from the government on the role of information and communications technology in nation-building; (2) vibrant competition on telecom services made available to end-users, MSMEs, government and industry; (3) the provision of internet access to the entire archipelago through a national broadband network free from graft; (4) the dismantling of monopolies and cartel operations in the telecom sector; and (5) the formation of a movement and union of consumers that demand better business practices and better services.

Thank you.