PINOY INTERNET: PHILIPPINES CASE STUDY

March 2002

INTERNATIONAL TELECOMMUNICATION UNION GENEVA, SWITZERLAND This report has been written by Michael Minges, Esperanza Magpantay, Lucy Firth and Tim Kelly of the International Telecommunication Union (ITU)" The report is based on field research carried out between 1 – 5 October 2001 as well as articles and publica- tions sourced in the document" The National Telecommunications Commission pro- vided incalculable support; without their assistance, this report would not have been possible" Equally, the report would not have been possible without the cooperation of the many from the Filipino public and private ICT sector who offered their time to the report’s authors" The kind hospitality of Philippine Electronics and Telecommunica- tions Federation (PETEF) is also acknowledged" We would also like to thank N" Santiago of Globe and A" Bengzon, Undersecretary for Communications, for their insightful comments" The report is one of a series of case studies examining the Internet in South East Asia carried out in 2001" Additional information is available on the ITU’s Internet Case Study web page at http://www"itu"int/ITU-D/ict/cs/"

The report may not necessarily reflect the opinions of the ITU, its members or the government of the Republic of the Philippines"

The title refers to the Filipino (Tagalog) word “Pinoy” meaning ‘Filipinos by Heart"’ The SMS message appearing on the mobile phone screen (“Kmusta txt k nman”) is also in Tagalog and means ‘Hello, can you send me a text message’"

© ITU 2002

ii Contents

1. Country background ...... 1 1.1 Overview ...... 1 1.2 Demography ...... 1 1.3 Economy ...... 2 1.4 Human development ...... 3 1.5 Recent history ...... 3

2. Telecommunications and Mass Media ...... 5 2.1 Telecommunications ...... 5 2.2 Mass Media ...... 17

3. Internet in the Philippines ...... 22 3.1 History...... 22 3.2 Market ...... 22 3.3 Interconnection ...... 23 3.4 Pricing ...... 24 3.5 Broadband ...... 24 3.6 Rules & regulations ...... 26 3.7 Universal access...... 27

4. ICT in Government, Education, Health and Business ...... 31 4.1 Government ...... 31 4.2 Health ...... 34 4.3 Education ...... 36 4.4 Electronic commerce ...... 39

5. Conclusions ...... 42 5.1 State of the Internet...... 42 5.2 Recommendations ...... 43

Annex 1: List of meetings...... 46 Annex 2: Acronyms and abbreviations ...... 48 Annex 3: Useful links ...... 51 Annex 4: Framework dimensions ...... 52

iii Figures

11 Map of The Philippines  1 12 GDP change over previous year  2 21 Outperforming the rest of ASEAN  6 22 Philippine Telecom Sector  8 23 So many lines but we still can't catch up  11 24 Getting over international 12 25 Mobile mania  13 26 Telephones in the regions  16 27 Mass Media  18 31 Internet subscribers and estimated users in the Philippines  22 32 Dial-up Internet prices in South East Asia  24 41 Philippine IT Ecozones  34 42 Proposed Social Security Wide Area Network  35 51 State of Internet in the Philippines  42

Tables

11 Population Indicators, 1990-2000  2 12 Human Development Indicators  3 21 Telecommunication Industry Structure  7 22 EO 109  10 23 Plus I get free SMS! 14 24 Philippine mobile market  14 25 Universal Access and Universal Service  15 26 Mass media contradictions  20 31 Broadband pricing  25 41 Philippines@High School  37

Boxes

21 The demand for mobile messaging: SMS 5 22 Universal availability for US$ 24 million  17 23 The Portal Wars  19 31 E-vangelism  28 32 Txting Nation  29 41 e-whistleblower  33 42 Computerizing social security 34 43 "I Love You" and Filipino computer programming talent  39

iv 1 Country background

1 Country background

11 Overview Figure 11: Map of The Philippines The Republic of the Philippines, with an area of approximately 300’000 square kilometres, is located in South East Asia, between mainland Asia and Australia# It is surrounded by the South China Sea on the west, the Pacific Ocean on the east, the Sulu and Celebes Seas in the south and the Bashi Channel in the north# The Philippines’s 7’107 islands form one of the largest archipelagos in the world# Of these islands, only 2’773 have been named# The three major island groups are Luzon, Visayas and Mindanao# The Philippines is divided into 16 regions, 78 provinces, 96 cities, 1’513 municipali- ties and 41’943 baran- gays#1

The country has a diverse topography, including high mountains and volcanic formations, extensive valleys and plateaus interspersed with rivers and lakes# Some 53 per cent of the country’s total land area is forest and woodland# The Philippines has a tropical climate with two pronounced seasons, rainy from June to November and Source: The World Factbook dry from December to May# The country is situated within a cyclone belt and is hit by numerous tropical storms every 76#5 million people# The capital, the year# city of Manila, has 1#6 million inhabitants and is the most densely 12 Demography populated area# The National Capital Region, consisting of the capital and The 2000 Census of Population and surrounding urban agglomeration, is Housing showed a population of home to some ten million people (or

1 Philippines Internet Case Study

13 per cent of the population)# Rural Table 11: Population Indicators, 1990-2000 and urban population in the country are split evenly# The annual average population growth rate between 1995 à and 2000 was 2#4 per cent# The à à à à country’s 15#3 million households 7RWDOÃ3RSXODWLRQà ¶¶à ¶¶à ¶¶à averaged five members in 2000# In ÃÃÃ0DOHà ¶à ¶à QDà 1999 it was estimated that 37 per cent of the population was under the age of ÃÃÃ)HPDOHà ¶à ¶à QDà 15, 59 per cent between 15 and $QQXDOÃDYHUDJHà à à à 64 years and only four per cent of the JURZWKÃUDWHÃ È Ã population is 65 years or older# Although $YHUDJHà à à à there are an estimated 111 linguistic KRXVHKROGÃVL]Hà groups, there are two official languages, 'HQVLW\à ÃÃà SHUVRQVNP à Filipino (which is based on Tagalog) and ÃÃÃ3KLOLSSLQHVà à à à English# English is the official language used in business and government ÃÃÃ0DQLODà ¶à ¶à ¶à dealings# The majority of Filipinos speak à one of eight major dialects, namely Source: National Statistics Office Tagalog, Cebuano, Ilocano, Hiligaynon or Ilonggo, Bicol, Waray, Pampango, and Pangasinense#

The majority of Filipinos, some (ten per cent)# According to the United 95 per cent, are of Malay descent# Nation Development Programme’s Ethnic minorities include people of (UNDP) Human Development Report Spanish and Chinese descent# A 2001, the Philippines ranked 22nd out major heritage of Spanish of the 30 leading exporters of high- colonialism is the country’s religion# tech products in the global market# Some 84 per cent of the Filipinos are The inflation rate in April 2001 was Roman Catholics# Some ten per cent 6#7 per cent compared to 3#7 per cent are Protestants or part of another in April 2000# The unemployment rate Christian religion and around five per stood at 10#1 in July 2001, three cent are Muslims# points lower than April 2001 (13#3 per cent)# Outstanding external debt 13 Economy amounted to US$ 55#5 billion at the end of 2000# At the end of 2000, GDP at current prices amounted to 3’302’589 million pesos (US$64’127 million), with GDP per capita amounting to 42’112 pesos Figure 12: GDP change over previous year (US$817)# Services accounted to more than half of the country’s GDP, industry 31 per cent and agriculture GDP Growth 16 per cent# Due to the spill-over of the Asian financial crisis, the economy 5.9% sharply deteriorated in 1998# GDP 5.2% dropped by almost 0#6 per cent that 4.1% year but has since recovered and grew 3.3% 3.3% 3#3 per cent in 1999# The country experienced a rise in the value of output until the end of 2000 but due to the sudden change in the administration, and political unrest in -0.6% the country, the first two semesters of 2001 again showed a decrease in 1996 1997 1998 1999 2000 2001 GDP growth (see Figure 1#2)#

Source: National Statistical Coordination Board Top exports are electronics and components (46 per cent) and textiles

2 1 Country background

Table 12: Human Development Indicators

Philippines compared to other South East Asia economies, 1999

/LIHà &RPELQHGÃà H[SHFWDQF\à $GXOWà VFKRROÃJURVVà *'3ÃSHUà +',à DWÃELUWKà OLWHUDF\à HQUROPHQWÃUDWLRÃà FDSLWDÃà 5DQNà (FRQRP\à \HDUV à UDWHÃ È Ã È Ã 333Ã86Ç Ã Ã 6LQJDSRUHà à à à ¶Ã à %UXQHLÃ'DUXVVDODPà à à à ¶Ã à 0DOD\VLDà à à à à à 7KDLODQGà à à à à à 3KLOLSSLQHVà à à à à à 9LHWÃ1DPà à à à à à ,QGRQHVLDà à à à à à &DPERGLDà à à à à à /DRÃ3HRSOHVÃ'HPÃ5HSà à à à à à 0\DQPDUà à à à ¶Ã

Source: United Nations Development Programme, Human Development Report 2001

14 Human development Spanish named the land ‘Filipinas’, after Philip II of Spain# For over 300 years, According to UNDP’s Human the Philippines was a colony of the Development Report 2001 the Spanish crown# In 1898, the territory Philippines ranks 70th out of was ceded by Spain to the United 162 countries in the Human States, following the Spanish-American Development Index (HDI), placing the war# Following Japanese occupation country in the upper third of the during World War II, the Philippines medium human development gained full independence in 1946# category# The Philippines achieves a Ferdinand Marcos was elected president relatively higher ranking in terms of in 1965, and remained in power for 21 human development than its GDP years# He fled the country in 1986 when would suggest# The HDI is composed Corazon Aquino called on ‘People of a basket of indicators including life Power’, a non-violent resistance to expectancy at birth, adult literacy, Marcos’ government# A new school enrolment and GDP per capita# Constitution was ratified in February Table 1#2 shows that HDI varies 1987# Aquino faced many challenges, greatly in the South East Asia region including economic problems, and that the Philippines ranks fifth opposition from certain Filipino elite and among its nine neighbours# It is hostile military# After seven coups in six interesting to note that the country years, Aquino was succeeded by the has by far the highest school gross Minister of Defence Fidel Ramos in enrolment ratio (82 per cent) and the 1992# In 1998, Joseph Estrada replaced second highest adult literacy rate him# Only two years later Estrada was (95#1 per cent)#2 impeached on charges of corruption and mass demonstrations (People Power II) 15 Recent history eventually forced him to resign in January 2001# Vice-president Gloria In 1521, Ferdinand Magellan arrived Arroyo, the second woman to take over in the Philippines and claimed the as president of the Philippines, archipelago for the King of Spain# The succeeded him#

3 Philippines Internet Case Study

1 Source: National Statistical Coordination Board Barangay is the basic unit of the Philippine political system and consists of not less than 1’000 inhabitants residing within the territorial limit of a city or municipality and administered by a set of elective officials headed by a barangay chairman 2 These figures are misleading and symptomatic of the confusing statistics plaguing the Philippines For example, the figure for literacy does not refer to functional literacy (84 per cent) Also the last national literacy survey was carried out as long ago as 1994 Therefore, the source of the UNDP statistics is questionable The school enrolment figure also does not seem consistent with national statistics Participation rates reported by the National Statistical Office for School Year 1999-2000 are: elementary 970 per cent; secondary 654 per cent, and tertiary 239 per cent A weighted average results in a figure of 64 per cent and not 82 as reported by UNDP See “A View of the P hilippines” on the NSCB web site at: http://wwwnscbgovph/view/peoplehtm

4 2 Telecommunications and Mass Media

2 Telecommunications and Mass Media

21 Telecommunications Message Service (SMS), or “txting” (see boxes 2#1 and 3#2)# The Philippine telecommunication market is distinctive in a number of As Figure 2#1 shows, the results ways# First, it is one of the few have generally been positive# The countries in the world where Philippines has outperformed the telecommunication services have rest of the ASEAN region in terms historically been operated by private of its fixed-line network for every entities# Second is the innovative year between 1992 (before the regulatory requirement laid out in the policy began) and 2000 (by which mid-1990s that called for mobile and time fixed-mobile substitution was international telecommunication having a negative effect on further operators to install a specific number fixed-line growth)# Similarly, of fixed lines# This was seen as a way mobile growth, which peaked in of balancing lucrative opportunities in 1995, has also been higher in the the international market against the Philippines on a consistent basis supposedly less profitable since 1992# There has been a requirements to roll-out lines outside notable upturn in mobile growth the main population centres# Third is since 1998# Part of this reflects the the explosive growth of mobile, rebound from the 1997 financial making the nation among the first crisis, which occurred much faster where mobiles surpassed fixed in the Philippines than elsewhere telephone lines# In particular, Filipinos in the region# But it also reflects have shown themselves to be world the beneficial impact of pre-paid champions in the use of Short tariff packages#

Box 21: The demand for mobile messaging: SMS

SMS, or Short Messaging Service, is one of those revenues for the Philippines’ two main mobile serendipitous applications that are discovered operators, Smart and Globe almost by accident The capability to send some 160 or so characters of data (barely a kilobit) was Why did it take off? Part of the reason has to do included in the original specification of the GSM digital with the way it was charged A number of free SMS mobile standard that was developed in the 1980s messages were included in each prepaid and implemented from 1991 onwards But it was subscription The popularity of SMS is partly due to never considered to be a viable application for which the fact that a user can send around eight SMS for customers would pay After all, compared with sending the price of one minute of voice call and the price is e-mail from a computer, why would anyone want the independent of distance (until recently, there was no inconvenience of having to make several keystrokes surcharge for sending SMS overseas, where many to create each letter or restrict themselves to such Filipinos work) In addition, mobile users can receive short messages? Consequently, in the early years of messages from Internet users and, of course, use GSM, SMS was given away free of charge SMS to download the ubiquitous ring tones

The European engineers who defined the GSM SMS played an important part in recent Filipino standard did not imagine that their throwaway history When President “Erap” Estrada refused to service would find its apotheosis in the Philippines stand down, even after being implicated in a Around Christmas 2001, the volume of messages corruption scandal, Filipinos used SMS to co- there reached around 90 million per day, or around ordinate the demonstrations that eventually led to ten for each user, creating a considerable source of his downfall; so-called “People Power II”

5 Philippines Internet Case Study

Figure 21: Outperforming the rest of ASEAN

Annual growth rates for the Philippines in fixed-line and mobile networks, 1992 - 2000

Annual grow th rates in fixed-lines networks Annual grow th rates in mobile subscribers 35% 200% Philippines’ average grow th 30% 175% Philippines average 25% 150% growth rate 20% 125% 100% 15% 75% 10% 50% ASEAN average grow th ASEAN average 5% 25% growth rate 0% 0% 1992 1993 1994 1995 1996 1997 1998 1999 2000 1992 1993 1994 1995 1996 1997 1998 1999 2000

