THE REAL STORY OF THE CREEPING PH INTERNET

I recently had a lively discussion with someone whose work involves analyzing and interpreting market trends. It seemed like talking to a local telecom executive justifying their lousy service :)

Excerpts:
HIM: "Yes, Pinas remains a relatively small market for internet services....I mean, seriously, a nine percent broadband penetration? The same S&P report states that only one-third of smartphone users utilize data due to it being too expensive, and that share represents only 10 pct. of all fone users. Besides, I said it was a "small" market...I didn't say it was a "poor" market. "

(Yeah, right. I thought people who could not afford expensive internet were poor sorry.) :)

HIM: "So you ask why "prospective NEW players" are keen on participating? Because there is still ample room for growth and having customers of your phone services allow you to further market and sell products to them...."

(A small "cannot afford" market with ample room for growth, etc...? Huh? Am I confused?) :)

"And with what I recently said about industry reports indicating a 9 pct. broadband penetration (S&P, 2015) and forecasting about 15 pct. (by 2021), applying across-the-board from low-end to high-end, it remains to be seen whether opening up the market to further competition even from regional providers will lead to significant improvements in quality internet service. In my view, it will also depend on other factors, such the mix of incentives offered by the Philippine government....
How low would you want to go to provide "affordable" internet service--and still generate a decent return on investment? Some companies might enter the market by providing lower cost wifi to consumers and then generate profits in other ways....But a Third World country like the Philippines simply does not have a sufficient enough consumer base....What could you market in this country that could justify companies providing such a subsidy?"

( Sounds like someone seems really bent on making a case to dissuade other telecoms from coming in. Are Smart and Globe even profitable? Funny how people can't even realize when they are contradicting themselves with their own arguments huh? :) )

So here is my rejoinder:

It seems that your viewpoint, based on an analysis of market share and projections in your professional capacity is indisputably correct from the context of guiding a Globe/Smart financial analyst figuring out strategies about how to make the most money out of existing infrastructure and what strategies to pursue to preserve this state of affairs. It is, so to speak, what is.

On the other hand, what I am trying to explain is the reason for the current state of affairs from a consumer's point of view as compared to what it could be if certain things were allowed to happen.

What I disagree with is your assessment that the mediocre state of affairs is simply an "innocent" result of the small and poor market currently existing. That is the propaganda that the local telecoms would have everyone believe. Being in the job you are in, it is but natural for you to see things from a management POV so I don't really blame you for your perceptions. I am merely trying to present a different perspective to what the SAME facts say to us from a consumers POV when some other factors are taken into account.

The reality is that the current cost of service has more to do with gouging the market as much as they can considering all their built-in advantages and ability to protect their turf through the law rather than by fair competition. To compare simply compare the local cost to the US is rather like comparing the cost of an owner jeep to a Tesla. :)

The fact that many other players have signified interest in joining the market but have been dissuaded, not by the market itself but for purely political and bureaucratic reasons belies the conjectured small market and its supposed inability to pay. Had the prospective margins been as thin as they are conjectured to be, then it may be reasonable to assume that they would not have even seriously tried even in the absence of the government incentives you cite which even the existing telecoms would avail of anyway. So why are they still interested?

To speculate that they might have wanted to center on the even more miniscule "lucrative" premium market does not sound quite right either unless their usage is as big as inverse of the percentage of rich and poor.

Rather, they will more probably rely on the wide performance disparity of their equipment to the obsolescent ones the local telecoms currently use to blow the current providers away and laugh all the way to the bank. They would not even have to buy new equipment as what we are using here is already several generations behind. All they will do is transfer their existing equipment as they replace their own with the newest tech, thus hitting many birds with one stone.

Keep in mind that the cost we currently pay for getting more and better service is really not a function of the cost of providing it but rather a function of how to eke out the most from the decrepit equipment we have. It is like loading a tricycle to the roof with 16 pax instead of loading them on to a jeepney.

The truth is that the actual physical cost of providing 10MBPS at P3,500/mo is practically the same as providing 2MBPS at P1,200/mo. It is the limited capability to provide wider bandwidth or throughput that forces them to charge higher to DISSUADE even more extensive use even is they strive, like a barker calling passengers, to fill up every possible space with a paying pax.

IF ONLY the provider had the ability to provide the wider bandwidth or throughput that more modern equipment could provide they could offer better service even at lower cost and still have "seats on the bus" to spare.

Really, how much more does your computer really cost to operate when you are using 15 tabs and 5 windows compared to when it is idle? :) What the local telecoms are doing is akin to installing more memory to accommodate more data but processed at the same speed instead of changing the CPU as well.

And as I said, new entrants to the local telecom industry would not even have to put in the most modern but simply hand-us-down whatever they replace in the process of upgrading their systems. It would be akin to the difference between a single core and a quad core CPU. They only have to put in the current "quad core" here while they install an even higher model chip back home.

That is what probably encourages them to enter.