Telecoms experts clash in DoJ’s NBN probe

By Jerome Aning - Philippine Daily Inquirer

The justice department’s probe into the aborted NBN-ZTE deal on Thursday took testimony from a National Economic and Development Authority official who said the proposal of China’s ZTE Corp. was a “good deal” and a technical consultant for the competing Amsterdam Holdings Inc. who countered that the AHI bid was better.

AHI head Jose “Joey” de Venecia III, did not show up at the hearing and sent instead consultant Richard Pratte, an industrial engineering and telecoms expert who was part of the team that drew up the AHI proposal.

Ruben Reynoso Jr., NEDA assistant director general, said that had the ZTE deal pushed through, the government would have saved P4 billion a year in communication and Internet bills.

Reynoso said the NBN-ZTE project would have been a potential revenue earner as areas not yet covered by commercial cell phone and Internet service providers could subscribe to the state-owned national broadband network.

Good return

He said the estimated rate of return on investment in the $329-million ZTE project of around 29 percent was favorable as the NEDA normally considered a 15-percent return as “a good figure.”

The NEDA official also clarified that the agency’s primary task was to “review and comment” on completed contracts submitted to it and that background checks were the responsibility of the implementing department or agency.

He said the NEDA evaluated the ZTE proposal at its value, adding that as a government official “he presumes everything was done with a presumption of regularity.”

Reynoso also said he did not meet the Senate’s star witness Rodolfo Noel Lozada Jr. to discuss the NBN project.

He said he knew Lozada “socially,” having met him several times at the NEDA office when Lozada would visit the then NEDA head Romulo Neri when the latter “felt a need to relax for while.” He said he did not know of any instance that Lozada intervened or exerted influence to push for the project.

Confidential info

Speaking to reporters, panel member and Justice Undersecretary Jose Vicente Salazar said Neri could be charged for leaking confidential information about the contract to Lozada.

He said the details that Lozada disclosed about the NBN-ZTE deal, including the proposals of ZTE Corp. and AHI, were considered confidential, citing a Malacañang memorandum banning the premature disclosure of details regarding government deals and provisions of the Revised Penal Code pertaining to infidelity in the custody of public documents and revealing trade secrets.

Salazar said that no document has been presented to the panel indicating that Neri hired Lozada as a consultant authorized to view documents on the NBN project.

“There seems to be no written authorization which would entitle Lozada to get a copy of these documents,” said Salazar.

Pratte said the AHI offer was more advantageous because no government loans or guarantees would be involved as AHI proposed to undertake the project on a build-operate-own basis. He said AHI’s rates would also be 25 percent lesser than the lowest prevailing rates. He said the company would earn income by offering its broadband services to private companies.

The $246-million AHI proposal also ensured government control of the security of all data transmitted via the NBN, Pratte said.

He said the AHI project would cover 57 percent of the country’s population, including those living in all chartered cities, all provincial capitals and all first- and second-class municipalities.

Pratte said he found it “strange” that the NEDA should consider AHI’s proposal as limited in coverage when it would be using 587 broadband sites against ZTE’s 300. With a report from Gil C. Cabacungan Jr.

Globe, Smart say they can do ZTE’s job

By Efren L. Danao, Manila Times Senior Reporter

Telecommunications companies told the Senate blue-ribbon committee on Tuesday that they can provide the last-mile broadband connectivity of the country and denied claims of the government that none of them was interested in the project.

Executives of Smart and Globe said at the resumption of hearing on the aborted $330-million project that the government need not enter into a contract with a Chinese firm for the broadband project because they already cover almost the entire country. They refuted the earlier statements of Assistant Secretary Lorenzo Formoso 3rd of the Department of Transportation and Communications that the government was forced to pursue the broadband project with foreign partners because no local telecommunications company was interested in it.

During the hearing, the blue ribbon headed by Sen. Alan Peter Cayetano, asked former socioeconomic planning Secretary Romulo Neri to show cause why he should not be cited in contempt for not attending the hearing. It also decided to refer to the Senate Committee on Public Order and Illegal Drugs the alleged assassination plot against Jose “Joey” de Venecia 3rd after lawyer Raul Lambino corroborated it. De Venecia, son of House Speaker Jose de Venecia Jr., blew the whistle on alleged brokers for the broadband deal—among them President Arroyo’s husband, Jose Miguel Arroyo, and resigned Commission on Elections Chairman Benjamin Abalos Sr.

Rodolfo Salalima, vice-president for operations of Globe, and Mon Isberto of Smart said their respective companies were not approached in any way about the broadband project. If they were invited to bid, they would have done so and would have been capable of providing the service, they added.

Isberto said Smart already has cell sites in all but a dozen of the 1,600 towns in the country, that it is offering wireless broad­band services in 43 percent of the country, and that it has wired broadband services in 116 cities and major municipalities outside of Metro Manila.

Salalima said they have 7,000 cell sites covering about 80 percent of the country.

Globe and Smart said they were asked to participate only after President Arroyo had already canceled the contract with ZTE Corp., the Chinese firm that won the broadband project.

Cayetano said he found the testimony of the telecommunications companies “very revealing.”

“Imagine, the government will be spending $329 million without even asking local telcos if they can do it,” he said.

Cayetano said the government has been arguing that the project is needed but it has never maintained that it could save on the project cost because it is available locally.

He formed a technical group that included the telecommunications companies to go over the technical aspects of the project and determine if there was overpricing. The work of the group is facilitated by the rejection of ZTE’s request that its documents on pricing be considered proprietary.

Sen. Manuel Roxas, who moved for the opening of the documents, said committee members may now share the documents with any technical people they might want to consult so that they could make an informed decision.

Meanwhile, the Senate inched closer to an expected confrontation with Malacañang after the blue ribbon required Neri to show cause why he should not be cited in contempt for failing to appear at the hearing.

