AS a matter of public concern, we are reproducing in text form the Powerpoint presentation of Transportation and Communications Assistant Secretary Lorenzo Formoso III.

In the Senate hearing today, Formoso said the controversial Chinese company Zhong Xing Telecommunications Equipment Limited (ZTE) “offered the best package in both capability and cost” to the government, contrary to claims that the ZTE proposal for the National Broadband Network (NBN) project was “ridiculously overpriced.”

He explained that with the project cost of $329 million, ZTE will be able to provide a nationwide system for a “seamless connectivity of landline, cellular and Internet services” in all national and local government units, down to the 6th class municipalities. He said losing bidders Arescom and Amsterdam Holdings would need to spend $1 billion and $562 million, respectively, to provide coverage like ZTE’s.

The Truth About the National Broadband Network Project

This report will show:

  • The National Broadband Network project will save billions of pesos every year.
  • NBN will greatly enhance government communications capability and security, down to the poorest communities.
  • NBN’s chosen supplier ZTE offered the best package in both capability and cost.
  • NBN is going through all procurement processes required by law.
  • In sum, the nation will gain and the law will be followed.

NBN will save billions

  • Current cost of government telecommunications: more than P4 billion a year
  • NBN amortization cost: Less than P1 billion a year
  • Operation, maintenance, and upgrading: P1 billion a year, using current Telecommunications Office budget — hence, no additional cost
  • Savings over 25 years: P20 billion in first five years, P60 billion in next 20 years
  • Even more, in fact, since current telecom costs will rise when more government agencies get connected

NBN will enhance security and services

  • Government information and telecommunications will be kept with a secure system, instead of going into the internet, where copies of documents are kept in outside systems.
  • All NBN equipment deliveries will be subjected to security audit, to ensure they are free from surveillance devices.
  • NBN will have high-level encrypting and security programs and protocols.
  • Using internet protocol for voice, image, data and other information, NBN will enable video conferencing, data sharing, mobile VOIP and other high-grade services down to 6th class municipalities and community e-centers.
  • Mirror-image data centers in Manila and Cebu will ensure uninterrupted service.

NBN’s chosen supplier offered the best package

  • ZTE will provide a nationwide system serving national and local governments down to 6th class municipalities, plus GOCCs and community e-centers, for $329 million.
  • Based on their costs for much smaller systems, Arescom and Amsterdam Holdings would need to spend $1 billion and $562 million, respectively, to provide coverage like ZTE’s.
  • ZTE’s package would be fully funded by China’s Export-Import Bank, at 3-percent interest payable over 20 years, with no payments in the first five years.
  • Arescom and AHI have no firm financing commitments. At commercial terms of upwards 6-percent interest with no grace period, at cost would be far higher than ZTE’s.
  • ZTE is a global name in building integrated telecom systems. Both Arescom and AHI have no track record in such undertakings, and AHI has no clear technical partner.

NBN is following processes required by law

  • CICT and DOTC studied proposal since August 2006.
  • China designated ZTE as supplier under its soft loan for NBN.
  • Government Procurement Policy Board opined that NBN is covered by executive agreement not covered by RA 9184.
  • NEDA Board approved NBN project.
  • Conditional supplier’s contract signed and reconstituted.
  • DOJ opinion affirmed that NBN is covered by executive agreement.
  • NBN now awaits forward obligational authority from DBM, loan negotiation by DOF and China-Exim Bank, final DOJ opinion on overall agreement, and Supreme Court decision on ZTE contract.

NBN or no NBN?

  • If we don’t build NBN, the government will spend higher and higher amounts on telecom services, and be exposed to security breaches using the public interest.
  • If we build NBN, government telecom costs will fall by approximately P3 billion a year, and we will have a secure, government-only system serving the nation down to the poorest communities.






Cost vs. Deliverables


  • 3000 Base Station
  • 300 Backbone Station
  • 30 IPMPLS Nodes
  • 25,844 CPEs with IAD/VOIP Terminals
  • 1 IDC & NOC with back up
  • Managed Services & Trainings


  • 87 Base Stations
  • 500 Cell Sites

Note: Government will buy its own cellphone from AHI or other vendors


  • 21 Base Stations
  • 83 CPEs
  • Satellite Central
  • Hub Station

Cost to provide same coverage





Government offices up to 6th class municipalities

Access up to 2nd class municipalities and some 3rd class depending on the distance to cell sites

21 Selected
DILG Regional Offices

Company Information

State-owned company, publicly listed in Hong Kong and Shenzhen Stock Exchange
Selected and nominated by China Government for the NBN

A holding company (no other details were provided)
No partners mentioned except the Liga ng mga Barangay and unidentified Chinese partners

A consortium of companies, but no details were provided

Financial Capability

Asset amounting to RMB23.07B or PhP140.54B

Paid-up capital of PhP312,000

Paid-up capital of PhP625 thousand

Technical Capability

Highly experienced in development, manufacturing, installation, integration and operation of ICT

