Policy reforms crucial to inclusive internet connectivity – gov’t think tank

MANILA, PHILIPPINES — Policy reforms that tackle barriers in the interconnected value chains are necessary to harness inclusive internet connectivity in the country, a recent study by state-run research organization Philippine Institute for Development Studies (PIDS) suggests.

According to PIDS’ study titled “The Philippine Digital Sector and Internet Connectivity: An Overview of the Value Chain and Barriers to Competition,” the Philippines’ digital sector has grown significantly. Philippine Statistics Authority (PSA) data show the digital sector’s economic contribution grew by 7.8 percent (Php1.87 trillion) in 2021. This amounted to 9.6 percent of the country’s gross domestic product (GDP). 

Despite this, the research pointed out that the sector’s total median investment and the number of digital businesses in the Philippines are lower compared to neighboring countries like Cambodia, Vietnam, and Indonesia.

PIDS noted that globally, the internet value chain has had an annual growth of 15% to 16% from 2008, and an estimated total revenue of US$6.7 trillion in 2020.

The country’s digital sector’s complex and interconnected value chains—or the “value web”—suggest that barriers in one market create a rippling effect on the other markets within the growing sector.

“The interdependence of different markets within and across segments of the digital value chain implies that barriers to entry and expansion in one industry can have far-reaching effects on the growth of the rest of the digital sector and the economy more widely. Ensuring robust competition across the digital value chain is therefore of paramount importance,” the study said.

Based on the study, internet connectivity is the “most critical element” in the digital value chain. 

“Digital value chain participants ultimately depend on the broadband access network to reach the final users or consumers. Although natural barriers to entry exist, regulatory and strategic barriers further constrain competition,” the authors Ramonette Serafica and Queen Cel Oren said. 

Barriers to entry and expansion in the internet access connectivity segment include high bandwidth cost, the required congressional franchise, expensive pole rental and bureaucratic requirements, and lack of technical competence among internet service providers (ISPs) to make operations more efficient.

The study recommended specific measures to address the barriers to entry and expansion.

“Key to developing viable and sustainable solutions is knowing where the gaps exist. For instance, the National Telecommunications Commission could develop a uniform reporting system for ISPs, while the Department of Information and Communications Technology could compile and publish a broadband map that identifies internet service availability down to the barangay level where competition in the last mile occurs,” PIDS explained.