Purpose-driven competition among telcos needed

WHEN TELECOMS promise to create a limitless world for Filipinos, to what extent should consumers believe?

Recently, the country’s telecom providers have been aggressively competing to win consumers in the “unlimited” market. Indeed, their new unlimited offers are reflections of the new vigor of the Philippine telecommunications industry. But are local telecoms able to help Filipinos break new grounds and embrace truly unlimited opportunities?

High but not perfect

In economics, perfect competition is defined as the scenario wherein firms end up taking the prevailing market price. Although competition in the industry is deemed high and intense, telcos still maintain some degree of power to set their own prices.

In the same breath, however, telcos must always keep in mind that there exist competitors who can take away customers from them and that new players may freely enter the industry at any time. As a result, local telecoms are always wary about the prices they charge and the kind of services and products they are offer. As such, the local telecoms industry is often described as monopolistically competitive—that is, even if the industry is not working within a perfectly competitive setting, it is still considered highly competitive.

In the Philippines, those that are aggressively competing against each other are the Philippine Long Distance Telephone Co. (PLDT), Globe Telecom, Digitel Mobile Philippines (Sun Cellular) and Bayan Telecommunications. While there are a host of smaller players operating throughout the country, these few are considered the telecom industry’s leaders.

Defining telecom’s competitive edge

Through the years, each of these four major telcos has carved its presence in the market. The past five years saw how each company tried to locate its niche in the market.

Faced with a cutthroat competition, telcos introduced new products and services at affordable prices. The industry has experienced new heights in wireless landline services, broadband, and mobile text and call services.

For example, Bayan became one of the pioneers in wireless landline services in the country. By offering its products such as Bayan Span and Bayan Wireless Landline, Bayan experienced a major turnaround in part due to the success of its wireless landline services. This success has prompted rivals PLDT, Globe, and Sun Cellular to offer their own wireless landline services as well.

PLDT launched its Landline PLUS by means of intensive advertising campaigns equipped with big names in the entertainment industry—Marian Rivera and Edu Manzano. Sun Cellular also utilized the same strategy by enlisting superstar Judy Ann Santos to promote its wireless landline, while Globe recently unveiled its mobile-landline unlimited services referred to as Duo.

The market for broadband services has also become a new arena for competition among telcos. After PLDT tested the waters for wireless broadband services (via Smart Bro), Globe and Sun Cellular were also quick to offer the same service. By a strategic re-branding of its wireless broadband product into the brand name, Tattoo, Globe has joined PLDT and Smart as a growing provider of wireless internet services. For its part, Bayan was also quick to position itself as a reliable partner for wired broadband services by its Satisfaction Guaranteed and “Bayan DSL, Ang Dali” campaign.

But if one will have to select the best determinant of heightened competition among telecoms, it would be the industry’s fascination over unlimited offers for texts and calls.

Sun Cellular pioneered the introduction of cheaper packages that include unlimited texting and calling. Sun Cellular offered a package, giving away intra and inter network call and text services, for as low as P10 only. Globe also brought into the market a series of unlimited offers such as Unlitxt, Sulitxt and Unlicalls Night—offers that provided unlimited texting and calling services for as low as P15. For its part, Smart initiated its Smart Talk promo that allows subscribers to host unlimited intra-network calls for only five days.

Some industry players have also issued other pioneering products and services. In 2008, Smart launched the Plug ‘N Talk USB communication device which allows those outside the Philippines to communicate from an Internet-connected computer to any Philippine number. Globe has also launched iPhone 3G and Blackberry. These new products feature 3rd generation wireless technology, GPS mapping and Wi-Fi capability.

The need for a purpose-driven competition

To a certain extent, the description that the telecommunications industry is highly competitive does hold some water. Through the years, cheap telco products and services have flooded the market.

Since the start of the Ramos administration’s deregulation efforts in 1993, the Philippines has slowly become a global leader in the use of short messaging services or SMS. Anecdotal evidence suggests that prior to deregulation, it could take almost one year for a customer to get a telephone line.

Now, some telecoms even promise to connect broadband or landline services within forty hours. While it’s true that consumers are probably better off in terms of quality of service and reasonability of the prices of telecom products today, there remain some missing blocks that, when completed, can pave the way for more purpose-driven competition.

The Philippines is still home to a low broadband penetration rate relative to its Southeast Asian counterparts such as Malaysia and Thailand. Coupled with that is the fact the country is also one of the developing countries with inadequate telecommunication facilities. Most of the reliable facilities are confined in the Metro Manila and the urbanized cities of Luzon.

Still, a lot of areas across the archipelago are not able to experience seamless mobile and broadband connections. These circumstances highlight the need for the industry to invest in and develop facilities that will sufficiently respond to the demand of potential consumers in the countryside.

Indeed, more Filipinos are able to access telecom products and services than the time when the industry was still under a monopoly. However, it must be emphasized that the broadband packages in the Philippines are more expensive than the packages available for our neighbors.

A 3-mbps unlimited plan in Singapore only costs around P800 while our 1-mbps packages are priced not less than P1000. While the industry can be credited for creating a series of packages for consumers, firms must be able to deal with providing faster connections at reasonable prices. For instance, except for Sky Broadband’s 12-mbps offer, most of the firms are only able to offer a maximum of packages with a speed of 2-3 mbps. To expand access and intensify their penetration of the market, telecoms should be more creative in designing cheaper yet reliable packages.

The Asian Development Bank also reported that telecoms are not yet maximizing e-commerce in the country. The support for small and medium entrepreneurs (SMEs) in the country is still not that strong. Sure, PLDT has its SME nation program and Globe has its Globe Business products. But the fact remains that majority of SMEs are still outside the scope of the SME support services provided by local telecoms. Electronic payment system, for instance, is still an unexplored area for many local companies because of the complexity of the process in utilizing the said service.

Connecting the 7,107 islands of the country is really a tremendous challenge for telecom operators. However, with the presence of strong competitors and discerning consumers, telecoms can’t afford to create a room for complacency. Beyond the battle for promotions through million-peso worth of multi-media advertising, telecoms should gear up for a new phase of the competition. After all, millions of those outside Manila and other urban centers are still waiting for improved communication infrastructures to pave the way for a more reliable connectivity.

Not only will industry reforms spell growth for telecoms, these changes will also mean maximization of the industry’s potential to become a pillar of the nation’s development. Having a purpose-driven competition in the industry is a step closer to the industry’s promise of unleashing unlimited opportunities for Filipinos.