Source: ITU World Telecommunication Indicators Database

211 Policy and regulatory: interconnection rules# The Act Private ownership endorses the policy of private preferred ownership, instructs the government to sell remaining publicly held The Department of Transportation telecommunication assets and also and Communications (DOTC, calls for operators to list up to 30 per ) is the ministry cent of their shares to encourage responsible for telecommunication citizen ownership# It also entrusts the policy in the Philippines# The National NTC with the right to establish tariffs Telecommunications Commission for telecommunication services# (NTC, ) is the industry regulator# The NTC was The present Philippine telecommuni- created in July 1979 by Executive cation market is one of the most Order No# 546 when it took over from competitive in the world with five the former Board of Communications companies providing mobile cellular and the Telecommunications Control services, eleven international Bureau# This makes the NTC one of gateway providers and at least two the oldest telecommunication operators theoretically allowed to regulators in the world# Although the provide fixed service in each region NTC is an agency of the DOTC, its legal across the country# Market entry is decisions can only be appealed to the however constrained due to policy Supreme Court# The NTC has three and technical reasons and apart from commissioners appointed by the the Value-Added-Service segment; President# no new operators have been authorized over the last five years Republic Act No# 7925, “Public (see Table 2#1)# On the policy front, Telecommunications Policy Act of the there is a feeling that there are Philippines” passed in March 1995, is enough operators considering the the main legislation for the level of development of the market# telecommunication sector#3 The NTC Some operators are losing money is expected to ensure that the policies and if anything, there is a belief that laid out in the Act are implemented# market consolidation rather than The law sets out the duties and more liberalization is needed# obligations of public telecom- Indeed, consolidation is already munication operators as well as starting to occur# Technically, there

6 2 Telecommunications and Mass Media

Table 21: Telecommunication Industry Structure

Number of licenses, by category

Telecom Service 1997 1998 1999 2000

Local Exchange Carrier Service 76 76 76 77 Cellular Mobile Telephone Service 5 5 5 5 Paging Service 15 15 15 15 Public Trunk Repeater Service 10 10 10 10 International Record Carrier 5 5 5 5 Domestic Record Carrier 6 6 6 6 Very Small Aperture Terminal 4 4 4 5 Public Coastal Station 12 12 12 12 Radiotelephone 5 5 5 5 Value-Added Service 47 70 106 156

Source: NTC

are limits for the mobile market with Convenience and Necessity# Third, the additional spectrum not available to NTC must also grant authority for accommodate new entrants# operation of the service; these are almost always provisional, generally The more serious limitation on market covering a period of around five years# growth is the limitation on foreign ownership# The Constitution limits 212 Operators foreign ownership in public utilities to 40 per cent# The incumbent carrier, Although there are numerous PLDT, has attempted to raise finance telecommunication operators in the for investment (and to reduce its older Philippines, the industry is dominated debt) by selling chunks of shares to by several large companies# foreign investors# First Pacific of Hongkong owns 24 per cent while a The nation’s oldest operator is the 20 per cent stake of its mobile Philippine Long Distance Tele- subsidiary, Smart, is reportedly phone Company (PLDT, )# It was incorporated in among others# But the fact that these 1928# Predominately US-held, control foreign investors could never own or reverted to Filipino shareholders in control a Philippines operator reduces 1967# Its charter was amended in the level of interest, and therefore the 1991 granting PLDT the right to offer price# This constraint is particularly any telecommunication service in the acute in segments of the market, like country# PLDT’s franchise was also broadband, which are more capital extended until 2028# PLDT is by far intensive# the largest operator in the nation# PLDT’s foreign owners are Hong Unlike many countries, licenses per se Kong’s First Pacific with 25 per cent are not issued to telecommunication and Japan’s NTT with 15 per cent# service operators in the Philippines# Remaining shares are traded on the Operators require a franchise, Philippine Stock Exchange# certificate and approval to provide telecom service# First, a legislative PLDT also wholly-owns Smart and is franchise, issued by Congress majority-owner of Piltel# Smart (parliament) is needed# Second, the was set up in NTC must issue a Certificate of Public 1991 to provide mobile telephone

7 Philippines Internet Case Study

Figure 22: Philippine Telecom Sector

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7(/2) 17&

5DGLR 3ULYDWH 3XEOLFÃ ,QGXVWU\Ã (TXLSPHQW %URDGFDVW 1HWZRUN 1HWZRUNV $VVRFLDWLRQV 0DQXIDFWXUHV 1HWZRUNV ÉÃ6XSSOLHV

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,QWHUQDWLRQDO &DUULHUV

0RELOHÃ5DGLR 6HUYLFHV

5DGLRÃ3DJLQJ 6HUYLFHV

9DOXHDGGHG 6HUYLFHV

Source: DOTC

services# It has a 25-year franchise tions Corporation (ICC) and in mobile issued in 1992# It was purchased by operator Extelecom# Express Telecom PLDT in March 2000# Piltel was (Extelecom) was established in 1988 established in 1968 to operate local and launched the country’s first mobile telephone service in General Santos cellular service in May 1989# Its City# PLDT purchased 32 per cent in owners are Bayantel, Luxembourg- 1975 and increased its holdings to based international cellular operator 50 per cent in July 1998# Remaining Millicom, and the Philippine group shares were listed on the Philippine Mayon Holdings# Stock Exchange in 1995# Piltel has a 25-year franchise, renewed in 1992# Digital Telecommunications Phils#, Inc# It launched mobile services in 1991 (Digitel, ) was and today operates both AMPS and awarded a 30-year contract in CDMA networks and leases GSM February 1993 to manage and operate capacity from Smart# the DoTC’s telecommunication facilities Luzon Island# In 1992 it Bayan Telecommunications gained an international gateway Incorporated (BayanTel, ) was established in this was converted into a franchise October 1993# It has majority under the Special Areas Scheme ownership in several local exchange (SAS) to provide nationwide fixed and carriers, in international gateway international telephone service# In provider International Communica- August 2000, Digitel was granted a

8 2 Telecommunications and Mass Media

Provisional Authority to provide mobile a small portion of lines# The most cellular services# It is in the process significant impact on the fixed line of constructing a GSM 1800 network# market occurred in 1993# That was Digitel plans a soft launch in 2002 and when then President Fidel Ramos a hard launch by May 2002# signed Executive Order 109# It called for mobile cellular and international Eastern Telecommunications telephone service operators to also Philippines, Inc# (ETPI, ) provides international Each cellular operator was required telephone services# It has ownership to install 400’000 lines and each in a number of submarine fibre optic international operator 300’000 lines cable systems# The company’s roots within five years# EO 109 enforced go back to 1878# It became part of compliance by requiring operators to the UK’s Imperial and International put up performance bonds that could Communications that later became be forfeited if line installation targets Cable and Wireless# In October 2000, were not met# Operators were the forty per cent shareholding of assigned different regions of the Cable and Wireless was sold to country to ensure even roll-out# In Australian Gigahertz Network# addition, in order to ensure that lines were not only installed in cities, there Globe Telecom were targets for the ratio of urban emerged from Globe-Mackay Cable to rural lines# That is, one rural line and Radio (GMCR), a company set up was to be installed for every ten fixed in 1930 to provide maritime and lines# The EO also explicitly allowed telegraph services# It received cross-subsidies in order to keep local franchises to provide fixed, mobile and service rates affordable# This was to international telephone services in the be implicitly carried out by operators early 1990s and has since emerged through their supposedly more as the second largest operator in the lucrative mobile or international country# In June 2001, Globe acquired operations# In addition, local mobile operator Islacom with the exchange operators were to receive result that Islacom’s strategic access fees for use of their networks# investor—Germany’s Deutsche Telekom—ended up owning part of Nine operators were obligated to Globe (4#65 per cent)# Globe’s other install fixed telephone lines under foreign shareholder is Singapore EO 109# When all the new lines to Telecom (11#79 per cent)# The Ayala be installed were added up, they family owns a further eleven per cent# came to four million or more than Islacom launched a GSM network in quadruple the number that existed 1994 and also operates main at the end of 1993# These were to telephone lines# have been installed by the end of 1998# The implementation of the Philcom, PT&T and Capwire are policy fell short by around linked through holding company 600’000 lines in 1998 but by the end Republic Telecommunications of 2000, the four million target was (Retelcom)# All provide international reached# Some operators exceeded telecommunication services in their line installation requirements addition to local exchange services# while others did not complete theirs# One reason put forward by some There are also over 50 small local operators for not accomplishing the exchange operators, many members target was “peace and order” of the Philippine Association of Private particularly in the south of the Telephone Companies (PAPTELCO)# country# Other reasons include permission not being granted by the local authorities as well as the 213 Fixed: The EO 109 effect financial crisis# There were 77 operators providing fixed telephone line service at the end Although the number of lines called of 2000# Most are provincial operators for under EO 109 was eventually (PAPTELCO members) that account for installed, the majority are not in

9 Philippines Internet Case Study

Table 22: EO 109

/LQHVÃ /LQHV /LQHV /LQHVÃLQÃ 6HUYLFHÃ UHTXLUHG LQVWDOOHGÃE\Ã LQVWDOOHGÃE\ 6HUYLFHÃE\Ã &DSDFLW\ &RPSDQ\Ã ,*)Ã &076Ã $UHDÃ (2Ã    XVHG

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3+,/,33,1(6à à Ãà ¶¶ ¶¶ È Ã Note: IGF = International Gateway Facility CMTS = Cellular Mobile Telephone Service Source: ITU adapted from NTC

service# The Philippines has one of the mobile communications# To be fair, at world’s highest ratios of unused the time EO 109 was implemented, telephone lines# At the end of 2000, mobile communications was costly only 44 per cent of installed telephone and considered a luxury, even a status lines were in use, and only 29 per cent symbol# In retrospect, a lighter among those companies subject to the regulatory burden, which would have Special Areas Scheme# A major reason opened the market to new players is that lines were installed in places and investors, without dictating the where people could either not afford pattern of their investment, may them or did not want them# Also, have proved more beneficial# Such subscription charges were not a policy might have meant that the dramatically reduced# Thus EO 109 market consolidation that has overlooked one of the principles of recently taken place would have Economics 101: an increase in supply happened earlier# It may also have should lead to a fall in price# Since encouraged greater price this did not happen, and considering competition# the level of economic development, without a fall in prices, the Philippines Nevertheless, despite these just did not have the capability to shortcomings, the impact that the absorb all the new lines# policy of opening up the market had on fixed-line growth is evident, at least A more significant shortcoming of the in the mid 1990s (see Figure 2#1)# Not EO 109 was the emphasis it put on only did the policy introduce new the fixed-line network, whereas investors, it also re-energised the subsequent developments showed incumbent, PLDT, which still holds that Filipino’s appetite was greater for more than 55 per cent of local line

10 2 Telecommunications and Mass Media

Figure 23: So many lines but we still can't catch up

Fixed lines installed and in use, Philippines and main telephone lines per 100 inhabitants, Philippines and South East Asia

7 Telephone lines in service per 5 6 100 inhabitants

Millions 5 4 Main lines South East Asia 4 Capacity 3 Philippines 3 2 2 1 1 0 0 1994 1995 1996 1997 1998 1999 2000 1992 1993 1994 1995 1996 1997 1998 1999 2000

Source: ITU

subscribers as of 2000# By the mid- seen its market share (based onlines in 1990s, however, when mobile provided service) plummet from 95 per cent in a more attractive alternative to fixed- 1992 to just over half (56 per cent) by line service, the shortcomings in the 2000# While many countries are policy were more evident# While the struggling to attract competition in their Philippines had the highest line fixed line markets, the Philippines installation rate of the region, this did already has it# not transform into the biggest gain in lines in service or penetration rate# The 214 Long distance Philippines telephone lines in service rate grew by 16#8 per cent a year There are three nationwide terrestrial between 1995 and 2000, a rate backbones# PLDT has a nationwide fibre surpassed by three other South East optic network as well as a digital Asian Nations (Cambodia, Lao PDR and microwave network for backup# In Vietnam)# Indeed the Philippines was 1999, the Telecommunication Infrastru- not much closer to catching up with the cture Corporation of the Philippines South East Asian average teledensity (TelicPhil), a consortium of seven at the end of EO 109 than it was before#4 telecom operators, completed a Finally, the explosive growth of mobile nationwide fibre optic network# There was the nail on the coffin for the EO are also several satellite networks with 109 experiment# The popularity of nationwide coverage utilizing VSAT mobile was completely unforeseen at (Very Small Aperture Terminals) the time EO 109 was designed# One antennae for the ground segment# interesting development is how the Despite increasing competition, PLDT Philippine fixed line market is now remains the largest national long adopting popular mobile features such distance operator# It carried 3#3 billion as text messaging and prepaid service# minutes in 2000# National long distance accounted for 17 per cent of PLDT’s Perhaps the main legacy of EO 109 is revenues in 2000 or 10#6 billion pesos that it created alternate providers of (US$ 210 million)# In May 2001, PLDT fixed telephone lines# The fact that the reduced prices to a flat 3#00 pesos Philippines implemented the policy early (US$ 0#06) per minute rate for any on, when teledensity was so low, has national long distance call within its resulted in a market with a number of network and 3#50–5#00 pesos alternative providers to the historical (US$ 0#07-0#10) for calls terminating in provider, PLDT# As a result, PLDT has other networks#

11 Philippines Internet Case Study

215 International destinations where there are lots of As recently as five years ago, Filipino workers, such as in the Arab international telephone service was States# This is perhaps one unintended perceived as a lucrative market outcome of the NTC’s relaxed attitude segment# The 8 million or so Filipinos to price cross-subsidy between market working outside the home country are segments# The difference between the eager to stay in touch with friends and settlement rate to the US of 19 US$ family, providing a huge potential cents and the retail rate of 40 US$ market#5 A number of new carriers cents still leaves plenty of scope for were willing to take on fixed line arbitrage# Consequently, PLDT’s installation obligations in order to international incoming traffic jumped obtain the right to provide by over 100 per cent in 2000 while international telephone service# But outgoing traffic has actually fallen pressure by the US to reduce since 1998# As a result of these price settlement rates, IP Telephony and reductions, and because PLDT’s rates alternative routing of calls have made have been matched by every other the international gateway business carrier in the market, leading to a loss much less attractive than at the time of market share, PLDT has seen its the licenses were awarded# international revenue decline from just over 50 per cent of total revenues In its so-called Benchmark Order, the in 1996 to 21 per cent in 2000 (see US regulator, the FCC, had ordered the Figure 2#4)# Philippines to reduce its settlement rate to US$ 0#19 by January 2001, a 216 Mobile step the Philippines carried out a year Technically, the Filipino mobile cellular in advance# By doing so, the market is diverse with five companies Philippines hoped to stem the large operating seven networks (AMPS (2), rise in illegal accounting rate bypass CDMA, TACS, GSM (3))# In reality, the traffic# International prices have market is dominated by two players dropped sharply over the last few (PLDT and Globe) and one technology years and now stand at a flat US$ 0#40 (GSM)# PLDT wholly-owns Smart and to any destination# Although this majority-owns Piltel while Globe sounds attractive, what it really means recently purchased Islacom# These two is that low cost traffic to the US is companies—PLDT and Globe—thus being used to cross-subsidise the cost control 98 per cent of all subscribers# of outgoing traffic to other higher cost The dominance of GSM is almost

