A tale of two telecom industries

THERE ARE remarkably parallel developments transpiring on both sides of the Pacific in two very different economies: the Philippines and the United States of America. Here’s the general scene: A giant telecommunications company has moved to acquire (and thus merge with) another competitor, threatening to achieve a commanding share of the industry, thereby reducing competition therein.

In the US, American Telephone & Telegraph (AT&T) has announced a $39-billion takeover of T-Mobile USA, in a merger that would make the company the dominant player in an industry that has heretofore had four major players. Industry rival Sprint Nextel Corp. is fighting the move, claiming that the merger threatens its very existence as a standalone company, which could bring back the old telephone monopoly (of the then giant AT&T) that US regulators broke up in 1984. Since the AT&T-led American Bell Telephone Co. opened the first telephone exchange in 1877 in New Haven, Connecticut, this single firm had controlled the American telephone industry. The forced break-up led to a lively competition that resulted in lower costs and wider choices for American consumers.

In a parallel development here at home, the Philippine Long Distance Co. (PLDT) has acquired a controlling stake in Digitel Corp. which operates Sun Cellular, whose entry into the erstwhile duopoly of PLDT/Smart and Globe had dramatically transformed the nature of pricing in the industry, to the benefit of consumers. Just as Sprint Nextel is unhappy in the US, so is Globe in the Philippines as it faces the prospect of being relegated to a small minority share (30 percent) of a two-player market. It is arguing for a more level playing field with the National Telecommunications Commission, inasmuch as PLDT would now own a disproportionate share of the telecommunications frequencies on which the companies may transmit their phone services.

Read more at Philippine Daily Inquirer

 

Con Yap