Much controversy has surrounded the Arroyo administration's recent proposal to build a national broadband network (NBN) in tandem with a Chinese firm. Reports of corruption are rife; accusations are exchanged between the Philippine President Gloria Arroyo's very own allies. But what is a national broadband network, really? And is this a project that most Filipinos need?

The NBN Project: A Short Timeline

Apparently, talks on the NBN started in 2005. For an ambitious project that would entail such a tremendous cost for the Philippine government, the Department of Transportation and Communications (DOTC) managed to hide the discussions from public scrutiny.

According to the DOTC, the NBN was spurred by the Electronic Commerce Act of 2005, which mandates the Commission on Communications and Information Technology (CICT) to "install an electronic network" and to have an "integrated government information and communications infrastructure development program." It was hoped that this would facilitate faster transactions between the local and the national government and pave the way for the creation of web-based government portals or websites by local government units (LGUs).

By July 2006, a Memorandum of Agreement was signed by Chinese firm ZTE Corporation and the Department of Trade and Industry (DTI) to "explore" various projects.

Normally, for such a huge information and technology (IT) project such as the NBN, studies for a proposal would usually take more than a year. However, the following month, ZTE submitted a proposal for a NBN that would be financed by the Chinese government through a "concessional loan". The ZTE's NBN proposal was endorsed to the National Economic Development Authority (NEDA) on October 2006. A revised proposal taking account of suggestions from the Bids and Awards Committee for Information and Communications Technology (BAC-ICT) of the DOTC was again submitted to NEDA on March 2007. Meanwhile, Amsterdam Holdings Inc (AHI) submitted a $240 million proposal while another company, US-based Arescom submitted a $135 million proposal for the NBN project.

A P16.5B NBN project by ZTE was approved on 29 March 2007 and was signed on April 2007. The NBN envisioned by the Philippine government is priced at $329.5 million. This project aims to interconnect government institutions and offices using broadband technologies, creating a huge intranet which supposedly will cut government spending in telecommunications by P3.6 billion. The use of voice-over-internet protocol (VOIP) terminals is the government's main reason for approving the ZTE proposal. The DOTC claims that these devices will lower the government's P4B communications expenditures every year to P990 million.

The NBN project became publicly controversial when copies of the contract between the Chinese and the Philippine governments were lost after ZTE Vice President Yu Yong and DOTC Secretary Leandro Mendoza signed the $329.5-million contract in Boao, China.
According to the National Bureau of Investigation (NBI), the copies of the contract were stolen. A reconstituted contract was then made to replace the original contract without any review from responsible agencies. No available agreement has been made available to the public until the Senate investigation on the project. AHI, the competing bidder then threatened to sue the government for favoring ZTE Corp.

Recent developments brought present Commission on Elections (COMELEC) Chairman Abalos—who has yet to be cleared in the recent Election Automation controversy—as one of the key players in the NBN deal. Abalos was dragged into the picture for brokering for ZTE and DOTC as well as allegedly bribing Jose de Venecia III of the AHI to drop their bid. Furthermore, the First Gentleman Mike Arroyo was identified as the so-called “mystery man” by de Venecia III to be linked to the ZTE deal.

This adds the NBN project to the litany of alleged corrupt undertakings of President Gloria Arroyo and her family.

The Need for a National Information Network

In addition to the allegations of high-level corruption, another question that the NBN controversy begs to be answered is whether a national information network proposed is needed at this point and time.

The proposed National Broadbank Network can potentially interconnect all government agencies and institutions thus improving communications and interactions between them. By creating a huge LAN or wide area network (WAN), the NBN aims to construct a national backbone in lieu of local providers to provide internet access to local government units and institutions and to streamline government services. The use of new value-added services can also be of great advantage to institutions in the network such as VOIP and video conferencing, which can reduce communications charges for the government.

Yet the Philippine government is not new to having such an intranet structure. The DOST Advanced Science and Technology Institute (ASTI) already maintains a similar network which interconnects different research institutions nationwide. The Philippine Research, Education, and Government Information Network (PREGINET) has at least 16 access points for use of its partners all over the archipelago [1]. On PREGINET, local partners can connect to one of the access points which has direct connections to one of the four exchange points. The exchange points are then connected to the ASTI which utilizes available providers to connect the whole PREGINET to the internet.

