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Why Your Telco Needs to Cap Your Mobile Internet




This year, we see both telcos started admitting that there needs to be a cap on our mobile internet. Globe is sunsetting SuperSurf into GoSurf while Smart has recently introduced All-Month Surfing.

Both mobile data plans have a soft cap (Globe has 5GB and 10GB while Smart has 3.5GB, 8GB, 10GB and 18GB), something we’ve only experienced this year. This is one reason why the Department of Justice has published an advisory against the practice of throttling and data caps.

The original reason behind the imposition of data caps is network congestion. Well, we now know that it if subscribers pay more, they are given mo data allocation which debunks the idea that it’s merely congestion.

The real and more logical reason — business growth. If you read the recent investor reports of PLDT and Globe, you will notice that their year-on-year revenues are either flat or declining. If you look closer, the revenues from SMS and voice calls are the ones that went down significantly while revenue from data/internet is growing.

Subscribers are now using messaging apps (WeChat, Line, FB, iMessage) more rather than traditional SMS while voice calls are now leaning towards Viber or Skype rather than traditional phone calls. The user behavior is even more prominent with NDD and IDD calls.

The shift in business growth is expected as more and more Filipinos are becoming connected (35% internet penetration this year) to the internet while smartphone penetration has grown to 15% with 30% adoption on new purchases.

The trade-off in services, SMS and voice shifting to data-based communication, poses a problem. So, we followed the money-trail and investigated. Here’s why:

1) Data services (mobile internet) is supposed to be a new product line. It’s even classified as VAS (value-added service) and supposed to augment the existing revenue streams coming from SMS, voice calls and fixed line.

2) Messaging Apps are eating into the SMS and voice usage of active subscribers. This cannibalization of existing services reduces its year-on-year growth as more and more people use the internet. While telcos earn more from data subscription, they are losing money from reduced usage of voice and SMS.

3) The risk in this shift in subscriber behavior is that loses in SMS and voice might be bigger than the gains in the data front. As such, as more and more people use data, there’s a net negative effect on revenue growth.

4) To compensate for this cannibalization, telcos need to push data services so that the growth in that service will compensate in decline of core services.

5) However, providing “unlimited” data services will mean that revenue potential from that service will eventually hit a ceiling. That ceiling used to be Php999 a month per subscriber.

In theory, once all subscribers are paying that amount for unlimited data, there’s no more room for growth. What used to be multiple revenue streams will not be just be from one single source (e.g. Php800 from voice, Php500 from SMS and Php999 from data will become just Php999 from data since it can carry voice and SMS for free).

6) As a business owner, that is a scary future. Once the market is saturated, there will be no more room for growth. The idea that “as subscribers consume more, they pay more” in the era of voice and SMS will not hold true once they shift to data.

7) As the business owner, what do you do? Don’t offer unlimited mobile data. Keep the old model of voice and SMS — pay more if you use more.

That’s the reason why your fixed line internet (DSL) doesn’t really pose a huge threat compared to mobile internet, thus, the idea of capping DSL isn’t on the table. It’s the smartphone users that are changing their consumption behavior.

Since telcos are publicly listed companies, they need to perform well or else investor confidence goes down, share value goes down and market capitalization shrinks. Now that’s a scary thought. The sooner we realize that as subscribers, the sooner we understand that it’s where this business is heading.

So yes, it’s all about the money.

From the business perspective, the revenue model for VAS (specifically mobile internet) needs to be changed in order to survive and continue the uphill growth.

As consumers, what we can do is (a) not give them your money and/or (b) lobby for better legislation on net neutrality.



Abe is the founder and Editor-in-Chief of YugaTech. You Can follow him on Twitter @abeolandres.

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73 Responses

  1. Neil says:

    Yep. It’s all about the money.

    Also, a tiny typo on the “we’ll” on the third paragraph.

    • ButtSniffer says:

      Simple solution, Just stop giving us misleading names, titles & info’s, we understand why teleco’s needs to cap our data but should thry give us an impression that their services is unlimited even though it’s capped,? Just call it somthing like “Smart 3gb monthly” or “Globe 1gb a day” or atleast advertise it with those info clearly visible with large text. saying 1gb 3g and unlimited 2g banwith. . .

