Telecomms oligopoly

I wrote this last February this year:

The telecommunications industry is among the heavily regulated (ie, most number of permits, licenses, fees, taxes, bribes) by many governments, including the Philippines. Note that Singapore with only 4 million people (plus around 8 million tourists a year, staying an average of about 3-4 days/visitor), has 5 competing telecomms companies (telcos). While the Philippines with 85 million people, or Metro Manila with 11 million people, has only 3 competing telcos, the 3rd of which is only a new-comer (2-3 years ago only). A friend once argued with me that while Singapore has only 4 million people, the spending power is bigger than those of the Philippines'. Well, not true. Estimated GDP by purchasing power parity (PPP) valuation (2004 data) of Singapore was only $116 billion, while the Philippines' was more than 3x bigger than that, $383 billion (data from IMF, World Economic Outlook, Sept. 2005, database).

This means that the combined spending of the roughly 30 million subscribers of the 3 telcos (Smart, Globe and Sun) in thePhilippines is much bigger than those in Singapore. Globe and Smart may be feeling some "heat" from new-comer Sun cellular, but that's not enough. The 2 big telcos can still afford to be complacent to some of their subscribers' complaints. After all, customers only have 2 other options, so why be extra courteous?

Certainly there's room for a 4th and 5th or 6th telecomms company here and hence, lots of promos for the consumers like cheaper calls, cheaper text messages, faster connections, cheaper cellphone units, etc. But why aren't they here? The old answer: government over-regulations, its franchising rules, of discretionary choosing players and disbarring or disallowing others. To be a new telco player, you have to make "mano po!" to the Natl. Telecomms Commission (NTC) and the Office of the President (OP) or Malacanang, get franchise from Congress (the House of Representatives and the Senate), get business permits and cell site permits from the mayors (and governors?), barangay captains, and various licenses and permits from other national government agencies (DTI, DOTC, SEC, DENR, DOLE, BIR, SSS,...) and their respective attached bureaus.

One crucial role of goverment (that's what the taxes are meant for) is the protection of private properties like a cellphone, cellsites, protection of lives, ensure rule of law. Over-regulating telecomms firms (and firms in all other industries) is not an important government role, not even a role. Activities that create jobs and provide services to the public (transpo, housing, food production,...) should not be over-regulated, if at all. Government should over-regulate idleness and laziness, like idle lands, robbers, kidnappers, land-grabbers and other criminals. Give the latter hell and taxes.

But incumbent and existing players can be happy with a bureaucratic government set-up. It protects them from incursion by new players and competitors. The red tape, taxes and bribes may be high, but so are their profits since customers don't have enough choice.

Ooppss, let it not be misunderstood that I find no improvement in the current telecom infrastructure. The current set-up is a lot better compared to 10, 15 years ago. I am only saying that a 4 or 5 or 6 competing telcos are a lot better compared to the current 3 competing telcos.