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China Telecom entering Philippines as third telco – what does it really mean for the Filipinos?

Will we really see a change in our telecommunications and internet status?

We all still remember when the news broke out about Australia’s Telstra plans, and failure to enter the Philippines to be the next telco player, promising high-speed internet plans and cellular network services that will compete with the country’s duopoly in its somewhat expensive yet really slow and small capacity data plans.

Since there’s another challenger who wants to enter the Philippine telco industry, we might like to know more about China Telecom, the largest telecommunications provider and network in mainland China, with a total subscribers of about 245 million as of October this year, and posting an almost 16.8-percent market share in China, as noted by GMA News.

But before it really enter the Philippines and seriously compete with our existing network providers, there are some hurdles that China Telecom has to face, even if it has both the PH and Chinese governments backing and support.

The 60/40 rule mandated by our constitution

Our 1987 constitution mandates that every public utility service that is operating on the country should be sixty-percent (60%) owned by a Filipino and forty-percent (40%) by a foreign company, in ANY joint venture. In simple words, foreign firms could not operate alone in the Philippine telco industry and would need to partner with a local company.

Probably this is the most and the biggest problem that knocked down Telstra, as its local partner, San Miguel has to exceed Telstra’s reportedly $1 billion investment in the Philippines.

On a media gathering at the Department of Energy, the president of the National Transmission Corp. (Transco) on Monday said the state firm is a candidate to be the local partner of state-run China Telecom Corp., noting that they have the technical expertise in operating and Transco has the facilities to offer.

According to lawyer Melvin Matibag, “We can be the 60 percent,” and this will shorten the process, although there’s no official discussions yet with China Telecom as of this writing.

In case of China Telecom, we aren’t sure if San Miguel plans to deal up with them, since it already sold out its telecommunications assets to both PLDT and Globe this year. China Telecom’s local partner should have the guts to pair up their amount of investment, and has to know how the telco industry works. Transco would be a good fit but they also face another problem as well, in which we’re tackling below.

Congressional franchise might not allow Transco

As BusinessMirror reports, Better Broadband Alliance convener Mary Grace Mirandilla-Santos says that “Transco’s franchise does not allow it to operate as a telco. It needs to have Congress approval for such a franchise,” she said.

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It would be interesting to see how this would affect the DICT’s plan to use the fiber in the power grid for building the Domestic Wideband Information Network and as the backbone of its free Wi-fi program,” she added.

The need for another wireless spectrum

Following the sold-out of San Miguel’s telecommunications assets (particularly the 700MHz spectrum that was recently enabled), there’s really nothing left to be used by China Telecom as of this moment, as National Telecommunications Commission (NTC) data showed that existing telcos hold the majority of the said frequencies to date.

PLDT holds 400 MHz of the total holdings, while Globe has rights to 325 MHz.

What remains for new telecom players is a mere 140-MHz frequencies in the 700-MHz, 850-MHz, 2100-MHz, 2500-MHz and 3500-MHz spectrum.

The need to allocate another frequency to be used by the new telecom should be addressed as well, and that connects to the next problem which is…

Lack of telecommunications infrastructures

Even PLDT and Globe are admitting that they still lack infrastructures such as cell sites, repeaters and cables to deploy their services in full capacity. Now, this would have been another problem with a third major telco player (unless they’re fast building and deploying their own assets). Problems such as red tape, homeowner’s protests and costs might push back the quick deployment of these structures, and if China Telecom was building them from scratch, nationwide deployment might take up until 5 years.

Possible blocking by the duopoly

Of course, this might happen as well. Competitors such as PLDT and Globe might do something in order to prevent another competitor to come up and defeat them (yeah, we know, many Filipinos are already sick of them), so that’s why it’s like that. They might do anything they can in legal means to prevent another telco, even with the backing of the government to enter.

On the other hand, what could we get if China Telecom successfully entered the market?

Any competition is good for consumers, and disrupting the current duopoly of Ayala-led Globe Telecom Inc. and Pangilinan-led PLDT Inc. will be really appreciated. If China Telecom brings its existing data promos to the country, we’ll be glad to have another options when it comes to subscription of data promos.

Our average internet speeds might also get a bump as well

Data from popular internet speed-benchmarking site shows the average speed of China. Considering that China Telecom dominates the country, it ranks 31st, and has an approximately 31Mbps download and 14Mbps of upload speeds when it comes to mobile, and ranks at 23rd, with around 61Mbps in download and 17Mbps in upload when it comes to fixed broadband speeds.

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While data from the same analytic shows the Philippine Internet average speeds as of the same period, ranking at 91st, and has only around 12.3Mbps download and 5.8Mbps of upload speeds when it comes to mobile, and ranks at 91st as well, with only around 14.4Mbps in download and 12.1Mbps in upload when it comes to fixed broadband speeds.

Adding to that, China Telecom is already deploying some of its 5G testing facilities around Shanghai, ahead of its planned 2020 launch. And if they do have a direct subsidiary here in the country, our 5G connectivity deployment might become much faster than other countries.

READ: PLDT and Huawei partnered to bring 5G in Philippines by 2020

Better data and internet promos

If China Telecom deployed the same promos listed here, then PLDT/Smart and Globe might make adjustments to their existing data promos as well. Although China Telecom also has data caps, perhaps we can argue a little bit that their promos are a tad better than what do we currently have, but still, we can’t wish for unlimited internet unless we subscribe to an expensive, fixed broadband plan from either Converge, PLDT, Globe or if permitted, China Telecom.

Although in our evaluation, they aren’t really a big bump from what our duopoly currently has. Heavy users of the internet should still consider subscribing to existing Fiber-optic internet plans instead of relying on mobile data, and if you want to know why, we made an editorial months ago about that.

READ: There’s no thing such as Unlimited Internet

But before we end this article, we would like to raise another red flags that this deal might bring, especially it concerns our information and everyday use.

Security and trust issues

While most of us are all-positive about new telco entering the country in order to defeat the duopoly’s domination, there’s also a possible national security risk incoming.

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Although we don’t want to flame China for this, it is well-known among cyber security practitioners and professionals that there are numerous hackers from China, spies and everything else that might use the infrastructure to obtain confidential and important information.

As Inquirer Business reports, a retired intelligence officer who held a delicate post at the height of China’s artificial island-building in the South China Sea told them that the entry of China Telecom into the Philippine market poses a national security threat.

It’s going to be a long-term disaster for us,” the intelligence officer said, observing that President Rodrigo Duterte “is so attached with China.”

We’re dead. They [will] now have access to our telecom infrastructure,” added the former officer, speaking on condition of anonymity. Adding to that is the fact that the biggest cybersecurity threat to the Philippines came from China.

Former President Benigno Aquino III also said having a Chinese firm in the local telco market could have national security implications, as he recalled that years ago, both the United States and Australia cited national security as a reason why they did not allow Chinese communications and technology firms to take part in businesses in their countries.

There’s also the issue of heavy censorship, and blocking of services and other websites that might enter in our country as well in case the government-backed network provider enters the country.

READ: China bans unauthorized VPN access from local ISPs

Should we have this problem, we are already wondering if VPN is just enough to keep ourselves in private and free, or should we let them access our information just like any ISPs down there. (Yes, we know that, too.)


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Sources: 1, 2, 3, 4

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