Myths and lies about the NBN and CEP

FINANCE Secretary Margarito Teves recently told reporters the controversial national broadband network (NBN) and the Cyber Education project (CEP) deals with China are under review. The NBN contract, according to Teves, is far from perfect.

Indeed, the Department of Finance (DOF) should review them thoroughly and with great transparency because, if these deals push through, Filipino taxpayers are going to pay for them in the next 20 years. The amount is huge: $829 million in all, covering $329 million for the NBN and another $500 million for the CEP, for projects with dubious technical and economic merits.

“Far from perfect” is an understatement. Those deals have always been suspicious. They seem to possess most, if not all, indicators of anomaly, and the government has not explained properly the deals to the public. In fact, government agencies like the Department of Transportation and Communications (DOTC), which has been enthusiastically pushing the deal, and the National Economic and Development Authority (Neda), have been obfuscating the issue. The myths and lies thus far spawned are simply adding to the confusion.

At least three major myths or lies are easily detectable.

Myth number 1—DOTC officials say it’s the best deal the government could ever have. It will save the government bureaucracy close to P4 billion in government expenses on communications, including landline calls, cellular-phone calls and Internet connections.

DOTC officials say the NBN and the CEP deals are the most technologically superior vis-à-vis the proposals offered by competitors Filipino-owned Amsterdam Holdings Inc. (AHI) and the American firm Arescom. DOTC officials say AHI’s offer is limited to the urban areas while Arescom is satellite-based, which is supposedly expensive to maintain.

In truth, it was President Arroyo herself who clarified that the bulk of those communications expenses by government are accounted for by mobile- phone calls, and government officials are going to continue using the facilities of the telcos. Recent advertisements by the DOTC indicate that government will even continue relying on existing private Internet providers despite the NBN. The DOTC says that government agencies will save through NBN’s voice-over-internet calls among themselves. That is true, but they are not saying something crucial: the government will still have to pay the telcos when it has to call outside of the NBN backbone.

Right now one would never know the true worth of the NBN, because there are just too many unknowns. From the original amount of only $135 million (Arescom’s offer), the amount has inflated to more than $800 million after the government spun off the CEP from the original NBN component. Besides, both supply deals were not subjected to either a Swiss challenge or international bidding, so there’s no chance of knowing the real score.

And if indeed, a satellite-based technology as proposed by Arescom is obsolete and expensive, why did the government agree for such technology to be used in the other controversial cyber twin, the CEP? The fact is that the DOTC’s technical working group has always proposed a single backbone for both the NBN and CEP and has opposed satellite-based technology.

Myth number 2—The NBN will address the “digital divide.” This is Neda’s line, a dig at the private telcos, which officials say make money by concentrating their operations in the major cities but neglect the countryside. Neda officials say the NBN is a perfect foil to this trend.

In truth, the NBN won’t address the digital divide. The backbone the NBN is going to build will be used solely by government agencies, including about 50 percent of the barangay halls. Yes, barangay halls, but not the barangay residents! Residents in remote barangays will have to wait for the rollout of private telecoms before they can even fantasize about flying in the ethereal realm of the digital world.

And myth number 3—The government needs a dedicated state-owned and controlled Intranet and separate backbone for “national security” reasons. The government, DOTC officials say—and echoed by Neda—has to own and control that backbone so that neither a snoop nor a malevolent hacker could do mayhem.

This argument is really the craziest. The truth is that government has been using private networks for its e-mail and other communications needs since time immemorial, but “security issues” was never a problem. It has never been a problem during the time of President Fidel V. Ramos, a former general who probably appreciates “national security” more than anybody else in the DOTC. Besides, if “national security” were an issue here, then wouldn’t it be riskier to entrust government’s information to a foreign state? Unless they’re saying a foreign government is trusted more than the Filipino private sector.

In our midst today are huge multinationals owning sensitive intellectual property, including patents and trade secrets worth billions of dollars greater than the Philippine GDP. Yet these MNCs never felt compelled to build their own separate fiber-optic backbone. Imagine a situation where everybody lays down fiber-optic cables for “security reasons.” Wouldn’t that be the ultimate “spaghetti sa ibaba,” underneath our soil and the seas?

But private firms do have their own private and secure network, not by having their own separate physical backbone, but by buying capacities from existing privately run backbones—PLDT and Telecphil. For instance, it’s not uncommon for these huge firms to use Telecphil facilities for their Philippine operations while connecting to the PLDT backbone for their fiber-optic link to their headquarters in the US. And security has never been an issue because there are a thousand and one ways of securing them.

If there’s one agency that should be crazy about having a “secure network,” it should be the Department of Interior and the Local Government (DILG). The truth, according to sources from Neda, is that the DILG was never enthusiastic about the project, and this is why Arescom’s proposal, initially offered to the DILG, went nowhere. According to Neda sources, DILG officials thought the backbone was not their priority, thus giving DOTC officials the opportunity to disregard Arescom and endorse ZTE to the Neda Investment Coordination Committee.

The two deals could also be examined on transparency, governance and economic issues—something the professors of the University of the Philippines School of Economics have done extremely well without any reply from either the Neda or DOTC. The DOF should cover all these issues before even thinking of approving the deals.

We dare the DOF to make its own review open to the public.

(Note: I wrote this as an editorial piece for BusinessMirror, September 5 2007)

Please see also related posts
Philippines’ NBN: government porn at broadband speed?
National Broadband Network: a backbone of waste and shame
RP needs Freedom of Information Act to curb corruption