Tuesday, February 08, 2005

When Free Becomes A Crime

Pilipino Telephone Corp. (PILTEL) has asked the National Telecommunications Commission (NTC) to disallow Gokongwei's mobile-phone brand Sun Cellular from offering unlimited call and text services, saying the pricing scheme threatens its viability in the already crowded cellular market, it was learned Thursday.

PILTEL, a unit of Philippine Long Distance Telephone Co. (PLDT), said if Digitel is to continue offering 24/7 Call and Text Unlimited service to its subscribers, other mobile-phone firms will loose [sic] market share. This practice will therefore lead to the survival of only one player and, thus, a monopoly.

"The current pricing scheme of Digitel affects PILTEL and seriously threatens the viability and rehabilitation of PILTEL. The company's rehabilitation is now under grave threat and peril due to the unwarranted action of Digitel in imposing rates arbitrarily and without passing through the time-honored process in this Commission," said PILTEL in its 12-page complaint.

The 24/7 Call and Text Unlimited is a service that allows subscribers unlimited local Sun-to-Sun calls and texts.

Postpaid plan holders can subscribe to the service and pay only P250 every month on top of their current plans.

For prepaid subscribers, 24/7 Call and Text Unlimited can be loaded via call cards available in P100 and P250 denominations.

The success of Digitel's 24/7 service drove the company’s subscriber base to 1.1 million as of end-December last year.

The rates, PILTEL said, are priced below the marginal and variable cost of production of its airtime access charge.

"Digitel charges PILTEL a wholesale rate of P4.50 per minute access charge to its network, while its own subscribers have an unlimited retail access to its own network at P250 a month, or P100 every 10 days. PILTEL by itself is charging its subscribers an average retail P5.50 per minute and has not embarked on an atrocious wholesale pricing scheme," said PILTEL.

PILTEL said Digitel's 24/7 Plan constitutes predatory pricing as this will force carriers to drastically lower their airtime rates in a bid to catch up with competition but result in the decrease in the quality of service.

Predatory pricing is an anti-competitive measure employed by a dominant company to get or protect market share from new and existing competitors. It involves temporary pricing a product low enough to end a competitive threat.

"Digitel's 24/7 Plan has started to destroy the fundamental or basic market pricing considerations when it has priced its service at a level where no new market entrants in the cellular market can still compete and that any losses Digitel may incur at the moment may be recovered later on when it has severely weakened its competitors and successfully driven them off the market," said PILTEL.

Digitel, for its part, said it is not engaged in predatory pricing. "Sun Cellular cannot be considered as engaging in predatory pricing since it is not a dominant player in the cellular industry.

Smart and Globe are the two dominant cellular firms with more than 95 percent of the market. Compared to these two giants, Sun Celular is a very small competitor with less then five percent of the market today," said Digitel senior vice president William Pamintuan.

PILTEL urged the NTC issue a cease and desist order to Digitel's 24/7 Plan and to revert to the rates allowed by the commission in 2002.

Digitel, PILTEL added, should also be penalized for violation of due process for unilaterally revising its charging scheme without the approval of the NTC.


~Thanks Karlo.

Can you believe these guys at PILTEL? "Predatory Pricing"? They, who would rather keep the prices up to keep the money flowing. Guess who's the predator.

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