The Internet In South East Asia

The Internet in South East Asia workshop took place in Bangkok, Thailand from 21-23 November 2001. The workshop was organized by the International Telecommunication Union (ITU), hosted by the Post and Telegraph Department (PTD) of Thailand and supported by the Communications Authority of Thailand (TAT), Telephone Organization of Thailand (TOT) and the National Electronics and Computer Technology Center (NETEC). There were 96 participants (of which 24 women) from 19 countries. Mr. Rianchai Reowilaisuk, Deputy Director General, PTD Thailand, was appointed chairperson and Ms. Azizah Hamzah, Senior Principal Assistant Secretary, Ministry of Energy, Communications and Multimedia (Malaysia), was appointed vice-chairperson.

The purpose of the workshop was to present the results of the ITU's Internet Case Studies carried out for South East Asia during the year and to uncover and discuss the key issues affecting Internet developments in the region. National and international experts made presentations on topics including Internet policy, commercial aspects, public access and awareness, market research, and regional cooperation. Highlights and conclusions of the workshop included:

Internet Policy

It is a myth that the Internet market is (or should be) unregulated. Governments clearly feel the need to monitor Internet developments and to promote Internet access. While the scenarios vary, all governments share some level of supervision, whether for licensing Internet Service Providers (ISPs), ruling on IP Telephony, requiring ISPs to interconnect or resolving disputes between ISPs and telecommunication operators. One of the recurring questions is about the number of ISPs. Is there such a thing as an ideal number of ISPs? Which criteria should determine the government's decision on how many licenses to give out? Several policy makers expressed their concerns that unrestricted market entry in smaller markets could discourage serious investors from making a long-term commitment to developing Internet infrastructure in the country. Regarding IP telephony, most countries in the region approve of the technology but allow only licensed telecommunication operators to provide the service. Recognizing that bans against IP telephony may be hard to enforce, it may be more practical to license IP telephony providers and have them contribute to universal access goals, just like licensed telecommunication operators. Few countries allow ISPs complete freedom. In most instances, ISPs depend on telecommunication operators for the provision of key network linkages such as incoming modem lines, broadband connections, leased lines, and international Internet bandwidth (see slide 'What can an ISP do?'). When incumbent telecom operators compete in the ISP market, there are often disputes over the supply, pricing and quality of these network components that may require regulatory involvement.

There is also a need to deal with the convergence of telecommunications, Information Technology (IT) and broadcasting. Digitization means that the same information can now be transported over diverse types of networks that have traditionally been regulated by different government authorities. Malaysia has created a converged regulator, the Malaysian Communications and Multimedia Commission (MCMC). Its Communications and Multimedia Act (CMA) streamlines numerous service-specific and technology-specific licenses into four technology-neutral generic licenses (see slide 'Regulation of Market Activities (CMA)').

Governments must also guard against over-regulation of the Internet market. In Thailand, government intervention- for instance through the requirement that the incumbent international telecom operator (CAT) have a stake in all ISPs and that ISPs use the international gateway of the incumbent operator-is calculated to have cost an overall welfare loss to consumers of around 230 million Baht per year (US$5.25 million) (see slide 'Welfare Loss'). One trend is towards industry self-regulation by governments facilitating the development of codes of practice in areas such as interconnection and content.

Governments also have a key role to play in promoting and helping the Internet industry develop. This may include industry incentives for training and content development as well as projects to provide Internet access in public locations such as schools. The National Electronics and Computer Technology Center (NECTEC) in Thailand has spearheaded many government initiatives for ICT. It has been instrumental in guiding the SchoolNet project that has provided free Internet access in some 3'300 schools (see slide 'The SchoolNet Project').

Public Access & Awareness

The vast majority of inhabitants in South East Asia cannot afford individual Internet access-that is a telephone line, plus a personal computer (PC) plus Internet access in their home. If Internet access is to be boosted, it will have to be through public locations such as schools, universities and Internet cafés. Indonesia has been a trendsetter in the latter.