Executive Secretary Eduardo Ermita wrote a letter to Cayetano asking the committee to dispense with the testimony of Neri because he had already testified and “exhaustively” discussed the broad­band project on September 26. Ermita invoked executive privilege in explaining why Neri could not testify on his conversations with Mrs. Arroyo regarding the project.

Cayetano also noted that Neri had already made disclosures on his conversations with the President in media interviews so Ermita’s explanation does not wash. He directed the committee secretary to draft a letter asking Neri to show cause why he should not be cited in contempt for not appearing at the hearing.

“If the committee won’t accept his explanation, then the next step is to have a vote on holding him in contempt,” the blue-ribbon chairman said.

Sen. Juan Ponce Enrile asked for an immediate vote since that is where the committee appeared to be heading, but Sen. Panfilo Lacson and Cayetano said they have to accord Neri due process.

The blue ribbon also decided that the Senate should pursue the investigation of the alleged threat on the life of the de Venecias. Senate Minority Leader Aquilino Pimentel Jr. and Sen. Rodolfo Biazon said the alleged plot could be an attempt to silence a vital witness in a Senate investigation.

Lawyer Raul Lambino, a legal adviser of the Speaker, corroborated the earlier testimony of Joey de Venecia that retired Gen. Jaime de los Santos had warned of an assassination plot against him and his father, allegedly hatched by Transportation Secretary Leandro Men­doza, Land Transportation Office Director Reynaldo Berroya and prisons Director Ricardo Dapat.

Cayetano said Berroya and Dapat previously confirmed their attendance but called Tuesday morning that they were sick. The young de Venecia also begged off from the hearing, saying he had a prior commitment that could not be rescheduled and that the secretariat might have made a mistake in saying that businessman Enrique Razon confirmed his attendance.

“We have another hearing tomorrow involving another Razon, Gen. Avelino Razon, and our staff might have mistaken him for Enrique Razon,” Cayetano explained.

ZTE, Cyber Ed deals with China suspended

By Lira Dalangin-Fernandez, Veronica Uy
Agence France-Presse, INQUIRER.net, Associated Press, Reuters

The controversial $329-million national broadband network (NBN) deal with the Chinese company, ZTE Corp., has been “indefinitely” suspended, Trade Secretary Peter Favila said Saturday.

In a broadcast interview with reporters, Favila said the suspension was on the instructions of President Gloria Macapagal-Arroyo, who personally called him. He said the review of the deal that has been marked by scandals of bribes and kickbacks will be discussed “quietly and appropriately” between himself and his Chinese counterpart.

“Utos ng Pangulong Arroyo (It was the President’s instruction),” he said without explaining why the deal to set up a network for exclusive use of the government was suspended.

Favila also announced a similar government action on the $460-million Cyber Education Project, another China-funded loan project which seeks to connect 90 percent of all public schools nationwide.

The announcement came after a week of allegations in the media and before a Senate inquiry of supposed government incompetence, corruption, and the involvement of Arroyo’s husband, businessman and lawyer Jose Miguel Arroyo, in the deal.

Howard Xue, ZTE's global marketing director, has denied allegations his company bribed Philippine officials to win the contract. ZTE "proposed the best price, financing and technical proposal ... There is absolutely no need to bribe anybody to get the project," he said.

“I think this is the best thing to do now,” Favila said in an emergency press conference he called at the Edsa Shangri-La Hotel. He said the Chinese agreed to the suspension Friday night.

"Minister Bo Xilai said his government understands and respects the decision of President Arroyo and will continue to support her and her programs," presidential spokesman, Ignacio Bunye, said in a statement on Saturday.

Favila said Arroyo did not give her reasons for the suspension, commenting “that is her executive privilege.”

But Presidential Management Staff chief Cerge Remonde said the President bowed to “public opinion” when she decided to suspend the deal.

Remonde said the deal has generated much controversy and that suspending it is one way of putting a rest to it.

The President’s decision came even after Palace officials claimed that they have successfully defended the deal and that they have shown the public that it was above-board at the Senate hearing on Thursday.

Remonde did not reply when asked if the President considered the pending cases before the Supreme Court and the Ombudsman in making the decision to suspend the project.

Acting Justice Secretary Agnes Devanadera, who was in the same forum as Favila when the suspension of the deal was announced, said the deferment does not mean that the deal was anomalous.

Devanadera said Transportation Secretary Leandro Mendoza had done his homework. “He looked into the background of the nominated contractor,” she said, adding that “due diligence” was practiced.

In reaction, House Speaker Jose De Venecia Jr. said over DZMM he was “happy” over the temporary suspension.

“Masaya ako (I am happy) because I have been calling that the deal be reviewed, suspended, and eventually cancelled in its present form,” De Venecia said, adding that he hopes that the deal will be converted into a form, as in a build-operate-transfer (BOT), that would not cost the country a single centavo.

The House Speaker, who claims to be the “father of the BOT law,” said he supports his son’s formula for the NBN project.

The House Speaker’s son and namesake had told the Senate inquiry into the NBN deal that the agreement had been pushed by election chief Benjamin Abalos.

Jose De Venecia III, who has his own proposal on the NBN project, had also told the Senate that the President’s spouse told him to “back off” from the government project.

The Supreme Court earlier this month issued a temporary restraining order preventing the government from going ahead with the project.

Analysts have said a split between Arroyo and Speaker de Venecia could open the way for an impeachment motion in the lower house of Congress against the president, who has failed to shake allegations she cheated in the 2004 elections.

Favila ‘at a loss’ over House summons on NBN deal

By Maila Ager
INQUIRER.net


MANILA, Philippines -- Trade Secretary Peter Favila said he was “a little bit at a loss” as to why he was being summoned by the House of Representatives to answer questions on the $329 million national broadband network contract between the government and the ZTE Corp. of China.