    • Easy E says:

      I am very bothered with how the author uses the terms “money trail” and “net neutrality”. Mali.

      We have no issue (yet) on net neutrality here in PH. Service providers here don’t care what content are being carried through their networks. They don’t charge more if a customer is streaming video from another provider nor they limit the connection speed if a customer is doing so. http://en.wikipedia.org/wiki/Net_neutrality

      And for the “money trail” http://en.wikipedia.org/wiki/Money_trail

    • nameless says:

      Walang kaibahan ito sa mga kundoktor ng BUS. Kapag puno na yung bus, magpapasakay sila ng standing. Tapos yung mga standing, pauusugin nila sa dulo, kasi daw masikip sa unahan. Pero pagnakausog na sa dulo ang mga standing na pasahero, magpapasakay naman ulit sila at isisiksik nila sa unahan din. So ang problema, lahat siksikan at yung pinaglalaban nung una na masikip sa unahan, eh masikip na din. Sino ang panalo? yung driver at kundoktor at operator kasi dagdag kita pero ang pasahero, magtyaga na lang. Me magagawa ba? Wala. Wala kasing option ang mga pasahero at di naman sinisita ng authorities ang overloading sa pasahero. Sasabihin sayo ng kundoktor pag nagreklamo ka, mag taxi ka na lang o bumaba ka.

      Sa ISP satin, ganyan din. FUP daw para fair sa lahat ng tao at magkaroon ng reliable speed. Pero di naman nag upgrade ng infra at panay pa din tanggap ng subscribers kaya ang problema, mabagal pa din. May reklamo ka? May magagawa ka? Wala. Wala naman option. Lipat ka na lang daw sa iba. Ganun din sila.

  2. De-Lima- says:

    Eh kung tama nga yan, eh di gusto lang talaga ng mga telco na kumita ng kumita at isangtabi ang mga reklamo na mabagal ang internet nila.

    Sabihin nalang nila ang totoo hindi yung kung ano ano pa dinadahilan nila kesyo congestion daw.

    gawin nalang nila P3000 unli surf para matigil na sila sa kakadahilan gusto lang naman pala nila kumita e.

  3. Andre says:

    bullshit

    paid sponsored post

    so you are saying like say DSL which is a flat fee, and once everyone has DSL there is no more room for growth?

    but mobile if you can not charge per use there will be no growth, no investors and the companies will fail? go ahead and try lets see which telco fails first, oh wait Sun did unlimited flat plans before, that sure made them fail, oh wait they captured market share and had people buying multiple phones.

    • barry says:

      So who paid yuga to attack the telcos this time?

    • garyb says:

      The DOJ paid for this article.

    • gagotech says:

      I think you’re the one paid by the telcos to attack this article!

    • Pat says:

      To say this is a paid ad is irresponsible and ignorant. Show hard evidence or you’re just bi*ching. Meanwhile sun has nothing to lose so they can offer what they want, when they reach the level of smart and globe i bet you this unli flat plans will have caps on them.

    • silverlokk says:

      Sun’s flat plans — you referring to so-called unlimited voice calls? Not exactly unlimited, you get cut off after about an hour. Sure, you can redial and talk for another hour but good luck getting through on the first or second try.

    • Andre says:

      talked with yuga over twitter and the article is legit, reading it more carefully it seems to try to prove a point that the telcos are in this for the money and thats the reason they need to cap mobile internet. i would have preferred the technical reason vs the business one which is always a profit driven excuse. Profitability does not have to hinder innovation and growth.

      I would still say poor case presentation, which made it seem written by a PR agency of a telco, you know how they dont seem genuine and you can smell them from a mile away.

      i think you guys can come up with better articles than this

  4. blahblahblah says:

    ble bla ble ble bla bla ble blu bli blo bla blu bli blo bla blu bla blu blo bli ble bli bli bli bla blo blo bla

  5. rio says:

    Bullcrap. What growth are you talking about when they can’t even deliver consistent and reliable service. You’re telling us that investor satisfaction is more important than customer satisfaction. Screw you dumbass. You wouldn’t be a “big” telco if it wasn’t because of your subscribers.

