DICT says auction model will only benefit telco ‘duopoly’

The Department of Information and Communications Technology (DICT) is standing by its decision that it is unwise to hold an auction for the entry of a new major telco player.

DICT acting secretary Eliseo M. Rio Jr.

This is despite the insistence of the Department of Finance (DOF), which said that an auction is needed as the country cannot afford to give out frequency spectrums for free again.

In a strongly worded Facebook post on Tuesday, July 10, DICT acting secretary Eliseo Rio Jr. said an “auction will not benefit the Filipino people, it will only benefit the duopoly.”

“Some argue that auctioning the frequencies in selecting the new major telco player would be beneficial to the Filipino people for it would monetize the spectrum that they own. Yes, the highest bidder will put upfront billions of pesos to be awarded the frequencies. But, from whom shall the winning telco recover this auction expense that has nothing to do with rolling out its infrastructures and nothing to do with improving telecommunication services? From the Filipino people, of course!” he declared.

“In effect, the Filipino people will gain nothing from the auction of frequencies for they will pay for it in the long run, as it will only be passed on to them by the winning bidder to recover the amount it paid,” he added.

Rio said holding an auction will just make telco services more expensive than when the frequencies were awarded free. “It will just make the winning telco uncompetitive to the duopoly that never paid the Filipino people for their frequencies,’ he stressed.

Earlier on Sunday, Rio reiterated his opposition to the proposed auction of frequency spectrums that will be used as basis for the selection of the new telco player.

“There are those who contend that the frequencies are owned by the Filipino people, but these frequencies are totally useless without telcos who have to invest tens of billions of pesos for their infrastructure. Yes, some telcos who sold their frequencies to the duopoly earned billions of pesos. But why punish a new player who has not earned any single centavo yet, for the sins of these incumbent telcos?” Rio said.

“By proposing an auction for the new player to recover what is due the Filipino people from failures of past administrations is not only illogical but really unfair. The government can still run after the beneficiary of the sale of frequencies if proper taxes were not paid, and it is not the task of DICT to get it from a new player whom we are trying so hard to attract to give better and less expensive ICT services,” he said.

The DICT has opposed the auction mode as it will force a new player to put up a huge amount to qualify for the bidding process, which is not related to setting up telecommunication facilities and improve services.

Telco industry stakeholders have expressed their preference to the draft terms of reference (TOR) of the DICT, which uses the highest committed level of service (HCLoS) as criterion for the selection of a new major telco player, over the use of auction as a mode for the selection during a public consultation conducted by the department last Friday.

Under the HCLos formula, which is being favored by the DICT, the new telco will be selected on the following criteria: 40 percent for national population coverage, 20 percent for minimum average broadband speed and 40 percent for annual capital and operating expenditure over a five-year commitment period.

On the other hand, the guidelines using the auction mode stipulates that a bidder that will offer the highest annual capital and operating expenditure for a five-year commitment period shall be selected as the new major telco player. The new telco player shall be subject to the applicable spectrum user fees pursuant to prevailing rules and regulations after the said period.

Last June, the DICT has directed the National Telecommunications Commission (NTC) to conduct a review on spectrum user fees being paid by telecommunication firms in a bid to improve the state of mobile services in the country.

Department Order No. 003-2018 directs the NTC to review and make appropriate adjustment on spectrum user fees for 610-790 MHz, 790-960 MHz and 1710-2025 MHz radio frequency bands to ensure efficient spectrum use, amid the rapid growth of new technologies and preparations for the entry of a new major player in the local telco industry.

The DICT is eyeing to pick the new telco player as early as September this year. – with Aerol John Pateña (PNA)

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