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Publication Date : 28-07-2014
Internet access in the Philippines is more expensive and more restricted than other countries
Rosemarie Pendon, 24, lives in Lagro, Quezon City and has mobile broadband sticks from three different telecommunications networks (telcos) but none can provide the sufficient signal for her to connect to the Internet while inside her home.
“With Smart and Globe, you have to go outside of the house to get a signal. For Sun, there is no signal even if you go out of the house,” Pendon said in an interview with INQUIRER.net.
“Our neighbour has PLDT WiFi which I sometimes connect to but its still slow,” she added.
Dennis Garcia, 29, cannot get a sufficient network signal in his home province of Nueva Ecija even when he goes outside of the house.
“The broadband stick that I bought was useless,” he said.
Pendon and Garcia are a couple working in Dubai, United Arab Emirates (UAE) who are in the country for a short vacation. Pendon is an assistant manager in a cafe while Garcia works as a web journalist for one of UAE’s online news agencies.
“In our cafe in Dubai, during busy nights with events, as much as 80 to 90 people could be connected to the WiFi network and the Internet connection will still be fast,” Pendon said.
“When you go to malls, their WiFi Internet is very strong. You can really use your phone just for calls, which is also cheaper than text messaging,” she said.
The cheapest Internet broadband subscription in Dubai is 110 Dirhams per month (around 1,300 pesos), which Garcia said he has in his apartment.
“Even if the price there and here are nearly the same, the speed there is very different than here,” Pendon said.
Both could not help but accept the sad fact of the slow Internet in the Philippines, which has the slowest average speed in the Association of Southeast Asian Nations (Asean), according to the crowd-sourced Net Index (www.netindex.com) rankings by Internet broadband testing company Ookla.
President Benigno Aquino III acknowledged this in a speech at the opening of the Convergys San Lazaro branch in Manila on Sept 3, 2010.
“Investors will invest more if we address factors like the expensive cost of power and bandwidth problems,” Aquino said. He ordered then Commission on Information and Communication Technology (CICT) chair Ivan Uy to “ensure that telecommunication companies upgrade the technology they provide, while ensuring that these investments do not result in prohibitive data costs.”
Ten months later, President Aquino issued Executive Order No. 47 which placed the CICT under the Department of Science and Technology (DOST) and renamed it the ICT Office (ICTO). The DOST also unveiled a five-year Philippine Digital Strategy (PDS) which was formulated by the CICT.
DOST Secretary Mario Montejo described the PDS as the “ICT road map.”
The PDS’ major thrust are e-Governance, Internet access for all, digital literacy, and ICT sector development. Each of these has a set of objectives for 2016 and a set of corresponding actions that respond to these objectives.
“It is an ambitious but doable strategy with success hinging on strong cooperation between different ICT sectors for its implementation,” Montejo had said.
Apologies and expectations
Angela Maravilla, a Client Solutions Manager of virtual office service provider vOffice Philippines Inc. in Bonifacio Global City (BGC), said that she apologises to their clients when they complain about intermittent Internet connection.
“There are times when all our meeting rooms are fully booked, then the Internet really slows down. Somebody complains and we have to reset our connection and I just apologise,” Maravilla told INQUIRER.net in a separate interview.
“Although it’s not reason enough, it’s in our contract that we should provide fast and reliable Internet. Sometimes it’s inevitable that the Internet connection will slow down because of many people connecting at the same time,” she said.
vOffice offers office services such as phone answering, reception, meeting room facilities, and free WiFi, to small and medium enterprises who find the cost of establishing a physical office too restrictive.
The company started June 2013 in the Fort Legend Tower with around 50 clients that are mostly freelancers and consultants. They had more than 1,000 clients by the end of 2013 prompting the expansion of a second business centre in One Global Place Tower also in BGC.
vOffice has 25 business centres throughout the world including China, Vietnam, Australia, Hong Kong, Malaysia, Indonesia, Thailand, and United Kingdom, but Albert Goh, Founder and CEO of vOffice Philippines Inc. said that Internet in the Philippines “certainly ranks among the most expensive” in relation to the speed and reliability offered.
