This document summarizes the telecommunications reforms that have led to greater universal access in the Philippines. It describes how the Philippines achieved significant increases in teledensity through introducing competition in telecommunications and pursuing regulatory reforms. Competition was introduced in the 1990s and 2000s through allowing new private firms to enter. Interconnection rules and policies further increased competition between dominant players. This led to innovative pricing models and expanded infrastructure that increased mobile phone penetration rates from 5% in 1991 to over 49% in 2006. While universal access programs had limited direct success, the unleashing of competition between private mobile providers indirectly achieved greater access, especially through affordable mobile services. The next challenge is expanding internet access through similar market-driven reforms.

1. Achieving Universal Access
through Policy &
Regulatory Reforms:
The Philippine Case
Mary Grace P. Mirandilla
The Asia Foundation - Philippines
CPRsouth2, IIT Madras
Chennai, India
December 15-17, 2007

2. Philippine Political Economy
Election Financing
Domination by
Economic Powers
Oligarchic Elite
Influence on Capture of
Policy, Appointments Economic Rents
Policy Distortions
Weak Institutions
So, is reform possible? YES!

3. Reform in Telecommunications
Teledensity (per 100 persons)
1991 2006
Two principal and 3rd
Fixed Single dominant private
competitor
player 772%
Installed: 8.28
Installed: 0.95
Mobile High subscription rate Pre-paid and SMS
Subscribed: 0.05 Subscribed: 49.29 91,178%
Internet Negligible Subscribers: 2.3
Users: 9
How did reform happen despite the odds?

4. Possible Scenario
Worst 2nd best 1st best
Fully competitive
Cost-based
Monopoly
pricing regime
Low Cost
High charges
Efficient service
Regulation
because it can!
needed
Minimal

5. How it happened
Competition introduced (1993-2000)
– Leadership and policy framework
– Other private firms
– Unmet consumer and business demand
Interconnection (2001-)
– Two dominant players
– Wide public awareness
– Regulatory reform pursued
– But, Presidential intervention needed

6. Universal Access
Service Area Scheme
• Deployed fixed lines in exchange for IGF and
mobile licenses (300,000 and 400,000 local
telephone lines, respectively)
Results
• Universal access limited success
• Improved teledensity but not in non-viable
areas
• Cross-subsidy not used for UA

7. Universal Access
Municipal Telephone Project
• 2,879 “Telepono sa Barangay” (village phones) financed
thru a US$177-million loan in 1989
Result
• Supplier/donor-driven – technology now obsolete
• Poorly maintained – 700 PCOs (1998) to 150 (2005)
• Prone to corruption – no monitoring mechanism
• Overstaffed - 5,000 employees 150 calling offices
• For privatization since 1998 but no progress –
mandated by law (Republic Act)

8. Mobile: “Unintended” UA Program
Initially, cross-subsidy used to gain market share in
urban areas
Interconnection was critical!
Innovative pricing increased teledensity!
• Subsidizing handsets (from $1,500 in 1989 to less
than $100 in 2006)
• Mobile overtook fixed line in 2000
• Cell site roll-out, with almost 100% coverage
• More than 40% penetration, saturation in urban areas
Today, mobile is king! 68% telecoms revenue market
share

9. UA in perspective
UA is being achieved through the
unleashing of competing private interests
• 24/7 Unlimited SMS and Voice
• “e-Load”
• “Mobile wallet”
Elephant vs Elephant
– 1994 Globe (Ayalas) vs. Smart (PLDT)
– 2003 Sun Cellular (Gokongwei) vs. dominants

10. Results of Reforms
50 Unlimited
SM S war
45
Interco nnect
A greement
40
35 Interco nnect
R ules
30 Installed Fixed Line Teledensity
P ublic T eleco ms
P repaid M o bile
Law Subscribed Fixed Line Teledensity
25
Subscribed Mobile Teledensity
SM S
20
Universal A ccess
P o licy
15
Interco nnectio n &
C ro ss-Subsidies
10
5
0
1990 1991 1992 1993 1995 1996 1997 1998 1999 2000 2001 2002 2005 2006 2007

11. The Next UA Frontier: Internet
Internet access dependent on fixed line
Déjà vu!
– High cost of leased lines (ISPs)
– High cost for consumers
– Concentrated in urban areas
– Anti-competitive practices
Dominant fixed line firm owns the leased
lines and national internet café chain
VoIP interconnection

12. Moving Forward
Learn from the mobile success story
Market dynamics
– Another elephant
– Disruptive/affordable technology e.g. WiMax?
In our hands
– Regulatory intervention
– Government Telecenter Program
– Shared Access Model

13. Thank you
grace@asiafound.org
+632 917 8167492