Figure 24: Getting over international

PLDT's international revenues as per cent of total and PLDT's international telephone traffic

51% PLDT: International long distance PLDT: International telephone traffic, 46% revenues as % of total 2’500 millions of minutes

2’000 32% Outgoing 28% 1’500 Incoming 21% 1’000

500

0 1996 1997 1998 1999 2000 1998 1999 2000

Source: ITU adapted from PLDT

12 2 Telecommunications and Mass Media

Figure 25: Mobile mania

Fixed and mobile telephone subscribers per 100 inhabitants, Philippines and mobile telephone subscribers per 100 inhabitants, Philippines compared to South East Asia

9 Fixed and mobile telephone 8.4 9 Mobile telephone 8.4 8 subscribers per 100 inhabitants 8 subscribers per 100 7 7 inhabitants 6 6 5 Fixed 5 4.2 4 Mobile 4.0 4 Philippines 3 3 South East Asia 2 2 1 1 0 0 91 92 93 94 95 96 97 98 99 2000 91 92 93 94 95 96 97 98 99 2000

Source: ITU

complete# From less than five per cent region# The fact that most of the of subscribers in 1994, some 92 per operators also had international cent of subscribers were connected to licenses made it easier to keep GSM networks in June 2001# mobile tariffs down# The Philippines has among the lowest The Filipino market is also one of the tariffs in the region# fastest expanding in the world# Mobile growth in 2000, 127 per cent, was the • A second factor was huge pent- second highest in the country’s history up demand# Though cellular (and after the peak of 1995, and the signs international) operators had are that 2001 will be almost as good obligations to install several a year# Mobile is increasingly becoming million fixed lines, there appears a way of life in the country and, since to have been a mismatch early 2000, the predominant method between supply and demand# of telephone communications# The Fixed lines were installed in Philippines became the 13th country places where people did not need in the world where mobiles passed them or for prices that they could fixed# From some 100’000 subscribers not afford# Mobile went where the in 1993, the Philippine mobile market demand was and thus has emerged as the largest in South substituted for fixed lines# Mobile East Asia with 8#6 million subscribers was a more attractive proposition in June 2001# Unlike fixed telephone not because it was cheaper but lines where the Philippines is still it was easier to acquire and playing catch-up, the nation’s mobile prepaid meant that anybody density is way above the South East could subscribe# At December Asia average (see Figure 2#5)# 2000, around 80 per cent of all subscribers were prepaid# What has driven this rapid mobile growth? • Finally, the craze over Short Messaging System (SMS), • One reason is the large number particularly the fact that mobile of full service operators# The text messages are either free or decision to allow five mobile cheaper than a regular mobile operators from the mid-1990s call, drove others to mobile# made the Philippines one of the Mobile has spread like wild fire# most competitive markets in the Mobile coverage is estimated at

13 Philippines Internet Case Study

Table 23: Plus I get free SMS! Internet, operators have launched 2#5 generation Comparison between fixed and mobile monthly applications as a precursor charges, Pesos/United States Dollar to future third generation (3G) networks# à 3/'7ÃIL[HGà *OREHà Smart launched Wireless 0DQLOD à 0RELOHà 3HUVRQDO à Application Protocol (WAP) service in June 2000 and ,QVWDOODWLRQÃIHHà à à in November 2000 it 0RQWKO\ÃIHHà à à launched a WAP portal called Zed in partnership )UHHÃPLQXWHVà 8QOLPLWHGà à with Sonera, Finland’s )UHHÃ606à à à leading mobile operator# The portal can also be accessed via SMS text Note: Fixed tariffs are for December 2000 Mobile messages# Smart tariffs are for December 2001 launched GPRS in Source: ITU, adapted from PTOs March 2001# One innova- tion is ‘Smart Money’, which allows users to 70 per cent of the population# download cash to their SIM cards# Arguably, more Filipinos are Smart Money won the 2001 GSM within range of a mobile signal Association Most Innovative Service than a fixed telephone line# award#6 Globe introduced WAP in 1999 and GPRS in the second quarter of As a result, the Filipino market is one 2001# There are problems with these of the most dynamic and closely services that operators around the observed mobile markets in the world# world also face# One is the shortage It leads the world in per capita SMS and high cost of WAP and GPRS use (see Box 3#2) and for a developing enabled phones# Another problem has country, is quite advanced in other been slow speed and lack of mobile data applications, such as compelling content# Despite these those using the SIM Toolkit# Although limitations, it is estimated that there SMS continues to drive mobile were around 60’000 WAP phones and

TableFigure 24: Philippine 25: Mobile mobile mania market

Mobile operators and subsribers, June 2001

2SHUDWRUà 6\VWHPà /DXQFKà 6XEVFULEHUVà -XQHÃà Extelcom ([WHOFRPà $036à 0D\Ãà ¶ à 2% *OREHà *60à 6HSWHPEHUà ¶¶Ã Distribution of à Globe Smart mobile 40% ,VODFRPà *60à -XQHÃà ¶Ã 46% subscribers, June 3LOWHOà $036à 0DUFKà ¶Ã 2001 &'0$à à ¶ à Total = 8.6 million 0DUFKà Piltel à 11% Islacom 1% 6PDUWà (7$&6à à ¶Ã *60à $SULOÃà ¶¶Ã

Note: * December 2000 ** Including GSM subscribers served by using Smart's network Source: ITU adapted from PTOs

14 2 Telecommunications and Mass Media

some 10’000 GPRS phones by mid- minute payments amongst the year 2001# No policy on the licensing operators that process the telephone of 3G mobile has yet been announced# call# One major problem has been that, due to the growth of mobile 217 Interconnection telecommunications, most local fixed One obstacle to the smooth operation line operators are finding that they are of the Philippine telecommunication paying an increasing amount to mobile market has been interconnection# operators, thus reducing the amount Although operators are obligated to that was supposed to be used for interconnect their telecommunication maintaining lower local fixed tariffs# networks under the Public Telecommunication Act, the process 218 Universal Access has been slow# The NTC is supposed The Philippines has had success over to establish interconnection rates if the last decade in improving access operators cannot agree amongst to basic telecommunication services# themselves# One irony is that even One measure of Universal Service is though cross-subsidies are legal, and the number of households with a actually encouraged in the Philippines telephone# The nation has seen a in order to keep local service affordable, steady rise in the number of homes many local exchange operators claim with a fixed telephone line over the last they pay out more in interconnection decade, from 3#3 per cent in 1991 to fees than they receive# The situation 14 per cent at the end of 2000#7 If has been aggravated by the fact that mobile telephone ownership were there are generally no local telephone included, the figure would undoubtedly usage charges (local calls are covered be higher but this information is by the flat rate monthly subscription) unfortunately not collected# but nevertheless local exchange carriers have to pay interconnection charges to Nonetheless, it is clear that a majority mobile operators# of Filipino homes still do not have a telephone, either because they cannot Interconnection either takes the form afford one or because the of revenue sharing agreements or per infrastructure is not available#8 Thus,

Table 25: UniversalFigure 25: Access Mobile and mania Universal Service

$GPLQLVWUDWLYHà 1XPEHUà 1XPEHUà Households with a 14 8QLWà ZLWKà 13.5 WHOHSKRQHà fixed telephone line 12.1 VHUYLFHà 10.1 8.9 3URYLQFHà à "à à 6.7 5.2 &LW\à à Ãà 4.2 3.3 3.2 0XQLFLSDOLW\à ¶Ã È ÃÃ

%DUDQJD\à ¶à ¶Ãà È Ãà à 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 à Note: 1/ Data comes from NTC, which does not distinguish between city and municipality Data refer to 1999 Note that in its 2000 Annual Report Form 20-F, PLDT reports that its network is linked to calling points in 1’134 municipalities in the country, which would raise the per cent with telephone service to 74 per cent 2/ Data for number of Barangays with telephone service is from PLDT’s 2001-02 Metro Manila Telephone Directory Data for households with a fixed telephone line is derived from the number of residential telephone lines divided by the number of households Source: ITU adapted from NTC, NSO and PLDT

15 Philippines Internet Case Study

Figure 26: Telephones in the regions

Distribution of main telephone lines and main telephone lines per 100 inhabitants by Philippine region, 2000

NCR 14.2 Distribution of main IV S. Tagalog 4.2 telephone lines in Philippines 4.0 VII C. Visayas 3.3 the Philippines, 2000 CAR 3.2 Rest III Central Luzon 2.9 I Ilocos 2.5 36% Metro Manila VI W. Visayas 2.4 XI S. Mindanao 2.2 Main lines per 100 49% X N. Mindanao 1.7 inhabitants, 2000 S. VIII E. Visayas 1.3 V Bicol 1.3 Tagalog II Cagayan 1.1 15% XII C. Mindanao 1.0 IX W. Mindanao 0.9 ARMM 0.4

Note: NCR = National Capital Region CAR = Cordillera Administrative Region ARMM = Autonomous Region in Muslim Mindanao Source: ITU adapted from NTC

a more realistic goal is Universal Another measure of access to Access, that is reasonable access to a telephone service is the number of telephone# This could either be payphones# This has risen steadily through a neighbour, from a work from 4’809 in 1991 to 14’959 in 2000# telephone or from a public payphone# Another indicator would to be measure This might be measured in a survey the number of localities with telephone that asked households how far (either service# This gauges the level of by time or distance) they are from a telephone availability in the various telephone# This kind of data is lacking# administrative units in the Philippines Instead, most Philippine government (i#e#, province, city, municipality, and measurements of telephone access barangay)# The Municipal Telephone are based on the traditional Act of 2000 aimed to have publicly teledensity indicator—that is the provided and subsequently privatized, number of fixed telephone lines in telephones installed in each city and service divided by the population# The municipality# By 1999, one year before government often uses capacity (i#e#, the Act lapsed, 46 per cent of the the number of lines installed), rather original target of 1’609 cities and than lines in service, to calculate municipalities were still without a teledensity# This presents a distorted telephone# and not globally comparable figure# Other government policies for Data for main lines in service show promoting telephone access included wide variations within the country# EO 109 that mandated mobile cellular Almost half of all fixed telephone lines and international telephone service in service are in the National Capital providers to also install fixed Region (around Manila) even though telephone lines# At least ten per cent it only accounts for 14 per cent of the of the lines were to be installed in rural nation’s population# The number of areas# The government has explicitly fixed telephone lines in service per encouraged cross-subsidies in pricing 100 inhabitants varies from 14#2 in in an attempt to keep local tariffs the capital region to less than one in affordable# Local service prices in rural three regions# All but two regions are areas and provincial regions are also below the national average of four cheaper than in the National Capital fixed telephone lines in service per Area# However since most operators 100 inhabitants# do not charge for local calls, the

16 2 Telecommunications and Mass Media

Box 22: Universal availability for US$ 24 million

One potential solution for universal telephone access One lesson learned from earlier GMPCS systems is satellite technology One interesting technology is that were not successful was that pricing has to be the regional Global Mobile Personal Communications competitive with mobile cellular systems Calling Satellite Systems (GMPCS) These have rather more charges for the ACeS system in the Philippines are modest costs and objectives than the global GMPCS reasonable at US$ 026 per minute for domestic operators, like Iridium, Global Star or ICO, which have calls and US$ 035 per minute for international struggled to come up with viable business plans But These rates are competitive with other offerings they still offer services that can be accessed by small The downside is that incoming calls are charged at handsets and do not require large investment in the US$ 026 per minute A handset and SIM card cost ground segment (eg, earth station or large satellite US$ 691 and US$ 43 respectively The Philippines antenna) Asia Cellular Satellite (ACeS), a consortium could thus extend telephone service in the 32’000 or of PLDT, Lockheed Martin (USA), Nusantara so barangays without telephone service for around (Indonesia) and Jasmine (Thailand), launched a US$ 235 million This represents a modest regional GMPCS satellite in February 2000 that has a investment; more or less equivalent to PLDT’s footprint over all of East Asia Smart plans to establish profits in the first half of 2001 some 1’500 public telephone offices in remote areas around the Philippines using the ACeS system11

monthly service charge is higher, raising a mobile signal# The government has the cost of telephone service# Line set a target of 100 per cent coverage installation charges also tend to be of provincial capitals and cities by relatively expensive and, unlike monthly 2004# This target is probably already subscription charges, are the same close to being met if not already throughout the country# For example, accomplished# It might have been PLDT charges 1’999 pesos (US$ 38#82) more relevant to pursue a goal of (reduced from 3’377 pesos (US$ 65#57) 95 per cent of the population covered in November 2000) regardless of by a terrestrial mobile cellular signal# whether the subscriber is in Manila or Furthermore, this important Mindanao# Despite this reduction, over indicator should be tracked and half of Filipino homes cannot afford fixed monitored on a regular basis# line telephone service#9 Fixed operators are taking a lesson from mobile and The entire archipelago is already introducing prepaid service# PLDT’s covered by a telephone signal if one Teletipid fixed line prepaid service had factors in satellite systems# This chalked up over 100’000 subscribers by coverage could be leveraged to September 2001, one year after provide a higher level of telephone launching# access (see Box 2#2)#

Future government plans call for 22 Mass Media raising installed capacity density to 12#73 in 2004 (from 9#05 in 2000)#10 The Philippines has a vibrant media This target is not likely to add to any sector# Ownership is predominately measurable increase in telephone private and press freedom is access unless prices are lowered, as guaranteed under the constitution# the telephone lines will remain The end of the Marcos regime unsubscribed# More likely, it will add represented a turning point for the to the already high level of excess industry# Several leading newspapers capacity# Plans also call for extending and broadcast stations had been telephone service to 71#6 per cent shut down during the imposition of of barangays (from 24 per cent in martial law# They reopened later, to 2000)# The impact of mobile on be joined by newcomers attracted by enhancing access to telephone the liberal press environment# One service is also significant# Though major problem in analysing the mass official figures are not available, it is media sector is the lack of reliable estimated that over 70 per cent of information# There is a shortage of the Filipino population is covered by timely official statistics and other