No documents submitted to prove experience and technical capability

No documents submitted

Project Nature

  • Government to government project covered by tied loan from China
  • 0 years repayment with 5 years grace at 3 percent maximum

Private telecom business with government as target subscriber

  • Government to government but no endorsement covered by loan
  • 0 years repayment at 6 percent

Source: DOTC

9 Responses to NBN deal: The truth according to DOTC


Current » Liveblogging the cootie grooming session

September 20th, 2007 at 9:01 pm

[…] Formoso’s presenting is the one Formoso presented at the Ateneo last June; Formoso’s Power Point is available at the PCIJ Blog; it’s a longer version of their ads; see NBN deal articles: if the DOTC had sense, […]



September 20th, 2007 at 11:17 pm

“What is a broadband?” our officekeeper asked us this morning. “Is this the same broadband in those commercials, like internet?” referring to the broadband deal.

I wonder who else among the poor know what this broadband is. Will it matter anyway to a Juan dela Cruz? Will it cure the epidemic called “poverty”.

Is this another Northrail Project? “There’s no need for bidding. As long as we’ll get the funds. It doesn’t matter if it will face legal battle. Taxpayers will take care of it anyway,” they must have always said.

Just look at every government websites. Click on their projects and bidding section. Don’t get surprised if you see nothing. It’s been like this all the time. They don’t need to inform the public. They know everything. It’s for the “common good”.

“Go on. Just let them spill the beans,” someone else told the housekeeper.

Perhaps what makes this broadband deal controversial is the involvement of the greatest Comelec Commisioner in Philippine history. Shall I call him the Kingmaker. Everyone loves him, that’s why.

NBN will save billions! What on earth finally makes this government to finally save? Am I just dreaming? I guess not. I believe that as long as we’re borrowing billions of dollars for projects that does not actually benefit the biggest taxpayers – poor people, this country will always be a nation of thieves.

NBN will enhance security and services? I’m sure every government agencies wanted to enhance their services. Everyone will love it but this is not the case.

NBN’s chosen supplier offered the best package? What package? Maybe that’s the reason why the contract was “stolen”.

NBN is following processes required by law? I remember my subject matter about fallacy – “Not all law enforcers are law breakers”.

So what’s this broadband deal all about? Neither do I know. But the way it look like it’s not that funny commercial about internet. It’s the newest teledrama only Philippine politicians play. ;(



September 21st, 2007 at 5:59 am

The present controversy that again put some of our country’s top government officials in the headlines is sickening. While majority of our countrymen are in desperate quest where to get money to buy their next meal, they who are tasked to help them busy themselves instead to further their greed for economic power and influence. The expose’ made by the young DeVenecia is the latest example of how far insatiable greed had gone up in our country’s bureaucracy. If the claim that the deal is overpriced by about $130million, this amount if converted in our currency is about P5.85 billion pesos based on the P45 pesos to the dollar exchange rate, and if this is used for poverty alleviation could spell a big difference in gradually solving the extreme poverty that is strangulating our countrymen; and this is but one of the many questionable deals our government had entered into. We need modern heroes, the likes of Jose Rizal, Andres Bonifacio and Ninoy Aquino,etc. who sacrificed their own lives for the betterment of each and every Filipino, that each of us may live a decent and comfortable standard of living. When shall come a time when those in governance will feel the desperate woes of the hungry majority; or shall we just wait in despair and continue to be the laughing stock and hopeless basket case of Asia? Time is of the essence. Change for the better has to start now. We are calling on all Overseas Filipino Workers, the modern heroes, to stand up to this challenge for CHANGE.


Bong V.

September 22nd, 2007 at 4:41 am

There is no need for separate broadband network. Security is well taken cared of by 128 bit SSL protocol plus PPTN protocol. These protocols are proven technologies used by OECD government bodies.

BPL technology can provide a nationwide system serving national and local governments down to 6th class municipalities, plus GOCCs and community e-centers WITHOUT THE $329 million price tag.

BPL technology can provide a more cost-effective alternative to ZTE – pennies to the dollar.

ZTE maybe a global name – but its costs are high. Local companies are equally adept at building integrated telecom systems – as proven by the proliferation of call centers that serve a global customer base.

In sum, the nation will lose if NBN is awarded to ZTE


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October 5th, 2007 at 10:13 am

I am no expert, but just using common logic would raise a lot of questions on how government has approached this project. Why didn’t government commission a full study of the issue and set the common standards and requirement with which bids will be based on? By not doing this, we are looking at 3 bids that are vastly different. We are at best comparing apples to oranges. Isn’t this a sure recipe for graft and corruption? We have so many brilliant people in government and yet we could not think of something as simple as setting common benchmarks. Was bidding limited to these 3 entities, 2 of which seems to have no substance at all? I can imagine the frustration of Filipinos confronted with yet another corruption froth and seemingly stupid situation.


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October 25th, 2007 at 10:57 pm

[…] the doors of the National Economic and Development Authority (NEDA) to get more documents about the National Broadband Network (NBN) deal, they found the passageways shut due to an order by Executive Secretary Eduardo […]


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October 30th, 2007 at 4:19 pm

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