commercial aspects of the internet the views expressed in this paper are those of the authors and do...

Commercial aspects of Commercial aspects of the Internetthe Internet

The views expressed in this paper are those of the authors and do not necessarily reflect the opinions of the ITU or its Membership. The author can contacted by e-mail at [email protected].

Dr Tim Kelly, Head, Strategy & Policy Unit,

“ITU Workshop on Internet diffusion in South East Asia”Bangkok, 22 November 2001

mailto:[email protected]

International Telecommunication Union

2

AgendaFrom Dot.com to Dot.bomb

The Global Slowdown in the Telecoms sectorHow is ASEAN doing?

The health of the ASEAN ICT sector Incumbent Telecom Providers Internet Service providers

Commercial strategies for InternetWhat works where?Price comparisons

Future challenges IP TelephonyBroadband


3

Bursting the Telecom Bubble

Total market value of telecom operators down from US$6.3 trill. to US$3.8 trill.

More than 400’000 redundancies announced in telecoms since Oct 00

On average, a major telephone operator goes bust once every six daysSource: www.ft.com

Share price trends in the US “Technology Media and Telecoms

(TMT)” sector


4

How is ASEAN doing? (1)Growth rate in fixed-lines

0%

5%

10%

15%

20%

25%

30%

1992 1993 1994 1995 1996 1997 1998 1999 2000

ASEAN average growth rate

Global average growth rate

Source: ITU World Telecommunication Indicators Database.


5

How is ASEAN doing? (2)Growth rate in mobilephones


0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

1992 1993 1994 1995 1996 1997 1998 1999 2000




6

How is ASEAN doing? (3)Growth rate in Internet users


0%

50%

100%

150%

200%

250%

1992 1993 1994 1995 1996 1997 1998 1999 2000




7

Signs of a future slowdown

Telecom investment halved since 1997

Withdrawal of certain foreign investors, such as SwissCom, BT etc

Evidence of substitution (slowdown in fixed-line growth rate)

Delays in privatisations

6.53

8.16 8.47

4.383.53 3.49

1995 1996 1997 1998 1999 2000

Investment in telecom networks, SE Asia, US$ bn


8

Policies that worked in the early 1990s may no longer be appropriate

Franchising policy provides short-term incentives, but creates longer-term problems

Foreign investors deterred by caps on foreign ownership

Privatisation of fixed-line assets no longer attractive to investors

Some ASEAN currencies now much weaker

0%

5%

10%

15%

20%

25%

30%

1991 1993 1995 1997 1999

ASEAN average

Thailand

Thailand outperforming ASEAN

Thailand underperforming ASEAN

Fixed-line growth rates in Thailand compared with

ASEAN average


9

Nevertheless, ASEAN incumbent operators still relatively profitable

Top ten ASEAN operators made (US$2.3bn profit in 2000)

Only one of top ten lost money

Several still expanding overseas (e.g., SingTel in Australia, TM in South Africa)

Top ten operators, US$ bn, 2000

2.9

2.3

1.2

1.1

1.1

1.0

0.7

0.6

0.6

0.60.14

0.02

0.16

0.03

0.30

0.10

0.25

1.35

-0.03

Singapore Telecom

TM (Malaysia)

TOT (Thailand)

Telkom (Indonesia)

VNPT (Viet Nam)

PLDT (Philippines)

AIS (Thailand)

TAC (Thailand)

Celcom (Malaysia)

CAT (Thailand)

Revenue

Profit


10

Incumbent operators and the Internet (selected ASEAN nations)Incumbent ISP CommentsTelkom (IDN) TelekomNet Market leader with 10% of

post-paid users.

Telecom Malaysia TMNet Market leader with around 65% of users.

PLDT (Philippines)

Infocom Acquired by PLDT in 1998, JV in 1996. In top 3 ISPs.

CAT (Thailand) CAT has 32+3% of all 18 ISPs.

Internet Thailand IPO, Nov. 2001.

Singtel (Singapore)

SingNet First ISP to launch. Now market leader.

VNPT (Viet Nam) VDC Monopoly IAP and IXP. Retail Market leader with 60% of users

Source: ITU ASEAN Internet case studies (www.itu.int/ti/casestudies)


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Internet strategies: What works where?

