Saturday March 21, 2009

Speeding up broadband

Stories by B.K. SIDHU

The biggest challenge for broadband is in the speed of building and satisfying users’ demand.

IDA Ayu needs to download large files from the Internet and transfer them between her house and workplace frequently. To do that, she needs high-speed Internet access or in other words, broadband connection. But, she had to wait a good two years to get Streamyx into her house in Glenmarie, Shah Alam.

The thing with fixed broadband (as opposed to wireless) in the country is that the choice is limited. There are five players that offer the service – TM Net, Time dotCom, Maxis Communications Bhd, Jaring (all four nationwide) and PenangFON (only in Penang).

On the other hand, Vicknesh Arumugan of Subang Jaya and Abu Bakar Zainal of Kuala Lumpur were less fussy. All they wanted was access at affordable rates but they too had to wait a while. A month ago, when Packet One launched its wireless coverage in these areas, they grabbed the offer, which was far too good to miss. For RM49 a month, Vicknesh gets a bandwidth speed of 400kilobits per second (kbps). He is now a satisfied customer. So is Abu: “The speed is excellent. I’m happy.”

Clearly, there is a massive under-served market right smack in the Klang Valley craving for affordable and decent broadband coverage. For those who have tapped into the network, there is no end to their grouses – snail’s speed due to lack of coverage, frequent disconnection and breakdowns.

As it stands now, the broadband speed in the country, regardless of operator, does not exceed 4Mbps (megabits per second) for retail users or in more imaginable terms, almost a whole night to download a movie.

Pricing is another major beef. Many cannot afford the fixed broadband packages, which explains why over 2,000 people snapped up Packet One’s attractive offer on the very first month of its launch.

“Many subscribers were first-time users and on dial-up. The demand for broadband is out there. The biggest challenge is how fast can we build and satisfy that demand,’’ says Packet One chief executive officer Michael Lai.

A major dampener is also the basic affordability (or lack of it ) of computers.

Time dotCom Bhd chief executive officer Afzal Abdul Rahim says it all boils down to three factors – cost, speed and quality – to drive broadband penetration.

But that’s easier said than done, given the fragmented nature of the Malaysian market and as correctly pointed out by a recent Malaysia Information Technology Report 1Q09: “Malaysia’s IT market is distinguished by a marked digital divide, which really makes for two separate markets. In the Klang Valley, around the capital Kuala Lumpur, a mature urban population surpasses even some developed nations in terms of IT adoption on some indicators.

“Outside this metropolitan area, around 20 million people still lack access to basic information and communication infrastructure,’’ it said.

Against that backdrop, the Government’s aspiration for a 50% broadband penetration in Malaysia by end-2010 may be far too ambitious as it has a long way more to go in a short time to boost it from the current 21%. High-speed Internet access is highest in the workplace while that of households stands at a just 7%.

“It should not be about numbers, anyone can dress up the numbers. Consumers are not getting enough speed and volume and there is over-charging in the marketplace,’’ DiGi.Com Bhd chief executive officer Johan Dennelind said.

Broadening access

In comparison, Singapore has become the world’s most wired nation with an enviable household broadband penetration of 99.9%. It speaks volumes about the republic’s competitiveness. Some attribute the high penetration to the republic’s relative small size but it’s hard to dismiss the political will and effective execution that has brought Singapore to that level.

Other powerhouses with impressive household broadband penetration are South Korea (93%), Hong Kong (83.8%) and Taiwan (76.8%).

Noteworthy is that back in 1996, when the Multimedia Super Corridor was first conceptualised, Malaysia was at par with South Korea and Taiwan in terms of broadband penetration rates. Today, we are miles behind in terms of broadband penetration while these countries have steadily forged ahead. Why was Malaysia so slow in opening up its market and moving to next-generation networks? Lest we forget, information and communication technology (ICT) can be a major contributor to a country’s economic prosperity.

“I do not think we (Malaysia) are behind in terms of broadband. How many countries are better than Singapore (in that regard)?,’’ contends Telekom Malaysia Bhd (TM) HSBB (high-speed broadband) programme director Ahmad Azhar Yahya.

Last year, Malaysia decided to move up the value chain by announcing the multi-billion ringgit HSBB project. TM is the key player in fixed broadband. (HSBB is about bigger bandwidth and speed.)