Appearing at a budget hearing in the House Thursday, Favila pointed to the Department of Transportation and Communication (DoTC) as the agency tasked to handle the NBN project.

“In fact, I received an invitation sent by the Office of the Speaker to a question hour and I already replied to the Speaker’s office that I did not get the permission to attend to this question hour,” Favila said, responding to Deputy Minority Floor Leader Roilo Golez when questioned about his absence Wednesday.

“But really, I am a little bit at a loss here because this is DoTC, as I understand, the DoTC is the implementing agency,” he said.

Favila said he had written Speaker Jose de Venecia to inquire why he was being summoned to a question hour. But he said he had not received an answer from the Speaker up to this day.

“Not that I’m questioning the Speaker but I’m just seeking a clarification,” he said.

As trade secretary, Favila explained that his responsibility was to look after the country’s bilateral relations with other trading partners in neighboring countries.

Wednesday’s question hour did not push through as the House decided to cancel its session because of the promulgation of the verdict on former president Joseph Estrada.

The Supreme Court issued an indefinite temporary restraining order (TRO) over the NBN agreement over allegations of corruption and had asked the government to comment on a petition filed by a losing bidder.

No deal yet with ZTE, only supplier’s contract--Arroyo execs

No deal yet with ZTE, only supplier’s contract--Arroyo execs


By Lira Dalangin-Fernandez
INQUIRER.net


MANILA, Philippines -- There is no contract yet between the government and China's ZTE Corporation for the implementation of the $330-million national broadband network project, President Gloria Macapagal-Arroyo’s officials insisted Thursday.

Former Socioeconomic Planning Secretary Romulo Neri said what was signed in April was a prospective supplier's contract.

Neri, who now temporarily sits as chairman of the Commission on Higher Education, said the supplier's contract would take effect only once a loan agreement was signed, adding that a loan agreement "will have an effect of an executive agreement" between the Philippines and China.

In a separate interview, Finance Secretary Margarito Teves corroborated Neri’s statement.

The Supreme Court issued an indefinite temporary restraining order on the project last Tuesday in response to a petition filed by Amsterdam Holding Inc. (AHI), one of the losing bidders, which claimed that not only their rights but those of the Filipino people would be violated if the project would push through.

But Neri reiterated that "there was no contract so to speak."

Teves added that both countries were still at the "talking stage, without going into the nitty-gritty yet."

Transportation Secretary Leandro Mendoza and ZTE vice president Yu Yong signed the contract on April 21 during the President’s visit to Boao, China. The contract was reported stolen shortly after the signing but was later reconstituted and re-signed.

Mendoza dodges solons’ questions on broadband deal

By Maila Ager - INQUIRER.net

MANILA, Philippines -- (UPDATE) Transportation Secretary Leandro Mendoza has invoked the sub judice rule to evade questions on the $329 million national broadband network (NBN) deal between the government and China’s ZTE Corp.

“I’m sorry your honor, but my legal counsel has advised me from answering questions on the matter,” Mendoza told members of the House appropriations committee during a hearing Thursday night.

Mendoza said officials of the Department of Transportation and Communication (DOTC) could not speak about the contract, citing pending petitions filed against them before the Supreme Court and the Office of the Ombudsman.

He said they were “bound by the sub judice rule for pending cases and in this way, might not discuss any matter related to the merits of the case lest be declared by the SC in contempt of court.”

Jose “Joey” de Venecia III has asked the Supreme Court to stop the implementation of the controversial project while Iloilo Vice Governor Rolex Suplico has filed a petition before the Ombudsman.

Acting on De Venecia’s plea, the high tribunal on Tuesday ordered a temporary halt to the broadband project, envisioned to establish a seamless connectivity of landline, cellular and Internet services among all government offices nationwide.

But opposition Congressman Rufus Rodriguez, who raised the NBN issue during the hearing, said Mendoza simply needed to answer questions whether a contract was actually signed between the ZTE Corp. and the government.

“This is not any investigation,” he said, adding that it was not the merit of the case being questioned.

But Mendoza maintained his stated position prompting Rodriguez to suggest he might be constrained to request for the resetting of the DOTC’s budget hearing.

Committee chairman Edcel Lagman reminded Rodriguez , however, that the NBN project has no budgetary implications because it has no appropriation yet as earlier stated by Budget Secretary Rolando Andaya.

Committee vice chair Junie Cua agreed with Lagman.

The NBN contract was reportedly signed by Mendoza and Yu Yong, ZTE vice president, on April 21 in ceremonies witnessed by President Gloria Macapagal-Arroyo in China.

SC votes 8-7 to stop NBN deal

By Leila Salaverria - Inquirer


MANILA, Philippines -- By a vote of 8-7, the Supreme Court Tuesday ordered a stop to the implementation of the $329-million contract for the National Broadband Network (NBN) project, which has been tainted with allegations of bribery, overprice and sexual favors.

The seven justices who voted against the temporary restraining order (TRO) were mostly new appointees to the tribunal, said a lawyer who asked not to be named.

Acting on the petitions of Iloilo Vice Gov. Rolex Suplico and Amsterdam Holdings Inc. (AHI), the tribunal issued an order temporarily prohibiting government officials from enforcing the deal with China’s ZTE Corp.

AHI, which offered an unsolicited bid for the project, and Suplico also sought to compel government officials to give them a copy of the contract and other related documents for scrutiny.

“Now, therefore, effective immediately and continuing until further orders from this Court, you, respondents ... and any and all persons acting on their behalf are hereby enjoined from ‘pursuing, entering into indebtedness, disbursing funds, and implementing the ZTE-DOTC Broadband Deal and Project’ as prayed for,” the high court said in an en banc resolution.