Internet cafés in Indonesia, which are termed Warung Internet or Warnets, have proved highly successful. Over 42 per cent of Internet access in Indonesia comes from some 2'500 Warnets, many operated by Small and Medium Enterprises (SMEs). The Warnets have banded together in an organization and cooperative to help advance the industry. Much of the cooperation takes place virtually, through mailing lists. Although Virtual is the Organization, Real is the Struggle (see Slide 'Institutional Framework 2: Virtual organization/collaboration').

Innovations that help reduce prices also help to boost access. In Thailand, the incumbent domestic telephone operator, TOT, provides free Internet access to national websites and email through a short, four-digit number (1222) to sites located in the country. Vietnam has the same system. These types of Intranets are made possible through national Internet exchanges and eliminate the cost of international traffic. Another way of making the Internet more accessible is through pre-paid cards. With this paying method, customers avoid the monthly subscription charge. They can also use their pre-paid card at Internet cafés where they do not need to pay for a phone line or a PC. Thailand has been hit by a 'pre-paid revolution', with over 70 per cent of Internet accounts being pre-paid. Launched in 1998, pre-paid cards are highly convenient for users, who can purchase them from a variety of retail outlets, recharge them online or at automatic teller machines (ATMs) and purchase them in a variety of denominations. (see slide 'Why is pre-paid Internet popular in TH?').

Arguably, most people who really want to use the Internet in South East Asia are already doing so, though perhaps not as often or in as data-intensive manner as they would like to. Therefore it is worthwhile examining factors that affect awareness and use of the Internet in order to boost Internet access. These 'soft' factors include aspects such as literacy, educational attainment and language. While the region's literacy rate is relatively high (around 90 per cent in most of South East Asia) it is not enough to be able to read and to write to be an Internet user.

 It is interesting to note that there appears to be a close relationship between newspaper readership and Internet access (see slide 'Literacy'). This suggests that the factors that drive newspaper reading (e.g., high level of literacy, curiosity, language familiarity, etc.) also influence Internet usage. Language continues to play an important role in Internet usage. Since the Internet is dominated by English language content, some countries, where English is widely spoken (such as Singapore, Malaysia, and the Philippines), have a strategic advantage vis-à-vis their neighbors. The Indochina countries, Thailand, Laos and especially Cambodia face extra barriers because their alphabets are Sanskrit based making them difficult to adapt to computers. Most policy makers seem to agree that while content development in the local language is very important, the promotion of second languages, especially English, is an effective way of increasing Internet usage.

While users can adapt to the Internet by learning English, the Internet also needs to be adapted to users' needs. This requires applications that interest users. Non-Governmental Organizations such as the Open Forum of Cambodia have been playing a leading role in this area. For example, the Open Forum says that in the IT equation, too much attention has been focused on Technology and not enough on Information (see slide 'Role in Internet Development.'). More emphasis needs to be placed on the latter to increase interest in the Internet. Their approach includes developing applications in local languages, nurturing online communities through mailing lists and news groups and providing training in IT.

Software Parks

The enormous success of Silicon Valley and the software development industry in India has excited interest around the globe. Many governments, including in South East Asia, are trying to foster their own software havens (see slide 'South East Asia Software Parks'). Computer programming is basically brainpower and thus requires relatively little investment. The region has successfully used its relatively lower labor costs for driving manufacturing based export growth in the past and now wants to use this advantage for software development. Potentially these projects promise to generate foreign exchange and investment, reduce the brain drain problem by providing skilled manpower with attractive jobs, and generate local IT expertise.

Telecommunication infrastructure is a key component of most software development centres. In India, the government's decision to let software parks have their own Internet connectivity has contributed to growth. Vietnam, which offers discounted Internet access for software parks, is also thinking of moving in this direction. Thailand has a fully occupied Software Park on the outskirts of Bangkok with some 40 companies. Its goals include attracting foreign investment and developing high quality and competitive software, especially for mobile Internet applications.

It is still too early to tell how software centres will fare in the region. One danger is that software centres may become islands of IT expertise while the remainder of the country falls behind. Also, with so many IT parks, the market is getting increasingly competitive. Countries need to determine their advantages, distinguish themselves from others and find niche markets. A crucial issue will also be the ability to attract, keep and train skilled labor, particularly when almost all countries around the world have a shortage of IT personnel. Thailand has developed a SWOT model that analyzes its particular strengths, weaknesses, opportunities and threats (see slide 'Thailand SWOT') in a way that could serve as a model for others.

