PH needs reliable, cheap internet heading into new normal – World Bank

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Metro Manila (CNN Philippines, June 9) – Internet speeds must be fast and cheap or else it may hinder the revival of the Philippine economy, the World Bank said, as the "new normal" will see more Filipinos relying on digital platforms for work, school, and day-to-day needs.

In its special report included in its Philippine Economic Update, the multilateral lender said the government should act fast in relaxing regulatory rules and in allowing more internet service providers to enter the local broadband market to boost connectivity and make the service more affordable to consumers.

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"The current state of internet in the Philippines, calls for urgent and substantial improvements for the digital economy to play a key role in the economic recovery," read the World Bank report released on Tuesday, noting that widely-available internet services will support medium-term economic recovery and ensure long-term growth.

The Philippines is seen as a "potentially significant player" in the global digital market with 73 million internet users, emerging as one of the world leaders in social media usage. However, the country remains a laggard in terms of digital adoption.

Citing data, only 70 percent of Filipinos are active broadband subscribers against the 88 percent average in Southeast Asia, the World Bank said. Among internet users, only 72 percent had 4G or LTE mobile broadband coverage versus 82 percent for the region. More dismal is the local download speeds: mobile connections yield about 7 Megabits per second (Mbps), while fixed broadband speeds average 26 Mbps. For Asean, the average download rates are at 13 Mbps for mobile and 59 Mbps for fixed broadband.

Filipinos also pay more despite the slower service they are getting – the fourth highest cost at $6.30 (about ₱315) per 500 megabytes of prepaid mobile connection. The lender pointed out that the cost of fixed broadband plans here is close to the fees paid in Singapore and Thailand, home to the fastest internet speeds in the region.

There are also too few cell sites servicing mobile users, the report added.

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World Bank senior economist Rong Qian also told reporters that reliable internet speeds are the "prerequisite" of any plans to spur the digital economy. For this to work, data connections must be cheap, of better quality, and accessible everywhere. She added that better internet will be critical as more Filipinos work from home, millions of students rely on online learning, and people turn to e-commerce to buy their food and supplies amid stay-at-home rules.

The sorry state of connectivity can be blamed on three things: an outdated regulatory framework for telecommunications companies, underinvestment in the sector, and the lack of competitors. The Washington-based lender took note of state efforts to improve access to the web through the Free Public Wi-Fi program and the selection of a third network provider.

Internet services are limited to a few players, while mobile data is controlled by the duopoly of telco firms Smart and Globe. Dennis Uy's Dito Telecommunity is only expected to roll out its services by next year, barring further delays due to the pandemic.

MSME survival

Private sector groups added that connectivity could make or break small businesses, which have been forced to migrate to digital operations to make a profit.

Philippine Franchise Association president Richard Sanz said that delivery platforms are bound to grow as more people tap online services during the pandemic, with most member-firms reporting the downsizing of head offices as they realized the cost savings of letting employees work from home. However, the concern was that about 30 percent of workers did not have stable internet and only relied on mobile data connections.

READ: PH internet economy still the smallest in Southeast Asia

The Philippine Chamber of Commerce and Industry said numerous small-scale firms have also closed shop or were forced to retrench workers, while those which remain open are either part of a larger supply chain or were able to recover up to 60 percent of operations and sales by offering their products and services online.

However, most retailers remain worried as the economic slump and job losses will keep market demand weak, which would translate to lower sales even after the lockdown period.

Meanwhile, Qian said any plans to impose a digital tax on online purchases  should be premised on the current practice where buyers, not sellers, shoulder the 12 percent value-added tax whenever they purchase something from physical stores.

Some 7.3 million Filipinos went jobless in April. The World Bank said social distancing rules and the earlier lockdowns will shrink the economy by 1.9 percent this 2020, even worse than the slump during the 1998 Asian Financial Crisis.