17 Philippines Internet Case Study

sources vary widely (see Table 2#6)# penetration of 4#2 per cent or 2#7 for the country as a whole# 221 Printed press There are over thirty daily 222 Broadcasting newspapers, most published in Manila# The first radio stations were set up in Many are in the English language# the 1920s and the first commercial International dailies and foreign stations started broadcasting in 1930# magazines are widely available# Most The first television broadcast was in of the leading newspapers have web October 1953# sites (see Box 2#3)# Radio is the most popular medium in There is considerable variation in the the country with some 81 per cent of data regarding just how many Filipinos those over ten listening in 1994#13 AM actually read newspapers# A 1994 stations broadcast mainly in Filipino survey by the NSO found that 30 per whereas FM is mainly in English# The cent of the population over ten were NSO put the number of households exposed to newspapers# The latest with a radio receiver at 81 per cent in available data from UNESCO for 1996 1994# put the number of daily newspapers at 47 and circulation at 5#7 million There are six free-to-air nationwide copies or 8#2 per 100 inhabitants#12 television networks# ABS-CBN Another estimate, based on sales Broadcasting Corporation (ABS-CBN, figures, market share and pass-on ) broadcasts on copies of the country’s largest Channel 2 and claims to be the most newspaper, suggest that circulation of popular television station in the nation all newspapers in 2000 was around with an average audience share of two million copies per day# This 45 per cent#14 People’s Television amounts to an adult newspaper Network , the only

Figure 27: Mass Media

Exposure to Forms of Mass Media, 1994, among citizens older than 10

Source: NSO

18 2 Telecommunications and Mass Media

government-owned station, franchise was awarded to one broadcasts on Channel 4# Associated company in 1977# Ten years later the Broadcasting Corporation (ABC, industry was liberalized# According to ) broadcasts on the NTC, there were 1’162 licensed Channel 5# GMA cable television companies at the end claims to be the nation’s most of 2000# However perhaps less than awarded television network and the half are actually in operation and three second most watched; it broadcasts major ones dominate: Sky, Home and on Channel 7# Radio Philippines Sun# It is estimated that they account Network (RPN, ) for more than half of the some broadcasts on Channel 9# IBC 1#3 million estimated cable TV broadcasts on subscribers in the country# Channel 13# There are an estimated eight million TV homes in the country Satellite TV is available through the or a little over half of all households#15 use of large antennas (SMATV)# A few companies are trying to launch Direct- Cable television began in the To-Home (DTH) satellite service, but Philippines in 1969#16 It was face tough competition from the large monopolized when a nationwide number of cable TV subscribers#

Box 23: The Portal Wars

Filipino newspapers face a tough competitor in the online in September 1995 Since then, all the Internet The country’s large number of English leading newspapers have followed INQ7 merges speakers is comfortable surfing to US sites for news the country’s leading newspaper, the Philippines and information According to one estimate, some Daily Inquirer (PDI) and its second most popular 90 per cent of Filipino Internet traffic is destined to television station, GMA, into an integrated portal the US Global portals are moving in the reverse Since most Filipinos within the country do not have direction, setting up Filipino-oriented sites Yahoo fast Internet access, INQ7 optimises speed so that has a specialized Philippines page pages can be downloaded quickly It also offers regular updates to attract people to the site INQ7 while Lycos has established a Filipino site claims to be one of the most visited news sites in  Local newspapers also have the world PDI states that there were 800’000 daily to contend with new Filipino sites such as Global hits to its web site during the height of the Estrada Pinoy that do not have ties controversy to the traditional media Yehey!, set up by five college students in 1997, claims to be the Philippines Not to be outdone, broadcasters have also jumped top search engine providing links to some into the foray All the leading television networks 16’000 Filipino-related web sites Yehey!, which also have web sites ABS-CBN has three, one for its provides news, weather and other information, has television station, another for news reports and a six million page views a month third is community oriented Pinoycentral ABS-CBN was the first to provide live video streaming It The papers are fighting back The Manila Times, claims that its three sites, which swept the Philippine once the largest English newspaper in East Asia, Web Awards, garnished some 87 million page views was one of the country’s first newspapers to go in the year 2000

19 Philippines Internet Case Study

Table 26: Mass media contradictions

,QGLFDWRUÃ 9DOXHÃ 6RXUFHÃ 1XPEHUÃRIÃGDLO\ÃQHZVSDSHUVÃ Ã 81(6&2ÃÃ

([SRVXUHÃWRÃQHZVSDSHUÃSHUÃÃLQKDELWDQWVÃ Ã 162ÃÃ$JHÃÃ

1HZVSDSHUÃFLUFXODWLRQÃSHUÃÃLQKDELWDQWVÃ Ã 81(6&2ÃÃ

1HZVSDSHUÃFLUFXODWLRQÃSHUÃÃLQKDELWDQWVÃ Ã ,78ÃHVWLPDWHÃÃ

1XPEHUÃRIÃKRXVHKROGVÃZLWKÃDÃUDGLRà ¶¶Ã 162Ãà ÃÈÃRIÃKRXVHKROGVÃZLWKÃDÃUDGLRà ÈÃ

1XPEHUÃRIÃKRXVHKROGVÃZLWKÃDÃWHOHYLVLRQà ¶¶Ã 162Ãà ÃÈÃRIÃKRXVHKROGVÃZLWKÃDÃWHOHYLVLRQà ÈÃ

1XPEHUÃRIÃKRXVHKROGVÃZLWKÃDÃWHOHYLVLRQà ¶¶Ã 6XQÃ&DEOHÃà 1XPEHUÃRIÃKRXVHKROGVÃZLWKÃFDEOHÃ79à ¶Ã

1XPEHUÃRIÃKRXVHKROGVÃZLWKÃFDEOHÃ79à ¶Ã 6N\Ã&DEOHÃÃ

1XPEHUÃRIÃKRXVHKROGVÃZLWKÃDÃWHOHYLVLRQà ¶¶Ã ,78ÃHVWLPDWHÃà ÃÈÃRIÃKRXVHKROGVÃZLWKÃDÃWHOHYLVLRQà ÈÃ

1XPEHUÃRIÃKRXVHKROGVÃZLWKÃDÃWHOHYLVLRQÃà ¶¶Ã $%6&%1Ãà ÃÈÃRIÃKRXVHKROGVÃZLWKÃDÃWHOHYLVLRQà ÈÃ

1XPEHUÃRIÃKRXVHKROGVÃZLWKÃDÃWHOHYLVLRQ±Ã0HWURÃ0DQLODà ¶¶à $&1LHOVHQò ÃÈÃRIÃKRXVHKROGVÃZLWKÃDÃWHOHYLVLRQà Èà 0HWURÃ0DQLODà 1XPEHUÃRIÃKRXVHKROGVÃZLWKÃFDEOHÃ79Ãà ¶à ÃÈÃRIÃKRXVHKROGVÃZLWKÃFDEOHÃ79à Èà à Source: ITU adapted from sources shown

20 2 Telecommunications and Mass Media

3 Laws and regulations applicable to the telecommunication sector are posted on the NTC web site at wwwntcgovph/laws/lawshtml 4 Michael Minges “Philippine telecommunications in an ASEAN context” Presented at Philippines Telecommunications ’94 November 1994 Manila 5 The distribution of the Philippines international telephone traffic closely parallels the location of Filipino Overseas Workers For a breakdown of Philippine international telephone traffic see PLDT Annual Report of Form 20-F 2000 6 GSM Association “Winners of the 2001 GSM Association Awards acclaimed” Press Release 21 February 2001 http://wwwgsmworldcom/news/press_2001/press_releases_5html 7 This figure is derived from the number of residential telephone lines divided by the number of households 8 Infrastructure would also include electricity One quarter of Filipino homes did not have electricity in 1999 and some 10’000 barangays lacked electricity Medium Term Philippine Development Plan 1999-2004 9 It is reported that 63 per cent of families in the Philippines cannot afford basic telephone service See “PLDT launches Phonetastic Festival to offer affordable phone service” Press Release 9 November 2001 wwwpldtcomph/articles/11-09-2001html 10 NEDA Medium-Term Philippine Development Plan, 1999-2004 11 “SMART inaugurates satellite capable Public Calling Office” Press Release 15 January 2001 wwwsmartcomph/News/news_corpasp?Id=130 12 UNESCO “Daily and non-daily newspapers: number and circulation” http://wwwuisunescoorg/statsen/statistics/yearbook/tables%5CCultAndCom%5CTable_IV_8_Asiahtml 13 NSO “Exposure of Population to Mass Media” http://wwwcensusgovph/data/sectordata/fl94-expmmediahtml 14 “ABS-CBN registers 4% EBITDA growth as Net Income declines 19% as of September 2001” Press Release 12 November 2001 http://wwwabs-cbncom/ir/disclosure1112shtml 15 This figure is derived from a 1994 NSO survey, the latest official figures available The result appears low especially when compared with neighbouring countries An AC Nielsen study estimates that four out of every five Filipino homes has a television 16 For a brief timeline of the Filipino cable industry see the Philippine Cable Television Association web site at http://wwwpctaorgph/aboutushtml

21 Philippines Internet Case Study

3 Internet in the Philippines

31 History National Telecommunication Commission (NTC) has registered over Although some companies established 150 Value-Added Service (VAS) their own private connections to the providers# However not all are ISPs Internet in the early 1990s, it was not nor are they all in operation# There until 1994 that the Philippines obtained are also ISPs that have not registered its first permanent public connection# with the NTC# Counts of ISPs with AS The Philippine Network Foundation numbers or members of the Philippine (PHNET) achieved the nation’s first Internet Service Organization (PISO) public permanent connection to the both come to 48#18 Thus, it seems safe Internet, via a 64 kbit/s link to Sprint to say there were less than 50 active in the United States on 29 March ISPs in the Philippines at 1994#17 PHNET, a consortium of private October 2001# and government institutions, managed what was then the country’s only public The structure of the Internet market gateway to the Internet# These in the Philippines is hierarchical# This institutions included government is because VAS providers must lease agencies, especially those affiliated with their transmission infrastructure from the Department of Science and licensed telecommunication Technology, universities, and some operators# For example, at the end of commercial companies# The first 1999, only 13 out of 199 VAS had their commercial Internet Service Provider own networks# At the top of the (ISP), Mosaic Communications pyramid are the public telecommu- (MosCom), launched service in nication operators with international August 1994# Internet bandwidth# Some of these have their own Internet subsidiaries# 32 Market Almost all international telecom operators lease international Internet There is no official figure for the bandwidth to downstream ISPs# The number of ISPs operating today# The larger ISPs in turn resell connectivity to smaller ISPs in the provinces# Figure 31: Internet subscribers and estimated users in the Philippines Reliable figures on the number of Internet 2’000 000s 2.5% subscribers in the country do not exist# 2.0% 1’500 Although the NTC solicits 1.5% this information on a 1’000 1.0% quarterly basis, not all 500 ISPs furnish the 0.5% information# In any case, 0 0.0% 1998 1999 2000 the information is neither compiled nor Subs. 106 200 270 published# In addition, 823 1’090 1’540 Users some ISPs use different User 1.1% 1.5% 2.0% methodologies for penetration reporting subscribers (e#g#, estimated number Source: ITU estimates of users rather than subscribers)#

22 3 Internet in the Philippines

The growth of the pre-paid Internet Destiny, Digitel, Edsamail, ETPI, market also poses a statistical problem Evoserve, Interdotnet, Meridian, since there are different ways to MosCom, Pacific Internet, account for this# The ITU estimates Philweb, Sky Internet and Tridel# that there were around 270’000 dial- The CORE exchange also up subscribers at the beginning of the interconnects with MIX# year 2001# It is estimated that the top four ISPs account for around half the It is estimated that around 90 per cent market# According to a government of Philippine Internet traffic is destined report, there were some 1#5 million abroad, primarily to the United States# users at the end of 2000 for a Nonetheless there is a growing penetration of around two per cent of amount of domestic traffic# Since the population#19 there is no single Internet exchange to which all ISPs are connected, there 33 Interconnection are situations where national Internet traffic will be transited abroad to There is no legal requirement for ISPs return to the Philippines, adding to to interconnect with each other# Some international Internet connectivity ISPs have private peering costs# Thus far, there has been no arrangements with each other# ISPs neutral party interested in promoting using the same international gateway a neutral Internet exchange to which operator would be interconnected by all ISPs could connect# Except for default# Of the eleven international CORE, a different telecom operator gateway telecommunication operates each exchange and they operators, six provide international have not cooperated# Although CORE Internet bandwidth (Bayantel, Digitel, advertises itself as a neutral Globe, Eastern, Philcomsat and PLDT)# exchange, it is perceived as being controlled by Bayantel# PLDT has a ISPs can connect to three exchanges plan to interconnect all of the Internet for swapping their national Internet exchanges# traffic: ISPs cannot provide their own national • Philippines Internet Exchange or international infrastructure unless (PHIX) they also have a telecommunication operated by PLDT# PHIX was the franchise license# There is no national first Internet exchange in the Internet backbone so this means that country and launched in January some ISPs have strung together a 1997# Eight ISPs exchange their national network by leasing lines from traffic, including Infocomm, different telecommunication PLDT’s ISP subsidiary# Other ISPs providers# In an attempt to facilitate using PHIX are Evoserve, Iphil, the provision of international MosCom, Pacific Internet, Tridel, connectivity, PLDT has launched its I- Virtual Link and WorldTel# GATE service for ISPs# Instead of having to procure international • Common Routing Exchange bandwidth through multiple domestic (CORE) managed by the Philippine stop service that provides a direct Network Foundation (PHNET)# connection to the Internet backbone# This exchange is free and open It is powered by a 155 Mbit/s to all registered ISPs but they (December 2001) submarine fibre must have their own optic connection to the US# international connectivity and supply their own 128 kbit/s link The Philippines archipelago is well to the exchange# situated in terms of being able to take advantage of undersea fibre optic • Manila Internet Exchange (MIX, routes# As a result most international ) Internet connectivity is symmetric via operated by Eastern Telecoms fibre optic cable# Most connections are (ETPI)# MIX has 13 ISPs: Bitstop, to the United States, the destination

