Problem Solving Philippine Internet Speed

Like many problems — the MRT, Transportation, the Peace Process, and other similar issues, there seem to be a lack of coherent conversation, and analysis with respect to problem solving Philippine Internet Speed and reliability in the Philippines.

Problem solving Philippine Internet speed is multifaceted. For the consumer, it is the desire for affordable, high-speed Internet service at the lowest possible price point, and worth every centavo paid for. For the government, the “Internet Problem” looking at it from the perspective of delivering services, it is the deployment of Government service via online space, streamlining silos of Big Data and translating it into coherence. For the telecom industry, as well as the regulator (the National Telecommunications Commission) as it exists today, the “Internet Problem” is to to ensure entrenchment of businesses is not disrupted regardless whether or not it is beneficial to them in the long term. And for a number of advocates (not all), solving the “Internet Problem” is to answer all these needs (and more, as well as future needs) with a single, magic bullet called the Department of Information and Communications Technology or DICT. How then does one reconcile — if at all desirable, the various expectation, wants, and for a lack of better term — “advocacies” of each of these stakeholders in the Internet Problem?

Monolithic industry

The first fundamental step in solving any problem is understanding the situation. It means discovering how the existing structure works. In the Philippines, we have a telecommunications industry driven by antiquated 20th century laws, with a Congressional franchise requirement to operate a telecommunications business in the Philippines. The Philippine telecommunications structure is treated as a monolithic industry. This translates to an ownership of everything from 1) International Gateway or Landing Station to 2) In-Country Transit or “Middle Mile” and lastly, “Last Mile” or “Local Loop” which is where subscribers are connected to.

The monolithic industry works like this. Each telecommunications company has to have a franchise they acquire from Congress — not from a regular office like the LTO, or LTFRB, but Congress itself to operate. Each telecommunications company must own everything from the international gateways (where the Philippines connects to the rest of the world), to the middle mile — the spine, if you will, or the backbone, or artery, or another apt analogy — EDSA the highway to the last mile — the onramps, and offramp that lead from the telco to the secondary roads or smaller arteries of our homes and offices.

Impact of telecommunications industry so far

There was historical economic impact.

The telecommunications industry in 2012 accounted for 2.5% of the Philippines GDP or some US$5.3 Billion dollars. It contributed US$267 million annual to economic growth or 1% of tax collection. Furthermore, the telecommunications industry employed at the time, 525,000 skilled workers, and professionals. While fixed-broadband adoption hasn’t had any material impact on the greater economy, mobile broadband adoption impact between 2000 and 2010 reached 0.61% of GDP or 7.3% of all economic growth in the Philippines.

PLDT posted gross revenue of PHP122.9 Billion (fiscal year ending 2014). This represents their entire business from telecommunications to content creation. PLDT posted PHP103 Billion pesos for mobile cellular and data services from 69.857 million subscriber base. They generated PHP 13.8 Billion for domestic fixed-line broadband, PHP 7.972 Billion for domestic lease-line, PHP 6.412 Billion for International leased-line and PHP 2 Billion for Data Center Services.

Globe Telecom reported gross revenue of PHP 99 Billion (fiscal year 2014). They reported PHP 78 billion in mobile revenue from 44 million subscriber base. Globe made PHP 12.687 Billion from wired and fixed wireless revenue with 2.8 million subscribers and PHP5.480 billion from International and domestic data services, corporate Internet access and data center solutions.

A deeper look at those annual reports reveal that both telecommunications companies are diversifying their business. They are investing in what they call value added services like content creation, and content delivery services to deliver growth, and shareholder value. Core businesses showed substantial growth in prepaid subscribers, but postpaid subscriber count and data center growth and revenue are struggling.

Asia Pacific countries/regions had average connection speeds above the 4 Mbps broadband threshold, and 5 of these exceeded the 10 Mbps threshold. India had the lowest average connection speed among surveyed countries in the region, at 2.5 Mbps, followed by the Philippines at 2.8 Mbps. — State of the Internet Q3 2015 Quarterly Report

Internet in the Philippines is one of the slowest in the Asia-Pacific region. The Philippines recorded a 10% adoption rate for 4 Mbps broadband fixed line access in the first quarter of 2015. The Global Competitiveness Report says 37% of the Population is using the Internet and ranks the Philippines as 91st out of 144 economies in that regard. Telecommunications companies Globe Telecom, and PLDT say, they presently have a combined subscriber base of 113 million.

Internet slowness is further quantified as the Philippines ranks 76 out of 144 economies in the Global Information Technology Report 2014, an index similar to the Global Competitive Report, but focused on Network Readiness. The Network Readiness Index identified that the Philippines ranks 132 out of 144 economies on Mobile Broadband use. It also ranks the Philippines as 93rd in Fixed broadband Internet subscriptions and 79th in mobile broadband subscriptions.

