FRIDAY REFLECTIONS
By B.K. SIDHU
SOMEONE made a remark recently that “he is at it again’’.
The person was referring to the Information, Communications and Culture Minister Datuk Seri Dr Rais Yatim, who wants broadband rates be brought down.
That is a fair request and rates should come down with the entry level packages reduced further.
The call made this week is not his first nor will it be his last but at the same time, access to broadband should not be confined to urban centres. There should be equal offering in the rural areas and he wants that done too.
He wants the service providers to offer broadband to the 7.5 million 3G and Internet dial-up users so that the migration can take place.
Currently, almost all celcos and telcos and even the WiMAX players are offering broadband services. The question is at what price and where?
Most of them concentrate on urban centres, big towns and big cities, leaving the rural folks with slow speed or no Internet connectivity at all.
From an EBITDA (earnings before interest, taxation, depreciation and amortisation) perspective, celcos in the country have margins of 40% to 50%. That is high considering the fact that most industries’ margins are in the 30%-40% range.
These EBITDA margins are perhaps the highest ever recorded in Asia if not the world and at 50%. Maxis Communications Bhd is perhaps the only celco globally with that kind of margins.
Surely these celcos can still make a lot of money if rates are dropped further but where is the push or incentive for them to drop rates? Logically, why should they? It is a demand-driven market and even if quality is questionable, consumers live with it.
What could drive rates is actually fierce competition.
And to get these operators slugging it out to keep their turf will require a neutral network where all operators ride on to offer services. They do not have to invest millions to build the network, they just focus on the service level and offer the services. In that way, the investment is lesser and the fight is really on the service level.
Singapore is adopting that and frankly speaking, it should be the model for Malaysia to adopt to avoid duplication of infrastructure. At the same time, it offers a network that all can ride on and not be subject to conditions by any operator. And the issue of the stifling of growth of others will not arise.
That kind of network is lacking here and that is why the broadband infrastructure in the country is not complete for all to enjoy as Malaysia marches to become a knowledge and innovative nation.
Today, all the operators are investing a lot of money to build their own network. Then they worry about return on investment as the gestation period is long.
A neutral network will definitely drive competition. To make it easier for the operators, they can be owners in a consortium that owns and operates the network.
There is also no need to build a brand new network to call it neutral. Time dotCom Bhd’s network is one that can be re-deployed as neutral. What needs to be done is some adjustments so that it can cater for all players.
By doing so, the minister does need not cajole the operators to drop rates. Competition will force rates down and the fight will also drive and determine the quality of access to consumers.
That is the type of network planning those in charge should be looking at.
Deputy news editor B.K. Sidhu is all for rates to drop and she believes the entry level packages should be no more than RM20 a month, as this will get more people to jump on the broadband bandwagon.
http://biz.thestar.com.my/news/story.asp?file=/2010/7/16/business/6675947&sec=business
