AS SMS continues to be the dominant mode of mobile communications, both Smart and Globe have enjoyed a happy onslaught of subscribers. Globe now has 4.6 million, mostly prepaid subscribers, a 79-percent increase from 2000, with prepaid additions at 149,704 subscribers per month.

Smart doubled its subscriber base to 4.6 million GSM subscribers, apart from Piltel's "Talk 'N Text," which has snagged more than a million prepaid subscribers. Last December alone, Smart and Piltel had a combined net activation of over 400,000 subscribers. Including both their analog subscribers, the total runs up to almost five million.

Globe and Smart, however, still insist that voice service is their primary moneymaker, though the volume of text messages now far exceeds that of voice calls (when last checked, the ratio was eight to one in favor of text). Revenues from voice service increased to P17.3 billion from P9.8 billion for Globe, and to P14.2 billion from P8.3 billion for Smart.

Having pointed to voice service as their main business, the operators are asserting that text messaging has always been only a value-added service, and hence not subject to the regulatory powers of the NTC. That was also the position of the regional trial court that dismissed the case filed by the Philippine League for Democratic Telecommunications, Inc. (PLDTI), a consumer advocacy group that protested the free text reduction. Citing the lack of jurisdiction, the court also withdrew the temporary restraining order it had issued earlier. (The case in now before the Court of Appeals.)

As the PLDTI and other protesters see it, however, text messaging is integral to the GSM platform. Data on the historical development of the GSM Phase 1 standard shows that with half a channel left, the GSM Association of Europe created SMS in 1994 to fill such gap. There is also the reference of one legislator to SMS as a two-way paging service, which is not a value-added service as per Republic Act 7925, the Public Telecommunications Policy Act.

Isberto thinks a lot of the confusion stems from the fact that text messaging was originally offered free of charge, even if by "our understanding of the classic definition of value-added services, it is value-added service." Smart, he says, has been consistent about its treatment of text messaging as a charged service. "But the point was to find a price point low enough to encourage usage but sufficient enough to generate revenues for us," he adds.

The problem, says PLDTI president Jonathan Domingo, is that text messaging is what made these companies in the first place. "Without it," he says, "the cell-phone industry wouldn't be this big a success. They did not expect it to be this popular. Now that it is such a hit, they want to capitalize. Since they have effective monopoly power over the market—they're the only GSM service providers at present—they're squeezing the consumers as much as they can, milking them dry."

For Domingo, the value-added service debate has become even moot. "The question is whether it should be regulated if the public interest so requires," he says. "And in this case, the public interest so requires it."

To lessen the impact of reduced free text allocations, consumers groups like PLDTI, as well as the NTC, are batting for lower voice-call rates. Currently, cell-phone operators charge prepaid subscribers P8 per minute for voice calls. But whether that is cheap or not, Domingo says, nobody would know since the companies are not transparent about their costs.

"What I do know is that (Islacom's) Touch Mobile offers a much lower rate at P6.50 per minute. See, they can lower it if they wanted to," he says.

In relation to voice-service rates, an NTC proposal to use the six-second pulse for billing calls, particularly dropped calls, is also being considered. But Smart and Globe have fought this all the way to the Supreme Court, where it now awaits final resolution. Both firms have been very wary of the scheme, which they believe will have a negative impact on their earnings, voice being, they repeat, their major service.

If enforced, this would mean that calls would be charged for every six-second interval instead of every minute. That way, callers need not pay for the whole minute if they consumed less than that.

Still, consumers will have to contend with the NTC's limited capacity as the government's industry regulator. With no monitoring equipment of its own, the commission has been unable to conduct independent studies to check the veracity of the telcos' data.

What the NTC hopes for as a sort of remedy is that the entry of at least two new players in the GSM market—Extelcom and the Gokongwei's Digital Telecommunications Phils., Inc. (Digitel)—will spur strong competition. (The third wanna-be, Bayan Telecommunications, Inc., had its expansion plans to the cellular business derailed by a court case filed by Extelcom.)

But the NTC itself is not too optimistic about the situation. Says Edgardo Cabarios, director of the NTC's common carrier authorization department: "They're all sharing the same market, the same subscribers. Can you expect two million or three million more when the economy is struggling? Unless the economy really improves, there will be fewer people who can afford a cellular service."

Already, projections of some telecom research firms are pointing to slower subscriber growth in the next few years as the mobile-phone penetration rate, currently at 12 to 13 percent, reaches 20 percent and the prepaid market becomes saturated. But unless something like mass arthritis hits the Philippines and renders millions of texting fingers immobile, cell phone providers are still a long, long way from the poorhouse.