Mobile phone firms oppose free SMS, agree to lower charges

MANILA, Philippines Telecommunications companies on Wednesday opposed a government proposal to make short messaging service (SMS) free, but agreed to sit down with lawmakers on how to lower the charge amid rising consumer prices. At a joint hearing of three House committees, mobile phone firms said making SMS free would affect their earnings and result in poor service. Rodolfo Salalima, senior vice-president for corporate and regulatory affairs of Globe Telecom, Inc., said their revenues could be halved if text message charges are terminated. "In this era of free competition, it should be the business players that should determine the rate," he pointed out. But Globe, he added, was willing to discuss with legislators ways to lower interconnection rates. "We are amenable to sit down with the government and work out the issue and perhaps lower interconnection rates so the P1 standard [SMS] charge could be lowered," Mr. Salalima said. But shortly before the hearing stopped, he said market forces should dictate the price, adding that competition among networks would ensure this. Parañaque Rep. Roilo S. Golez suggested a 60-centavo charge for every text message sent from one network to another and 50 centavos for every SMS sent within a network. "If we cannot achieve zero charge, at least it should not be P1. I direct the National Telecommunications Commission (NTC) to study the viability of my proposal," he said. Albay Rep. Al Francis C. Bichara has filed a bill forcing mobile phone companies to provide SMS as a free service. Under the measure, prepaid subscribers will be entitled to free text messages until the load is fully consumed. The Philippines is said to be the text capital of the world. Filipinos send about a billion outgoing and incoming messages daily. This figure is more than the total daily text messages sent in the US and Europe combined. Mr. Bichara noted that one mobile network, Sun Cellular, is no longer charging SMS sent between subscribers. "If this company can have this kind of program, other telecommunication companies can certainly afford to offer the same to subscribers," Mr. Bichara said, referring to Sun Cellular Company. But Mr. Salalima told reporters separately Sun Cellular’s unlimited texting promotion is not free. "You still have to pay so much to avail [yourself] of [the service]." Under Globe’s present promotion, SMS can be as low as 10 centavos. Its average text rate, Mr. Salalima added, is as low as 19 centavos, lower than the 50 to 60 centavos being targeted by the NTC and the House of Representatives. He also argued free SMS could be abused and could clog networks. Access charges On Friday, the NTC released draft circulars that limit the interconnection charge between two different networks for SMS to 15 centavos and to P1.50 per minute for voice calls. The existing interconnection rate for SMS is 35 centavos, while the voice interconnection rate is P4 per minute. Under current access charges, subscribers are usually charged a peso per text message, while mobile calls range from P6.50 to P7.50 per minute. The circular also mandates telephone companies to ensure optimal service despite lower access charges. The NTC issued the circulars amid rising consumer prices, which mean Filipinos can buy fewer goods with their money. On other hand, carriers said the teeth of rising consumer prices have yet to bite deeply into their business, but a global slowdown could take its toll on profits via lower consumer demand. Quezon Rep. Danilo E. Suarez, House oversight committee chairman, backed Mr. Golez’s proposals. "I am directing the NTC to arrive at a formula on how to lower the rate of SMS charges and present it before the committees at the next hearing," he said. Mr. Suarez also ordered the mobile phone companies to submit their position papers next week on the Golez proposal. Roy Ibay, legal corporate counsel of dominant carrier Philippine Long Distance Company (PLDT) and mobile unit Smart Communications, Inc., said competition has forced players to come up with pricing promotions to gain and retain subscribers. "Unlike electricity charges, water charges and transport fares, which keep increasing from time to time... SMS charges... have decreased over the years," he said. He added that SMS in the Philippines is cheaper than in other countries. "This phenomenon is a positive testament to the benefits derived by consumers under a deregulated industry where free market forces continue to drive the process down to the benefit of the public," Mr. Ibay said. Mr. Ibay reiterated that there is no such thing as free SMS anywhere in the world. Warnings "SMS is essentially a commercial service and usually, it is bundled under a plan where subscribers pay a flat fee. The unlimited SMS is already part of the plan," he claimed. He also said making SMS free could deprive more than a million Filipino families a source of income. He said low-income families form part of Smart’s retail distribution network for prepaid cards. He also argued mandatory free SMS could ruin the country’s most pervasive communication infrastructure. "Free SMS service will encourage and lead to network abuse. Our network will become severely congested. It will crash in less than an hour under the weight of a massive surge in SMS," Mr. Ibay said, noting that a billion text messages are sent and received through the industry’s networks daily. As a result, both voice and SMS services could be affected. "This will be surely detrimental to our more than 32 million customers who rely on our mobile phone services for their personal and business communication," he said. Asked by a congressman, Mr. Salalima said Globe had posted P13 billion in net income in 2007. Mr. Ibay said PLDT posted a consolidated net income of P35 billion last year. The group’s consolidated wireless revenues rose to P86.5 billion, 10% higher a year earlier, with Smart and Pilipino Telephone Corp. continuing their stellar performances. Mediaquest Holdings, a subsidiary of PLDT’s beneficial trust fund, has a minority stake in BusinessWorld. — Elizabeth T. Marcelo, BusinessWorld