Prepaid Internet cards In the Philippines, more than 40% of use is pre-paid, and

growing fast Internet cafés / Public access

Only a quarter of Thai users use the Internet from home In Indonesia, there are more than 2’500 Warnets providing

public Internet accessNationwide dial-codes

In Viet Nam, around 40% of users dial-up via 1268 and 1269 numbers, without pre-registration

Low infrastructure costs, through competition In Singapore, a 64 kbit/s leased line costs as little as US$30 per

month and international bandwidth is plentiful


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The critical factor: IP connectivity

1.1

0.2

0.5

1.0

0.6

0.1

0

500

1'000

1'500

2'000

2'500

3'000

Viet Nam Indonesia Thailand Malaysia Philippines Singapore

Int'

l tra

ffic

(b

n m

ins)

an

d In

t'l b

and

wid

th

(Mb

it/s

)

0.0

0.2

0.4

0.6

0.8

1.0

1.2

Bit

-Min

ute

Ind

ex

Int’l traffic mins

Int'l bandwidth

Bit-Minute Index

Note: International traffic (in billion mins) includes both outgoing and incoming. Data is for 1999 except Indonesia & Philippines (2000). International IP connectivity is in Mbit/s (Sept. 01).

Source: ITU/TeleGeography Inc.

The bit-minute index is calculated as Mbit/s of int’l bandwidth divided by billions of mins of int’l traffic


13

Internet price comparisons

Thai users benefit from unmetered local calls

Singapore offers “free Internet” bundled with call

Indonesian users have nationwide dial-up access

Philippines has flat-rate local calls

Malaysia has very low ISP charges

$0.00

$0.20

$0.40

$0.60

$0.80

$1.00

$1.20

$1.40

Sing. Mala. Indo. VN Thai. Phil.

Phone usage

ISP usage

Typical Internet access prices, per hour (US$)

Source: ITU ASEAN Internet diffusion case studies.


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Leased line price comparisons

Huge differences in leased line prices across the region

Big differences between urban and rural areas in some countries

Infrastructure competition is critical factor in achieving lower prices

Leased line prices affect competitiveness of ISPs

$0

$200

$400

$600

$800

$1'000

$1'200

$1'400

$1'600

Sing. Malay. Indo. VN Thai. Phil.

Typical prices for a 64 kbit/s leased line, per month (US$)

Source: ITU ASEAN Internet diffusion case studies.


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Future challenges (1): IP Telephony

Highly competitive in Singapore (>70 IPTSPs)

Offered by incumbent PTOs in Thailand and Viet Nam In Viet Nam, IP Telephony has

taken more than 40% of market for calls between Hanoi and HCMC

In Thailand, CAT’s PhoneNet offers savings of up to 33% on int’l calls

In other ASEAN countries, IP Telephony is either restricted to the incumbent or prohibited

$0.225

$0.110

$0.052

001 V019 eVoiz

One minute call to USUS$, July 2000

Inter-national Direct Dial

VoIP

PC-phone

Price for one minute call from Singapore to US,

using different IP Telephony options (US$)

Source: ITU, adapted from SingTel


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Future challenges (2): Broadband

Multiple platforms DSL Cable modems Apartment LANs Fixed-wireless Satellites

Cross-media competition tends to speed up deployment

Cross-ownership tends to slow down deployment

<www.mdc.com.my/msc>


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Case study: Broadband in the Philippines

Competitive cross-media framework established Cable modems since 1999 (Destiny, Now, SkyCable) DSL since 2000 (PLDT, Globe) LMDS since 1999 (Broadband Philippines) Fixed Wireless starting 2002 (OneVirtual Corp., Meridian)

Relatively attractive pricing DSL priced at 2’500 pesos (US$50) per month, residential

But, market demand seems to have plateau’d at around 10’000 subscribers Low quality CATV networks need major upgrade and suffer

image problems “DSL” speeds are low (64 kbit/s burstable to 128 kbit/s for

residential) Foreign investment restrictions and economic uncertainty

limit scope for expansion


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Broadband experiences elsewhere in developing ASEAN

Thailand DSL, cable modems and Satellite broadband, but no fixed wireless (no

regulator to give licences!) Incumbent telcos not yet involved in market Only a few hundred users

Viet Nam Only 200 leased line customers (high prices) DSL pilot being conducted by VDC (<100 users) No CATV or DTH satellite

Malaysia Major effort to roll-out multimedia super corridor Unified regulatory framework (Comms & Multimedia Act ’98) Good fibre backbone, but DSL still only “experimental” Satellite TV, but no cable TV. Satellite killed off MMDS. Effectively, broadband means business use, not residential


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For more information …

Internet case studies (www.itu.int/ti/casestudies) IP Telephony (www.itu.int/wtpf)Broadband (www.itu.int/broadband)

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