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Accelerating
Technology Convergence
By Michael Alan Hamlin
June 14, 1999
News reports of the First Pacific/PLDT
bid for Home Cable have focused on the financial aspects of the
deal, suggesting that First Pacific would sell the network to PLDT
for a profit. While a good many analysts continue to view First
Pacific as a deal-making machine, my own perspective is that First
Pacific is much more strategic in its approach to opportunity than
in the past. If so, the potential Home Cable acquisition represents
a key component of the strategic initiatives of the conglomerate,
and not just the chance for a quick buck.
The opportunity is what telecom and
technology industry pundits call convergence of telephony, Internet
technology, and broadcast entertainment. Convergence requires a
large pipeline for the near-instantaneous transfer back and forth
of billions of bits of voice, video, and data. While other technologies
are emerging that offer the promise of high speed transmission,
companies leading the convergence initiative like U.S. communications
multinational AT&T have wondered why they must recreate the
wheel when millions of homes around the world are already wired
into cable.
To be sure, utilizing cable technology
for two-way communication involves its own technology challenges,
but those hurdles are gradually falling. For AT&T — now
one of the world’s largest cable companies as well as long-distance
telecommunications provider — cable offers the prospect for
breaking up the monopolies of local telephony providers and increasing
the amount of business it does with its customers.
Convergence is not just a developed
economy "pipe" dream. Both China and Singapore are aggressively
pushing convergence initiatives. In Singapore, 40,000 households
are already linked up to a broadband network that provides video
on demand, games, Internet access, video conferencing, and even
medical examinations. China has 80 million cable subscribers, and
has just announced the formation of a new company, China Network
Communication (CNC), to be run by one of the region’s most
successful Internet pioneers, Edward Tian.
CNC is China’s second telecommunications
company, and has been set up to compete with a broken up China Telecom.
According to reports, among the company’s first projects will
be a convergence initiative that will link 15 Chinese cities with
a fiber optic network. Another project involves linking an existing
state-owned fiber network to China’s 80 million cable subscribers.
The reason Singapore and China are
undertaking these initiatives is pretty clear, and it’s not
a quick buck either. Because so much of competitiveness is tied
to knowledge and using information resourcefully, convergence is
a means to both introduce and make commonplace advanced technology
to millions while providing the technology infrastructure enterprise
requires to more efficiently and productively process and capitalize
on information. Succinctly, it will make advanced technology as
exotic as a refrigerator.
Since both Singapore and China compete
with the Philippines — let’s be generous — for investment
and opportunity, the Philippines and its private sector should take
the threat of competitive national economies characterized by high-speed
networked information flow at low costs seriously. Interestingly
enough, the Philippines has had the basic components of convergence
for quite some time, and even once led the region in cabling. However,
it hasn’t capitalized on this advantage for two reasons. First,
unlike Singapore and China, government doesn’t — and probably
shouldn’t — take a direct financial interest in technology
infrastructure initiatives. While government support of private-sector
technology initiatives might be helpful, considering the way the
Philippine government and bureaucracy operates, it’s probably
better that they stay out of the way.
Second, like China and Singapore,
there’s been very little competition. China is addressing this
by breaking up China Telecom and forming the new, entrepreneurial
CNC. Singapore is encouraging private-sector start-ups through subsidies,
as well as underwriting its own network development initiatives.
It’s interesting that between the two countries, it’s
China that’s effectively fostering competition to catalyze
rapid convergence.
In the Philippines, the Lopez group
has had in place all the components involved in convergence: a cable
network, a broadcast network, production facilities, an Internet
provider, and a fledgling phone system. However, with no competition
and no government "encouragement," the components have
more or less been left to operate without a push for the synergy
of convergence.
In the case of PLDT, the company
has enjoyed the most elaborate telecommunications network in the
country, is the leading international carrier, and invested several
years ago in an Internet provider. Acquisition
of Home Cable will put another piece of the convergence pie into
place. If First Pacific and/or PLDT successfully acquire RPN9, the
sequestered television station, like the Lopez group, First Pacific
will have all the components required to drive convergence.
To get an idea of how competition
will affect the speed of convergence in the Philippines — which,
remember, is well behind the Singapore and China initiatives —
consider the recent benefits of competition in the retail development
and telecommunication industries. Development initiatives in retail
by Henry Sy, First Pacific, and Fil-Invest have resulted in dramatic
improvements in the quality of facilities, parking, walkways, and
greenery in the Makati central business district, for instance.
In telecoms and mobile telephony,
rates are down, quality is up, and customer service is thriving.
Technology convergence represents
important strategic initiatives for both the First Pacific/PLDT
and Lopez groups. Ultimately, however, the real beneficiary will
be national competitiveness, as convergence lowers the cost of communications,
makes people comfortable — and even reliant upon — advanced
technology, and provides the technology infrastructure requisite
to successfully compete in the global knowledge economy.
Thank goodness for competition and
the introduction of strategy in Philippine enterprise development.
Copyright © 1999 The Events
& Awards Managers of Asia and
Hamlin-Iturralde Corporation. All rights reserved.
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