In the life of every new institution there comes a time when its capacity for first-rate decision-making is put to the test. That time is called baptism of fire.
For Philippine Competition Commission, the agency created by Congress to implement the Philippine Competition Act of 2015, that time has come. PCC’s baptism of fire involves the acquisition by the nation’s two telecommunications giants— PLDT Inc. and Globe Telecom—on a 50-50 basis, of the entire equity interest of San Miguel Corp. in Vega Telecoms Inc., New Century Telecoms Inc. and e-Telco Inc. At the heart of the P69-billion acquisition is the 700-megahertz spectrum that the National Telecommunications Commission had previously assigned for analog television broadcasting and subsequently reassigned for telecommunications use when TV switched to digital.
The 700-MHz spectrum is considered critical to the improvement of this country’s internet infrastructure. SMC had intended to use the 700-MHz spectrum to provide Filipino consumers with “better and cheaper mobile internet service.”
The matter eventually reached the courts. The latest is the July 22 order of the Court of Appeals denying Globe’s application for a temporary restraining order and preliminary injunction against PCC, which had indicated a desire to conduct a review of the Vega acquisition by Globe and PLDT. The two companies opposed the review, contending that the transaction was completed before the issuance and effectivity of PCC’s implementing rules. The Vega deal was sealed on May 20 and the rules went into effect on June 20. As far as PLDT and Globe are concerned, the Vega sale is now a done deal and a PCC review is legally inappropriate. They claim that since May 20 they have incurred costs, which, if the review findings were to be unfavorable to them, would be unrecoverable.
I spoke at the outset of a baptism of fire for PCC. I did so because of three facts. The first of these is that, being a brand new institution, PCC has to show that it is capable of fulfilling its mandate and that the 24-year wait for the passage of a Philippine Competition Act was worth it. The second fact is that, as its name suggests, PCC is about competition – more specifically, the maintenance of a level playing field for businesses in this country – and it must make sure that it does the right thing for all concerned in the Globe-PLDT-SMC deal. And the third, and not the least, fact is that the PCC’s point man, chairman Arsenio Balisacan, is an economist of high caliber.
Because it is a new institution and the issue facing it is about the biggest-ever telecommunications deal involving three of the nation’s largest companies, all eyes are on PCC. A landmark precedent will be set here, not only for the Philippine telecommunications industry, but for all industries.
PCC cannot afford to make a bad call in this instance because after the sale, the Philippine telecommunications industry has become a duopoly and duopoly is the next worst thing to monopoly in competition terms. PCC has got to thread very lightly here, because its basic mandate is to protect consumers from abusive behavior by industry players.
President Benigno Aquino III, in appointing a PCC chairman could well have chosen a lawyer, considering that lawyers are well-versed in TROs and the other legal challenges that are bound to come PCC’s way. But he chose – perhaps upon the advice of the business community – an economist. That decision has set PCC off on the right footing.
Dr. Balisacan comes to the PCC chairmanship with excellent academic and professional credentials, the most recent of the latter being his tenure of the post of director-general of National Economic and Development Authority. Good economist that he is, Dr. Balisacan dislikes inefficiently working markets and market-distorting corporate behavior. He loves free markets and dislikes monopolies and duopolies.
Under the circumstances, to put a win-win end to all this, all that Globe and PLDT have to do is to convince Dr. Balisacan that they will operate as properly-behaving duopolies.