23 Philippines Internet Case Study

Figure 32: Dial-up Internet prices telephone ownership, in South East Asia and reduces the size of the dial-up market# So 30 hours of use per month, US$, October 2001 while the Philippines has comparatively low ISP charges, the overall Cambodia cost of Internet access Lao PDR is relatively high when factoring in the AVERAGE telephone subscription Vietnam charge# Philippines Indonesia Pre-paid cards have Thailand ISP been growing in popularity, for fixed as Malay sia Line rental Telephone Usage well as for mobile Singapore networks# One reason is that a pre-paid user 0 1020304050 does not necessarily have to have a Source: ITU adapted from ISP and PTO data telephone line or PC since the card can be used at Internet cafés#

of the majority of traffic# There are a 35 Broadband few connections to other Asian economies primarily Japan, Hong High-speed Internet access, via cable Kong SAR and Singapore# Although modem, ADSL (Asymmetric Digital ISPs have to go through telecom Subscriber Line), and fixed wireless operators for outgoing international broadband systems, is available in the connectivity they can negotiate their Philippines# There are up to ten own incoming satellite connectivity# As operators currently in the market, but with the number of subscribers and none has more than around users, there is a lack of clarity 3’000 subscribers# Perhaps because of regarding international Internet the confusing array of choices, the bandwidth in the country# The top four market has been slow to take off and ISPs reported 237 Mbit/s of no one is making money from international incoming connectivity broadband access in the Philippines and 154 Mbit/s of outgoing in at present: October 2001# • Several telecom operators have 34 Pricing launched ADSL# PLDT introduced ADSL in November The Philippines is the only country in 2000# It claimed around South East Asia where local telephone 3’000 subscribers in September calls are free#20 Thus, dial-up Internet 2001# However, the basic subscribers only pay the ISP charge# service offered for residential ISPs generally provide various packages users provides only a based on the number of hours# None guaranteed 64 kbit/s burstable yet offers an unlimited plan, possibly to 128 kbit/s# By most because when combined with the lack definitions, this would not of local call charges, users could stay constitute a broadband connected indefinitely# Efforts to adopt connection but in the Philippines, local call charging as part of a tariff where Internet dial-up speeds rebalancing exercise have met with stiff are generally slow and unreliable, resistance and it is unlikely it will be it is possible to market the implemented#21 The downside is that service as “broadband”# PLDT’s the Philippines has the highest monthly prices are around US$ 50 per telephone subscription charges in the month for residential subscribers region, which raises the price of and US$ 200 for business users#

24 3 Internet in the Philippines

It is not clear why business users , should pay so much more for the which uses spectrum in the 29-31 GHz same service, but PLDT obviously range to provide LMDS service# It was has no interest in cannibalising awarded the spectrum in 1998 and their existing leased line and has been offering service since ISDN services# October 1999# BP’s main service offering is 128 kbit/s burstable to • Internet access via cable modem 512 kbit/s, though some clients, like was launched in 1999# Industry Thomson Financial or IDS Finance, estimates of the number of cable have much higher capacity# television subscribers is over one Multimedia Technology Inc owns BP million, so it would seem that and its investors include the US cable modem access has company, Callahan Associates, and potential# However many the Soros Foundation# The limitation subscribers are connected to on foreign ownership has acted as a antiquated networks that would brake on expansion# BP’s strategy has need to be upgraded for cable been mainly to serve clients in Multi- modem access to be feasible# tenanted units (MTUs) in the main One of the leading cable modem business districts, like Makati in providers, Sky Internet, was Manila# As of October 2001, it had unable to bill its customers for around 300 customers in 80-100 such several months following its MTUs# launch due to the antiquity of its system# One incentive would be Broadband Internet access faces a to allow cable providers to also number of barriers# First, the service offer telephony over their cable is relatively expensive, at least for networks but so far this is business ADSL access# One reason is prohibited# that telecom operators are reluctant to price ADSL below their leased line Several companies have launched or and ISDN services for which they are planning to launch fixed wireless already have many customers# ADSL broadband access# These use various for the most part seems to be targeted systems including such as MMDS at business users# There is also no (Microwave Multipoint Distribution regulatory requirement for fixed line System) and LMDS (Local (or Low- operators to unbundle their local loop power) Multi-point Distribution lines to allow other operators or ISPs System)# Suppliers include, to provide ADSL service# Second, the Broadband Philippines (BP) availability of flat rate telephone tariffs

Table 31: Broadband pricing

Cable modem and ADSL subscription rates, December 2001

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0RQWKO\Ã6HUYLFHÃ)HHà ¶ÃSHVRVà 86Çà à 86ÇÃÃ

0RGHPÃ5HQWDOÃ ÃSHVRVPRÃ Ã 86ÇÃ Ã

,QVWDOODWLRQÃ)HHà ¶ÃSHVRVà 86Çà à 86ÇÃÃ

Note: Subscribers to the Home Cable package must subscribe for one year No mention is made of speed GlobeNet’s DSL Basic is priced in US$ Speed is 512 kbps both ways Source: ITU adapted from operators

25 Philippines Internet Case Study

means that no extra usage charges “a) prior approval of the Commission are incurred for dial-up access, is secured to ensure that such VAS mitigating the cost saving of migrating offerings are not cross-subsidized to broadband# Third, availability is from the proceeds of their utility essentially limited to Metro Manila# operations;

It is estimated that there were some b) other providers of VAS are not 10’000 broadband subscribers by discriminated against in rates nor October 2001, a figure projected to denied equitable access to their grow to 88’000 by 2005#22 facilities; and

36 Rules & regulations c) separate books of accounts are maintained for the VAS” 361 The Value-Added World Internet access provision is considered The Philippine Constitution prohibits a value-added service in the telecommunications entities, including Philippines and regulated under ISPs, from having more than 40 per Republic Act No# 7925#23 ISPs need cent of their share capital owned by only register with the NTC to provide persons who are not citizens of the service# The registration is valid for a Philippines and from appointing any period of five years# There is a one executive managing officer that is not time processing fee of 100 pesos a citizen of the Philippines# (US$ 2) and an annual fee of 6’000 pesos (US$ 120) per year# The latter 362 Content amount is payable at the time of There is no Internet content control registration for the full five years (i#e#, in the Philippines# An Internet 30’000 pesos (US$ 600))# This also content provider can establish a web means that there is no incentive to site without any formal application# follow-up whether a VAS actually Nonetheless content is a concern, starts up its business# There is no limit particularly pornography# The on the number of registrations# At the Catholic Church operates an ISP end of 2000, there were 156 Value- service that blocks out access to Added Service (VAS) registrations# pornographic sites (see Box 3#1)# Note that a VAS registration could be Some ISPs provide ‘family’ type for any service and not necessarily subscriptions that also provide Internet access# Also, as mentioned, firewalls to pornographic sites# even though a company has obtained a VAS registration, it does not mean 363 PH that it is necessarily in operation# The Advanced Science and Technology Institute of the A value-added service is one that is Department of Science and provided over existing telecommuni- Technology is responsible for the cations infrastructure# That definition #GOV#PH domain# The Philippine is strictly applied so that technically, Network Foundation (PHNET) ISPs are not allowed to supply their manages the #EDU#PH own infrastructure but must lease it domain# Only academic institutions from a franchised telecommunication operating in the Philippines can provider# In order to provide their own register under the EDU#PH domain and infrastructure, ISPs would have to must be recognized by the obtain a franchise (officially known as Department of Education or the “A Franchise to Construct, Install, Council of Higher Education# Fees are Establish, Operate and Maintain US$ 35/year or 1715 pesos/year# Telecommunications Systems Registration must be for a period of throughout the Philippines”)# The two years# dotPH manages all other domain that franchised telecommunication names# Second level domain names entities can provide value-added are not required# The cost is US$ 70 services subject to: for two years#

26 3 Internet in the Philippines

364 VoIP even though the capital only accounts for 13 per cent of the population#24 Voice over Internet Protocol (VoIP) is Another report estimates that there illegal except by licensed are 20 million potential Internet users telecommunication operators# The in the country but less than two million argument is that VoIP is a voice were actually using it# Despite these service for which a license is required# gaps, there are few practical measures This applies to telephone-to-telephone to remedy it# Though programmes and PC-to-telephone VoIP but not PC- called for telecom operators to install to-PC Internet calls# There is no four million telephone lines, or for so separate category of license of VoIP# many municipalities to be provided At this time, none of the major with telephone service, there are still telecom carriers were offering a many parts of the country without a discounted VoIP service# However, it basic telephone service upon which to is likely that VoIP traffic is widespread, pin Internet access# particularly in Cebu, which has a thriving cybercafé culture# One reason The number of PCs is also low# It is to believe that VoIP traffic is high is estimated that some 2#7 per cent of the fact that calls to the United States, households have a PC#25 Thus for the the main source of VoIP traffic, are majority, access via public locations no cheaper than to other international is the only immediate short-term destinations# option# Most surveys agree that outside Manila, the predominant form 365 Quality of Service of access is via public locations such as schools or Internet cafés# Complaints about Internet quality of service are widespread# This includes Private and voluntary efforts are slow speed and inability to dial-in# helping to enhance public access# Another growing problem is the There are between 1’500 - 5’000 release of prepaid cards that offer poor Internet cafés around the nation# quality service, or in some cases, no Cyberworld, a chain of branded service at all, if the supplier of the Internet cafés that launched in 2000, cards takes the money and then had twelve outlets in April 2001 and disappears# Although the NTC collects plans to create thousands more#26 The some quality of service information Catholic Church has emerged as a submitted in quarterly reports by VAS, leading ISP and is planning to connect this information is not published# Nor all churches and parochial schools (see has the NTC thus far investigated Box 3#1), though the lack of allegations of poor service quality# profitability of its services may slowdown its expansion plans# 37 Universal access One idea being contemplated by the Just like the economic divide in the NTC is a proposal to allow ISPs a Philippines, there is also a digital one# license for procuring their own According to one survey, over half the infrastructure in exchange for country’s Internet users are in Manila providing service in remote areas#

27 Philippines Internet Case Study

Box 31: E-vangelism

With a population that is over four-fifths Catholic, gospel Applications are being developed to deliver the Church is a large and powerful organization in marriage guidance, the catechism and even to the Philippines Furthermore, it has a pool of well- celebrate Mass, online through video streaming qualified members with compelling zeal If these Potential services include providing Internet resources could be applied to ICTs, miraculous telephony to the nation’s large overseas population things might happen so they can stay in touch with relatives back home (technically illegal at present, though if the Catholic Indeed, the Catholic Bishops Conference of the Church supported it, the official stance may shift) Philippines (CBCP) is aiming to Another idea is to provide e-commerce services for become the Philippines’ leading Internet Service farmers Provider (ISP) The CBCP has a five-year project to wire each of the nation’s 79 dioceses and Another reason for the Church’s interest in the 2’900 parochial schools in the country27 It has Internet is to provide pornography-free ISP strung together an Internet backbone (CBCPNet) access29 It has installed a firewall on its server running the length of the archipelago The CBCP is that blocks access to pornographic sites Violent also working with private companies to set up over games, however, are not filtered since they are often 1’000 Internet cafés in poor neighbourhoods28 the most popular application at most Internet cafés This would discourage customers and reduce the This so-called ‘e-vangelization’ not only uses ICT revenues needed for expansion for development, but also as a tool to spread the

28 3 Internet in the Philippines

Box 32: Txting Nation

Beep Beep The sound of an incoming GSM mobile portion of mobile revenues After exceeding Short Message Service (SMS) A sound becoming the monthly free messages (150 for prepaid as prevalent as cars honking in the Philippines and 400 for a basic post-paid package), the The nation is crazy about txting, the term used cost of an SMS message is still eight times to refer to SMS In December 2000, Filipinos were cheaper than a one minute peak period voice sending almost 50 million SMS a day or around call For every call made on a mobilephone, nine per subscriber They are the world leader in an average of ten SMS are sent Mobilephones per capita SMS usage, accounting for some ten are no longer a device for phone calls, but a per cent of all SMS messages sent around the ‘SMS terminal with voice capability’30 world (see Box Figure 11, left chart) What’s behind the craze? • Culture The Filipino language Tagalog uses Roman characters and can thus be used with • Mobile growth The Philippines had 85 million any mobilephone Many Filipinos also speak mobile subscribers at June 2001 Mobile English and indeed a hybrid ‘Taglish’ has passed fixed back in January 2000 and shows emerged for sending SMS messages Txting no sign of slowing down Estimates of the may also be supplementing the traditional potential subscriber base over the next few Filipino love of writing In a country in which years range from 15-20 million SMS is also a courting was traditionally conducted via love source of information for those that do not letters, sending txting is said to be a natural have a computer; mobile subscribers progression outnumber PCs in the Philippines 4:1 Though most SMS in the Philippines are personal • Pricing An SMS is much cheaper than a phone messages, there are other interesting applications call SMS was initially free Although a nominal Users can send a request for virtually any kind of P1 per message charge was introduced in information ranging from stock quotes and help with October 1999, a number of free messages are students’ homework, to astrological predictions, or included with both post-paid and pre-paid passages from the Bible SMS is also attributed with subscriptions The charge was introduced to accelerating the fall of former President Estrada by encourage ‘responsible txting’ but equally for facilitating the arrangement of rallies31 Txting has operators to cash in on the craze Despite the now expanded to fixed-lines so that regular free messages, SMS constitutes a growing telephones can send messages to mobile ones32

Box figure 32: The global SMS champ

SMS per subscriber, Wireless data revenue in the Philippines, SMS as % of December 2000 US$ million world $113 As % of total 30% Philippines 280 9.8% wireless revenue 25% 20% 5% UK 19 13% SMS per 10% month $31 Germany 37 12% 282 0% 188 World 35 -10% 1H00 1H01

Note: The left chart shows the average number of SMS sent per subscriber in the month of December 2000 It is obtained by dividing the number of SMS messages by the number of cellular subscribers ‘SMS as % of world’ is obtained by dividing the number of SMS messages (in December 2000) for the countries shown by the total number of SMS messages sent around the world (in December 2000) Source: ITU adapted from Globe Telecom, PLDT and GSM Association