“In general, Internet access in the Philippines is more expensive and more restricted than other countries. Our provider in [One Global Place], PLDT, has a slow Internet plan [and] the cost is certainly not cheap,” Goh said.
“We are paying around 8,000 pesos per month for 8 megabits per second (Mbps) download and 1 Mbps upload connection. In Malaysia, we are able to get 10 Mbps download/upload for about 5,000 pesos per month only,” he said.
Goh also noted troubles with their first business centre in Fort Legend Tower which has Globe as its Internet service provider (ISP).
“In addition to the high cost, we also experienced ISPs implementing weird techniques to encourage their customer to upgrade to a more expensive plan,” he said.
“For example, our Globe Internet connection in Fort Legend Tower will auto disconnect randomly and assign itself with a different IP address a few times a day. Besides assigning the connection with a different public IP, certain IPs that are assigned are not accessible publicly (behind their proxy),” Goh said.
For the virtual office service that Goh offers to clients, unstable Internet service has severe effects on their daily operations such as loss of productivity or money. He needed to subscribe to an additional 8 Mbps connection as back up to ensure consistent Internet availability for his clients.
“Many companies and clients heavily depend on a speedy and stable Internet connection as they are into the Business Process Outsourcing (BPO) industry. Having unreliable Internet access will easily mean loss of productivity and money for these clients,” Goh said.
“[Our two connections are still] somewhat insufficient due to the quality of the ISP here [because] our back up connection can be as slow or just as unreliable [as our primary]. In other countries, we have never needed to fall back to our redundant service provider so far,” he said.
Maravilla, who directly interacts with their clients on a daily basis, said that she informs them about Internet reliability on the outset of their service contract.
“I’m very transparent with our clients, I set their expectations regarding our Internet service provider … in order to serve them properly. We have a client here into construction and building development, they subscribed their own 8 Mbps line because they really need a fast connection due to their higher demands on the Internet,” she said.
“I think for us Filipinos, we are always aware and we understand for a fact that [the Internet] is like this in the Philippines,” she added.
Because of the higher price of ISPs in the Philippines, vOffice’s service plans in the country are also more expensive compared to in Malaysia.
“In general, [ISP costs] will definitely be a factor when we are pricing our services. Currently the pricing in Philippines is about 30 per cent more than Malaysia but this is not purely due to Internet alone. Philippine as a whole has a much higher legislation and operations costs compared with Malaysia,” Goh said.
“vOffice has thus far absorbed about 70 per cent of the ISP cost at this stage,” he said.
Two dominant players
The Philippines telecommunications industry is dominated by two major companies, the Philippine Long Distance Telephone company (PLDT) group, headed by Manuel Pangilinan, who owns Smart Communications, Sun Cellular, and Cignal Digital TV, and the Globe group, headed by the Jaime Augusto Zobel de Ayala II, who also own Bayantel.
These telcos build their own infrastructure from international undersea cable connection sites to the network of cellular towers scattered throughout the country. At present, PLDT has four connections to international cables while Globe has two giving the whole country a 2 terabit per second connection to the rest of the world.
(Two terabits per second is equivalent to 2,000 gigabits or 2,000,000 megabits. To upload a single photo that is 2 megabytes large in just one second requires a transfer rate of 16 megabits per second.)
In comparison, Indonesia has nine connections to international undersea cables, Malaysia has seven, Singapore has six, Thailand has three, while Brunei, Vietnam, and Myanmar each have two. Cambodia has one international undersea cable connection while Laos, as a landlocked country, has none.
Globe Vice-President for Broadband Product Development and Management, Francisco Fernando Claravall IV, said that the primary cause of slow Internet is congestion within the national network.
“When you build Internet infrastructure, you anticipate a certain amount of traffic that will flow,” Claravall said. “In the Internet, there is always the concept of peak and non-peak, like weekends and weekdays. The behaviours of people are different too, some are constantly connected while others only connect once in a while.”