However, internet connections are subject to the availability of local providers. Before high-speed internet connections called broadband, dial-up internet service providers were the main provider of internet access. These dial-up providers should be nearby so that connections would not need long distance charges to connect. With dial-up, traditional copper-wire based telephone lines can used but with broadband internet services, a digital subscriber line (DSL ) or cable modem is required to access the high-speed connection.

Government institutions and local government units ideally also should have their own separate local area networks (LANs). These LANs enable sharing of resources from printers, storage, emails, and internet connections.

When people do not have access to information services and telecommunications, and governance is hampered by slow coordination between the national and local government units, any improvement to the use and access of new technology will always be welcome if implemented by a government with genuine interest in serving its population.

Computerizations and improved communication networks are welcome development in providing service to the grassroots. Unfortunately, this administration seems to be primarily interested on sharing the kickbacks. It must not come at the expense of fattening the pockets of a few corrupt public officials and losing a strategic utility to foreign interests. Was the NBN created to provide accessible communication facilities to the countryside or just to fatten pockets of some government officials?

Lack of national ICT infrastructures

The NBN project furthermore draws attention to the prevailing lack of national ICT infrastructures as a public utility service in the Philippines.

Since the Philippine telecommunications industry was liberalized in 1995, an increase in the availability of fixed telephone line infrastructure has taken place. However, this increase in telephone density is very limited to the rural and urban centers which rake in profits for telephone companies.

The Telecommunications Act of the Philippines, RA 7925 also further opened up for liberalization and competition the long-time PLDT-monopolized telecommunications sector. This added around 6.9 million lines installed in the country in 2001. However, a 2001 NTC survey found out that there were very limited compliance by telecommunications companies to complete the missionary work mandated by the liberalization law. RA 7925 mandated a 10:1 ratio in line installation. For every 10 lines installed in profitable areas, one line should be installed in rural unprofitable areas. This definition of "service" by RA 7925 has brought limited telephone lines in the provinces. This ratio is already a modification of the 3:1 set on the first year of implementation of the law.

The lack of accessible and affordable telecommunications services in the countryside persists up to the present. In 2000, only 40 fixed telephone lines were available for every 1000 Filipinos. In 2004, this national average increased to only 41 fixed line per 1000 Filipinos. By 2006, the United Nations (UN) comparative survey [2] was already revealing that the "service" was disregarded by local telecommunications companies.

The lack of fixed line communications facilities for the public was supplemented by growing private mobile providers. In 2006, mobile networks (who are the same fixed line providers) had enlisted 34.7 million subscribers, making mobile services also the most profitable businesses in the country today. Globe Telecoms posted 2.7 billion net income for the first quarter this year. Mobile users are already expected to grow to nearly half of the population.

However, such mobile communication lines are unreliable for high speed broadband connections. In the 2006 UN survey, only three out of 1000 people have access to broadband connections. As such, broadband connections are almost non-existent.

The current ICT situation described in this section has shown that majority of Filipinos based in rural areas lack access to even the most basic of infrastructure for communications. The deregulation law has only brought saturation to profitable urban areas which now have more unused fixed lines, while the majority of rural areas remain without accessible communications infrastructures.

As an ICT project, the NBN will pose an additional burden to the people in the form of taxes. The envisioned network will be financed by a $400 million loan from the Chinese government and the China Import-Export Bank in the form of Official Development Assistance (ODA) to the Philippine government.

The Philippine Daily Inquirer editorial is correct in saying that "... ZTE is not in fact investing in the Philippines; it has bamboozled the Philippine government into taking out a loan from the Chinese government to fund ZTE’s investment" [4].

Failure of Privatization in Public Utilities

From all angles, the ZTE's NBN project must be terminated. The ZTE project, however, must be scrapped for the right reasons and the need for a NBN should be resolved through the proper solutions.

Other critics of the NBN contend that we should just leave the task of setting up a national information network to existing private firms instead. Economists Raul Fabella and Emmanuel De Dios, for instance, believe that government control over the telecommunications industry must be further reduced.

Fabella and De Dios propose a problematic solution: They claim that more efficient services can be brought about by privatizing and deregulating the Philippine telecom industry, where private companies develop the infrastructure and the government merely acts as a main consumer, citing the "successes" of Napocor privatization and MWSS as examples. They advised the government to just concentrate on "core competencies" and leave all "non-core competencies" to the private sectors. Rather than creating new broadband infrastructure, they say, the government should utilize the existing ones owned by private telecommunications companies.