29 Philippines Internet Case Study

17 Miguel A L Paraz “Developing a Viable Framework for Commercial Internet Operations in the Asia-Pacific Region: The Philippine Experience” http://wwwisocorg/inet97/proceedings/E6/E6_1HTM 18 AS stands for Autonomous System (AS) number used to identify an IP network An ISP needs this number to offer services ISPs with AS numbers were retrieved from the wwwinternetorgph site Members of PISO are listed on the PISO web site at: wwwpisoorgph A search on AS numbers assigned to Philippine organizations by the regional organization that assigns these numbers turned up 31, which suggests that the number of ISPs is even less than expected See Asia Pacific Network Information Centre at wwwapnicnet 19 National Economic and Development Authority The Medium Term Philippine Development Plan 2001-2004 Available at: wwwnedagovph DigitalFilipinocom puts the number of Internet users at around two million See wwwdigitalfilipinocom/contentasp?FileName=\statistics\demographicsini 20 Some telecom operators use usage-based local calls but these are a small minority of telephone connections in the country Some users may be better off moving to usage-based charges, as they would pay much lower fixed monthly charges, but there is strong consumer pressure against giving up “free” local call charges 21 Adam Creed “PLDT Telephone Metering Plans Suspended” Newsbytes 27 January 1999 22 “’The Philippines’ Own AOL-Time Warner Deal” Pyramid Research Perspective 9 February 2001 23 “An Act to Promote and Govern the Development of Philippines’ Telecommunications and the Delivery of Public Telecommunications Services” The Act defines a Value-added Service Provider as “an entity which relying on the transmission, switching and local distribution facilities of the local exchange and inter- exchange operators, and overseas carriers, offers enhanced services beyond those ordinarily provided for by such carriers” http://wwwntcgovph/laws/ra7925html 24 http://wwwacnielsencomph/newsasp?newsID=43 25 This is a projection based on the NSO 1994 Functional Literacy, Education and Mass Media Survey, which put the number of households with a PC at 115 per cent http://wwwcensusgovph/data/sectordata/1994/fl9401mmtxt 26 “CyberWorld Opens Five New Outlets” Press Release 23 April 2001 http://wwwphilwebcomph/NEWS/2000/p_apr23_01_cw_fivehtm 27 Michael Zielenziger “The Internet is Divine Catholic Church Expands Reach as Philippines’ Top ISP” San Jose Mercury News 28 December 2000 28 Philweb, CBCPNet Forge Strategic Alliance” Press Release 21 June 2000 http://wwwphilwebcomph/NEWS/2000/p_jun21_cbcphtm 29 Melvin Calimag “Philippines’ Catholic Church In Fight Against Net Porn” Newsbytes 27 January 2000 http://wwwnewsbytescom/news/00/142873html 30 “Multimedia to spur Asia GPRS handset uptake” Total Telecom 5 September 2001 wwwtotaltelecom/vprintasp?txtid=43461 31 Michael Zielenziger “Across the Philippines, Fast-Flying Fingers Type Messages on Cell Phones, Fuelling a Middle-Class Revolt Against President Who is Charged With Graft Movement to Impeach Estrada Accelerated by New Technology” San Jose Mercury News 12 December 2000 32 For example PLDT’s TXT 135 service had 100’000 subscribers in April 2001, just two months after launching TXT 135 allows customers to send text messages to PLDT’s mobile subscribers (ie, those on the SMART and Piltel networks) “PLDT’s TXT 135 Now has more than 100’000 subscribers” Press Release 26 April 2001

30 4 ICT in Government, Education, Health and Business

4 ICT in Government, Education, Health and Business 41 Government prioritising requests# Nor has there been sustained allocation of Government computerization in the resources# An allocation made one Philippines goes as far back as 1959, year could be denied the next, midway when an IBM mainframe computer through a project# was installed in the Bureau of Lands# Computerization reached a peak in the In an attempt to place the Philippines late 1960s and early 1970s through at the centre of South East Asian ICT the ‘evangelistic’ efforts of then development, an overhaul of Executive Secretary Alejandro government strategies and plans is Melchor#33 The National Computer underway# The year 2000 saw: Centre (NCC) was established on 12 June 1971 for • The Government Information government computerization# The Systems Plan (GISP) adopted35; early Information and Communication Technologies (ICT) drive subsequently • The Electronic Commerce Act lacked a champion and the Philippines passed36; and fell behind other South East Asian nations# • The National Information Technology Council and More recent attempts to reinvigorate Electronic Commerce Promotion ICT have had mixed success# In Council merged into the 1994, the government adopted the Information Technology and National Information Technology Plan Electronic Commerce Council 2000 (NITP2000) its first ICT strategic (ITECC) # Technology Council was created to serve as the nation’s top ICT policy 411 Online Deadline organ and to implement NITP2000# In February 1998, IT21 was launched as The Electronic Commerce Act covers a guide to the nation’s ICT more than just electronic business development through the early part transactions# It also has a section of the 21st century# A Government entitled “Electronic Transactions in Information Infrastructure was to be Government#” It stipulates that all developed via an online network for government agencies must accept government agencies and eventually electronic documents within two extended to academia and the public, years from the passage of the Act the Republic of the Philippines Web (i#e#, by June 2002)# It also calls for (RPWEB)#34 the completion of the RPWEB (the name for the online network of Few of these plans lived up to government agencies) by the same expectations due to ongoing funding date# The Act also specifies that shortages, infighting and security funding for getting the government issues# There is no overall government online shall be included in the annual budget policy for ICT# Each budget# There is a loophole in that department (in the Philippines the acceptance of online transactions ministries are called departments) has by government agencies is to apply annually to the Department dependent on public hearings and of Budget and Management (DBM)# the publication of guidelines# Thus, there is no coordinated evaluation of government ICT The GISP or Philippine Government expenditures and no framework for Online was approved in July 2000# It

31 Philippines Internet Case Study

is the nation’s masterplan for ICT in actually working and 75 per cent were government# It lays out strategies and actually being used# Some 44 per cent goals as well as specific projects to of agencies had a Local Area Network be implemented# It also discusses (LAN) while only twelve per cent had a financial implications and established Wide Area Network (WAN), suggesting deadlines# Specifically, the GISP calls that few are connected to their regional for the necessary infrastructure to be offices# Some three quarters had in place and operational before 2010# Internet access, around a third had e- That deadline is also set for ensuring mail and 38 per cent had a web site# that every Filipino shall have online Only one per cent supported some type access to government information# of e-commerce application# It should be noted that the survey is based on results ITECC is charged with executing the of less than half of government agencies nation’s various ICT strategic plans and is likely to have been completed such as IT21 and GISP as well as by those most active in ICT# Therefore, providing periodic updates and the actual level of government revising existing plans or establishing computerization is undoubtedly lower# new ones as needed# The Council is The government invested around composed of the Secretaries (i#e#, seven billion pesos (US$ 136 million) ministers) of key departments during the 1990s for ICT equipment and involved with ICT and is the ICT projects#39 In order to implement the advisor to the President and Congress# GISP, funding at least three times It is chaired by the President of the greater (around 23 billion pesos Republic of the Philippines and co- (US$ 447 million)) will be needed over chaired by the Department of Trade the next six years# and Industry and a representative of the private sector# Other members Eliminating graft and corruption is a include the Secretaries of the major concern of the government and Department of Management and it feels ICT can help in this area by Budget; Department of Transportation making transactions more and Communication; Department of transparent# The Department of Education, Culture and Sports; Budget and Management’s Electronic Department of Interior and Local Procurement System (EPS) provides Internet-based Agency and the Managing Director of services such as a “Public Tender the National Computer Centre# There Board” for procurement notices; a are also six representatives from the catalogue and virtual store for private sector representing academia, transactions with government consumer and business organizations agencies; and a suppliers registry to involved with ICT# provide agencies with a common source list of approved vendors# A The Electronic Commerce Act and related effort to reduce corruption is GISP are ambitious in their goal of the Transparent Accountable getting the Philippine government Government project (see Box 4#1)# online as quickly as possible# For most departments and agencies, this will be 412 Budding applications for very difficult to achieve, as their the e-Citizen current ICT status is low# Around one per cent of national government While the government has mostly personnel work in ICT#37 A survey by relegated the role of ICT infrastructure NCC in 1999, based on 300 out of provision to the private sector, it is the 819 government agencies that key player in terms of providing its own replied, found varying levels of information and services online to computerization in the government citizens# Though there are many and suggests that there has been informal listings of Philippine public underinvestment by the government for sector web sites, the official government informatin infrastructure#38 Some 80 portal is at http://www#gov#ph# At per cent of computers installed were December 2000, there were

32 4 ICT in Government, Education, Health and Business

Box 41: e-whistleblower

Transparent Accountable Government (TAG, • Document perspectives among various sectors wwwtagorgph) is an anti-corruption site that of the business community and general public collects anecdotes, runs surveys, investigates and concerning corruption as it relates to doing reports on corruption The investigative reports business in the Philippines; range from local issues such as ‘Local Officials Profit from Garbage’, to national issues such as • Identify and analyse key areas of corruption ‘Estrada and Associates Monopolize Gambling’ and quantify their economic costs; and The case studies and public opinion surveys are equally wide in their purview Jointly organized • Focus business and public attention on how by the Asia Foundation, Social Weather Station, particular areas of corruption affect the conduct the Philippine Centre for Policy Studied at the of business and economic growth in the University of the Philippines, the Philippine Centre Philippines, and build consensus on a concrete for Investigative Journalism and the Makati agenda for counter-corruption reform Business Club, TAG has been calling for the transparency that e-government can bring for The TAG is not alone Its site lists 70 other anti- years TAG’s objectives are to: corruption organizations active in the Philippines

232 government agencies with an used at special kiosks to obtain Internet connection; 115 had their own information (see Box 4#2)# This will web sites# This is out of a total of 415 eventually be extended to ATMs# federal government agencies# There is The SSS web site also allows users a tremendous amount of potential in to download popular forms# this area to get more agencies online and applications developed, perhaps • The Filipino tax authority, the led by a new ICT ministry# Bureau of Internal Revenue, is implementing e-filing, an online There is a number of budding public tax payment system# The initial e-services available for Philippine trial of the five million pesos citizens: (US$ 163’000) system allows 750 large taxpayers and • In addition to providing 2’000 employees of the agency to traditional statistical information pay their taxes online# The system on its web site, the National will eventually be extended so that Statistics Office (NSO) is in the eleven million tax payers could file midst of a project to digitise over their returns online# 100 million civil registry documents such as birth, 413 Ecozones marriage and death certificates#40 This 2#1 billion pesos The Government’s role in promoting ICT (US$ 40#7 million) project will includes the establishment of laws, allow citizens to obtain records regulations and incentives to encourage much more quickly than in the the use of ICT as well as encourage past# The Department currently private investment in ICT# The Philippine provides online information about Government has promulgated a series how citizens can go about of laws that establish an environment obtaining records including fees in which ICT-intensive activities can to be paid and maps to the NSO flourish# offices# Citizens can also fill in the request online and have the One area that the government is relevant records mailed to them# particularly keen to promote is the establishment of the Philippines as the • The Social Security System “e-services hub of Asia#” Specifically this (SSS) is in the process of issuing means attracting high-tech companies national ID cards that can be to invest in specially designated IT

33 Philippines Internet Case Study

Figure 41: Philippine IT Ecozones economic zones (ecozones)# There are tax holidays and other incentives for companies locating in the IT ecozones#41 The ecozones have advanced ICT infrastructure such as broadband access and top- notch human resources# Of the nine IT ecozones, seven are in Manila, and two are in Cebu# All are privately owned and run# One vision is to use the ecozones to complete in the offshore software development market, leveraging its abundant supply of skilled human resources#

42 Health

The Department of Health Source: Board of Trade (DOH, http://www#doh#gov# ph/) must not only deal with

Box 42: Computerizing social security

The second largest database in the Philippines belongs investment, member information and personnel to the Social Security System (SSS, system One partially implemented application is the http://wwwsssgovph/) SSS is charged with biometric ID card (a thumbprint identifies the protecting those employed in the private sector member)42 The card enables links to database listings (including the self employed but not in the informal for the individual Some members can interrogate economy) from hazards of disability, sickness, themselves via the Internet As at September 2001, maternity, old age, death and other contingencies three million cards had been distributed With resulting in loss of income or financial burden The 23 million members, it was deemed essential to start SSS also provides soft loans to members for this slowly investment purposes With 4’000 employees in 146 regional and extension offices, and a budget of The SSS currently employs some 4’000 regular staff 7 billion pesos, the work of the SSS is extensive and Its computing power includes 2’356 workstations; 129 the ICT operation critical notebooks; 23 processing centres It process over one million transactions a day on a database with In 1962, the need for a computerised system was almost 350 million records Total SSS operating recognised in order to automate members’ expenses (last 8 yrs) were 165 billion pesos, total IT contributions The first SSS computer had a tiny expenditure was 45 billion pesos (70% hardware, memory and no built in operating system The lease 18% software, maintenance 9% supplies 2%, and of a mainframe in 1970 provided greater training 018%) sophistication and more extensive processing of loans and benefits However, branch offices still only served Transactions with employers are largely undertaken as receiving stations for claims and applications that through EDI (400’000) or via ‘sneaker net’ (hand were forwarded to the head office for processing In delivery of disks for the 10 per cent of employers 1990, the system was upgraded again to a client- with computers, but without EDI or Internet) SSS server environment on a LAN, which is now being ‘seeded’ the use of computers among employers by extended to a wide area backbone offering loans at favourable conditions for buying computers and computerising payrolls in order to The 1998-2002 Information System Plan identifies automate deductions to SSS) Relationships with banks 26 systems to be developed and integrated to insure are not as smooth Wherever possible, benefits are paid interoperability These include management, financial, by direct credit; cheques are almost a thing of the past

34 4 ICT in Government, Education, Health and Business

will benefit the hospitals’ operations as Figure 42: Proposed Social Security Wide Area well as its reporting functions to DOH# Network It will also enable links through to academic institutions and private health institutions pioneering telemedicine#

The DOH web site contains a variety of useful information including statistics, description of policies and programmes, Frequently Asked Questions (FAQs) on diseases and listings of health institutions and practitioners in the country# It also provides information about doing business with DOH with forms for procurement of supplies and equipment and licensing provided online# It also provides a chat and message board service#

There are some private and public initiatives to use ICT in health services# One initiative is that of a local ISP, PhilWeb, and its partnership with a US telemedicine firm, MDVista, to offer medical services online to doctors including test results and information#43 The National Telehealth Centre, part of the University of the Philippines (UP) in Manila, was established in June 1998 to explore ICT health applications# The Philippine General Hospital has been involved in a telemedicine project with the UP College of Medicine for a number of years# The project offers tele-like Source: Board of Trade applications for dermatology, pathology, radiology and surgery#44 In 1999, an electronic claims processing system was primary and preventative health launched that links hospitals, insurers, measures but also with chronic and health maintenance organizations, emergency care# This role would be clinics and physicians# Funds and claims much easier with automated are transferred and processed information systems but with only 30 electronically# per cent of the staff using computers, and these mostly in the head office, the There are several portals being task is daunting# The aim of the DOH in developed under the auspices of the using ICT is to achieve better efficiency Department of Science Technology and effectiveness in enforcing health regulations# The limited manpower and geographi- cal presence compared to the pervasiveness of health institutions requires appropriate systems to store and update informa- tion to improve supervision and monitoring# The proposed system will provide computer-aided hospital management that