“There will be a point where your pipes will not be able to handle the amount [of connections], it means that the usual flow of traffic will be slower than the usual. So you have to take into account the capacity you’ve built, the behaviors of the people that use the service, and the frequency that they use it,” he said.
According to data from the World Bank, fixed or household broadband Internet subscribers in the Philippines rose from 0.11 per cent in 2004 to 2.61 per cent in 2013.
The percentage of Internet users had also risen from 5.2 per cent in 2004 to 37 per cent in 2013. The greatest rise in Internet users was from 2009 to 2010, a jump of 16 percentage points.
Claravall pointed to the proliferation of smartphones and tablets that added to the number of computer devices connecting to the Internet unlike in the past where one fixed broadband subscription equals to one desktop computer.
“Now a typical household can have three tablets and two smartphones. So many more are connecting and the activity ratio of your home connection has gone up, which introduces a lot of traffic on the network. That’s already a reality today,” Claravall said.
World Bank statistics showed that the percentage of mobile cellphone subscriptions in the Philippines has risen from 39 per cent in 2004 to 105 per cent in 2013.
He said that the Philippines’ IT infrastructure is very good and is actually better than other countries as reflected in the boom of the Internet-dependent BPO industry.
Philippines previously overtook India as the top country in the world for companies looking to outsource some of their business processes. The Filipinos’ English proficiency and the relatively cheaper labour in the country were cited as the main drivers of the growth of BPOs.
“Look at the BPO industry, why are we the number one destination for BPO companies worldwide? You cannot do that if you do not have good infrastructure,” Claravall said.
Globe announced in the last quarter of 2011, that they will invest as much as $790 million in their network and IT transformation program over two to three years.
“The technology we invest in today is world class. We use the same equipment that the very big telcos around the world use,” Claravall said.
Usec. Louis Casambre, Executive Director of the Department of Science and Technology-Information and Communications Technology Office (DOST-ICTO), likewise cited the growth of BPOs as proof of the Philippines’ IT infrastructure.
“We receive criticisms from time to time from the industry, but our ICT-enabled industry is booming and that’s a critical factor which says something about [the state of Internet in the Philippines],” Casambre said.
“We would not have this kind of ICT-enabled industry, and with the growth rate it has, if our Internet were as terrible as sometimes they make it to be. There’s something inconsistent somewhere,” he said.
Casambre also noted that the Filipinos ability to speak English means international website hosting companies don’t see the need to put up servers in the country which leads to the need to access servers in the US.
“In Singapore, Hong Kong, and a lot of the ASEAN countries, their Internet is fast because the content is local in their country because of their language. It makes sense for Facebook to put a server there because they are talking in their language among themselves,” Casambre said.
“Us Filipinos, we speak English at a higher level than they do, it doesn’t make sense from a technical point of view for Facebook or other websites to put servers here,” he said.
The main challenge is in the Philippines’ archipelagic nature which creates constraints in the expansion of telcos’ networks to the provinces and municipalities far away from the main urban centres.
Building the infrastructure to provide connectivity to the far-flung areas is very expensive while the rural market may not provide sufficient revenues for the telcos.
Casambre noted a report from the Department of Education which found that only 17 per cent out the total 42,000 barangays (villages) have an available Internet connection.
“But available does not mean they are connected,” he said. “We cannot blame the private sector if they will not invest somewhere where they will not get a return of investment.”
Telcos, as the ones building their own infrastructure, maintains exclusivity to their network and are not likely to share it with their competitors. Government, meanwhile, has no role in the building of infrastructure for Internet connectivity, unlike what other countries are doing.
Edgardo Cabarios, Director of the National Telecommunications Commission (NTC) Regulation Branch, said in a separate interview that “in the United States, the government invests in broadband infrastructure. They have to stimulate the economy, and they have the stimulus fund worth about $7.6 billion placed in broadband infrastructure. In the Philippines it’s purely a private investment.”