Congressional leaders have called for the scrapping of the controversial NBN contract, the subject of an investigation by committees in the House of Representatives and the Senate.

The NBN project is intended to connect government offices nationwide through landline, cellular and Internet services. It would be funded through a loan from China.

Supreme Court spokesperson Jose Midas Marquez said the respondents to the two petitions were given 15 days upon notice to file their comments.

The respondents include the National Economic and Development Authority and its former chief Romulo Neri; the Department of Transportation and Communications and Secretary Leandro Mendoza and Assistant Secretary Lorenzo Formoso III; the Commission on Information and Communications Technology and Chair Ramon Sales; ZTE Corp.; Arescom Inc.; the National Telecommunications Commission; bids and awards for information and communications technology committee, and the technical working group for ICT.

The high court, in a resolution released Tuesday, also took note of the entry of appearance of the Angara Abello Concepcion Regala and Cruz law office as ZTE Corp. counsel and granted its request to be given copies of pleadings, appearances and motions in relation to the case.

The $329-million contract was signed by Mendoza and ZTE vice president Yu Yong on April 21 in Boao, China, in ceremonies witnessed by President Gloria Macapagal-Arroyo. Hours later the Philippine copy of the contract was stolen in a hotel in China. It has since been reconstituted.

The NBN deal has been in the news over the past two weeks because of allegations of bribery and overpricing. Nueva Ecija Rep. Carlos Padilla accused Commission on Elections Chair Benjamin Abalos Sr. of brokering the deal and of receiving sexual favors from ZTE.

AHI cofounder Jose “Joey” de Venecia III also said Abalos offered him $10 million in exchange for backing off from the deal.

Abalos has denied the allegations, saying De Venecia’s statements were part of an attempt to mislead the public about De Venecia’s role in the NBN project.

ZTE has also denied bribing government executives to bag the contract.

Seen by only select few

Earlier, two economics professors at the University of the Philippines said the NBN deal was not necessary because of existing broadband networks operated by the private sector.

In their petition filed the other day, AHI and its president Nathaniel Sauz said the government was forcing the deal on the people despite the numerous questions about it, and despite the contract being seen by only a select few government officials.

“Very plainly, these parties, herein respondents included, are railroading the NBN-ZTE transaction, ramming it down every Filipino’s throat.

“The government is proceeding with this project with reckless abandon, impervious to the very valid concerns, criticisms, and misgivings already expressed before various fora during the past several months. Obviously, the parties interested in this transaction want the deal sealed, so to speak, even before anybody can raise a decisive howl.”

‘Rigged election process’

The petitioners also said that if the deal continued, Filipinos would be in debt for something that was not been studied well and to which they had not agreed.

Suplico said the high court should nullify the NBN contract with ZTE because it was entered into through “rigged selection proceedings,” and violated the procurement law and the build-operate-transfer law that require public bidding, and the Telecoms Policy Act that requires the government to privatize telecommunications facilities.

“The NBN project, under the contract in question, should be annulled and enjoined for preferring public indebtedness over self-reliant and self-liquidating private sector initiatives,” he said.

How they voted

A source said those who voted to issue the TRO were Chief Justice Reynato Puno, Associate Justices Leonardo Quisumbing, Consuelo Ynares-Santiago, Angelina Sandoval-Gutierrez, Antonio Carpio, Ma. Alicia Austria-Martinez, Conchita Carpio-Morales and Adolf Azcuna.

The seven justices who voted against the TRO were Renato Corona, Dante Tinga, Minita Chico-Nazario, Cancio Garcia, Presbitero Velasco, Antonio Nachura and Ruben Reyes.

DOTC ready to defend $329-M NBN project in any court

By Riza T. Olchondra - Inquirer

MANILA, Philippines -- The Department of Transportation and Communications (DOTC) said it was ready to defend the national broadband network (NBN) project in any court.

“We welcome the filing of any charges as we believe that the NBN matter should be resolved in a proper forum, which is the courts, and not through PR (press releases) and other grandstanding venues,” Transportation Secretary Leandro R. Mendoza said in a statement.

Mendoza made the statement following reports that Nueva Viscaya Rep. Carlos Padilla filed charges against DOTC and Chinese officials. Padilla cited a case filed before the Supreme Court questioning the project

As for the case in the high court, Mendoza said, “We are now working with the Office of the Solicitor General (OSG) to finalize our comments on the case.”

The $329-million NBN project won by ZTE Corp. of China is one of the target beneficiaries of the $1.8-billion loan agreement between the Philippines and China.

Signed and sealed

The Philippine government and the Chinese Export-Import Bank signed the deal without fanfare on Saturday on the sidelines of the ASEAN Economic Ministers meeting at the Shangri-La Hotel in Makati.

The NBN project is envisioned to establish seamless connectivity of landline, cellular, and Internet services among all national government agencies or offices.

DOTC reckons the government will save P2.51 billion yearly from the NBN project set to be undertaken by ZTE, aside from enjoying a lower three-percent interest on the loan compared with a nine-percent interest on government bonds used to fund communications spending.

On Tuesday, Padilla lodged a complaint in the Office of the Ombudsman against Mendoza, Assistant Secretaries Lorenzo Formoso and Elmer Soneja, four officials of the Chinese state-run company ZTE Corp., and several others.

‘Grossly disadvantageous’

Padilla said in his charge that transportation officials violated the anti-graft law and the Government Procurement Reform Act when they entered into a “grossly disadvantageous” broadband deal between the Philippines and ZTE.

“The NBN matter is now considered sub-judice, which means that the case is now in the hands of the court,” Mendoza said.

No go for broadband deal--Palace adviser

Apostol: Where's copy of contract?

By Michael Lim Ubac, Riza T. Olchondra, Jeannette Andrade - Inquirer

THE CONTROVERSY over the $329-million national broadband network (NBN) contract that went to ZTE Corp. of China was reduced Monday to a paper chase.