TM will invest RM8.9bil and the government will fork out RM2.4bil to roll out 1.3 million lines in the Klang Valley, Iskandar Malaysia (specifically Nusajaya) and other key industrial spots in the country. The HSBB project spans 10 years and involves adding high-speed fibre to the core network, laying fibre from the curb to your house in selected areas and increasing the number of passages for the international connectivity.

Undoubtedly, HSBB will have a profound positive effect on businesses, academic institutions and the general populace as it represents a core infrastructure in daily life, involving one’s ability to tele-work, operate the business from home, interact with family and friends, receive high-quality entertainment such as video-on-demand or IPTV (internet protocol TV), interface with government or manage the family’s health and household activities.

Indeed, it is an exciting proposition for those craving for fast Web access and data transmission. HSBB involves a speed starting from 10Mbps up to and over 100Mbps. Again, in more imaginable terms, with 10Mbps, it could take only 15 minutes to download a movie.

Industry woes

Broadband will be the future battleground and not voice. There has been a robust shift from voice to data transmission over the years which is expected to intensify. For operators, the gold mine is data.

Still, there are challenges to overcome for broadband access to be significantly widened from its current base of two million subscribers.

One has much to do with the lack of competition in the industry. Competition, as we all know it, is the hallmark of better pricing and quality (speed and coverage) as it provides consumers with choices. Unfortunately, there is very little of that currently.

TM’s Ahmad begs to differ: “There is enough competition and healthy competition. (But) we do not want to slash prices.’’

TM holds a near-monopoly for Internet services in Malaysia largely because almost all the last-mile connections (the line that links from the curb to your house) is owned by TM. About 96% of the fibre in the country is owned by TM and the remaining by Time dotCom Bhd, Maxis Communications and some other players.

Most operators have to rely on TM’s core network to offer services. Some industry players lament that the wholesale rates for access offered by TM are not “fair and equitable’’. TM’s retail unit, TM Retail, offers Streamyx. TM has 1.6 million users of whom 1.3 million are Streamyx users.

In addition, the players need to move traffic in and out of the country but that’s hard to do as the bulk of landing sites are controlled by TM. On the other hand, in Singapore, the landing sites are opened up where players compete by offering competitive pricing.

This has led to another problem: A pricing mismatch.

“TM’s wholesale pricing is much more expensive than its retail price. That means it is at a price advantage and we, the other players, are at a disadvantage,’’ says Intelligent Edge chief executive officer Anil Chet Karamsingh.

Another industry player echoes the sentiment. “We cannot match the pricing that TM Streamyx offers in the marketplace as it has the advantage over access pricing while we, the other players, have to pay high rates for using TM’s wholesale services to roll out our services.’’

Packet One’s Lai says: “If the wholesale cost is higher, how can last-mile players compete with TM’s retail business?

Energy, Water and Communications Minister Datuk Shaziman Abu Mansor could not be reached for comment for this article.

REDtone International Bhd group chief executive officer Zainal Amanshan says even though the wholesale pricing is better than TM’s previous rates, it remains on the high side. He points out that the cost in Sabah and Sarawak is three times higher than in Peninsular Malaysia for IP transit and Metro connect cost.

Because of that, an observer says the unfair advantage that TM has in terms of pricing as well as the high base cost for players could be stifling competition in Malaysia’s broadband segment. That pretty much explains why 14 out of the 52 licence holders in the country are not offering services.

REDtone group managing director Wei Chuan Beng says the regulator should take its whip out and re-look this issue which is curbing competition in the marketplace.

Jaring CEO Dr Mohamed Awang Lah points out that if not for competition in the cellular phone segment, consumers would not be paying such low rates for text messages (SMS) or even voice calls. Competition, he says, has driven mobile penetration rates to 94% from 10% some 12 years ago.

In its defence, TM’s Ahmad replies: “We are governed by the Communications and Multimedia Act. You cannot say our retail unit has special privileges. It is hard to comment if someone says it is unfair (pricing). Our pricing is based on volume and distance.”

HSBB: Awaiting pricing details

In three months, a portion of HSBB will be opened up to the players. The terms of usage has just been released but pricing for access is due out next month.

There is some anxiety among industry players that they may be left behind if the rules are far too stringent or pricing, far too high. TM, however, has stressed countless times that it will be an open access network but that the operators need to value-add as opposed to simply re-selling bandwidth. That’s tricky because a lot of the Applications Service Providers (ASPs) are merely re-sellers and they may be out of business unless they are willing to upgrade themselves.

TM’s Ahmad reiterates: “HSBB will be made available to all service providers via transmission, access and connectivity.

