1. Commercial aspects of the 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 Tim.Kelly@itu.int.Tim.Kelly@itu.int Dr Tim Kelly, Head, Strategy & Policy Unit, “ITU Workshop on Internet diffusion in South East Asia” Bangkok, 22 November 2001

2. International Telecommunication Union 2 Agenda From Dot.com to Dot.bomb  The Global Slowdown in the Telecoms sector  How is ASEAN doing? The health of the ASEAN ICT sector  Incumbent Telecom Providers  Internet Service providers Commercial strategies for Internet  What works where?  Price comparisons Future challenges  IP Telephony  Broadband

3. International Telecommunication Union 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 days Source: www.ft.com Share price trends in the US “Technology Media and Telecoms (TMT)” sector

4. International Telecommunication Union 4 How is ASEAN doing? (1) Growth rate in fixed-lines 0% 5% 10% 15% 20% 25% 30% 199219931994199519961997199819992000 ASEAN average growth rate Global average growth rate Source: ITU World Telecommunication Indicators Database.

5. International Telecommunication Union 5 How is ASEAN doing? (2) Growth rate in mobilephones Source: ITU World Telecommunication Indicators Database. 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 199219931994199519961997199819992000 ASEAN average growth rate Global average growth rate

6. International Telecommunication Union 6 How is ASEAN doing? (3) Growth rate in Internet users Source: ITU World Telecommunication Indicators Database. 0% 50% 100% 150% 200% 250% 199219931994199519961997199819992000 ASEAN average growth rate Global average growth rate

7. International Telecommunication Union 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 Investment in telecom networks, SE Asia, US$ bn

8. International Telecommunication Union 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% 19911993199519971999 ASEAN average Thailand Thailand outperforming ASEAN Thailand underperforming ASEAN Fixed-line growth rates in Thailand compared with ASEAN average

9. International Telecommunication Union 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

10. International Telecommunication Union 10 Incumbent operators and the Internet (selected ASEAN nations) IncumbentISPComments Telkom (IDN)TelekomNetMarket leader with 10% of post-paid users. Telecom MalaysiaTMNetMarket leader with around 65% of users. PLDT (Philippines) InfocomAcquired 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) SingNetFirst ISP to launch. Now market leader. VNPT (Viet Nam)VDCMonopoly IAP and IXP. Retail Market leader with 60% of users Source: ITU ASEAN Internet case studies (www.itu.int/ti/casestudies)

11. International Telecommunication Union 11 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 access Nationwide 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

12. International Telecommunication Union 12 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 traffic (bn mins) and Int'l bandwidth (Mbit/s) 0.0 0.2 0.4 0.6 0.8 1.0 1.2 Bit-Minute Index 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. International Telecommunication Union 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 Typical Internet access prices, per hour (US$) Source: ITU ASEAN Internet diffusion case studies.

14. International Telecommunication Union 14 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 Typical prices for a 64 kbit/s leased line, per month (US$) Source: ITU ASEAN Internet diffusion case studies.

15. International Telecommunication Union 15 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 Price for one minute call from Singapore to US, using different IP Telephony options (US$) Source: ITU, adapted from SingTel

16. International Telecommunication Union 16 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

17. International Telecommunication Union 17 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

18. International Telecommunication Union 18 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

19. International Telecommunication Union 19 For more information … Internet case studies (www.itu.int/ti/casestudies)www.itu.int/ti/casestudies IP Telephony (www.itu.int/wtpf)www.itu.int/wtpf Broadband (www.itu.int/broadband)www.itu.int/broadband