Energy costs push up internet rates in Philippines

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Filipinos are bound to shoulder one of the highest internet costs in Southeast Asia as telco operators remain burdened by high energy prices, according to industry experts.

Opensignal principal analyst Sam Fenwick told The STAR that connectivity prices in the country remain one of the highest in the region, as telcos pay for the most expensive power rates next to Singapore.

Fenwick said since fuel is imported abroad, telcos contend with electricity prices dictated by market conditions overseas, such as foreign exchange and geopolitical conflicts.

An analysis conducted by the Groupe Speciale Mobile Association (GSMA) showed that telcos exhausted an average of 0.17 kilowatt per hour for every gigabyte of data they provided in 2022. Although the efficiency improved from 0.24 kWh per GB in 2021, this remains too burdensome for a net importer of fuel such as the Philippines.

'Energy accounts for a high percentage of mobile operators' operating costs, (and) this matters a great deal in the Philippines, given its high electricity prices and status as a net energy importer. As a lot of fuel has to be imported abroad, energy costs are affected by the purchasing power of the peso relative to other currencies,' Fenwick said.

Globe Telecom Inc. vice president for brand management Raymond Policarpio said it is painful for telcos that the country has the second highest industrial power rates in Southeast Asia.

Businesses are charged an average of $0.12 per kWh in the Philippines as against $0.10 per kWh in Indonesia and $0.05 per kWh in Thailand.

'Such high electricity prices put pressure on operating costs not just for telcos, but across many Philippine businesses,' Policarpio told The STAR.

Power makes up at least 40 percent of telco expenses and up to 90 percent of network spending. In the connectivity supply chain, tower operators like EDOTCO attribute half of their operational costs to electricity, with the remainder divided into maintenance and manpower.

EDOTCO Philippines country managing director Suraj Narayanan Kutty said power distributors should also be given the same attention by the government as telco players. He suggested that the permitting process for the energy industry be simplified to welcome new investments.

Further, Fenwick believes internet service providers in the Philippines have to move away from their dependence on fossil fuel, recommending that they shift to renewable energy to bring down business costs and, in the process, connectivity rates.

Fenwick cited the case of wireless leader Smart Communications Inc., which is expanding its use of solar power in running cellular sites nationwide.

'If the government were to work with operators to accelerate and encourage this approach, then this would help keep prices down in the long run,' Fenwick said.

In a study, GSMA said telcos in Asia and the Pacific, including in the Philippines, are one of the slowest to shift to renewable energy in the world. Only seven percent in the region made a direct purchase of sustainable power in 2022 compared to Europe's 83 percent and North America's 38 percent.

'There is, however, considerable regional variation on the downside, particularly in Africa, India and Asia, where even mains grid access is patchy and diesel remains in use in rural off-grid areas. Political resistance to renewables is also present in some countries, with economies dependent on hydrocarbon/oil exports,' GSMA said.

The International Telecommunication Union (ITU), the agency delegated by the United Nations to promote universal access, is pushing for an affordability target for internet access equal to two percent of the average wealth of a citizen, measured as gross national income (GNI) per capita.

In the Philippines, the ITU found out that broadband subscription costs 11.26 percent and mobile internet requires 1.98 percent of per capita GNI, and they rank as one of the highest in Southeast Asia.

The ITU hopes that in economies like the Philippines, efforts to make internet access affordable are strengthened given the opportunities that are available online.