Telcos pay P460-M to NTC for frequency use

By Lenie Lectura, Business Mirror

Posted at Apr 19 2010 10:54 PM | Updated as of Apr 20 2010 06:31 PM

MANILA, Philippines - Telecommunication companies offering 3G (third-generation) mobile services paid a total of P460 million in fees this year for the use of frequencies which were awarded by the National Telecommunications Commission (NTC) to them 5 years ago.

The fees, called spectrum users fee or SUF, are collected annually from cellular firms, providers of broadband wireless access services, and public telephone entities that were assigned frequency bandwidth.

In the case of 3G frequencies, SUF payment posted by 3G firms depends on the bandwidth was allocated to them. As they build their 3G subscriber base, the NTC is requiring them to increase SUF payments, depending on the actual number of subscribers. If each firms will register more than 4 million 3G subscribers they will pay an additional P2 million in SUF for every 100,000 additional subscribers.

According to NTC director Edgardo Cabarios, Smart Communications Inc. paid P265 million in SUF. Globe Telecom Inc., Digitel Mobile Philippines Inc. and Connectivity Unlimited Resources Inc. (Cure) each paid P65 million for the 10-megahertz (MHz) frequency spectrum assigned to them.

Smart paid the largest because it has a total of 25 MHz of 3G frequency bandwidth. It was assigned to occupy the 1920-1935MHz/2110-2125MHz bandwidth for a total of 15MHz. These frequencies were awarded to Smart in January 2006 for the nationwide deployment of its 3G network.

Moreover, Smart paid additional SUF for the 10MHz frequency in the 825-835/870-880MHz spectrum which Piltel, a unit of Smart, used to own.

All in all, the NTC collected P460 million in 3G frequency fees alone this year.

Smart also owns CURE now. With CURE being a unit of Smart, the latter has allowed CURE to ride on to the network of Smart. This arrangement benefits CURE in such a way that it can tap Smart’s 3G network in areas outside Metro Manila where CURE is not present. CURE has 10MHz of 3G frequency in the 1955-1965/2145-2155MHz spectrum.

The Philippine Long Distance Telephone Co. (PLDT) Group now has a total of 35MHz.

Another unit of Smart, Smart Broadband Inc. (SBI), is applying for additional 3G frequencies.

SBI informed the NTC that it will pursue the filing of the 3G frequency application of Piltel, which has ceased to be a cellular operator. The latter is no longer engaged in mobile phone business, with the 20-percent stake in Manila Electric Co. as its primary asset and source of income. Piltel, as early as January 2009, filed its 3G frequency application with the NTC.

Piltel’s nationwide cellular mobile telephone system permit has likewise been transferred to SBI.

For the remaining 3G slot, the NTC proposes that the minimum bid price be set at P65 million for the paired 10MHz which is in the frequency band 1965–1975MHz/2155–2165MHz or 1890 1900MHz/1970 1980MHz. This is the only 3G frequency slot that remains unassigned.

But a permanent injunction against the NTC’s plan to bid out the last remaining 3G frequency bandwidth had been issued by the Court of Appeals (CA). This now prevents the agency from bidding out the precious frequency which is being eyed by about 10 applicants. “What can we do? We just have to wait for the court’s decision,” said Smart chief for wireless advisor Orlando Vea.

The NTC, through the office of the Solicitor General, is going to appeal the CA’s decision.

Globe had also applied for the said 3G frequency. The joint venture between Ayala Corp. and SingTel now operates within the 1945-1955/2135-2145MHz frequency spectrum. The bandwidths are equivalent to two channels which could handle a total of 50 million 3G subscribers.

DMPI, meanwhile, was assigned bands 1935-1945/2125-2135MHz. The company had programmed a spending of P10.6 billion in initial investment for the first five years of 3G service.

The NTC is currently thinking of ways to increase its revenues. “Every centavo goes to the national government. That is why there is a pending measure on a planned NTC reorganization. For us to keep a certain amount out of the fees we collect. Just imagine the potential revenue the government should have collected for the years that the remaining 3G frequency bandwidth was not allocated,” said NTC deputy commissioner Douglas Mallillin.

The NTC is deprived of P65 million in yearly SUF payment or a total of P325 million to date. This is why the regulator is in a hurry to award the said frequency bandwidth to a qualified applicant.

“The NTC deemed it necessary to expedite awarding of the last 3G slot as non-usage of said frequency consequently deprives prospective subscribers of easier access to services it can provide. The government has lost approximately P300 million in potential income through spectrum user fees, at the current rate of P65 million a year, due to the non-assignment of the last 3G slot for the past five years,” the NTC said in a statement.