The telecommunications industry is currently a hot topic in the Philippines today. There is much excitement in the prospects for the entry of a third player to finally challenge the duopoly’s limited access, unreliable, and expensive services.
Congress is currently crafting bills on mobile number portability, open access, prohibition of locked-in devices and subscriptions, among others.
The Department of Information and Communications Technology (DICT) is being showered with praise for their initiatives like the Luzon Bypass Infrastructure and the implementation of the “Free Wifi in Public Places Act”, while the National Telecommunications Commission (NTC) is being subjected to increased scrutiny by the general public.
One issue that has recently become part of the general conversation is that of spectrum. In a February 12, 2018 speech before local chief executives from Visayas and Mindanao at the Radisson Blu Hotel in Cebu City, President Rodrigo Duterte vented his ire on the duopoly via a simplified discussion on spectrum.
The issue of spectrum is worth a close look, because it affects the telecommunications sector on a fundamental level.
What is spectrum?
The radio frequency spectrum is invisible to us, but it is all around us. The radio frequency spectrum is the basis for all wireless communications, whether analog or digital, whether close range or kilometers-wide distances.
Most of us are familiar with the “kilohertz” (kHz) and “megahertz” (MHz) frequency designations from our AM and FM radios; these are part of the radio frequency spectrum.
However, spectrum for wireless communications, particularly for digital cellular mobile communications, are in higher frequency ranges than can be received by FM radios.
What is spectrum management?
Spectrum management is the process of regulating the use of radio frequencies to promote efficient use and gain a net social benefit or, in so far as the Philippines is concerned, the allocation of frequency bands for use by either the general public or by private entities, the classification of specific frequency bands for exclusive use by government or private sector entities, and the assignment of frequencies for exclusive use of an entity for specific purposes.
Currently, spectrum management is a function implemented by the NTC; however, despite powers granting it to the contrary, the DICT has not yet set spectrum management policy for the NTC to implement.
This absence of a coherent spectrum management policy has resulted in a situation where the duopoly has practically cornered the bulk of spectrum used for mobile cellular mobile communications.
From an FOI request, the data4 provided is a disappointment to any person wanting to see fairness for the benefit of the public:
The diagrams show clearly that the bulk of spectrum has been hoarded by the duopoly, which is the result of incoherent and poor spectrum management in the Philippines.
What is the effect of poor spectrum management and the hoarding of spectrum?
Why would a telecommunications company hoard spectrum in the first place? The answer is simple: it reduces capital expenditure, and thus improves profits.
A frequency band (for example, 900 MHz) has a finite number of frequency “blocks” that can be allocated. Each “block” has a finite amount of channels, and the said amount of channels determines the maximum number of subscribers that can be served by a single antenna for that frequency band, in a given area.
The more spectrum within a band that you control, the more “blocks” you hold. Thus, the more channels you have, and thus the more subscribers you can serve using that antenna.
Now, if you hold some “blocks” in another frequency band (such as in 1800 MHz), you are now able to serve more subscribers. This is why not only do telcos want as much as they can get within a frequency band, they also want as much as they can get from other bands.
So, if you increase the amount of spectrum holdings that a telco has, you increase the amount of channels available. Thus, an increase in the amount of spectrum you hold, the less number of antennas you will need in a given area to serve the same amount of subscribers.
The less number of antennas and sites built to serve a given area translates to reductions in capital expenditure, and thus improves profits. Spectrum hoarding is a means of increasing profits.
Also, as spectrum is a finite resource — you cannot make more spectrum after all of it has been assigned — the more spectrum existing entities hold, the less spectrum becomes available for any new challengers.
Spectrum hoarding is also an anti-competitive act, and allows for existing dominant players with large spectrum holdings to prevent new players from competing effectively in the same markets.
As we all have been aware for several decades now, the lack of competition is the root cause of our poor quality, unreliable, and expensive mobile telecommunications and mobile internet services.
What are the basics of proper spectrum management?