35 Philippines Internet Case Study

and the Philippine Council for Health 1600s and Spanish colonisation where Research and Development (PCHRD)# a network of parochial schools was The e-Health Village seven per cent of children at elementary aims to provide researchers with and 23 per cent at high school enrolled information# The cute, bi-lingual in private schools; 79 per cent of all village-like graphical environment tertiary schools are private# These are aims to give the site a more Filipino- largely Catholic schools that range from like feel# The PCHRD has also launched single rooms at the village level to a web page-Health Research and expensive schools catering to the Development Information Network children of the elite# The Catholic (HERDIN)-that provides extensive Education Association (CEAP bibliographic referencing information# www#ceap#ph/about) represents 1’173, It is based on their award winning CD- approximately half of the Catholic ROM that contained a list of all medical schools in the Philippines# Catholic papers published by Filipino specialists schools in the barangays have more in since 1906 as well as full-text from common with the strapped-for-cash over fifty journals#45 public schools than with the wealthy schools in the cities# 43 Education 431 Higher education Public education in the Philippines suffers from chronic shortages (e#g#, There are some 1’300 tertiary lack of classrooms, textbooks, institutions enrolling over two million electricity, etc#), not least of which are students# Information about how computers and Internet access#46 many have computers, Internet While these shortages are most severe access or web sites is not centrally at the elementary level, they continue collected# There was a Commission on through high schools, and to a lesser Higher Education (CHED www#info extent to the universities# The #com#ph/~chedco) project started in educational system also faces debates 1996 to computerize public and over policy# For example there is private universities#48 Some conflict about whether education 973 institutions benefited from the should be in English or local 251 million pesos (US$ 4#8 million) languages# One drawback with the project, which came to a close in English only policy is that there are January 1998# A second phase was not enough qualified teachers# The allocated 15 million pesos quality of the education system is also (US$ 291’000) while a third phase was questioned with Filipino students cancelled because of a lack of ranking low on national and government funding# Those that can international tests# Keeping youth in afford to, generally private universities, school is also a challenge# According often establish their own leased line to one educator, “ of every 100 six- Internet connectivity directly via ISPs# year olds in the Philippines, only One trend has been partnership 97 enter first grade, only 60 complete between universities and ISPs to set up their elementary education, only Internet cafés at campuses#49 50 enrol in secondary education, only 30 complete their secondary A number of leading universities first education, only 20 enrol in higher became connected to the Internet as education, only 12 earn a collegiate part of the Philippine Network degree, and only 4 are later employed Foundation project coordinated by the in a job aligned with the degree they Department of Science and have earned7”47 One consequence is Technology (DOST)# Indeed the first that those that can afford to, send institution to establish a connection their children to private schools# was the University of San Carlos in Cebu# However, this early effort has Private schools have played a not evolved into the sort of broadband historically significant role in the academic networks found in other Philippines# This dates back to the countries where the educational sector

36 4 ICT in Government, Education, Health and Business

was an early promoter of the Internet# national centres listed as DEPED There is a proposal to build the organizations have web sites# DEPED Philippine Research, Education, and employs 500’000 nationally, of which Government Information Network 400’000 are teachers# There are (PREGINET), a high-powered research 1’000 staff in the head office, which has and academic network#50 some 500 computers, 15 of which are connected to a LAN# Some universities have implemented online features such as downloading The Government does not have a application forms, checking test scores master plan for ICT in the classroom# and exchanging e-mails with teachers# At the elementary level, there are no Philcampus, a site of the ISP Philweb, policies for either ICT infrastructure enables students to enrol, buy books or curriculum# While the twelve million and reserve accommodation online# students at public elementary schools Universities in Cebu and Visayas are have no government-implemented partners# access to ICT, the some one million pupils at private schools may have The large spread out area of the access through community and Philippines make distance education voluntary initiatives# For example, the attractive# The University of the Catholic Church is working to wire Philippines launched its Open University some of its elementary schools while (UPOU) programme private charities such as the Ayala in 1995# Consisting of 17 branches Foundation provide some schools with across the country, UPOU has graduated computers# over 1’600 students since it was established# UPOU offers some An ICT curriculum is being designed 100 courses in 17 degree programmes for high school# The content has not from bachelors through doctorate# been finalised, but is planned to be part of a revised Technology and Home 432 Primary and secondary Economics curriculum# The plan is for The Department of Education, Culture students to receive hands on training and Sport (DECS), now Department of in the use of software applications Education (DEPED), http://www#deped# including word processing, gov#ph) is charged with overseeing spreadsheets and use of the Internet# primary and secondary education in the One priority for the success of the nation# All of the 16 offices, bureaus and curriculum is to increase the number of high schools with computers and Internet access# Table 41: Philippines@High School There are several programmes to Secondary schools, 2000-2001 academic year, increase the number of PCs in latest estimates secondary schools# Of some 4’209 (1998/99) public high schools, 1XPEHUÃRIÃVFKRROVà ¶à 3’000 have no computers and only two per cent have access to the Internet#51 3XEOLFà ¶à È Ã A 1996-2000 programme (Department 3ULYDWHà ¶à È Ã of Education, Culture and Sports 1XPEHUÃRIÃVWXGHQWVà V à ¶à Computerization Programme) is illustrative of the gap between goals and 3XEOLFà ¶à È Ã achievements that beset Philippines 3ULYDWHà ¶à È Ã government funded projects# The 1996 1XPEHUà RIà SXEOLFà VFKRROVà ZLWKà ¶à È Ã allocation of 375 million pesos 3&Và (US$ 7#2 million) was partly spent on training 656 teachers and partly (VWLPDWHGà QXPEHUà RIà SXEOLFà à È Ã VFKRROVÃZLWKÃ,QWHUQHWÃDFFHVVà unspent# The 1997 allocation was cut to 40 million pesos (US$ 770’000) while à the cost of computers soared due to exchange rate depreciation# The Source: ITU adapted from DECS, ITECC number of computers to be purchased was reduced by 60 per cent# The

37 Philippines Internet Case Study

number of recipient schools was 433 ICT human resources reduced to 624 high schools (from 3’900); the number of computers to The government regularly touts the each school was reduced to twelve per attraction of the Philippines as a school in 1999# The schools selected software development location# It were leading schools and the science often cites a report ranking Filipino ICT high schools and those with electricity workers high in a global comparison#57 and air conditioning for the PCs# Other attractions include the third largest English speaking country in the Another project under the Adopt a world and low wage rates# The quality School Programme is Personal of Filipino computer workers is such Computers (PCs) for Public Schools# that perhaps as many as 100’000 Launched by the Department of Trade Filipino IT workers were engaged and Industry in May 2000, the project outside the country in 2000#58 While is aimed at ameliorating the low level this presents an opportunity to the of ICT equipment and access in the individual, it is a challenge to nation’s public high schools# Starting Philippine companies and for the with a 600 pesos (US$ 11#75) million government# There is something of a grant from Japan, the government is hierarchy with the government- seeking additional donations of new trained staff being headhunted by or used computers and related industry where they are exposed to equipment from private companies more commercial ideas, and then the and foreign donors#52 One thousand international brain drain taking some high schools are expected to benefit of the most able# from this scheme# In addition to 20 PCs each, the schools will receive There are a number of ways the training and IT curriculum country hopes to expand and improve development support#53 The its ICT training# This will help boost Foundation for Information its attraction as a venue for foreign Technology Education and ICT investments, assisting the Development (FIT-ED) is encouraging propulsion of the nation into a Newly telecommunications firms to provide Industrialized Country (NIC)# In 1993, free Internet connectivity to 1’000 the number of IT workers was put at schools#54 30’000 and the Philippines is currently churning out the same amount each Another programme through which year#59 Nevertheless, with the brain under-privileged high schools are drain and estimated domestic receiving PCs is the Microsoft requirement of over 350’000 high- Philippines’ Connected Learning tech workers, urgent measures are Community (CLC) programme#55 The needed#60 programme started in 1999 when three high schools were given PCs# At the vocational and higher education Since then an additional five have level, there around 200 training centres been added to the list# Each school that offer popular short-term training receives eight PCs, digital camera, courses in Information Technology# printer, scanner and one-year free Some 30 universities have degree subscription to the Internet# programmes in computer-related disciplines# The number of college and One way of penetrating more schools university students taking ICT courses with ICT is through mobility# The DOST has risen dramatically from less than has four mobile IT classroom buses 200’000 during the 1998/1999 school built by Daewoo at a cost of 7#3 million year to over 300’000 in 2000/2001# pesos (US$ 142’000) each#56 They can There is concern that the quality of the accommodate 32 students each# courses needs to be improved# One way Started in 1998, the buses go to is to apply and improve certification primarily rural areas and have such as ISO 9001# The CHED plans to exposed over 18’000 students at some revise standards for information 300 elementary and secondary technology education to take place for schools to computer technology# the 2002-2003 school year#

38 4 ICT in Government, Education, Health and Business

Box 43: "I Love You" and Filipino computer programming talent

The infamous May 2000 “I Love You” virus caused rush of enrolments in Filipino computer courses62 an estimated US $ 10 billion of damage to computer A more formal recognition of the country’s software systems worldwide The source of the virus was skills was the Microsoft 2001 All-Star Award to a traced back to the Philippines making some in the 24-year old Filipino programmer He beat out some country proud of being able to prove their 500 other software developers from around the programming skills to the world It also caused a world63

There are a number of public and Specifically the DBM is charged with private initiatives to increase IT coming up with funding for training# The Department of Science implementation while the Central Bank and Technology and Information is responsible for banking-related Technology Foundation of the aspects# The three organizations must Philippines have a joint Virtual Centre provide quarterly reports to Congress for Technology Innovation in IT that on implementation of the Act# plans to churn out 10’000 certified professionals in five years# IBM E-commerce revenues in the established a training programme with Philippines were pegged at a local university as far back as 1991# US$ 250 million in 2000, estimated at Cisco established its first Networking US$ 770 million in 2001 and forecast Academies in the Philippines in 1998 to rise to US$ twelve billion by 2004#65 and now has 49 local and seven The National Statistical Office plans to regional ones in the country# They overcome the lack of official statistics provide a structured training on e-commerce activity by introducing programme in networking and relevant questions in future surveys# Internet technology# They are mostly established in vocational high schools The financial sector has been an early and universities# Cisco is also embracer of on-line business# The participating in an Ayala Foundation Philippine Stock Exchange project to bring out-of-school youth is online, as is the up-to-speed to enable them to enter Securities and Exchange Commission the Networking Academies#61 India’s # By the end of NIIT has also recently opened in the June 2001, 155 banks (out of 938) Philippines# had e-mail addresses or their own web sites and some 30 were offering e- 44 Electronic commerce banking services#66 Given the popularity of mobile text messaging, E-commerce in the Philippines received some financial institutions provide a big boost in June 2000 with passage mobile banking services# For those of the Electronic Commerce Act#64 The without Internet access, First e-Bank Act facilitates computerized transactions provides customers special kiosks at by giving electronic messages and branches to conduct online banking#67 electronic signatures legal status# The Act makes hacking and software piracy Business to business (B2B) e- a crime and provides for privacy and commerce got a big push with the confidentiality# It is modelled on the UN creation of BayanTrade a consortium of (UNICTRAL) Model Law on Electronic some of the country’s biggest Commerce to enhance international conglomerates: Aboitiz Equity uniformity and enforcement# The Ventures, Ayala, BenPres, JG Summit, Department of Trade and Industry, PLDT and United Laboratories#68 Since Department of Budget and BayanTrade was established in June Management (DPM) and the Central 2000, it has spent a year linking up Bank are charged with carrying out the and consolidating online relationships provisions and enforcement of the Act# between the six consortium founders

39 Philippines Internet Case Study

and 150 member companies# Filipinos working abroad#69 They BayanTrade hopes to ward off have higher incomes and better competition by offering non-members access to the Internet than the the same efficiency savings that the average citizen at home# For members enjoy# Another B2B example, it is estimated that around development is the launching of thirty per cent of Filipinos in the US agricultural information for the are Internet users# PhilWeb, a local nation’s farmers on the B2BPriceNow dot-com, hopes to cash in on this web site # group through the provision of online They can obtain commodity pricing remittance services (overseas information or offer to supply goods Filipinos transferred US$ 6 billion at local Internet access centres or over back home in 2000)#70 Its mobilephones# www#epadala#com#ph site allows users to transfer cash to family An attractive Business to Consumer anywhere in the Philippines in (B2C) market is the some one million between one hour to three days#

33 http://wwwnccgovph/aboutNCCasp?a=an1&an1=7 34 Administrative Order 332 and House of Representatives Resolution 890 35 http://wwwnedagovph/GISP/Defaulthtm 36 http://wwwi-philippinesph/filebank/Ecommerce_2000pdf 37 This figure is derived based on the number of government agencies that responded to a survey See Philippines Statistical Yearbook NSO “Information Technology Manpower Resources in the National Government” 38 NCC 1999 Survey on the Level of Computerization in the Government” wwwnccgovph 39 http://wwwnedagovph/GISP/Defaulthtm 40 http://wwwcensusgovph/data/pressrelease/2000/pr0048txhtml 41 http://wwwi-philippinesph/filebank/Guidelines_IT_Parks_6Oct99_Finalpdf 42 May Catherine C Ciriaco Developing and Implementing The Philippine Social Security ID System: A Large- Scale ID Application Using Biometrics http://wwwsssgovph/docs/sssidpdf 43 “Philippines to expect first On-line Diagnostic Clinic for teleradiology with US university hospitals” Virtual Medical Worlds Monthly 14 August 2000 http://wwwhoisecom/vmw/00/articles/vmw/LV-VM-09-00-26html 44 Alvin B Marcelo “Telemedicine: the UP-PGH Approach” Symposium on Developing the Next Generation Internet in the Philippines 25 April 2001 Quezon City http://ai3astidostgovph/ngi/up-pgh/up-pghpdf