“At the end of the day, we have engaged the service providers, and they have not raised any questions.”

Based on interviews with several key players, StarBizWeek has compiled their suggestions into a list, or a wish list, if you like. They are calling for:

1. Fair and equitable pricing structure to ride on the HSBB network. No favouritism to TM’s own unit, TM Net.

2. One flat price for wholesale product offering regardless of volume and distance. Prices should be published so all operators know how much they pay for services. All deals should be at arm’s length.

3. TM Wholesale and TM Retail to be split. TM Wholesale, which will own the core HSBB network, should operate as an independent company to ensure fair competition.

(Britain took a bold step years ago to deregulate the wholesale price BT can charge for fibre, so long as it did not favour its own brand of Internet service. Japan faced a similar problem after several years where regulation forced NTT, the incumbent phone company, to sell access of its lines to rival Internet providers at low prices.)

4. Open up and introduce landing sites to foreign carriers as done by Singapore. This will create redundancies that is needed so that the frequent breakdown of traffic to the United States and Europe can be avoided as 90% of the data traffic goes to United States to sites such as YouTube, MySpace, etc.

If all these fail, the players say the Government should support the build-up of a second network, an independent one which offers core infrastructure and not compete on services.

In this regard, Time dotCom is the de facto second fixed network operator but it will need funding to beef up its network. Industry players say the Government can enter a private/public partnership to invest in the network. Time dotCom, or even Maxis, has to then operate as a network provider and cannot offer retail services like TM Net.

5. Another alternative to set up a consortium that buys network space and leases it to all players, which does away with directly dealing with TM. That way, they say, there can be bulk buying and, hopefully, the pricing will be more competitive. For this to happen, all players need to be united.

6. There is a critical need for strict and strong enforcement and a review of regulations so that there is a level playing field. The regulator should use its whip and impose fines on those operators that delay broadband penetration growth.

Way forward

Governments across the globe are investing in private/public partnership to ensure that they remain competitive in the marketplace.

It is hard to deny that TM has the financial power to build the HSBB and it, too, needs to protect its investments. But with an adequate second network, players will have choices that will drive the much-needed competition in the marketplace.

“If a country like Singapore can have three networks, there is plenty room for a second network in this country,” says Jaring boss Dr Mohamed.

What matters in BROADBAND?

1. Malaysia defines broadband at speeds above 256 Kbps (kilobits per second) whereas that for South Korea and Japan is 512Kbps.

2. Malaysia is building a high speed broadband network with speeds from 10Mbps to 100Mbps (megabits per second) for RM11.3bil

3. Digital technology has a capability of combining and transporting multiple forms of communications media, including audio, text, data, music, video and other formats. The physical pathway can use one or more transmission media, such as copper/coaxial wire, optical fiber, digital broadcast, satellite or radio spectrum.

NARROWBAND

It is a low-capacity communications circuit/path with usual speed of 56Kbps or less.

DIALUP

A voice line up to 56K used for access to a computer or the Internet via a modem.

MEASURE OF DATA TRANSFER SPEED:

1. Kbps (Kilobits per second) - used as a rating of relatively slow transmission speed . (One Kbps is 1,000 bits per second.)

2. Mbps - stands for millions of bits per second or megabits per second and is a measure of bandwidth (the total information flow over a given time) on a telecommunications medium. (A megabit is a million bits.)

3. Gbps - gigabits per second is used for transmission speeds in a network or in internal circuits. (1,000,000,000 bits per second).

3G is a third-generation wireless broadband cellular network offering simultaneous delivery of voice and data. 3G network uses HSDPA/UMTS (High Speed Downlink Packet Access/Universal Mobile Telephone System) technology.

3G spectrum holders in Malaysia are Celcom (M) Bhd, DiGi.Com Bhd, Maxis Communications Bhd and U Mobile Sdn Bhd.

WiMAX (Worldwide Interoperability for Microwave Access)

WiMAX™ based on IEEE 802.16 standard, it enables delivery of wireless broadband services anytime, anywhere. WiMAX products can accommodate fixed and mobile usage models.

WiMAX players: Asiaspace, REDtone, YTL E-Solutions, and Packet One.

BEST EFFORT

In a best effort network all users obtain best effort service, meaning that they obtain unspecified variable bit rate and delivery time, depending on the current traffic load.

BROADBAND PENETRATION

It is the national total of connections (or subscribers) divided by the population and multiplied by 100. Malaysia’s household broadband penetration rate is 7% and internet penetration is 21%.

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