Some Philippine congressmen are calling for the nullification of 3G licenses of four telecommunications companies -- Smart, Globe, Digitel, and CURE (Connectivity Unlimited Resources Enterprise Inc.) -- declaring that the National Telecommunications Commission (NTC) broke the law in awarding licenses without bidding.
The term 3G is shorthand for the next generation of mobile communications networks running on the WCDMA (Wireless Code Division Multiple Access) platform. The technology allows faster data transmission speeds, making possible high-speed data communications and mobile multimedia services such as video conferencing, audio streaming and mobile Internet.
'If you put up the prices of biddings too high, the business will go bankrupt,' said Smart public affairs chief Mon Isberto, in an interview with Computerworld Philippines.
Isberto cited as an example the cellular companies in Europe that spent over a hundred billion U.S. dollars in the bidding of 3G licenses and are now in deep debt. 'In Europe the bidding process produced a situation in which all of the major cellular players ended up in deep debt.'
He explained the 3G licensed companies in Europe are still recovering from the biddings since they spent so much in acquiring the licenses alone without rolling out their networks.
'It nearly bankrupted the cellular companies,' Isberto added.
BIDDING UNLIKELY
However, Globe senior vice president for corporate and regulatory affairs Rodolfo Salalima commented, 'Bidding is far off.' He said for bidding to take place, it will undergo due process in the court of appeals and the Supreme Court.
In the second hearing of the two House resolutions calling for an investigation, and the other nullification of NTC's awarding of 3G licenses, Salalima said Globe would not have bid if there was a bidding since 3G is not mentioned in Republic Act 7925 (Philippine Telecommunications Act).
'The law clearly states frequencies must be awarded only to the best qualified,' Salalima said during the hearing. 'The law itself clarifies that not every applicant ought to be given a chance to get frequency.'
Salalima described as 'exaggerated' the amount of P15 billion (US$293 million) to P25 billion that the government could have earned in a bidding or tender process, as mentioned in the resolution filed by Congressman Alan Peter Cayetano calling for an investigation of the awarding of 3G licenses.
He told lawmakers Globe would not have bid, saying there is a demand for 3G services in the Philippines but claimed it is not a commercial one. 'During that time (2004), your honor, there was no business prospect for 3G and so we would not have participated if there was a bidding. Bidding is only an alternative.'
But when asked if its telco rival Smart would opt to have 3G, Salalima quickly replied 'Globe would also have asked for an award' but would insist in a clear application of RA 7925.
'We would have gone to the courts to stop a bidding as scandalously high as P2 billion,' Salalima said in the hearing.
House Oversight committee chair Congressman Danilo Suarez, in his resolution calling for the license nullification, claimed the P2.3 billion NTC got in the awarding of licenses is so 'miniscule' compared to the revenues earned by countries with a smaller population like Italy and the U.K., whose governments made $10 billion and $30 billion (P1.9 trillion) respectively, by openly bidding out the use of available frequencies devoted to 3G technology.
OPPOSING STATEMENTS
In contrast to Salalima's claims, NTC Commissioner Roland Olivar Solis said there is a huge business prospect for 3G in the Philippines.
'We take exception to the explanations made by Attorney Salalima,' Solis said. 'The commission believes there is indeed a surging market for 3G. Just like what happened in 2G. Definitely it is going to be a slow take-up. It would start with a niche market but we're confident that with the introduction of 3G in the country the commercial take-up would go as fast as what happened to 2G.'
Solis told the committees the NTC would not have wanted the Philippines to be left behind in cellular technology, thus they went into 3G. He said 3G licenses have already been granted in several countries like Australia, Japan, Singapore, South Korea, Hong Kong, Malaysia, and Indonesia.
Other telcos CURE and Media Telephony, through their consultant representatives in the deliberations, also said they would have participated in a bidding if it was required for them to do so'but not as prepared as telco giants Smart and Globe.
Media Telephony was the first out of nine telcos to have applied for a 3G license in the Philippines as early as 2002 but was rejected. The other failed applicants are Bayan Telecommunications Inc., AC Communications, and Pacific Wireless.
FAILED HINDSIGHT
Suarez directly told Solis that NTC also failed in terms of business hindsight in the awarding of 3G licenses.
'You should have anticipated that each of the telcos will not allow not having a 3G if their rival has,' Suarez told Solis. 'Out of that you should have conducted a bidding.'
The congressman added the system that NTC made in distributing frequencies was patterned to suit at least four or five licensees.
'If I was in your (Solis) position I would have placed the top players with the highest price and let them bid for the best frequency available. The law is very clear. Bid if there are more than one applicant,' Suarez, time and again told Solis.
Suarez reported to Congress that he reminded NTC several times to conduct a bidding on 3G since early 2004 and was surprised to learn that the commission was awarding licenses in the latter part of 2005.
Similarly, House ICT committee chairman Simeon Kintanar, citing his five-year experience as NTC commissioner, commented that big players such as Smart and Globe would not have allowed others to have exclusive use of 3G.
'I think the existing dominant player would like status quo. Anyway they are big, dominant, and making money. There is no need to pour in money to earn more money because they are there already but if something like this will happen, there is no way they would allow others to be in without them being in also,' Kintanar said. 'That's a reality, and I think the industry would have to accept that. If they can get away without any change, they will.'
Kintanar added: 'I congratulate NTC for going into 3G, but I'm really disappointed because I was thinking and hoping and I was made to understand there would be a bidding on this.'
According to Suarez's resolution, NTC violated Section 15 of Republic Act 7925 in awarding 3G licenses without bidding, while ICT committee member Augusto Baculio declared that NTC also violated the law for failing to place any monetary value on 3G's service spectrum.
Solis, in interpreting Section 4 and 15 of RA 7925, told lawmakers that under existing laws the commission is not constrained to bid out the frequencies since the law only allows the awarding of frequency to those best qualified.
Suarez said one more hearing will be conducted before the committees on Oversight and ICT submit their reports in Congress and have the resolutions approved.