  6. mapads2k3 says:

    This article screams Capitalism.

    • garyb says:

      To quote the article above:

      Since telcos are publicly listed companies, they need to perform well or else investor confidence goes down, share value goes down and market capitalization shrinks. Now that’s a scary thought. The sooner we realize that as subscribers, the sooner we understand that it’s where this business is heading.

      So yes, it’s all about the money.

  7. garyb says:

    kzap might be right, i think the government sponsored and paid for this post to criticise the telcos since they cannot do squat about it.

  8. ‘In theory, once all subscribers are paying that amount for unlimited data, there’s no more room for growth.’

    There’s no more room for profit not growth. The earlier statement of a low figure of smartphone/mobile devices (compared to other countries) suggest that if they would actually expand their infrastructure they would likely get more subscribers and grow.

  9. Justin says:

    If you actually believe that the figures in PLDT and Globe’s publicly released investor reports are true and accurate, then you’re dumber than I thought.

    • barry says:

      Wait, you don’t believe that Globe and PLDT are making billions, and growing, out of mobile internet as they reported?

    • wej says:

      as a shareholder, why shouldn’t I believe the investor reports? They are audited by competent external auditors.

  10. Groot says:

    I AM GROOT.

  11. denise says:

    This is just covering up the way these companies have been taking advantage of their customers. Bottomline: FALSE ADVERTISING, and we have been willing victims all this time.

  12. Junk FUP says:

    The people behind this lame and crappy article needs to read the concept of “Net Neutrality”

  13. Cindy says:

    They don’t have to cap. What they need to do is to invest in newer equipment and technologies.
    They should stop giving themselves and their executives excessive bonuse and benefits. They should not overprice their purchases and expenses.
    Compare our prices, speed, data cap to nearby countries and you will see that we are the most abused consumers

  14. Lala says:

    But they were able to sell the Plan to some because of the word ‘unlimited’. (guilty me)
    Does the resolution of DOJ applies to the FUP?
    I mean they will sell unli then change it 3Gb in the mid of your contract beacause according to their FUP they can.

  15. Japo says:

    i just hope (wish) that the local telcos would provide services (and fees) at par with our other asian neighbors.

  16. DOJ says:

    If they cant deliver quality and unlimited internet, they should stop offering internet services to newer subscribers so us current subs can enjoy good and reliable internet. Pag ready na cla too accomodate more subs eh di saka nalang sila mag offer sa mga bago. Ginagawa kasi offer lng ng offer, dumadami subs pero equipments hindi na pala kaya. Money is all they after and the subs suffer.

  17. ktine says:

    ONE WORD: EXCUSES

  18. lol says:

    fuck giving TQM ….its all about the money !!!–telcos

  19. imLordeYaYaYa says:

    we (DSL) subscribers also have cap (Globe). only 30% of the subscribed speed will be available when the cap is reached. it’s unlimited though in a sense. but not the speed.

    i think capping or FUP for mobile data is fine as long as it’s patterned like with their DSL capping, for all intents and purposes; 30% of the speed or something along those lines, not 2G speed. but they either need to lower the rate or beef up their mobile data program

  20. iconic says:

    Business 101 at it’s best… Fuck the rest of the 99% as long as the 1% gets richer. LOL

  21. abdulbulol says:

    LAHAT MAY MALI, MGA TELCO NA MALI ANG ADVERTISING AT MARKETING, AT MGA SUBSCRIBER NA ABUSADO, TAMA NAMAN NA MABAGAL KASI GAHAMAN SA DATA YUNG IBA, TAPOS MAY MGA PULUBI PA NA GUMAGAMIT NG PSIPHON, BUTI NGA WALA NG PSIHON PARA STABLE NA ULI DATA

  22. Manny says:

    Great article! Now we know.