President Gloria Macapagal-Arroyo's legal adviser, Sergio Apostol, said the project could not be implemented because the contract was nonexistent.

"How can we implement? There are no papers. Show me the contract," Apostol said when asked about the status of the ZTE contract.

The Philippine government's copy of the contract was stolen shortly after Transportation Secretary Leandro Mendoza and Yu Yong, ZTE vice president, signed it on April 21 in the presence of Arroyo.

Also stolen was the Philippine copy of the $460-million contract to build a satellite-based backbone for the Department of Education's Cyber Education Program (CEP).

Both the NBN and CEP contracts were signed in Boao, China, on the same day. The projects were to be financed by a concessional loan from China.

Two professors at the University of the Philippines' School of Economics said there was no need for the NBN and CEP deals.

Economics professors Raul V. Fabella and Emmanuel S. de Dios said the two projects were likely to end up being a waste of funds partly because it was not in the government's "core competence" to own, maintain and use an information technology infrastructure separate from two existing ones owned by private telecommunication firms.

Moral backbone
They said government should address "last-mile connectivity" to government agencies and public school computers instead of building another network.

"The only backbone that the government needs today is a moral one," Fabella and De Dios said in a paper titled "Lacking a backbone: The controversy over the National Broadband Network and Cyber-education projects."

Apostol said before Malacañang would answer the criticisms heaped on the project, there should be proof that the contract ever existed.

Details of the NBN project remain hazy at this time although the Department of Justice has ruled that the contract is legal.

In broad strokes, the NBN will exclusively cater to the telecommunication needs of the national government and local government agencies. It is also aimed at reducing the telecommunications spending of the government.

Budget Secretary Rolando Andaya Jr. said the NBN project, to be funded through a loan by China's Eximbank, carried a sovereign guarantee, which means that the government will have to pay for every yuan spent for the project.

Andaya, however, said the ZTE deal was not covered by the Government Procurement Act, which requires a transparent bidding process.

"There are exceptions under that law, and if it's a government-to-government (contract), then there's no need for it to go through that," he said.

Contract didn't reach Palace
But Apostol pointed out that legally speaking, the contract was nonexistent because there were no documents to speak of.

"Somebody has stolen it--(all) two copies. So there's no contract. We don't know what kind of contract it is," the President's legal adviser said.

He noted that the ZTE contract did not pass through his office for scrutiny.

"It did not pass through Malacañang because it was lost. How can it pass through me when the documents were gone? I haven't seen the contract," he said.

Never impartial
Apostol described Fabella and De Dios as "never impartial." He said the UP professors "have not even seen the contract, (yet) they made conclusions already."

The Department of Transportation and Communication (DOTC) disagreed with Fabella and De Dios' claim that the country does not need another broadband network.

"This is one of the few cases in which outsourcing does not make sense," said Lorenzo Formoso, assistant secretary for telecommunications.

"Using existing telco services is costing us almost P4 billion a year. If we make last-mile connections by buying more airtime from them, we will have to budget this again. In contrast, if government has its own network, the savings will actually pay for the loan," Formoso said.

Savings
DOTC data show that government can save P2.51 billion from the NBN project set to be undertaken by ZTE. At present, the cost of all telecommunications for government is P3.5 billion.

With the loan-backed contract, government is set to pay P990 million in annual amortization, giving the government P2.51 billion in savings that can be used for other purposes, according to the DOTC.

But the savings would exclude those for mobile communications because the NBN does not have a mobile component.

The DOTC said the offer of Amsterdam Holdings Inc. (AHI), the company that submitted an unsolicited to build a broadband network, and that of another bidder, US-based Arescom, would be more expensive than that of ZTE's.

This is because AHI is offering a $240-million satellite-based network with 87 stations but the government must buy its own Voice over Internet Protocol or VoIP service.

Arescom has offered a bid-price of $135 million but can only provide 21 base stations. "So, in reality, they are more expensive," Formoso said.

House probe
In the House of Representatives, the chair of the committee on information and communication technology wants to grill executives of the National Economic and Development Authority, DOTC and Commission on Information and Communications Technology on the NBN deal.

Catanduanes Rep. Joseph Santiago said representatives of ZTE, AHI and Arescom, along with Fabella and De Dios, would also be invited to the public hearing.

The Alliance of Concerned Teachers (ACT) asked the government to sober up on its "Cyber Education" program, calling it a white elephant that has nothing to do with cutting-edge technology.

ACT chair Antonio Tinio said the money to fund the project could be better spent on building classrooms, subsidizing the education of children who cannot afford to go to school, hiring more teachers, and producing quality teachers.

Simply broadcasting
"The project is very expensive with little or no proven benefits to the students. It is simply broadcasting a 20-minute lecture to selected schools via satellite. If that is the only thing the Department of Education (DepEd) wants to do, it might as well tape the lectures, place them in compact disks and distribute them to the schools for viewing,"
Tinio said.

The project aims to set up television production and satellite broadcasting facilities at DepEd's central office and satellite-based facilities in 26,618 schools nationwide, each of which will be provided with a multimedia classroom equipped with four television sets, two desktop computers and a printer.

Fifteen- to 20-minute lectures conducted by education experts in all subjects for all grade or year levels will be aired live via satellite to all schools on 12 television channels.

Tinio said the project would not provide students with computer-based learning as the name connotes.

With reports from Norman Bordadora

House ICT committee to probe NBN deal

By Erwin Oliva - INQUIRER.net

MANILA, Philippines – The committee on information and communications technology of the House of Representatives has said it will investigate the controversial national broadband network project.

The new committee chairman, Catanduanes Representative Joseph Santiago, said in a statement Monday that he would start the investigation once the committee is fully organized.