Such parties portray privatization as the cure-all for the nationwide lack of ICT services. But has privatization of Philippine public utilities been really beneficial to the people?

We can cite the power industry's recent experiences with liberalization under the Electric Power Industry Reform Act (EPIRA) as the best example of failed promises to lower costs of public utilities.

“Contrary to what has been promised during the passage of the law, the EPIRA has not caused any real decrease in power rates since its enactment in 2001, apart from a one-time and fleeting 30 centavo Power Act reduction. Instead, power rates have continued to climb upward after the EPIRA legitimized onerous Purchased Power Adjustment contracts entered into by the NAPOCOR.

The EPIRA failed to lower electricity rates for the majority of Filipinos precisely because its power industry reforms were geared not towards the benefit of end users but for foreign transnational corporations. The various highlights of the EPIRA ranging from the creation of the National Transmission Company (TRANSCO), the Power Sector Asset and Liabilities Management corporation (PSALM), the Energy Regulatory Commission (ERC), the wholesale electricity spot market (WESM), the unbundling of power rates and the various codes and rules implemented under the EPIRA are designed to segregate each saleable part of NAPOCOR, make it attractive to investors and create structures and offices to facilitate these transactions.

Public utilities such as the power industry and telecommunications infrastructures should primarily serve the interests of the people. Their services should help and improve the peoples' daily living. But as the country's experience with the power industry privatization indicates, privatizing another basic utility such as the telecommunications sector and handling over its ownership to private entities will eventually end creating profits for a few rather than providing services for the majority.” [5]

After more than 10 years of privatization and deregulation of the telecommunications industry communication lines have yet to reach the countryside. While mobile phones are accessible to almost 40% of the population, monopolistic tendencies in pricing also exist. The SMS services which are supposed to be free are now charge per SMS sent by the subscriber. In a day alone, telecommunications company extracts P250 million from SMS services. Extending and consolidating this policy of handing over the telecoms sector wholesale to business will only exacerbate the people's current woes.

An ICT Sector for the People

Technologies can indeed help in improving services to the majority of population. The role of ICT infrastructures to deliver efficient services and information to the majority of the Filipinos can not be disputed. The advancement of science and technology, information and communications technology have created many possible ways to improve information sharing and dissemination.

Any noble intentions, however, will be ruined when the interests of the people are neglected for the interests of a few government officials. The current NBN project is really about who will get the kickbacks. Even if the NBN deal improves the communications between government agencies, it will still fail to sustain a national communications network because of the corruption and kickbacks and the current administration's dependence on foreign technologies, expertise and financing.

The rampant corruption of the Arroyo administration is one of the main reasons that such services have not reached the majority of the Filipino people. Its tauted increase in GNP and GDP are rarely felt even by the urban poor much more by the ordinary peasant in the countryside.

The envisioned network will be financed by a government loan from the Chinese government as an ODA will favor the Chinese government and Chinese companies but not the Filipino people. In the end, the Philippine government will need to obtain millions from Filipino taxpayers to repay the debts incurred from the deal.

We believe that Filipino computer professionals have the competency to implement these projects. The government should recognize these to avoid too much dependence on foreign technologies. Whenever foreign help would be needed, such as in the absence of the capacity to build these infrastructures, genuine transfer of technology should be effected. Foreign contracts entered into by the government should always be in the favor of the Filipino people building our own capacity to produce and maintain.

A nationalized information and telecommunications network, if implemented by a government with genuine interest in serving its population can indeed enhance the flow of information between national and local agencies. Furthermore, a government with a clear plan of national industrialization is the very prerequisite for technological advancements in ICT to be in good use. Otherwise, huge ICT projects will always fail to address problems and will only enrich corrupt government officials. Improving telecommunication services by using modern technologies, without corruption and preference to foreign interests, is what the Filipino people need.###

References:
1.http://www.pregi.net/
2.2006 Information and Communications for Development, World Bank.
3.National Broadband Network, Erwin Oliva, Inquirer.net, 07 August 2007
4.Murphy's Deal, Editorial, Inquirer.net, 08 August 2007.
5.Ever increasing rates from the EPIRA, A closer look at the electric power industry in the Philippines, AGHAM Research, Dr. Giovanni Tapang, Engr. Ramon Ramirez, Kim Gargar.