  23. Banker says:

    As an investment banker who has covered telecoms around the world, i find the reasons put forth in this argument simplistic and fundamentally flawed.

  24. utot nyo!! says:

    business perspective? para maka-survive? lol, wala kami pakeelam jan. basta ibigay ng mga telco ang best nila. kung bumagsak man sila ehh malamang na rason nun ay bulok ang serbisyo nila. gusto nila ipakita sa mga international telco na hawak nila sa leeg ang mga pilipino para hindi pasukin ng ibang telco ang pilipinas!! dapat mag karoon ng outside telco dito satin, para matauhan yang mga hinayupak na yan.

  25. Mr. N says:

    upgrade nalang infrastructure nila para maka accomodate ug daghan subscriber…mao man kaha nai gusto nila daghan subscriber. its not fair nga ang subscriber bayad ug sakto sa dili sakto nga service.. it should be fair. money for money… if money matters then service matters pud sa mga subscribers…sure mo oi. ngita lang jud ug rason.

    • Translator says:

      upgrade nalang infrastructure nila para maka accomodate ug daghan subscriber…mao man kaha nai gusto nila daghan subscriber. its not fair nga ang subscriber bayad ug sakto sa dili sakto nga service.. it should be fair. money for money… if money matters then service matters pud sa mga subscribers…sure mo oi. ngita lang jud ug rason.

      “They should upgrade their infrastructures to accomodate lot of subscribers. Thats what they want to get; lot of subscribers. Its unfair to pay the right amount for a insuffecient service. Chaching for chaching. If what matter is the chaching then it should also be their service is what matters to the subscribers. Im from CDO so ” PAG SURE OI ” if from CEBU ” KAYASA SA” . Your just looking for excuses…

  26. pilamboy says:

    Data capping is a common practice among telcos not only in PH, but also in the US and other countries on the world. This is not only about money, but also about providing good service. Imagine if everyone uses data on a single cellsite or facility, there would be network congestion and other subscribers will not have the change to use the service anymore. Parang trapik lang yan sa EDSA – lung walang coding at truck ban, wala nang galawan ang mga sasakyan. I used to work for a telco company in the US and when someone calls-in complaining about data throttling, we always explain “Unlimited does not mean unreasonable.” Unlimited naman talaga anf service because telcos are not disconnecting your data service, it’s just throttled.

    • Andrew says:

      Kunwari kumain ka sa eat all you can. Pagkatapos ba ng 3rd serving mo, puro na lang tutong at mga tira tira pwede mong kainin dahil sa “Fair Food Policy”? Ganyan kasi pakiramdam nating mga consumer sa Fair Use Policy nila. Sabi unli, tapos pag nakadami ka na biglang may limit pala ung maeenjoy mo. Kung unli, dapat stable at continuous ung service. Wala dapat reduction sa speed at quality unless the promo is over.

    • pedro says:

      I believe you miss the point bro. technology provides us solutions for our needs that’s why meron na tayong mobile internet. network providers already know how many users there will be in an area and further more expansion of it thats why they put devices capable for that load (typically). given that there is network congestion, its the network providers fault.this simply boils down to profit as hardware for such load is more expensive and they dont want to spend for it kasi mababawas ang kanilang kita.

    • Red says:

      And once throttled your net becomes useless.

  27. Dicube says:

    This is very simple don’t use the net either if you dont want to pay. Ikaw? nung wala pang internet at cellphone humintu ba ang paghinga mu, can this telco’s could force you to subscribe? NO- The problem is US, pag nawala yung signal o di man lang makapag-status sa FB o di kaya ma-post ang ulam na kinain para na tayung namatayan kung mag-reklamu. Ang tanung mga ilang MB lang ang kailangan natin gamiting DATA para sa mga makabuluhang bagay need paba maging unlimited. Business is business guys if walang market the investors will not invest. And for the businessman LUGI ang ayaw nilang mangyari.