The committee would focus on whether the government really needed to establish the proposed network or whether it was better off obtaining services and equipment from the private sector, Santiago said in his statement.

He was not available for further comment at this writing.

The Department of Transportation and Communication is the lead agency of the National Broadband Network project.

The agency is implementing the project through a Chinese government loan and with Chinese company ZTE as supplier.

"The government's lack of core competency is definitely an issue. But this is not the only issue. Cost-efficiency is another issue. Unlike private enterprise, state agencies are inherently inefficient," Santiago said, as he referred to a University of the Philippines' School of Economics (UPSE) study, which warned that the government lacked the "core competency" to own, maintain and use an IT backbone.

Santiago reiterated that one of the strongest arguments against a government broadband system "is the fact that even the highly advanced governments of other countries do not have state-owned (broadband) networks."

"In many countries, governments agencies simply rely on existing, more efficient and highly reliable privately owned networks that provide universal access and connectivity," he added.

The House probe will invite officials of the National Economic and Development Authority, Department of Transportation and Communications, National Telecommunications Commission and the Commission on Information and Communications Technology, the lawmaker said.

He also said that representatives of ZTE Corp. and rivals Amsterdam Holdings Inc. and Arescom Inc. will be invited to the public hearing, along with the authors of the UP School of Economics study.

Broadband deal challenged at SC

Iloilo Vice-Governor Rolex Suplico on Wednesday asked the Supreme Court to nullify the controversial broadband contract between the government and Chinese company ZTE Corp.

In a 129-page petition the former congressman said the $329-million contract to build a National Broadband Network violates the Procurement Act, the Build-Operate-Transfer Law and the Telecommunications Policy Act which calls for the privatization of all telecommunications projects.

Suplico said the contract was also one of the reasons why Romulo Neri was pulled out as Socio-Economic Planning Secretary to temporarily head the Commission on Higher Education.

He said he had anticipated that the Department of Justice would consider the contract as an executive agreement that does not need a public bidding.

In an interview, Suplico said Neri was demoted to CHED to keep him out of the decision-making process on the escalating controversy hounding the NBN project.

“Neri was taken out of the loop on the NBN Project because he now shares a different view on its viability and regularity. He was demoted for giving the right advice to the President,” he said.

Neri had recommended to President Arroyo that the telecommunication project be implemented by the private sector at no cost to the government. Based on transcripts of their meeting on the Cyber Corridor Initiative in November last year, Mrs. Arroyo agreed with Neri.

But apparently, Neri was forced to endorse the proposal that the project be carried out by ZTE through an alleged government-to-government agreement, and not through a Build-Operate-Transfer (BOT) scheme as had been agreed upon, Suplico said.

“Neri had no choice but to toe the line. There’s nothing much he could do but to endorse it, as he was apparently kept in the dark until the final stages of the ZTE agreement had been drawn-up. But among colleagues and his close circle of friends, he has maintained that this deal was a mistake and that it should be undertaken by the private sector by way of BOT,” Suplico said.

Under the deal, ZTE will set up the network using funds the Philippine government would loan from the Chinese government and turn over its operation to the government after it is completed. The deal also contained a “sovereign guarantee” clause which requires the government to refund ZTE in case of financial losses.

Neri had preferred that instead of loaning money from the Chinese government just to establish a national Internet backbone, the government should have allowed the private sector to build the network.
--Maricel V. Cruz - Manila Bulletin

DoJ says $330-M broadband deal legal

By Tetch Torres - INQUIRER.net

The Department of Justice (DoJ) has affirmed the legality of the $330-million broadband contract the Philippines signed with a Chinese company.

Justice Secretary Raul Gonzalez told the Department of Transportation and Communication (DoTC) that the proposed National Broadband Network (NBN) project could be considered an executive agreement, “provided that the loan agreement between the Philippine government and China Exim Bank is subsequently concluded."

He said executive agreements do not fall under Republic Act 9184 or the Government Procurement Reform Act requiring that "all procurement activities must be made through public bidding."

Lawmakers have questioned why the government settled for negotiating with a chosen company, ZTE Corp., rather than auctioning off the project as mandated by law.

They accuse the government of failing to consider the offers of other telecommunication firms amid reports that two other firms have offered to undertake the project at significantly lower costs -- Amsterdam Holdings with $242 million and Arescom USA with $135 million.

The DoTC is pushing the project as a means to cut government spending in telecommunications, which is estimated to be worth about P4 billion every year. The agency estimates that government can save around P3.6 billion in communications expense if the NBN pushes through.

Questions hound national broadband network project

By Erwin Oliva - INQUIRER.net
MANILA, Philippines -- Controversy continues to hound the multi-billion-peso National Broadband Network (NBN) project of the Department of Transportation and Communication (DoTC).

The DoTC is pushing the network as a means to cut government spending in telecommunications, which is estimated to be worth about P4 billion every year. The agency estimates that government can save around P3.6 billion in communications expense if this project pushes through.

Discussions on the NBN project started back in 2005, said DoTC Assistant Secretary Lorenzo Formoso who also holds a concurrent position as commissioner of the Commission on Information and Communications Technology (CICT).

A policy-making body also directed to "establish and administer comprehensive and integrated programs in information and communications technology," the CICT started brainstorming on the NBN for government.

This ambitious project aims create an intranet or an "internal" network for government institutions, as mandated under the Electronic Commerce Act of 2000, and other policies that followed.

Under the Electronic Commerce Act of 2000, government is mandated to "install an electronic network" to facilitate transactions between government agencies from the national down to the local level. This government network is seen to reduce government's expenses on information and communications technologies, the law said.

The law also mandates the establishment of a web-based government portal, and a "domestic Internet exchange system" to help communications and electronic transactions between government agencies, and eventually to the public.

