A Brief Analysis of the Philippine Wireless Broadband

Industry
 Table of Contents
An Introduction to the Philippine Wireless Broadband Industry......................................................................................................3
Brief History................................................................................................................................................................................3
The Current Ecosystem...............................................................................................................................................................3
The Role of Technology in Creating Products..................................................................................................................................4
Market Segmentation ......................................................................................................................................................................4
Residential/personal users have the most eclectic or varied in terms of choices, browsing habits, and, especially, among the
youth, emphasis on what is fad, what is popular. A big chunk of residential/personal users are the youth which should be a
primary consideration when marketing broadband services.....................................................................................................5
Opportunities....................................................................................................................................................................................5
Threats/Impact of Global Competition.............................................................................................................................................5
An Introduction to the Philippine Wireless Broadband Industry

Brief History

The telecommunication deregulation thru the enactment of the Public

Telecommunications Policy Act of 1995 as spearheaded by then President Fidel
V. Ramos, gave players such as SMART, Globe and PILTEL (Pilipino Telephone
Corporation) the opportunity to slug it out with Philippine Long Distance
Telephone Company, which monopolized the telecommunications industry. With
the advent of cellular technology coming in two competing standards—GSM
(European) and CDMA (American) standard, further wrested the monopoly from
PLDT which was then purely a fixed wire line provider. SMART and Globe
adopted GSM technology to provide mobile voice services while PILTEL chose
CDMA. By the year 1997, it was clear that GSM was going to be the de facto
standard of mobile telecommunications thus SMART and Globe became the
dominant players, PILTEL had become stagnant and unable to grow with the
same degree as with SMART and Globe, thus being acquired by SMART
eventually.

With the uptake on Internet usage in the country, telecom providers

limited only to providing voice services diversified their offering to broadband thus
they became Internet Service Providers (ISP’s) at the same time. It was
envisioned that the succeeding technology of 2G GSM which was 3G technology
could meet the broadband needs, however due to technological limitations
(speed limit of 3G) and the lack of a killer application, like the SMS/text, the mass
adoption of 3G, is really slow prompting providers to have a “wait-and-see
attitude”, that is, they continue experimenting with different technologies coupled
with different selling plans.

The Current Ecosystem

The current wireless broadband industry in the Philippines is an oligarchy

of three companies, namely, Philippine Long Distance Company/SMART, Globe,
and Sun cellular. A number of entrants and new players offer broadband services
but they are only niche players. In one way or the other, they are either acquired
by the oligarchs or simply shut down due to tough competition. Meridian
Telecoms, Red Mobile (formerly Connectivity Unlimited Resource Enterprise,
Inc, and Airborne Access are examples of companies acquired by bigger
companies which in this case is SMART/PLDT. New entrants such as wi-tribe
(also known by Liberty WiMAX) which was a shared investment by San Miguel
Corporation and Qatar Telecoms, still has to gain foothold. Other companies
whose main products are not really broadband but who has the infrastructure and
 the resource to do so are starting to bundle this service to their product offerings
such as SkyCable which comes with internet access and Bayantel broadband
bundled with landline services are able to capture a small share of the
customers.

The Role of Technology in Creating Products

As of now, the price of broadband service offerings is partly dictated by the

technology which backs them up. Cheap but efficient and effective technologies
have an impact on the final pricing of the services offered. Unlike in cellular
technology which uses GSM, the broadband industry has yet to come up with a
dominant technology or a de facto standard. Usually, the adoption of a de facto
standard decreases the price of technology, for it increases the number of
vendors creating and supporting products following the standard. More vendors
stimulate competition and one way to command leadership in the competition is
to lower the prices of the products. As an example, GSM technology has been
supported by vendors such as Nokia, Motorola, Ericsson, Alcatel and Huawei. In
the broadband industry of the Philippines, providers introduced into the market
several broadband products, supported by a plethora of technologies. SMART,
for one, uses three technologies, HSDPA (Ericsson), WCDMA (Nokia), and
Canopy (Motorola). So technology comes at a high price for providers, for there
is less competition among technology vendors.

The success of GSM in the Philippines also is largely due to the popularity of
texting or SMS. This suggests that for the broadband industry to also reach mass
adoption, an application such as texting should also gain mass adoption. Voice
over IP (VoIP) and IPTV (i.e., television programs watched on the internet)
seems to be a promising application that could spur a wider acceptance of the
internet or broadband as a whole.

Market Segmentation

Wireless broadband consumers can be roughly categorized into two—

personal/residential users and corporate/enterprise users. Personal users are
further subdivided by what mode they access the internet either through mobile
devices such as PDAs and cell phones or personal computers such as desktop
and laptops. Corporate accounts and enterprises, on the other hand, use
broadband to fulfill their business needs or interests.

Residential/Personal Users

Mobile Devices (e.g. 3G enabled phones and PDAs)

Personal Computers (e.g. laptops and desktops)
 Corporate Accounts/Private Enterprises

Residential/personal users have the most eclectic or varied in terms of choices,

browsing habits, and, especially, among the youth, emphasis on what is fad, what is
popular. A big chunk of residential/personal users are the youth which should be a
primary consideration when marketing broadband services.
On the other hand, corporate accounts/private enterprises are high gain in
terms of return for they procure services in bundle or in a bulk. Their primary
concerns in choosing broadband product could be after sales support, tie-ups with
other vendors, and value-added services.

Opportunities

Underserved Areas – provinces (broadband penetration in the Philippines still

very low, only concentrated in Manila, if there is, very unreliable and slow)

IPTV/VoIP (TV programs to be streamed through the internet, e.g. Surf TV), voice
calls on the internet

Providers have to come up with a good billing system though, that is how the
customers will be charged with the calls. This is one of the reasons why PLDT or
SMART is not pushing on this yet because it will surely kill the landline and the
cell phone business; imagine anyone can call without being charged. Questions
such as what would be the mode of charging? Will it be packet-based charging,
that is one is charged by the amount of data downloaded (say, in megabytes per
second) or time-based charging, that is one is charged by the length he is using
the network regardless of the amount of data he downloads.

Threats/Impact of Global Competition

• Foreign investors (Qatar Telecoms) trying to enter the market.

• China having a different standard (TD-LTE) apart from the American and
European Standard, any Chinese investor who would be willing to invest
in the Philippines is a threat to SMART and Globe, considering that
Chinese products are cheaper/cost-effective.