The Department of Information and Communications Technology (DICT) is embarking on a consumer-friendly move to cut interconnection rates for calls and text messaging, taking aim at a multi-billion peso revenue source for the telcos.

The DICT issued an order dated May 11, 2018, directing the National Telecommunications Commission (NTC) to craft “concrete measures” that will reduce prevailing access charges for mobile calls and short message services (SMS) to the “minimum” amount.

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The DICT wants to lower the cost of mobile calls and text messaging, which it claimed were among the highest in the Philippines compared to the rest of Asia. It said this would also bolster prospects for a new major telco player it hopes to lure within the year to break the PLDT Inc. and Globe Telecom duopoly.

“Affordable interconnection charges would encourage competition and would attract new major telecommunications players by creating a healthy environment conducive for competition and a fair playing field,” the DICT said in its order.

Spokespersons for PLDT, which owns Smart Communications and Sun Cellular, and Globe said they will study the implications of the order.

The interconnection rate is an access fee charged by a telco operator to allow their subscribers to call and send text messages to subscribers from another network.

The interconnection fee for mobile calls was last tweaked in early 2017, when this was cut by up to 38 percent to P2.50 per minute. For text messaging, the rate was reduced by 57 percent to P0.15 per SMS in 2011.

The text messaging and voice segments have been on the downtrend as subscribers shift to smartphones and use internet-powered platforms such as instant messaging and social media to communicate.

Interconnection fees, meanwhile, are recorded under service revenues. An indicator of the size of this segment is seen under interconnection costs, which includes domestic and international fees paid by a telco. PLDT saw interconnection costs drop 21 percent to P6.4 billion in 2017. For Globe, interconnection costs fell 18.4 percent to P7.85 billion last year.

The DICT’s move to lower call and text rates would have the biggest impact on subscribers using 2G, or second-generation, mobile phones.

Gil Genio, Globe’s head of strategy, technology and information, said around 30 percent of its subscribers are still using basic handsets. For PLDT, the figure stood at around 39 percent, said Oscar Enrico Reyes Jr., PLDT First Vice President and Head of Consumer Business.

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Taken together, 2G phones are still used by around 40 million subscribers in the Philippines. The rest have shifted to 3G and 4G, which allows high-speed mobile internet browsing.

Mary Grace Mirandilla-Santos, lead convenor of advocacy group Better Broadband Alliance, said the “time is ripe” to revisit interconnection rates as other jurisdictions move to abolish the practice altogether.

“For sure the telcos have, for the most part, recouped their investment in interconnect facilities,” she said on Saturday.

The DICT hopes that by lowering the interconnection fee, PLDT and Globe will be able to fully pass these savings on to their subscribers—a view that is currently being challenged by the telcos.

When the NTC ordered the telcos to cut the interconnection fee for text messaging by 57 percent (P0.20) in 2011, it also ordered the reduction of the SMS retail price to P0.80 per message from P1. The telcos were also told to refund customers and pay a fine.

Globe argued then that a “reduction of the SMS interconnection charge does not automatically translate to a reduction in the SMS retail charge per text.” The matter was elevated to the Supreme Court in September last year. /jpv

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