In a presentation made before the House of Representatives Committee on Information and Communications Technology (ICT), Democracy.Net.PH outlined the fundamental concepts when crafting pro-Filipino spectrum management policy:
- The radio frequency spectrum is a scarce finite resource.
- This resource is owned by the Filipino people.
- Only spectrum designated by the International Telecommunications Union (ITU) as purposed for telecommunications, telemetry, navigation and life safety, and broadcast must be made licensed spectrum. Unlicensed spectrum must be the default, so as to encourage innovation and invention; public use must be the primary consideration when regulators decide whether a frequency band is licensed or unlicensed.
- The interest of the Filipino people must be the primary guidance when regulators grant private entities the privilege of spectrum assignments.
- Recalling, refarming, and reallocating spectrum bands and assignments must be in line with the interests of the Filipino people.
- Private entities must not forget that being a spectrum rights holder is a privilege, not a right or a chattel.
- Private entities must remember that they are not vested with ownership of their assigned frequencies.
These principles apply especially to all spectrum rights holders, such as telecommunications and broadcast entities.
Where did we go wrong?
While the incoherent and poor spectrum management policy at present affects a lot of sectors in the Philippines, the absence of proper spectrum management is more keenly felt in the telecommunications space.
What we have been doing wrong over several decades has been these:
- No periodic review of spectrum assignments and spectrum rights holders. The National Radio Frequency Allocation Table (NRFAT) may be requested from the NTC, but this document only shows how spectrum in the Philippines may be used for which sectors or industries. The NRFAT does not currently provide detailed information on spectrum assignments and spectrum rights holders ? as such, we have not known immediately who the spectrum hoarders are.
- The privilege of licensed spectrum use is granted for 25 years to an entity with a valid congressional franchise. As a congressional franchise is also granted for 25 years, this means spectrum rights holders hold spectrum for unlimited periods.
- Spectrum assignments are given using a “beauty contest” model. Rights over assignable spectrum are granted upon request to the NTC.
- There are no “spectrum caps”. The NTC does not practice reservation of channels for future players, and incumbents can acquire as much spectrum holdings as they want.
- Spectrum rights are treated as fungible assets. Companies who wish to be bought out by bigger companies use their spectrum rights holdings as a means to inflate their valuations, and companies who want to acquire more spectrum rights holdings merge or acquire other companies to gain their spectrum rights holdings.
- Because the NTC does not periodically review spectrum assignments and spectrum rights holders, assigned but unused spectrum is not returned to the government nor immediately recovered by the NTC.
- Even as the NTC assigns spectrum via “beauty contest” processes and by simple issuances of memorandum orders, memorandum circulars, and letters of approval, the NTC has claimed before Congress that quasi-judicial and judicial processes are required for revocation of spectrum holding privileges granted via administrative processes.
It is therefore not surprising that after more than two decades, about 75% of mobile telecommunications spectrum has been cornered by the duopoly:
How can we do proper spectrum management?
Knowing what we have not been doing right and learning from the best practices of other countries, we can immediately turn our efforts to reforming our poor spectrum management practices.
Many of these actions can be done immediately by the DICT, the NTC, and other relevant government agencies, but some may require congressional action. These are:
- The National Radio Frequency Allocation Table (NRFAT) must be published every year and be made available to the public. The full NRFAT must also include a list of spectrum rights holders, the frequencies assigned to them, and (when applicable) the provincial locations where these assigned frequencies apply. The FOI Philippines initiative (foi.gov.ph) of the Presidential Communications Operations Office (PCOO) can help the NTC in making this happen.
- Dynamic spectrum allocation. If you won’t have an antenna installed in a location, you do not deserve to have spectrum in that area ? that is a fundamental principle. Unless we are talking about satellite frequencies, whose footprints are larger than the size of the Philippines, spectrum assignments should be done based on a limited area of coverage. A good start would be to issue spectrum assignments at least down to the provincial level, which is a fine balance between ease of assignment and monitoring, and ease of compliance; in fact, this is already being done for the frequency assignments of radio stations. Later on, the NTC can implement other dynamic spectrum allocation methods, so that if a telco does not put up a cellsite in a far-flung municipality, the NTC will not assign the telco any spectrum in that municipality.
