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Philippine broadband plan hits snag

By Joel D. Pinaroc, ZDNet Asia on July 12, 2007

Summary

Dispute escalates over the legitimacy of a contract involving the national broadband network project, prompting President Gloria Arroyo to call for a review.

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PHILIPPINES--The government's plan to build a national broadband network (NBN) has hit a major snag, as losing bidders and concerned groups continue to question the legitimacy of the project, worth some US$330 million.

The national broadband network (NBN) project was envisioned to connect all government agencies and offices across the country. However, controversy erupted when the contract to build the infrastructure was awarded to China's largest listed telecoms manufacturer ZTE. Valued at some US$330 million, the deal was signed in April 2007 by Philippine government officials and ZTE representatives in Hainan, China.

However, a few hours after the signing, the Philippine Department of Transportation and Communications (DOTC) reported that the original signed documents had been "stolen". Local news reports indicated the documents were stolen when thieves broke into the hotel room of an officer from the Philippine Department of Trade.

The DOTC eventually reported that the sovereign documents have been "reconstituted".

The controversy over the missing documents opened a floodgate of inquiries, particularly from losing bidders Amsterdam Holdings and Arescom, which both claimed the project was awarded without a public bidding. Arescom is a U.S.-based manufacturer of broadband and wireless equipment, while not much is known about Amsterdam Holdings, except that it is a Philippine company and one of its shareholders is Jose De Venecia III. De Venecia is currently chairman and CEO of Broadband Philippines, which provides broadband services in the country.

Amsterdam Holdings and Arescom said they submitted bids--valued at US$242 million and US$135 million, respectively--that were much lower than the US$330 million price which ZTE quoted, according to local reports.

The controversy has now prompted President Gloria Macapagal Arroyo to order a review of the details surrounding the deal.

Local newspaper The Philippine Star  on Monday said Arroyo was compelled to initiate a review after Amsterdam Holdings threatened to pursue "legal actions" to oppose the contract, which the company said was "disadvantageous" to the country.

Arescom, in a separate report, said it questioned the lack of a public bidding for the project. The controversy had prompted U.S. Ambassador Kristie Kenney, to send a letter to the Philippine government urging a review of the contract.

Arroyo now wants the Department of Justice to conduct a thorough review of the project and submit its findings to the Philippine Senate, which will then conduct its own probe, according to The Philippine Star  report.

Philippine Senator and Senate minority leader Aquilino Pimentel, meanwhile, said the government should scrap the NBN project altogether because the deal was "flawed".

In a statement released Monday, the lawmaker said government should abandon the project to "pave the way for a re-bidding".

Pimentel described the controversial deal as "indefensible and not worth pursuing in view of revelations that its terms and conditions are grossly disadvantageous to the government", noting that the contract was not subjected to public bidding and was in violation of Philippine laws.

The senator also refuted the DOTC's claims that the project was a government-to-government arrangement that requires no public bidding.

Amid the controversy, ZTE said it remains unperturbed and will continue to invest in the Philippines. The Chinese company declined to comment directly on the NBN project.

Joel D. Pinaroc is a freelance IT writer based in the Philippines.

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