  28. Jep says:

    Like all other big corporations in the Philippines, they all an understanding between themselves. They have lobbyists that prevents big players to come in and invest in the Philippines. With telcos, everyone already knows where tih is is going. Data services, they need to upgrade and upgrade their facilities which cost money.hence they don’t want any other players to come in, since it would lesser profits because they need to invest on infra

  29. Francis says:

    Their most alibi “due to large number of subscribers” we implement capping of bandwidth also know as FUP” to provide better connection speed and avoid network traffic.

    The Q is, why they aren’t controlling their fast growing numbers of their subs if they cant handle it. Introducing unlimited services when it has limit. They are liars. Always produces false advertisement. This issue had been in a decade there is still no solutions for this greedy ISP companies.

    • meow says:

      no they dont have control on number of subscribers. they can only project the increase of user base in an area base on the volume a tower in a grid gets relative to the area class (urb/sub/rural). remember, anyone who has smartphone is mobile, and can get to place a to place b and thus would add up to user base. and they can not upgrade the tower capacity just because 1% increase was noticed last last night. they would have to wait until a tower reaches 90% relative capacity on a certain time of a day (on peak) before their system begin network balancing aka network throttling. and sadly most of the time, it is being triggered because of exponential growth of smartphone users and telco wouldn’t adjust in parallel to the growth.

    • me says:

      Why would they control the growing numbers of their subscribers? It’s completely illogical. Subscribers keep their business going. They should attract more and more subscribers, and to attract subscribers they should be reliable mobile internet providers.

  30. User says:

    Will you all lot stop complaining if the telcos will stop using the word unlimited?

    They will never offer unlimited plans in the future. And that’s how it should be.

    And stop using mobile internet to download movies. Use dsl instead!

  31. Cindy says:

    What the Government should do is to break the duopoly of Globe and PLDT/Smart. By cancelling some franchises (area and/or frequencies) and offering it to new investors

    http://en.wikipedia.org/wiki/Breakup_of_the_Bell_System

    • bubuxixi says:

      Wala naman kasi “anti-trust law” dito sa pinas, kaya kahit sino company pwede nila i-monopolize ang market, unlike sa US, pag alam na nila masyado ng malaki yun company at 99% na sa kanila ang market, talagang binubuwag ng nga korte ang mga company na ito.

  32. NotASheep says:

    People people people… what we need to do is invite Google over :D then will see some improvements~ i guarantee it~

  33. Andre says:

    I guess this is the reality of business. Similar thing happened here in SG. Previously telcos were generous enough to provide 12 GB of (3G) data monthly to subscribers. Eventually they pulled that out while trying to assuage subscribers that they are getting “faster” 4G connections.

    They should just do away with the ‘unlimited’ tag unless it’s really unlimited. Otherwise, they should just clearly say how much cellular data they are giving users. I agree that those who use cellular data to download movies are doing all other users a disservice.

    My current 3G/4G plan here in Singapore now only gives me 3 GB of data a month. So I’ve stopped watching YouTube via cellular.

  34. Athena says:

    goodbye unli data. :((

  35. xdarkx says:

    ” As consumers, what we can do is (a) not give them your money…” – Well, what other choices do we have, no thanks to that goddamned economic protectionism. That’s why these scumbag telcos adore Saint Cory Aquino of Hacienda Luisita a lot ‘cuz their “business growth” is all thanks to her economic protectionism. Oh, and they dare say they’re limiting us due to a “large number of subscribers”? Then why don’t they let other foreign ISP’s handle other subscribers? But in the end, they’re still greedy and they won’t do it…… ? #fuckpangilinan #fuckeconomicprotectionism

    “…(b) lobby for better legislation on net neutrality. ” – Hmph, trust government, who so happens to be in cahoots with these scumbags, to actually do something about this…. -_-

  36. paul says:

    It’s simple. Remember how Smart/Globe are not able to give consistent fast internet? If we give unli-net (no caps), that’s gonna make it worse.

    Let’s talk about the internet as the highway. If every vehicle and go and use the highway, then there’s bound to be traffic. After a few minutes, the road won’t be moving anymore. Same with internet, this will happen. Thus there needs to be capping and by capping, I mean, not all vehicles will be allowed to go in the highway or for some vehicles, they might have to be taken away or not be allowed to enter (i.e. roads with fee for one to use).