Mobile data plans in the Philippines give the lowest value for money compared to Internet Services Providers in South East Asia, and South Asia. It also ranks as one of the slowest LTE (mobile broadband) networks in the world.

In spite of all this, there is already an increase in e-commerce, and content consumption that is helping drive broadband use. E-Sports, Film and Television distribution by such services like iFlix, the local version of Netflix have entered the market. And recently, Netflix has also entered the market which is sure to drive broadband demand. E-sports and gaming distribution network Steam is already registering 845.5 TB from the Philippines, and an average download of 2.2 Mbps which is 0.9% of Global Steam Traffic.

Government perspective on ICT

From the government’s perspective, the Internet problem is all about delivering, and maximising the Internet in the delivery of information and services, as well as the management of cybercrime, and cybersecurity. It has a specificity in its view on Internet policy.

This demonstrates the perspective of the Philippine government in terms of ICT policy. Notable mention of what the Philippine government has done recently is the enactment of Cybercrime legislation, creation of the National Cybersecurity Inter-Agency Committee (its version of a National Computer Emergency Response Team), invovlement with Open Government, and Open Data.

You will notice the initiatives from the Official Gazette, Open Data, Open Government, ICTO, iGov, DOST, and even organizations like the PhilGeps (Government procurement), and the Bureau of Internal Revenue have been pushing for citizens to maximise Internet use by going online. This has been the push of PNoy administration with respect to ICT initiatives. Many of these initiatives may serve as prototypes, precursor, or building blocks necessary to surmount Big Data challenges moving forward.

The challenges from Government’s ICT perspective are numerous. Chief amongst which is the ability to compete against the private sector for labour, and it is constantly defeated and faced with a brain drain.

From a more technology, and architecture perspective, the government holds Big Data, and is pushing the limit of present technologies necessitating the migration in some cases from relational databases to NoSQL databases and highly available, and secure clusters. Even as these silos of information have scaled to Big Data proportion, allowing them to communicate together remain a challenge.

The advocate perspective

The perspective of the advocate is one outside looking in. Some advocates are frustrated by the perceived lack of progress in ICT development, particularly driving is their perception that Internet speeds should be increasingly regulated. They are not entirely incorrect in concluding that Internet speeds should be, and the focus in this regard is a rehabilitation of the NTC, or scrapping it entirely and start over. Advocates are however distracted with the insistance that Department of Information and Communications Technology (DICT) is essential to advancing the goal of Internet speed and reliability.

The current predominant view of Advocates is the necessity to establish a Department of Information and Communications Technology (DICT) as a big kickass super advocate to advance ICT policy within the Cabinet. This is a romanticized, and myopic perspective of how reality operates, and ignores bureaucratic realities that reorganization of the bureaucracy entails. This perspective also fails to recognize the geopolitical realities of either campaign platforms, and Presidential plans, and the unfiltered access to information of the Presidency necessitating the focus on views the advocate feels is divergent to their narrow perspective. This view also neither accomplishes solving the problem of brain drain from the ICT department perspective, nor fail to take into account the impact of bureuracrcy.

The government presently views ICT in its perspective as a tool, as a means to an end. As mentioned, in the last six years for example, the government has advanced numerous positions tangential to ICT such as open data, and open government, as well as the utilization of online tools to further its increased transparency agenda: the publishing of information through websites; the push to submit government documents and transactions online to minimize corruption from organizations like PhilGeps and BIR. It does not however pushed ICT in the context of a national broadband plan, and again the reason is fairly simple: the government prefers a specifity in its ICT focus which is limited to ICT in context of government services.

In startup terms, the advocate position is like picking the drapes, having stationaries and business cards printed before you even have an actual product in development.

To achieve the goal of injecting ICT into the broader economic plan, it should be through the National Economic Development Authority, however the reader should be cautious. Presidential plans, and campaign platforms have specific points of view, and that ICT is in service of those plans and perspectives, and not its prime driver.

In 2010, PNoy was elected and his focus had always been his social contract as driven by the Daang Matuwid philosophy. It was in the liberal sense focused on delivering Freedom from Hunger for many impovrished Filipinos. Barack Obama’s first term focused on combatting the Great Recession, and only after he was successful in that did he shift focus into something more like the Affordable Care Act. It was only through his second term that he also focused on a National Broadband Plan in the context of invigorating the American economy and pushing for Clean technologies for example.

If there is a lesson to be learned from Obama it is in his handling of ObamaCare. The best way to address government brain drain is to take a page on How Silicon Valley saved HealthCare.gov. And it sure isn’t about creating new bureuracies nor to spend much of our time reorganizing it.