“The government must invest in broadband because the private investment is not sufficient. [They are investing] 60 billion pesos a year at least for network development,” Cabarios said.
“There is no problem in connectivity to the international network, but there is a problem in national connectivity. The problem is price, especially in the regions outside of Metro Manila because they are far from where the majority of connections are. The cost of the infrastructure to give them connectivity [is high],” he said.
Cabarios pointed out that Singapore continues to lead in Internet connectivity in the entire Southeast Asian region because it is a small country making the cost of infrastructure very low.
“We cannot catch up to Singapore even if it takes so many years because it is very small. The cost if infrastructure is much less. We also cannot compare with Malaysia because it is compact with just two islands that are close making their cost of infrastructure much less than in the Philippines” Cabarios said.
“Same with Thailand because its just one big landmass.” “We are 7,107 islands, its very difficult [to build infrastructure] and the cost is really very high. Compared to these three, we will have difficulty catching up,” he said.
According to Cabarios, Philippines is more like Indonesia which has 13,000 islands and Vietnam which is one landmass but very long. Philippines remains ahead of Laos, Myanmar, and Cambodia.
“We are at par now with Vietnam but they might surpass us as far as Internet penetration and broadband infrastructure is concerned,” Cabarios said.
If the government invests in infrastructure to give people in the outlying areas of the country Internet connectivity, which Casambre calls the “last mile,” and giving them basic government services online, the private sector will soon follow in providing Internet services.
“We really have to address the last mile. If we’ve built the e-government services and systems but 83 per cent of the public is out of our reach, what’s the point? We’re not talking just about birth certificates, but also e-health, where patients can consult doctors via online systems,” Casambre said.
“As we see e-Filipinos advance and government is there to remove the obstacles, we continue to reach out to areas that are not exactly doable by the private sector, eventually it can be done,” he said.
Senator Paolo Benigno Aquino IV, who previously held a hearing to look into the issue of the slow Internet speed, said that they are already looking into the possibility of government investing in IT infrastructure because its just like when government invests in physical roads to connect to those in the outlying areas.
“You can look at it as a physical road and a virtual road. Government is already spending for physical roads why cant it spend of virtual roads also?” Aquino said in a phone interview citing also how economic development happens when physical roads are brought to areas.
He also cited problems experienced by telcos with local government units (LGUs) because some of them ask for high fees to set up a cell tower while others are very welcoming and are even the ones requesting for more cell towers.
“It takes about 30 permits to set up a cell site in an area and the LGUs even have different charges. We need to standardise rules on how LGUs treat the telco when they put up their infrastructure,” Aquino said.
NTC, the government agency mandated with regulating telcos, and DOST-ICTO, responsible for developing the country’s information technology (IT) infrastructure, both pointed to the outdated Republic Act 7925 or “Public Telecommunications Policy Act of the Philippines” that was enacted into law on March 1, 1995, as reason why the government has difficulty in regulating Internet service today.
“Looking at what the commission can do considering the limitations under the law, our power is very limited, because we are just taking our powers from RA 7925,” Cabarios said.
The wordings of RA 7925 does not include “Internet,” “broadband,” “cellphones” or “computers” and focused more on telephone networks and services and mobile radio systems.
Cabarios said that a telco can only be fined 200 pesos per day if a subscriber experiences dropped calls in more than two per cent of the total calls.
The 200 pesos fine is not stated in RA 7925, but can be found in Section 21 of Commonwealth Act No. 146 also known as the “Public Service Act” that was enacted nearly 80 years ago in Nov 7, 1936.
“[That is for] all types of violations in the conditions of your authority. If you continue violating the rule, one year is only around 73,000 pesos worth of fines,” Cabarios said.
“There have been many cases [of violations] but it’s just a small amount. The two penalties we can impose are fines and cancellation of authority. When you cancel their authority, you are not only penalising the company, you are also penalising the subscribers because they will lose service,” he said.
In Singapore, telcos are fined millions of dollars if they fail to meet service standards. Fines also ensure the telcos companies maintain consistent service because investors get angry when fines are imposed.
