MANILA, Philippines—The government’s new proposal to cut charges for consumers making calls and sending texts outside their respective networks will cost local telecommunications firms billions of pesos in revenue losses, further cutting profits of an industry already under heavy price pressures.

But Globe Telecom, the country’s second-largest industry player, considers the lowering of interconnection charges as inevitable, saying it has to be done considering that call and text rates in the Philippines are among the highest in the Asia-Pacific region.

The Ayala-led firm formalized on Monday its support for a National Telecommunications Commission (NTC) draft circular to lower interconnection charges, which are paid for by consumers when trying to reach users in other networks.

“We agree with the findings of the NTC that charges in the country are the highest in the region. There’s a lot of pressure to lower this,” Globe counsel Froilan Castelo said, adding that cutting charges would be impossible to avoid.

The NTC wants interconnection charges for voice calls lowered to P1 per minute from the current P4 in three years. Charges for text messages will also be lowered to 15 centavos from the current 35 centavos per message. These are in line with the average charges of countries in Southeast Asia.

Castelo said this would mean a massive reduction in revenues for local companies. “Interconnection fees are a big source of income for companies,” he said. “In this regard, we would like to work with the NTC to find a way to help cushion the blow on our income.”

He estimated that the reduction in company revenues would reach “billions” of pesos if the lower interconnection fees were implemented.

Castelo said the company would ask the NTC to defer the implementation of the proposed rules and would submit its position paper in a week’s time.

Leading carrier Smart Communications questioned the NTC’s methodology in coming up with the lower rates.

Smart counsel Roy Ibay said it was not right for the NTC to compare rates in the country with others in the region due to the different cost structures of companies in different markets.

He said costs in the Philippines have always been higher because local firms usually imported most of their equipment, while other companies in the region produced their own.

Consumer group TXTM8 Consumer Group Tayo Inc., meanwhile, said lowering of interconnection charges had long been overdue.

“The regulation of the rate of interconnection will benefit the industry and the public in at least two ways: It will lower the barrier to entry for small and new operators… and improve market efficiency, which will lead to innovation,” the group said in a statement on Monday.

source:  http://business.inquirer.net/5934/globe-telecom-backs-ntc-plan-to-lower-interconnection-charges

REACTION

In this article, the Globe company supported the NTC's plan on lowering the call and text charges in communicating with other networks, while the Smart company had opposed it. Smart buddy, I think, is the most expensive of all telecommunication companies. In my case, as a student with a limited amount of allowance, prepaid load can be expensive. Most of my classmates are Sun cellular users which means I will have to buy more prepaid regular load, which is expensive, in able for me to communicate with them; such as asking about assignments, and other school related questions. Imagine there are millions of students in the Philippines who are willing to pay 100 pesos of prepaid load just so they can communicate with their classmates who are using other network servers. So it justifies the idea that the article mentioned that once telecommunication firms lower the charges on call and text to other networks, it will result to billions of revenue losses. With this amount of opportunity cost from telecommunication companies, the public will definitely gain so much from it. Example are businessmen. As business people, they would really prefer cheaper costs when dealing with business transactions with their clients. Using different telecommunication networks, they will be able to call and text to their clients who are using different networks without having the thought of losing their prepaid load. They would be able to save more money, and with that saved money they can use it to improve their business. Another group of people that can benefit from this plan would be the students, like me. Say, a student consumes 100 pesos of load weekly. With the NTC's plan of lowering the charges, a student may save, say, 40 pesos a week which means 1,920 pesos in a year. In that 1,920 pesos, students can spend it to other things which are more important, such as tuition fees, books, and school materials, than communication expenses. Families can also benefit from this. Instead of budgeting, say, 10% of their money to prepaid load so they can communicate with each other, they may be able to save up to 3% if NTC's plan is realised. In that 3% of their money, they can just pay it to their other house bills such as water and electricity.  

If the said plan will be implemented, many mobile services will change. I guess unlimited calls and text messaging services will no longer be existent in two reasons. The company had lost billions from this plan and implementing unlimited services will once again become their loss, or consumers will no longer need unlimited services due to lower rates in call and text messaging. As the article said, it will improve market efficiency, well, it will not only improve market efficiency but also the lives of its consumers at least, maybe, in a little way.