40 4 ICT in Government, Education, Health and Business

45 “PCHRD CD-ROM Development Team wins first health IT innovation award” http://wwwpchrddostgovph/press_release/001_magsaysayhtml 46 For a summary of some of the problems and possible solutions see the Executive Summary of the 2000 Philippine Human Development Report at http://wwwhdnorgph/phdrhtml 47 Eloisa P Tinio « E-education and the P hilippine Infrastructure” 48 http://wwwinfocomph/~chedco/compu96htm 49 http://wwwphilwebcomph/NEWS/2000/P_nov_14_cichtm 50 http://preginetastidostgovph/about 51 See Personal Computers for Public Schools at http://wwwmbccomph/corporate_citizenship/pcpshtm 52 “Japan PC fund outfits Philippine schools” ZDNet Asia 11 January 2001 53 Department of Education, Culture and Sports “1,000 schools nationwide benefit from PCs for Public High Schools Programme” Education News January 2001 http://wwwdepedgovph/ENjanHDLhtm 54 “GLOBE/ISLA, FIT-ED Sign MOA on Internet Connectivity” Press Release http://wwwglobecomph/news/art1207chtm 55 “Microsoft adds five to its CLC list, gears up for provincial launches” Press Release 29 March 2001 http://wwwmicrosoftcom/philippines/pressroom/pr001htm 56 “New Mobile IT Classrooms to Roll Off” Press Release 27 September 2001 http://wwwdostgovph/media/printphp?sid=48 57 According to the META group in New York (wwwmetricnetcom/specials/GNEImain), the Philippines is the world’s best source for ICT workers 58 According to one report, there are 65’000 Filipino IT specialists working in Silicon Valley alone “Philippines faces IT manpower shortage” ZDNet Asia 1 February 2001 59 The figure for IT workers comes from “Information Technology” on the Philippine Council for Advanced Science and Technology Research and Development web site at http://dostwebdostgovph/pcastrd/ infoservices/primers/prmr_infotechhtm“How do companies choose from the 30’000 IT graduates annually from over 600 schools in the country?” See Delma L Peyra “The Right Graduates What does it take to produce industry-ready IT professionals?” Philippine Business Volume 8 Number 3 http://wwwmbccomph/economic_research/pbm/2001/no3/defaulthtm 60 “Over 350’000 information technology (IT) job vacancies in the Philippines need to be filled ” See “Philippines faces IT manpower shortage” ZDNet Asia 2 January 2001 61 “Ayala Foundation Launches Bridge Project to Cisco Networking Academy Programme for Out-of-School Youth” Cisco Press Release 31 August 2001 http://wwwciscocom/warp/public/146/asia_pr/august01/ 9html 62 “ has been inundated with students enrolling for computer courses” See “Love Bug suspect speaks” BBC News 3 July 2000 http://newsbbccouk/hi/english/sci/tech/newsid_817000/817269stm 63 “Young Filipino programmer bags global development award given by Microsoft Great Plains Business Solutions” Press Release 20 April 2001 http://wwwgreatplainscom/documentasp?link=/newsitems/all%20star%20awardhtm 64 http://wwwi-philippinesph/filebank/Ecommerce_2000pdf 65 Vincent S Pérez, Jr “Gearing up for the Knowledge Economy: The Role and Policies of the Government” 25 April 2001 66 Status Report on the Philippine Financial System 1st Semester 2001 http://wwwbspgovph/downloads/srpfs-1s2001pdf 67 “First e-Bank Implements Internet Banking Applications over Cisco Infrastructure” Cisco Press Release 30 August 2001 http://wwwciscocom/warp/public/146/asia_pr/august01/15html 68 For more on B2B marketplaces in the Philippines see: Maricar T Manuzon “Trading Places: Electronic marketplaces are changing the way businesses manage their supply chain” Philippine Business Volume 8 Number 4 http://wwwmbccomph/economic_research/pbm/2001/no4/defaulthtm 69 See “Index of Overseas Worker Statistics” on the NSO web site at: http://wwwcensusgovph/data/sectordata/datasofhtml 70 See “Overseas Filipino Workers’ Remittances by Country & by Type of Worker” on the Bangko Sentral ng Pilipinas web site: http://wwwbspgovph/Statistics/spei/tab10htm

41 Philippines Internet Case Study

5 Conclusions

51 State of the Internet • Connectivity infrastructure: a measure based on international The Mosaic Group , has developed a bandwidth, exchange points, and framework for characterizing the state last-mile access methods# of the Internet in a nation# They consider six dimensions, each of which • Organizational infrastructure: has five ordinal values ranging from a measure based on the state of zero (non-existent) to four (highly the ISP industry and market developed)# The dimensions are as conditions# follow: • Sophistication of use: a • Pervasiveness: a measure measure characterizing usage based on users per capita and the from conventional to highly degree to which non-technicians sophisticated and driving are using the Internet# innovation#

• Geographic dispersion: a Philippine values for these dimensions measure of the concentration of are shown in Figure 5#1# the Internet within a nation, from none or a single city to Pervasiveness is rated at level 3, nationwide availability# Common# At December 2000, there were an estimated 1#54 million • Sector absorption: a measure Internet users in the country or two of the degree of utilization of the per cent of the population#71 Internet in the education, commercial, health care and Geographic dispersion is rated at public sectors# level 2#5, between Moderately and

Figure 51: State of Internet in the Philippines

Dimension Value Pervasiveness 4 Pervasiveness 3 3 Geographic Dispersion 25 Sophistication 2 Dispersion Sectoral Absorption 2 1 0 Connectivity Infrastructure 25 Organizational Infrastructure 3 Organizational Absorption Sophistication of Use 2

Connectivity TOTAL 15

Note: The higher the value, the better 0 = lowest, 4 = highest Source: ITU

42 5 Conclusions

Highly dispersed7 Internet access is 52 Recommendations available in cities and municipalities in most provinces, generally as a local In the Philippines, the first steps call# However, it is not widely available towards market deregulation actually in rural areas due to a lack of preceded the large-scale development telecommunication infrastructure# of the Internet# This situation is relatively unusual in developing Sector Absorption is rated at level countries# Market deregulation has 2, Moderate7 This ranking is a function benefited the industry, which is of the type of connectivity in characterised by relatively unfettered education, government, health care market entry and exit, and a vibrant and business# Internet access is spirit of competition# Market available from all universities and development has been characterised approximately one third of public by innovation, both in pricing and in secondary schools# Some methods of network deployment# 230 government agencies have There is also a high degree of cross- Internet access of which around half platform competition, with fixed-line, have web pages# The Ministry of dial-up, leased line, DSL, cable Health has its own web site# Usage in modems, GSM dial-up, WAP, LMDS, the business sector is growing# MMDS, satellite and other platforms being used to support Internet The Connectivity Infrastructure is services# at level 2#5, between Expanded and Broad# International connectivity is One consequence of this highly estimated at over 250 Mbit/s# There competitive environment is that are a number of POPs outside of the Internet prices have been forced down capital but there is no nationwide to levels at which it is hard to make a public Internet backbone# There are profit# At the low-end of the market, several domestic Internet exchanges in particular pre-paid cards, quantity but none that connects all ISPs# has triumphed over quality, and Leased lines, fixed wireless, ADSL and consumers have come to associate the cable modem for broadband local Internet with low speed and unreliable access are available# access# Consequently, even though Internet access can be purchased for The Organizational Infrastructure as little as 20 pesos (around US$ 0#4) is at level 3, Competitive# There are per hour, with no additional metered an estimated 50 operational Internet dial-up costs, the main form of Service Providers (ISPs) in the messaging between Philippine country# Market entry is consumers is not e-mail or chat, but straightforward, requiring only rather mobile Short Message Service registration with the (SMS), where service quality is more telecommunication regulator and reliable (albeit limited in scope)# payment of a nominal fee# However, Another consequence of the wild west ISPs are not allowed to provide their style market is that there has been own infrastructure and must lease it no serious attempt to measure the from licensed telecommunication volume of Internet usage in the carriers# country and market estimates range from as few as 500’000 to as many as Sophistication of Use is at level 2, six million users# Conventional# The most popular applications among most users appear Although the Internet in the to be e-mail, browsing and chatting# Philippines is currently going through Games are also popular# More a tough phase of market sophisticated applications are in use consolidation, and intensive price or being developed, for example e- competition, there are good reasons marketplaces for electronic commerce to be hopeful about the future# A or offshore software development# number of schemes for enhancing However, they tend to be limited to access in rural areas and outlying niche areas# islands are being launched, and bodies

43 Philippines Internet Case Study

with a nationwide presence, such as Internet users or subscribers in the the Catholic Church or the school nation# system, are becoming involved# There is strong potential for mobile Internet Both the National Telecommunication and there is already a large number Commission (NTC) and the National of Internet cafés# The Philippines has Statistical Office (NSO) compile some the potential to emerge as a regional statistics on the ICT sector# The NTC market leader for Internet access as publishes data on the number of it already has done for SMS use# telephone and mobile cellular subscribers on its web site# The NSO 521 Fully liberalize the ISP carried out surveys in 1990 and 1994 market on household ownership of ICT equipment such as radio, television, Although there are no market PCs and telephones# However, these restrictions on ISPs, in reality they are data are now out-of-date# little more than resellers# Those ISPs Unfortunately, the NSO missed an that are not part of a excellent opportunity to update this telecommunication group cannot build information in the 2000 Census# It is their own infrastructure# One result is recommended that the NTC and NSO that many regions of the country partner to improve the quality, scope remain poorly served for Internet and timeliness of data on the access# Another outcome is that those Philippines ICT sector# This should ISPs linked to telecommunications include quarterly updates of industry operators have an unfair market statistics such as fixed, mobile and advantage# The distinction between an Internet subscribers and annual ISP and telecommunication operator updates of household ICT penetration should be erased# ISPs should be for television, cable television, fixed allowed to construct their own and mobile telephones, PCs and networks and permission for doing so Internet subscribership# should be simplified# In exchange, they would be expected to contribute 523 Internet Exchange to universal access goals# The Philippines has several Internet 522 Market research exchanges# However, they are not interconnected with consequent Reliable and timely information on ICT repercussions on efficiency and is lacking in the Philippines# Statistics resources# These exchanges should be are often misleading# The use of connected, or combined# The unreliable and improper statistics is government might also want to causing serious harm in terms of consider the establishment of a public, proper policy analysis# Examples neutral peering point where all ISPs include use of simple rather than could connect to# This would help drive functional literacy that gives a national e-commerce in the nation by distorted account of true literacy in making Philippine web sites easier and the country# Another example is the faster to get to# The government prevalent use of telephone capacity should also promote the esta- rather than telephone lines in service blishment of a nationwide, high-speed penetration that overstates the true public Internet backbone that would level of telephone access in the boost research and development country# Data are also incomplete# efforts, local broadband access and Data are also widely contradictory as connectivity of public institutions such Table 2#6 on mass media access in the as government offices and schools# country shows# Finally, data are incomplete or lacking in key areas# For 524 Universal access and example, a 1999 survey of the level public training of computerization in government only had results from less than half of Though the government has several government agencies# There is no policies for promoting universal reliable information on the number of telephone access (e#g#, plans that

44 5 Conclusions

called for the installation of telephone ICT courses beyond the schools will lines, subsidized tariffs, providing a also help to increase awareness public telephone office in all among a broader part of the municipalities, the Alternative population# Communications Programme (ACP), etc#), it does not have a coherent and 525 Coordination measurable plan for expanding Internet access# Instead, most public Better coordination is needed to access to the Internet has been met reduce wasteful duplication of by Internet cafés# Policies should be resources and simplify procedures# For designed for expanding Internet example, there are numerous access such as a clear funding agencies responsible for government timetable for providing Internet access ICT actions; there are at least three in schools# Internet cafés should be different Internet exchanges and there provided with incentives to expand, are three different organizations particularly in underserved areas# ISPs responsible for domain names#72 All should be encouraged to extend this causes considerable confusion and infrastructure into unserved and overlap# It is recommended that ICT underserved areas# activities dispersed across various government agencies be united in a Access alone cannot always slove the new Department# Furthermore, the problem, though# Since a large part scope of the NTC’s regulatory activities of the working age population is not should be expanded to cover the computer literate, the government entire ICT industry# Distinctions should also look into the possibility of between broadcasting and providing basic computer and Internet telecommunications should be erased, training in public locations# Expanding at least for the carriage of information#

71 This is according to government sources Another source puts the figure at “around 2 million Filipino Internet Users” which would raise the penetration to 26 per cent of the population See Janette Toral “DigitalFilipino Philippine Internet Demographics” December 3, 2000 http://wwwdigitalfilipinocom/contentasp?FileName=\statistics\demographicsini 72 According to one Congressman, a single government ICT entity would “virtually eliminate redundant functions and overlapping responsibilities of some government agencies such as the Department of Transportation and Communications (DOTC), the National Computer Centre (NCC), the Department of Public Works and Highways (DPWH), the Department of Science and Technology (DOST) and the National Information Technology Council (NITC)” Note that the NITC has since been merged into the IETTC but the argument still holds true Joel D Pinaroc “Philippines – State of IT in Gov’t” Newsbytes 6 November 1998

45 Philippines Internet Case Study

Annex 1: List of meetings

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46 Annexes

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47 Philippines Internet Case Study

Annex 2: Acronyms and abbreviations

ADSL Asymmetric Digital Subscriber Line AMPS Advanced Mobile Phone System ASEAN Association of South East Asian Nations B2C Business to Consumer Bayantel Bayan Telecommunications Incorporated BP Broadband Philippines Capwire Capitol Wireless, Inc# CBCP Catholic Bishops Conference of the Philippines CDMA Code Division Multiple Access CEAP Catholic Education Association CHED Commission on Higher Education CLC Connected Learning Community program CMTS Cellular Mobile Telephone Service CORE Common Routing Exchange DECS Department of Education, Culture and Sport DEPED Department of Education Digitel Digital Telecommunications Phils#, Inc# DOH Department of Health DOST Department of Science and Technology DOTC Department of Transportation and Communications DTH Direct-To-Home satellite EO Executive Order EPS Electronic Procurement System EPTI Eastern Telecommunications Philippines, Inc Extelecom Express Telecom FCC Federal Communications Commission FIT-ED Foundation for Information Technology Education and Development GISP Government Information Systems Plan GMCR Globe-Mackay Cable and Radio (Globe) GMPCS Global Mobile Personal Communications by Satellite GPRS General Packet Radio Service GSM Global System for Mobile Communication HDI Human Development Index HERDIN Health Research and Development Information Network ICT Information and Communication Technology IGF International Gateway Facility Islacom Isla Communications

48 Annexes

ISP Internet Service Provider IT Information Technology ITECC Information Technology and Electronic Commerce Council LAN Local Area Network LMDS Local (or Low-power) Multi-point Distribution System MIX Manila Internet Exchange MMDS Microwave Multipoint Distribution System MosCom Mosaic Communications MTUs Multi-tenanted units NCC National Computer Center NEDA National Economic and Development Authority NIC Newly Industrialized Country NSCB National Statistical Coordination Board NSO National Statistics Office NTC National Telecommunication Commission PAPTELCO Philippine Association of Private Telephone Companies PC Personal Computer PCHRD Philippine Council for Health Research and Development Pesos Philippines National Currency# At 30 June 2001 one United States dollar (US$) was equivalent to 51#5 pesos PETEF Philippine Electronics and Telecommunications Federation, Inc# PhilCom Philippine Global Communications, Inc# PHIX Philippines Internet Exchange PHNET Philippine Network Foundation Piltel Pilipino Telephone Corporation PISO Philippine Internet Service Organization PLDT Philippine Long Distance Telephone Company PREGINET Philippine Research, Education, and Government Information Network PT&T Philippine Telegraph and Telephone Corporation Retelcom Republic Telecommunications RPN Radio Philippines Network SAS Special Areas Scheme SIM Subscriber Identity Module Card Smart Smart Communications Incorporated SMS Short Messaging System SSS Social Security System TACS Total Access Communication System TAG Transparent Accountable Government

49 Philippines Internet Case Study

TelicPhil Telecommunication Infrastructure Corporation of the Philippines UNESCO United Nations Educational, Scientific and Cultural Organization UPOU University of the Philippines - Open University UP-PGH University of the Philippines – Philippine General Hospital VAS Value-Added Service VoIP Voice over Internet Protocol VSAT Very Small Aperture Terminals WAP Wireless Application Protocol

50 Annexes

Annex 3: Useful links

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51 Philippines Internet Case Study

Annex 4: Framework dimensions

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52 Annexes

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54