The CICT is specifically required to create and implement "an integrated government information and communications infrastructure development program" that would coordinate all existing government programs.

The Department of Science and Technology's Preginet (Philippine Research, Education and Government Information Network) is currently one of biggest government networks established, said Tim Diaz de Rivera, CICT commissioner and in-charge of e-government projects.

NBN project takes shape

In 2005, the CICT was appointed in charge of restructuring two government agencies: the National Computer Center and the Telecommunications Office (Telof), which was placed under the supervision of the CICT.

The CICT set up an information infrastructure group and mandated former Telof head Frank Perez to oversee implementation of the NBN project.

Perez eventually resigned and Formoso took over as head, while holding on to his concurrent position at the CICT.

On July 2006, ZTE Corp. signed a memorandum of understanding (MOU) with Department of Trade Industry (DTI) Secretary Peter Favila, Formoso said. Under this MOU, ZTE agreed to bring in investments in the Philippines through various projects including one on telecommunications, said Formoso.

In a separate interview, National Economic Development Authority (NEDA) Director General Romulo Neri confirmed this MOU between the trade department and ZTE, but stressed that it was more "exploratory."

By August 2006, the ZTE submitted a proposal to the CICT to help set up an NBN. Formoso said that ZTE proposal indicated that the People's Republic of China will finance the project through a "concessional loan."

The CICT eventually endorsed ZTE's proposal to the NEDA sometime October 2006, Formoso continued.

The staff at the NEDA Infrastructure Development Division, where the project had been assigned for evaluation, confirmed this endorsement from the CICT. But they said the proposal did not indicate if the proposal came from ZTE. The proposal indicated a generic NBN project.

"It could have been from ZTE. NEDA does not evaluate suppliers for projects," Neri stressed. Asked if the DoTC-endorsed project proposed a build-to-operate scheme, the Socio-Economic Planning secretary said it was among the options considered.

On December 2006, Formoso said that a Chinese ambassador announced the Chinese government had agreed to finance the country's NBN project and had chosen ZTE as the major contractor and supplier. On that same month, the Amsterdam Holdings Inc. said that it submitted its own unsolicited proposal to the DoTC that involved a build-to-operate scheme, Marinelle O'Santos, legal counsel for AHI, told INQUIRER.net in a separate interview.

By December 5, 2006, the lawyer revealed that ZTE had also sent a counter-proposal to AHI suggesting that the holdings firm should adopt its NBN proposal, O'Santos said. AHI had sent a request for information to Chinese suppliers Huawei and ZTE as early as September 2006. Huawei quickly responded on September, while ZTE asked for an extension.

In a timeline it prepared, AHI showed that DoTC had set February as the deadline for submission of unsolicited proposals for the NBN project.

Return of Telof

On February 2007, the Palace announced that it was moving Telof back to the DoTC, which originally oversaw its mandate. In an interview, Formoso said the government is planning to transform Telof into a government broadband service provider.

According to the NEDA Infrastructure Development Division's records, the DoTC-CICT reported the result of the evaluation done by the Bids and Awards Committee for Information and Communications Technology (BAC-ICT) commissioned by the DoTC, in response to the February 13 instruction of President Gloria Macapagal-Arroyo.

NEDA said that the BAC-ICT recommended the establishment of a 'single broadband network" that would satisfy government's requirements.

On March 23, the DoTC formally endorsed the revised proposal for the project, as it took account the BAC-ICT recommendations, NEDA added. Three days after, the NBN project was presented to the joint NEDA Investment Coordination Committee (NEDA-ICC) Technical Board and the Cabinet Committee, composed of different government agencies.

NEDA said that the NEDA-ICC deferred approval of the project and recommended DoTC to refine the proposal.

"I was there as part of the technical working group created by NEDA," said Formoso who represented the CICT.

On March 29, 2007, the NBN project was approved during the joint NEDA-ICC and NEDA Board meeting with a total project cost of about P16.5 billion.

Around April 2007, NEDA director general Romulo Neri wrote a letter to the Chinese government saying the agency was endorsing the NBN project for financing. Neri confirmed writing the letter.

On the same month, President Arroyo flew to China to witness the signing of the contract between the Philippine government and the Chinese government.

Formoso said the supply contract will only push through after "favorable [legal] opinion" from the Department of Justice is issued, and that government finally agrees to the proposed loan agreement.

Lost contract

Transportation and Communications Secretary Leandro Mendoza and ZTE Corp. Vice President Yu Yong inked the $329.5-million supply contract for a national broadband network, a statement from the Office of Press Secretary's website said.

This was the same contract that was later reported "lost" by the Department of Trade and Industry commercial attaché for China. The National Bureau of Investigation had suspected that the contract had been stolen.

"If you have an executed agreement, it is not yet effective until it fulfills the two conditions set," added Formoso who is also a lawyer.

"The issue of transparency is really a non-issue because the proposal did pass through different agencies through the NEDA-ICC," Formoso said, as he denied reports that accused the DoTC of keeping this project under wraps.

Formoso said that the DoTC had reconstituted the lost contract based on the "control copies that we had." The reconstituted contract was signed by ZTE officials and DoTC Secretary Leandro Mendoza in late May 2007, just after the NBI came out with its report on its own investigation.

A source privy to the NBN project said that any reconstituted contract should pass through the NEDA-ICC again. Neri was not available for further comment.

A staff at the NEDA Infrastructure Development Division, said that the supplier contract does not to pass through the agency until it has been finalized.

Transparency questioned

The DoTC official said proposals from Filipino company Amsterdam Holdings Inc. (AHI) and Arescom were also received.

"The Amsterdam Holdings also presented to the CICT their proposal, which came in later after we received the proposal from ZTE," Formoso said.

Formoso said that the Amsterdam proposal was later given to NEDA "but with a cautionary note that they have not disclosed who their partners were."