  37. glenndy says:

    Data capping/throttling is not the issue but truth in advertisement. When telcos where promoting unlidata they did not mention anything about data capping and fair use policy. When i subscribed to globe’s unlidata plan and talked with one of their staff regarding this I was never informed about their fair use policy.

  38. leyokium says:

    paano ba naman bigay ng bigay ng free facebook kaya ayan bumagal internet. alisin na kasi yan.

  39. pinpoint015 says:

    They can counter it by blocking those free messaging apps. Also, don’t offer free FB if you can’t accommodate all the additional subscribers. That’s why there are those who apply for subscription plans so that they have better service..

  40. x says:

    I DONT CARE WHAT THE REASON IS ON CAPPING,JUST GIVE US WHAT WE WANT, INVENT SOMETHING, FIND A WAY TO GIVE US THE UNLIMITED INTERNET YOU ADVESTISED. DAPAT SABIHIN NYO “UNLI UNTIL THIS OR THAT” OR JUST SAY LIMITED INTERNET OR UNLI (THEORETICALLY).

  41. InsideJob says:

    There is NO NETWORK CONGESTION. If the internet is truly congested, every form of accessing the net will be very slow.

    Globe and Smart are capping data because they are only “renting” from PLDT to use the internet. Smart only capped their data recently so as not to attract attention (say MVP, Smart, and PLDT in a sentence).

    It’s all about the money. More data usage by customers, Globe pays more, less profit for Globe.

  42. Name: pwnishable says:

    Ok lang kung may cap pero lakihan naman nila. bakit? kasi as a gamer, ngayon kasi naguumpisa na ang 4K resolution. Baka abutin n ng 50GB ang isang game in 4k resolution at high quality audio same din sa movies mapasteaming or download. Disc will become a thing in a past and Cloud services is getting more popular. Sa Gaming services like PSN, Steam, Xbox Live ang lalaki ng file size ng mga AAA titles at Downloadable contents kahit 720p lang ang resolution and the price is cheaper kung idadownload mo na lang ung game instead of buying disc. kung bibigyan ka ng 12GB lang, kulang na kulang talaga. Pagdating naman sa illegal stuff at meron kang unli data, abusong abuso talaga ang mangyayari. Sino ba namang tao ang ayaw ng free stuff sa net, di ba.
    In the end, Telcos should really think ahead, internet data it is becoming a basic necessity, sa bahay, sa school, sa trabaho. They really need to catch up.

  43. UGLYBUSSINESS (DTI?) says:

    Hehehe, They knew they had the wrong moves…
    Now they LEARN…

    NTC and DTI (You should be the one to protect us)? who should win?

    Them or the consumers?

  44. john says:

    dear writer,

    It’s not all about business at all, it’s all about network traffic and providing better network service. Mobile internet is not designed for heavy usage, if you like downloading videos or large files you should subscribe to DSL because DSL providers don’t have to worry about network traffic.

    In fact I’m surprised that there’s no data capping here in the Philippines until this year, maybe that’s one of the reasons that Philippines has a slow mobile internet. And I’m glad that they implemented data capping to provide better mobile internet here in Ph..

  45. john says:

    If there’s something us consumers should complain about, it’s the false advertisements that Smart and Globe continuously doing. There’s no such thing as “unlimited” in mobile internet world, Globe and especially Smart should stop telling that to people because most of us don’t spend time researching about the product before we buy.

  46. kremtopad says:

    What we’re paying is for the speed. Pinagkakakitaan nila yung hindi naman sa kanila. Internet is free, guys.

  47. Renz Path says:

    I like that you shared with us that telcos recognized the need for the mobile internet to have a cap like a soft cap that both Globe and Smart have. As I am not really a tech-savvy character that idea is something that will take time for me to absorb fully. However, if that is the case, then all the internet service providers must provide a cap or have a cap as a matter of compliance as well because more and more are becoming connected to the internet.

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