Casambre said that “in 1995, RA 7925 was a masterstroke. It broke apart the monopoly, it started to get government out of the telecommunications industry and set the stage for the tremendous growth that we saw around 1997. At one time we had 12 telcos that are really active.”
He however noted that the law achieved the goal of making the industry grow, but it was not able to put controls in place making the industry very liberalised.
“It’s the perpetuation of these old and obsolete prototypes of the way the industry is supposed to operate that does not allow the government to play its essential role to regulate and see that the industry prospers while at the same time that the consumer is protected,” Casambre said.
“The law that governs most of our ICT industry was passed in 1995 so it’s already ancient … [it needs to be amended to] take it to the next decade of ICT development in the country,” he added.
Aquino said that some of the utilities being referred to in RA 7925 “no longer exist” and the “Internet is not even considered a basic service in that act”.
“In these days, to be able to transact and to be able to communicate, you really need Internet service. We need to start considering Internet as a basic service. Even the United Nations has considered Internet access as a basic right,” Aquino said.
“If its a basic service, it can be regulated in terms of price, quality standards, and government will have more basis to monitor and regulate the industry,” he said.
Collaboration and competition
According to Google Philippines, telcos should collaborate through Internet exchanges, or IP peering, which allows traffic to cross between the two competing networks locally instead of having to travel to servers outside of the country before arriving to their respective subscribers.
“The Philippines has a unique opportunity to speed things up by better using the connections it already has. When you wait a long time for a website to load, your request is traveling all the way to the United States, then back to the Philippines, even when you’re accessing Filipino content from Filipino companies,” Gail Tan, Communication Manager of Google Philippines said in an email interview.
“Even at the speed of light, and even with higher bandwidth, shortcuts make a difference. You don’t want your data to take the scenic route. Creating more Internet exchanges inside the Philippines would create more direct connections between the servers and the people, as well as encourage investment in the Philippines’ digital resources,” she said.
Claravall said that Globe has already joined the Philippine Open Internet Exchange (www.PHOpenIX.net) operated by DOST-Advanced Science and Technology Institute (ASTI) along with several other telcos and local organisations.
PLDT has expressed its support for peering but has yet to join PHOpenIX.
“[Without IP Peering], local traffic has to go trough a longer path which consumes resources therefore unduly adding load to some resources which could have been left free for other uses. If you use resources inefficiently, it has an impact on cost and pricing,” Claravall said.
“WIth Internet exchange, telcos can connect and exchange traffic instead of having to connect to offshore sites. We should do peering, no ifs and buts, and it has to be open. US telcos do peering for free because they are the core of the Internet. Here in the Philippines, whats stopping us to do the same?” he said.
Cabarios believes that the lack of competition is keeping the prices high while more telcos will improve the quality of service for the public.
“Its better if there are three [telcos], it will open and improve the marketplace. They will compete in prices and quality, but right now there are only two [PLDT and Globe]. We don’t know if there is a cartel or none. The probability of cartelised pricing lessens if there are more telcos, three is good but its better if there are four,” he said.
Aquino cited the necessity of a “Competition Law” that would prohibit acts and practices from stifling the competition or preventing new players into the telco industry.
“For an industry to be truly competitive you need to have three major players, and we only have two. If there is competition, at the end of the day the consumer is the one that benefits from lower prices, higher standards, and quality of service. Its a tried and tested economic principle,” Aquino said.
“This is not just for telcos, it will be for all industries. It will prohibit acts and practices that hamper market competition which negatively affect the consumers such as when the dominant player prevents smaller competitors from entering the market, or when it uses its position to create a monopoly,” he said.
The bill, which has passed the committee level in the Senate, is set to be sponsored by Aquino once Congress resumes. He also said that mergers and acquisitions will also be prohibited if it results in worse situations for competition.
“It should promote competition but not in a direct way, at least it will help promote competition among the current players and when new players want to join in, they will not have difficulty because practices which make it hard for them will be prohibited,” Aquino said.