Tuesday, June 26, 2007 |
Philippine Silicon Valley
Advertisements in a number of dailies a few days ago titled "Broadband for Barangays or Better Education and Health?" questioned a controversial $330-million contract with Chinese firm ZTE Corp. for the supply and construction of a national broadband network.
The ads from the Management Association of the Philippines (MAP), the Bishops-Businessmen’s Conference (BBC) for Human Development, the Makati Business Club (MBC), the Foundation for Economic Freedom (FEF) and the Financial Executives Institute of the Philippines (FINEX) said that "a central government...electronically linked to local governments by broadband [was] a good idea.
It went on to say that "spending on an expensive broadband technology, instead of maximizing and expanding existing networks, [was] not the best option."
The groups added that "there already existed national broadband networks that our telecommunications companies operate. Our national government agencies [could] lease bandwidth from them at market rates."
In the interest of fairness, maybe a Net Present Cost (NPC) analysis of the expected spending cash flows, compounded to 2007 dollars, be done. Assuming a certain life for this broadband network, what would the NPC be of using the telco broadband networks, projecting the amounts estimated and factoring in expected increases in the future?
If the NPC comes out to below $330M in 2007 dollars, then MAP, BBC, MBC, FEF and FINEX will have a point. But if the NPC is greater than $330M, then the argument not to build the network becomes fuzzy.
Added to this, are we spending the $330M in a lump sum for 2007 or spreading out the payments? All these have to be factored into the NPC computations.
Adding fuel to the fire are comments from certain sectors asking that just because this statement was issued by these various groups, that we must now "diplomatically abrogate" the contract with China?
I’m not knocking these groups down. For all I know, they may have already done the numbers to justify their statements, right? But where are the numbers? Maybe they can take out the full page ads again and show the numbers, including the assumptions. I mean, these charges and countercharges are being aired not just in the national dailies but in the business dailies as well, so I’m sure the readers would like to see these numbers.
I think we ought to go beyond just general statements — at least if the claim is on the expense of the project. Let’s judge this on the basis of facts.
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I do agree on one point though. Before the government considers building a national broadband network, it should look at the previous history of its involvement in telco type projects.
Foremost of these is the Telepono ng Bayan. The real Telepono ng Bayan are the cellphones, which run efficiently on a regulated but competitive marketplace.
Then there is the issue of obsolescence. Private telcos have a profit motive, which also means (if they want to keep that profit) that they will have to spend for upgrades.
A government-run telco project — while it sounds good to operate as a non-profit outfit — will run out of steam sooner or later because the funds to upgrade the system were not factored in.
On a theoretical basis, I would agree that the $330M would be better spent building classrooms, artesian wells, rural health centers, and other basics for education. I do not know enough about the funding scheme to comment on the real terms of payment.
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One thing that is missing in these big technology infrastructure projects that the government plans to do, is the potential of these big ticket expenditures to jump-start a nascent local technology sector. We probably should end up buying the big mainframes and the big telco switches from the well-known names.
But there are always hardware and software out there that link-up these big systems. We should study how some of these "glue" items (e.g. interface software, hardware) can be the basis for developing niche technology start-up companies from our universities and incubators.
As a matter of disclosure, I am a consultant to the Ayala Foundation, whose sister company is Globe Telecom.
Comments can be sent to dennisposadas@yahoo.com
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