- Appropriate methods of spectrum assignment ? spectrum auction for contestable frequencies and beauty contest for not. “Beauty contest” assignment is appropriate for broadcast entities, government agencies, and other similar users who by the nature of their operations only use small slices of spectrum and do not attempt to hoard more. Spectrum auctions are more appropriate for mobile telecommunications spectrum, because the telcos will try to get as much of they can get. One fortuitous side effect of spectrum auctions are the government earnings as a result; in India in 2016, the government had put a total of 2,354.55 MHz of mobile airwaves for sale across all bands, cumulatively valued at around Rs 5.63 trillion (P4.57 trillion) at base price5.
- Spectrum holding limits “spectrum caps” for contestable frequencies. To further ensure competition, the NTC and the Philippine Competition Commission (PCC) must work together to determine a spectrum cap for contestable frequencies. Spectrum caps prevent large holding of spectrum by a particular mobile operator and thus will provide competitive advantage to the operators. For example, in India, there is a cap of 35% for spectrum holdings6.
- “Use it or lose it” spectrum use privileges. Spectrum holdings that are not utilized provide no benefit whatsoever to the general public, and must be returned immediately to the government. The DICT is currently proposing a Spectrum Monitoring and Analysis System — once we are able to monitor actual spectrum use, we can more accurately demand for the return of unused spectrum. However, there is no need to wait for this project to take off to start implementing such a policy.
- ‘Close shop and you stop’ policy. The cessation of business of a spectrum rights holder must result in the immediate return to the government of assigned spectrum. Mergers and acquisitions must result in the immediate return of previously assigned spectrum of the non-surviving entity to the government. The PCC can help enforce such a policy.
- “Non-compliance and lose your assignment” policy. The non-payment of spectrum user fees (SUFs), supervision and regulation fees (SRFs), and other non-compliances to NTC regulations governing spectrum use should result in the immediate return to the government of assigned spectrum.
- Short term spectrum use privileges. Assignments must only be granted for a period of 5-10 years or less. After the end of this period, spectrum will be returned to government and subject to auction or beauty contest allocation, whichever becomes applicable at the time.
- ‘What is administratively assigned must also be administratively revoked’ policy. The NTC claims that because of the provisions of the Radio Control Law (RA 3846), spectrum that has been assigned willy-nilly requires quasi-judicial, or even court action, to claw back. We do not believe that this is true, but Congress can put an end to this practice by enacting a spectrum management reform law amending RA 3846.
- Spectrum currently licensed and assigned to spectrum rights holders, and have become identified as unlicensed (e.g., wi-fi, bluetooth, citizens’ band, VHF and UHF ham radio, among others), should be clawed back to allow public use. This encourages invention and innovation; the Philippine ICT sector needs a lot of this, and will continue to do need it a lot.
Spectrum management policy reform will support the President’s agenda of better ICT services for the Filipino people. Political will that will result in such reforms is not only something good, but also something important and imperative.
The Philippines needs spectrum management reform now.
The author is the co-founder and co-convenor of Democracy.Net.PH
President Duterte presides over a meeting with local chief executives from Visayas and Mindanao at the Radisson Blu Hotel in Cebu City.
Martin Cave, Chris Doyle, William Webb. Modern Spectrum Management. Cambridge University Press, 2007.
Current spectrum rights holders?. Tracking no: #NTC-058014424019.
4“2017 CMTS Spectrum Assignment Data“. Engr. Pierre Tito Galla/ Democracy.Net.PH.
5 “Govt plans largest ever spectrum auction of 3,000 Mhz“. BGR. February 8, 2018.
6 “India’s new spectrum cap to enhance telecom consolidation efforts“. telecomlead. January 11, 2018.