The Return Of A Monopoly

My previous blog post discussed about how the virtual monopoly of the phone business in the country by the Philippine Long Distance Telephone Company (PLDT) was dismantled and made competitive by the issuance of EO No. 109 that mandated the fast-tracking and roll-out of landline networks through Service Area Scheme and the enactment of the Public Telecommunications Policy Act of 1995 (RA 7925) that sets the policy for competition and liberalization of the industry.

Since late 1990s, we are enjoying a competitive telecommunications industry where the phone companies try to outdo each other by offering unlimited voice calls and text messages at prices advantageous to us, the consumers. While the current competitions among the remaining phone companies have not brought down their prices to levels comparative to other countries, it is better for us to have it this way than what is predicted to happen when the PLDT-Digitel stock swap deal pushes through.

The stock swap transaction which would initially result to PLDT owning 51.55% of Digitel was said to benefit the consumers with wider and complementary array of products, improved quality of service and continued expansion of broadband roll-out throughout the country. On the contrary, parties opposing the transaction said it would result to the return of a monopoly in the telecommunications business because PLDT’s current 53% share and the 17% of Digitel would result to its cornering an enormous 70% of the market. Also, the allocation of radio frequencies being used in the business would be too lopsided in favor of PLDT.

Once the stock swap deal pushes through, PLDT said that Sun Cellular would continue to operate as a separate entity and this is one situation that PLDT can easily use its grossly dominant position to crush its only remaining competitor. Contrary to popular belief that the “unli plans” will be discontinued, one of the many things PLDT can do is continue them and use Sun Cellular to charge absurdly low rates for unlimited voice calls and text messages so that subscribers will flock to them.

PLDT can do this even if Sun will lose money because it will survive on the cross-subsidy given by the mother PLDT, while the remaining competitor flounders in competing with rock-bottom prices. It will be good for the consumers in the short term, but in the long run, PLDT will want to recoup what Sun lost in the predatory pricing scheme.

This is something which can happen at the expense of the consumers once the remaining competitor is out of the picture. It will happen when the consumers will have no choice but to subscribe to PLDT (Smart or Sun), regardless of how much it chooses to charge for mobile services and how poor the quality of those services are.