PLDT Disclosure: PLDT and Smart response to the PSE 

As of this writing, Smart Communications, Inc. (“SMART") has not yet received the complaint filed by DITO Telecommunity Corporation (“DITO”) with the PCC. Nonetheless, SMART assures the public that it is not engaged in any act constituting abuse of dominant position or other anti-competitive behavior against DITO.

As a background, SMART and DITO entered into an interconnection agreement in February 2021 to allow inter-network calls between their respective subscribers.

Shortly after DITO’s commercial launch, however, SMART detected fraudulent international bypass traffic from DITO’s network to SMART subscribers, and SMART promptly notified DITO. International calls (calls from abroad to the Philippines) using DITO SIMs that should have been subject to proper toll rates, came through SMART’s network as local calls with DITO mobile numbers as caller IDs. This has resulted in poor customer experience and revenue losses on the part of SMART.

SMART has since devoted the past several months in earnest negotiations with DITO on the establishment of operational coordination and fraud detection measures to mitigate, track and block the illegal bypass traffic. In those discussions, SMART even offered substantial discount on compensation that DITO should pay it for the detected illegal bypass traffic from DITO’s network, the priority of SMART being the maintenance of the integrity in DITO’s network and the tracking, blocking, mitigation and avoidance of its fraudulent use.

It must be emphasized that DITO’s vulnerable network has adversely affected SMART subscribers, not only in the form of low-grade calls from masked DITO numbers, but also through spam or robot calls and scams from overseas sources that are difficult to trace. Also, with the proliferation of quishing, smishing and other similar machinations to perpetrate fraud against the Filipino public, illegal bypass calls are enabling tools to fraudsters and must therefore be curbed at the outset. For its part and owing to SMART’s robust monitoring and fraud detection systems, which it has invested and continues to invest heavily on, SMART is able to track and block such illegal calls emanating from its end. These measures and investments of SMART have protected DITO’s network and subscribers. There is, therefore, no reason why DITO is unable to do the same to protect SMART’s network and subscribers.

In the interim, DITO requested SMART for additional interconnection capacity, and SMART has clearly stated to DITO that it will do so but DITO must do the following to ensure that the illegal bypass traffic is mitigated or avoided to protect SMART and its subscribers, the most important of which are: (1) the establishment of operational coordination and fraud detection measures to mitigate, track, and block illegal bypass traffic, and (2) the signing by DITO of a Memorandum of Agreement (Cooperation Against Bypass Activity) with SMART which shall set out, among others, the procedures for handling any bypass activity, including the formula for computation of penalties for said fraudulent calls. SMART also asked DITO to compensate it for the minutes of bypass traffic which DITO failed to detect and block, for the period from July 2021 to current date. This matter is pending before the National Telecommunications Commission. It thus came as a surprise when, in the thick of SMART’s good faith efforts to settle the issue, news of DITO’s PCC complaint came out.

Based on the foregoing, DITO’s claim that SMART is engaged in anti-competitive behavior is clearly baseless and meant to avoid: (i) responsibility for the establishment of operational coordination and fraud detection measures to mitigate and avoid, track and block illegal bypass traffic, and (ii) liability for these illegal bypass activities, which, while committed by DITO subscribers, are the ultimate responsibility of DITO as the telco provider.

In closing, we stress that DITO’s request for capacity augmentation must be evaluated from the lens of fairness, and that the duty to interconnect must not be used as a shield for the perpetuation of fraud to the detriment of SMART subscribers, with concomitant adverse financial impact to SMART.

We trust this clarifies matters. Should you require more information, please let us know.

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