Regulating the unregulated telecoms market

It was on a plane trip back home from Singapore that I was able to grab a copy of a magazine (I can’t remember if it was Newsweek or The Economist) which featured a guy named Joseph Stiglitz, a Nobel Prize laureate for economics in 2001.

In the magazine article, Stiglitz, an American who served in the Clinton administration, was portrayed as a socialist economist who advocates for judicious regulation of the market rather than allowing laissez faire – the doctrine that espouses economic liberalism by discouraging government intervention – to take hold of the marketplace.

Although the story was written in the context of the global financial crisis, I was struck by the wisdom of Stiglitz because his economic views can very well apply to the current situation of the telecommunications market in the Philippines.

Let me backtrack a bit for some background information. It was during the incumbency of former President Fidel Ramos in the 1990s that the telecommunications industry was completely deregulated. The onset of this policy dismantled the monopoly of PLDT (Philippine Long Distance Telephone Company) and ushered in a new era of “openness” for the sector.

With new players such as Bayantel entering the field, the industry became more competitive which ultimately benefited of the consumers. Later on, mobile phone firm joined the fray and the Philippines was soon on its way to becoming the text messaging capital of the world. Consumers, as well as operators, were all singing hallelujahs to the wonders of deregulation.

But, as mobile phones became more dominant than landline, two players emerged as heavyweights – Smart Communications and Globe Telecom. Because of the deregulation law, the two giants practically dictated their prices and terms on the market. Everyone, including the National Telecommunications Commission (NTC), was virtually powerless to stop the rampage.

It was only when Senate President Juan Ponce Enrile, after allegedly noticing that his cellphone load disappeared mysteriously, raised a ruckus that the NTC was roused from its slumber.

Deregulation would have been ideal if there were many telcos battling each other and setting prices at ridiculously low levels. But that’s not what has happened, even with third player Sun Cellular coming in.

This is where the principles of Stiglitz come in – that while deregulation may be good, it is not necessarily better that the welfare of the public is entrusted to market forces alone. There is still a need for oversight.

Speaking of NTC, the agency is still headless as of this writing since Ruel Canobas, its former chief, resigned just before President Gloria Arroyo embarked on her controversial U.S. trip a couple of weeks back.

Rigodon Update Software giant Microsoft has just named John Bessey, a New Zealander, to head its Philippine subsidiary. He’ll assume the post on Oct. 1, right after his predecessor, Rafael “Pepeng” Rollan, winds up his stay at the company on Sept. 30th.