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NEWS UPDATES 6 August 2009

Philippines: Proposed fees to deter broadband expansion

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Globe Telecom Inc said the National Telecommunications Commission’s (NTC’s) proposed fees for Internet wireless broadband frequencies could deter the expansion of the telecom industry to the countryside, the Manila Times reported.

In a position paper, Froilan Castelo, Globe regulatory affairs head, said the cost of spectrum, either for its assignment or for its use, is one of the primary economic considerations to any business using the air waves as means to deliver service.

Frequencies in the 2.5 to 2.7 gigahertz (Ghz), or 2500 to 2690 megahertz (MHz) band are considered valuable because broadband wireless access or Interoperability for Microwave Access (WiMAX) may be offered on those frequencies.

WiMAX is a technology that provides faster wireless transmission of data. It also offers broadband speed without the need for cables.

In a draft memorandum circular, NTC said the prescribed spectrums users fee (SUF) for the use of the 2.5 to 2.7 GHz bandwidth, telcos should pay P1 million per MHz for the first 5 MHz assigned to them.

The regulator said telcos should pay 2 million peso for every additional 1 MHz in excess of 5 MHz but not exceeding 10 MHz; 3 million peso for each additional 1 MHz in excess of 10 MHz but not exceeding 15 MHz and 4 million peso per MHz of 15 MHz but not exceeding 20 MHz. (1$=48 peso)

Telcos should pay 5 million peso per MHz in excess of 20 MHz but not exceeding 25 Mhz; 6 million peso per MHz in excess of 25 MHz but not exceeding 30 MHz and P7 million per Mhz in excess of 30 MHz.

Castelo said Globe’s analysis of the proposed SUF yields an average price of 2.5 million peso each megahertz (MHz) of relevant broadband wireless access (BWA) frequency, while 2G spectrum carries an average price of 0.5 million peso per MHz.

The lawyer said the proposed SUF rates “do not incentivise” broadband development and that the BWA is much less mature than 2G. Besides the higher SUF, Castelo said a substantial capital expenditure is needed to put up the necessary broadband wireless access network and its related backhaul transmission.

There is also the associated cost to clean up spectrum of both legitimate legacy and illegal users. Castelo cited a recent International Telecommunication Union report that said there is a need to minimize unreasonable costs that are barriers to entry in broadband services.

The Globe executive recommended that NTC should lower SUF and reduce these entry barriers to promote the rapid development of broadband access needed to bridge the digital divide.

Castelo added that high speed Internet access is the name of the game in the telecom industry within the next three years.

“The progress of broadband services is so far mimicking, if not outpacing, the growth story of GSM,” Castelo said.

In 1997, the number of Globe GSM subscribers has reached 100,000 and ballooned to almost 25 million in 2008 while its broadband subscribers almost doubled from 127,000 in 2007 to 234,000 the following year, he said.

Besides lowering SUF, Castelo proposed that the adoption of BWA fees should be on a phased implementation approach to accelerate nationwide broadband deployment.

A phased implementation of the proposed SUF should set the stage for cost-efficient BWA deployment that will reach more Filipinos in less time, he added.


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