“One lesson of the fall and reise of HealthCare.gov has to be that the practice of awarding high-tech, high-stakes contract to companies whose primary skill seems to be getting those contracts rather than delivering on them has to change.” — Obama’s Trauma Team

Lack of regulatory activity

From a regulatory point of view, the National Telecommunications Commission has been slow to adapt fair minimum speed requirements that strikes a balance for consumer protection as well as fair business practices. The situation is execrated by the absence of regulatory activity such as setting of Quality of Standards for fixed-line broadband, and for mobile broadband. The National Telecommunications Commission, the agency tasked to set standards of quality measure and to regulate the industry has constantly dragged its foot, and has set only a minimum of speed of 256Kbps, and no quality of standard for mobile broadband.

Lack of competition and interconnection

The current structure also makes interconnection difficult to do. For example, PLDT has refused to participate in the Philippine Exchange. The Philippine Exchange means to speed up the Internet by interconnecting the networks of Globe, PLDT, and other smaller players. It means local users will have shorter data routes, reducing latency cost.

Coupled with these regulatory failures is the stringent Congressional franchise requirement preventing real competition in the market place.

You see, it isn’t enough to simply want a third player. It isn’t enough to want or desire “a third player.” Such a move doesn’t change the structure. It may in fact set that new player up for failure. Given the current structure of the field, entrenched players will have undue home court advantage against any new player attempting to enter today. They have had years for example in building Internet gateways, investing in middle-mile infrastructure. Entrenched players have had years of building relationships with Congress, and with the NTC. How can any new player compete with such overwhelming home field advantage?

Structural separation

The long term solution that would establish real competition; real vibrancy in the industry that is both win-win for consumers and businesses — including entrenched players is structural separation of the industry. At least so far as solving the issue of Internet speed and reliability is an essential component.

The OECD recommends structural separation in regulated industries. Liberalization need not necessarily involve mandated corporate restructuring of the existing incumbents. It only requires the opening-up of the segments and incentives for more players to invest and operate. Breaking the monolithic telecommunications structure by doing away with a Congressional franchise requirement, and implementing a franchise requirement per segment is key. Indeed, segmentation and liberalization may result in greater efficiencies in the incumbent’s own operating units.

For example, a more liberalised International Gateway business can provide more competitive choices for downstream providers. The liberalising of the “Middle Mile” or National Backbone may allow for a more redundant, and resilient network especially in times of crisis. The removal of geographical service area restrictions in “Last Mile” ISP (end-user subscriber level) is likewise essential to a more robust competition. The removal of broadband Internet and Internet content creation and distribution as Value Added Services will be essential in driving liberalistion as well as fairness in the marketplace.

What does that mean in simple language?

We talked about how the existing structure is monolithic. A telecommunications company in the Philippines needs to own everything top to bottom. Structural separation means we breakup that requirement — not the companies, but that requirement of ownership. The layers of the industry need to be broken up. It means if a new player wants to come in and only wants to invest in a new International Gateways, then great! If a new player wants to invest only on the middle-mile, then fantastic. If a new company wants to engage in last mile business then they can buy middle-mile data from Globe, PLDT or another third party. This solves the interconnection issue. That company is no longer in direct competition so they can buy and sell bandwidth with each other. By breaking up the industry structure, you allow for competition and efficiency in all three levels. This path also doesn’t require the government to tell PLDT or Globe to breakup their companies. In fact, they may desire to do so on their own if it makes their respective businesses more efficient and profit making.

Conclusion

What’s clear moving forward that the solution to problem solving Philippine Internet Speed and reliability in the Philippines is focus on structural separation of the industry. It is a clear path to opening the industry to competition, and more competition and more economic freedom is good.

The cleaning up of the NTC, its rehabilitation as regulator or perhaps it maybe necessary to scrap it, and start from scratch is likewise essential to improving both Internet speed, and reliability. So long as the regulator refuses or can not accomplish what it should be — as a referee, then Internet speed and reliability will languish.

From a government perspective, improvement in procurement laws allowing for suppliers focused on delivering solutions is important step to solving the brain drain. Put it another way, business process outsourcing maybe a path — but if there is anything I’ve learned in six years, this should be up for debate.

From the advocate perspective, it is my hope that their perspective is not a fixed-point in time; that imagination, and flexibility thrive and that they are appreciative of realities of Presidential points of view as a foundation, and holistic perspective it affords in the grander plan that ICT is but a mere element in the Freedom to Dream.

Problem solving Philippine Internet Speed and reliability in the Philippines necessitates a multifaceted approach that must take into context different perspectives, and to ignore this dynamism is to miss essential point.