The NEDA Infrastructure Development Division, however, could not recall receiving any proposal from AHI, nor did it receive any NBN project proposal that follows the build-operate-transfer scheme. Under a BOT scheme, a private contractor will sets up and finance the project until a period of time when it turns over the entire operations to government.

Neri stressed that NEDA does not evaluate proposals from suppliers.

Formoso said the DoTC eventually found out that AHI only had a capitalization of P625,000, which the legal counsel of AHI had confirmed.

AHI's O'Santos, however, said that the holdings firm had increased its capitalization to P11 million.

"The Amsterdam Holdings was set up to bid for the project…but we didn't want to place all our eggs in one basket," added the lawyer who said that the company had tapped Chinese supplier Huawei to become its technical partner for this project.

Jose De Venecia III, who is chairman of Broadband Philippines, is the principal of the holdings firm, the lawyer said.

Track record

In a Powerpoint presentation on the NBN project shown to a local business community, Formoso noted that AHI failed to show any "technical capability much less a track record on IP-based telecommunications."

The DoTC executive said the AHI proposed a "predominantly mobile network with very limited coverage."

"It does not have financial resources as its paid up capital is a mere P625 thousand pesos and has no firm commitments from equity or debt investors," Formosa's presentation added.

In December 2006, Amsterdam Holdings filed an unsolicited proposal with the government to build the NBN under a Build-Own-Operate scheme. It was to be financed privately.

Formoso said that Arescom, on the other hand, proposed to use an "outdated technology" including satellite that has very limited coverage, he said. "Arescom is a wifi and DSL product manufacturer with no telecom system integration track record," he added.

The NEDA Infrastructure Development Division pointed out that the Arescom project was a Department of Interior and Local Government project that was endorsed to the agency years back. It was formerly called the Comnet 2005 project, where Arescom was the supplier.

DoTC said that a comparative evaluation of the proposals for the NBN project showed that AHI offered to do the project at $240 million, while Arescom proposed $135 million.
The ZTE's proposal cost about $329 million.

The deliverables, however, varied as AHI offered to deploy 85 base stations and 500 cell sites, while government had to buy its own cell phone units and voice over Internet Protocol (VoIP) terminals, the DoTC presentation said.

Arescom, on the other end, had to deploy 21 base stations and 83 customer premise equipment, along with a satellite central hub station, it added.

Specifications

ZTE's proposal involved deploying 145 repeater stations, 30 IP-based virtual private network nodes, 300 base stations, 25,844 customer premise equipment with VoIP terminals, and the establishment of one Internet data center doubling as the Network Operating Center with back up.

The AHI lawyer, however, disclosed that the original ZTE project proposal, which the company believes to be the same proposal given to the CICT, would cost government $262 million. This was based on the counter-proposal given by the Chinese supplier to AHI in December 22, 2006 after the holdings firm requested for a proposal after it submitted its unsolicited bid to the DoTC.

AHI was later surprised when the DoTC advertisement revealed that the ZTE project cost had increased to $329 million, O'Santos said.

Showing its own side-by-side proposal analysis of the ZTE and its own, O'Santos said that AHI's cost was not too far off from ZTE's proposal. "But ours is zero cost to government," she added.

"All we ask is that the process should be followed. Why didn't the DoTC say that our proposal was not complete? They never gave us the opportunity to complete our proposal," she said.

AHI also defended its decision to offer a mobile solution to government since a Commission on Audit report shows that the bulk of government telecommunications spending is going to cellular and national direct distance calls.

"We're offering to reduce the cellular cost to government," the lawyer said.

Again, AHI's own timeline showed that ZTE had submitted its original proposal of September 6 to DoTC and requests for time for amendments on February 26, 2007.

Deeper probe into broadband deal sought

By Francis Earl A. Cueto, Manila Times Reporter

A MAJOR labor organization on Tuesday sought for a more in-depth investigation in connection with the losing bidders in the $329.5-million broadband contract between the Philippines and a top telecommunications firm in China.

In a statement, the Construction Workers Solidarity (CSW) said the incorporators and owners of all the companies that bid in the project should be made public as part of the probe being conducted by the National Bureau of Investigation (NBI) over possible sabotage in the loss of the ZTE contract signed by the Philippine government and ZTE officials in the presence of President Arroyo in China.

The CSW said a deeper probe into the incident should be done in view of reports that the son of a high-ranking government official owns one of the losing companies.

ZTE is the second-largest telecommunications firm in China.

The NBI has filed charges of malversation of public property against Philippine Commercial Attaché to China Emmanuel Nino Wee before the Ombudsman over the loss of the ZTE documents, according to CSW.

Crispin Soriano, CSW secretary-general and spokesman, said that identifying the owners of Amsterdam Holdings, Inc. (AHI) and Arescom, two companies that bid for the project, would help the NBI determine motive, if any, to support its suspicion that the project is being sabotaged.

Besides the loss of the documents, Department of Transportation and Communications Assistant Secretary Formoso has accused AHI of spreading “disinformation” about the national broadband project.

The statement also quoted Arnel Dalumpines, chief of the NBI task force, as saying that the ZTE’s competitors in the bidding might be behind loss of the signed documents between China and the Philippines.

When completed, the national broadband project will connect all government offices nationwide down to the barangay level, at a cost much lower than the price of the same services offered in the IT market.

“It might be a demolition job hatched by the competitor against the winning bidder ZTE Corp. They might have connived with Commercial Attaché Ang and Chinese interpreter Allan Liu,” Dalumpines was quoted as saying.

Ang, who worked closely with Liu during President Arroyo’s visit to China, said the ZTE documents were either stolen or were lost in his hotel room in China after they were given to him for safekeeping.

The broadband project aims to speed up communications and coordination among government offices, and is expected to result in billions in savings in taxpayers’ money