By John Mark V. Tuazon
Computerworld Philippines
January 12, 2011

If the NTC (National Telecommunications Commission) will push through with its draft memorandum circular imposing minimum speeds and bandwidth caps on broadband subscriptions including BT Infinity, it will adversely affect the growth of the IT industry in the Philippines, a concerned professional from a local IT startup remarked during the public hearing on the issue Tuesday.

Saying the cap will limit the kind of applications developed by startups for consumption by local audiences, Marco Palinar of Sine Func, Inc., a local web development firm, asserted that the cap is detrimental to developers as they would now have to keep it in mind when creating their applications.

The NTC issued in early December a draft memorandum circular imposing, among other things, for telcos to declare the minimum speeds of their broadband Internet offerings and maintain it 80% of the time, and allowing them to set a maximum amount of data per subscriber per day.

“If you are a part of the IT industry, it’s a kind of a limitation. Instead of being at par with the start-ups in Silicon Valley that can dream of whatever, we are now suddenly limited by the capacity of our target audience. It’s a big blow to the IT industry,” Palinar explained.

The Philippines isn’t exactly a breeding ground of tech start-ups compared to the US’ Silicon Valley, considered to be an incubation hub of future IT mega-companies, and where recent successes such as Google and Facebook took off.

Reports peg the number of independent software development firms in the Philippines at around 400 firms. Issuing a broadband cap, according to Palinar, would just stunt this meager growth.

Palinar cited the example of videos, considered by many IT vendors and telcos as a “killer application,” to which every Internet user can subscribe. “[With the cap], the experience of the users will be limited. [They would have to] constantly mind if they have already reached their daily caps,” he added.

Palinar said the data cap is not fair to consumers because the repercussions are practically unilateral. “With the [imposition of the] data cap, if, for example, you reach your limit of 25 gigabytes per month, you get cut off without bias,” he said. “But what is the effect on the telcos [if they don’t meet the service guarantee]? There is a lot of wiggle room here for the telcos.”

PH as Social Media Capital
Consumer group TXTPower.org, Inc., meanwhile, through its President and CEO Anthony Ian Cruz, maintained that the Philippines has achieved its status of being one of the social media capitals of the world due to the encouragement of telcos to use their services.

“Now we are shocked that they are taking it against [users] that we are allegedly abusing their services,” Cruz lamented, adding that the country achieved such a status while “enduring so-called broadband Internet connections from the telcos.”

Cruz added that if the memo is adopted fully by telcos, it will destroy social media in the Philippines, adversely affect many industries, and be bad for the interest of the country. “It’s not just for consumers,” he stressed.

TXTPower.org, through its position paper submitted to the agency, called on the NTC to put its foot down and begin with basic definitions of broadband and other such connected terms as GPRS, EDGE, 3G and 4G, among others, before agreeing on measures that impose minimum speeds and bandwidth limits.

“Without such definitions, the Commission, the Republic, the consumers and end-users and the telecommunications supposedly offering broadband services are at a loss. Without such definitions, it would be foolish to ask telcos to arbitrarily and baselessly prescribe minimum speeds and impose so-called data caps,” the group’s position read.

Broadband as VAS
The problem with the current situation, according to Douglas Mallillin, deputy commissioner, NTC, is that broadband is defined in Republic Act 7925 or the Public Telecommunications Policy Act of the Philippines as a value-added service.

“[The law] was drafted in 1995. Back then, it had a picture of voice [as a basic service], but it did not envision yet the Internet being mobile,” Mallillin explained.

As such, current applications outside voice—including SMS and the Internet—are considered deregulated, which means the government will allow the market to develop until such a time that it reaches a plateau and can be considered a basic service.

The problem, Mallillin said, is that the NTC doesn’t have the power to redefine what can be considered as a basic service. “The law made the definition. What is needed are slight amendments to give it a more technology-neutral tone, since the industry is very dynamic. The law was from 15 years ago, but you cannot change the definition if you do not change the law,” he added.

Caps expected
It is the “deregulated” nature of broadband Internet that telcos are now trying to use to justify the imposition of bandwidth caps, along with the doctrine of Fair Use.

In a position paper submitted to the NTC on December 17, Atty. Rodolfo Salalima, president, Philippine Chamber of Telecommunications Operators (PCTO), asserted that “requiring the providers of [broadband Internet] service to specify the minimum connection speed, service reliability, service level, and service rates would amount to regulating the same, contrary to the Commission’s own rules.”

Salalima added that the NTC should give way to the dynamics of the free market, where users are left to choose the providers of their choice based on their individual requirements.

The PCTO president also underscored the fact that due to the expectedly high volume of users, no minimum speed can be declared at any given point in time. “That is the reason why global industry practice specifies a maximum data connection rate for best efforts services but not a minimum,” he added.

Salalima also stressed that they agree with the “maximum volume of data” clause of the draft memorandum circular “as this is consistent with the demands of fair use.”

“Let me clarify, therefore, that the Fair Use doctrine is not an isolated policy,” Salalima said during the public hearing. “It is being used in so many countries. It has been a policy of the telcos. The origin of fair use is that it is, in fact, the bastion of consumer rights.”

He went on to explain that something is wrong with a proportion where only a few users hog up majority of the Internet bandwidth. “My understanding is that only 5% to 7% of consumers are using about 80% of the bandwidth while the others are using the remaining 20%,” he related.

Fair Use as Mask
TXTPower.org’s Cruz said the telcos are now hiding behind the mask of ‘Fair Use’ to hide their own abuses. “It takes two to tango. It’s a contract to enter in a fair use policy, so telcos must first promise to deliver basic service. The cart should not come before the horse,” he decried.

The concept of Fair Use in regulating broadband Internet usage can only succeed if the telcos have the guts and infrastructure to deliver, Cruz added.

“We are in favor of true Fair Use, but not as an excuse to deny the Philippines of broadband definition and standards,” he clarified.

Telcos’ Wish
The contentious paragraph 5 of NTC’s draft memorandum circular regarding minimum speed of broadband connections states that “service providers may set the maximum volume of data allowed per subscriber/user per day.”

The clause, according to NTC commissioner Gamaliel Cordoba, was not present during the earlier stages of the draft memo, but was simply requested by responding telcos upon meeting with them a few months back.

“We called up a meeting with ISPs, first to focus on their advertisements. Most of them state they have ‘speeds of up to xMbps,’ but it doesn’t state the minimum. It means there is a chance for the speed to hike, but there is no minimum for speed on a regular basis,” he explained.

Cordoba said during the meetings with telcos that it was the telcos who raised concerns that there are some users who are hogging the bandwidth by using the Internet for 24 hours straight or for commercial purposes.

“The cap [idea] started as a proposal from the telcos, saying there must be some safeguards so that they can meet the minimum [required speed],” deputy commissioner Mallillin added.

Cordoba, however, clarified that the memo is not final, as it will still go through further studies and consultations. “It’s a work in progress, we haven’t finalized everything. We are all here so that we can get all your inputs,” he stressed.

As a result of the public hearing, the NTC resolved to conduct public consultations in key regional cities to get a pulse of their broadband woes, before finalizing the memo. Consumer groups and other industry stakeholders welcomed this development.

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