International charging

 The cost of international bandwidth is an important concern in South East Asia. The fact that regional ISPs have to pay the full cost of an Internet connection to North America is perceived as unfair. This subsidizes North American users who can browse sites in South East Asia for free. North American users of IP Telephony calling South East Asia also benefit from this discrepancy. While most content has traditionally been in North America, this is changing with more websites appearing in the region.

In some countries in the region, international bandwidth accounts for a significant percentage of the ISPs' total costs (up to 80 per cent in the case of Cambodia). This is passed on to users in the form of higher prices, reduces affordability of Internet access and increases the Digital Divide. One way around this is to develop Internet exchanges that encourage local hosting and keep national traffic within the country.

It is important to distinguish between the various components of international connectivity, which is made up of two elements: the cost for an international connection to an Internet hub and the actual connection to the Internet backbone (see slide 'International internet connectivity: two markets'). Some countries in the region do not allow ISPs to procure their own international connectivity, thereby driving up costs. The last component, the connection to the Internet backbone, needs to be monitored carefully. While it remains the most reasonable component of international connectivity it is controlled by relatively few companies and therefore potentially subject to market dominance. Ideally, the costs of backbone connection should be unbundled from those of the leased line charges.

Size matters for international Internet connectivity and economies of scale are important in determining the price paid for international bandwidth. Countries with small markets and those that are land locked (and therefore do not have access to undersea cables) pay more for Internet connectivity than others. These tend to be Least Developed Countries and special initiatives should be designed to provide affordable international bandwidth to this group of countries. Infrastructure costs could be reduced and international data gateways could be liberalized. For instance, the region is served by a growing number of satellites that are improving the technology for data transmission (see slide 'South East Asia'). Another way of lowering costs would be for countries to pool their bandwidth requirements and to develop regional backbones.

The issue of international bandwidth charging should be placed at the top of the agenda and discussed at the appropriate forums, including ITU Study Groups and other international and regional forums dealing with this issue.

Business

The region's telecommunication operators are deeply involved in the Internet market. In most countries the incumbent telecommunication operator is the largest ISP, as well as the main provider of infrastructure such as international bandwidth and leased lines (see slide 'Incumbent operators and the Internet'). However there are some signs of a downturn in regional markets, partially caused by the regional economic crisis and partially by strategies that are no longer relevant. Telecom operators will have to adapt more appropriate business strategies-based on successful examples from other countries-as well as overcome one of the main barriers in the region, the lack of bandwidth.

One way of surmounting barriers is through industry collaboration. In Indonesia, the ISP association has been successful in encouraging ISPs to create a national Internet exchange. This has led to a growth of national websites, thus keeping more traffic within the country and cutting down on demand for international bandwidth. This also helped many ISPs weather the financial storm. The ISP association has also been involved in a number of other industry initiatives including domain name management and promotion of the Internet in schools (see slide 'Programs').

Regional cooperation

One common trait of the region is that all countries are members of the Association of South East Asian Nations (ASEAN). This organization has launched the e-ASEAN initiative to help promote ICT development in the region and a number of projects have been identified (see slide 'The e-ASEAN Framework Agreement'). There needs to be close coordination between telecom policy makers and other parts of the government interacting with ASEAN. It would also be useful for South East Asia nations to cooperate with other regional and international initiatives bridging the Digital Divide in order to cross-fertilize ideas, strengthen initiatives and avoid duplication. Regional organizations should ensure that their interests in such issues as international charging are defended with a common voice at international forums. The region's ICT pioneers should also enhance their support for the developing nations to increase their Internet infrastructure and services. E-ASEAN should equally strengthen its awareness building activities. It is especially important that top-level officials embrace and support ICT within their countries and commit themselves to promote, use and provide ICT applications.

Market research

Information about ICT markets is important for policy makers and others. Yet few governments in the region regularly collect and compile the needed information. They need to work with national statistical agencies to design ICT related questionnaires and collect the needed data on a regular basis. Thailand, for example, has published an Internet User Profile, which provides useful information on who uses the Internet, what kind of information users are looking for and what types of barriers they see.

Any country interested in increasing Internet penetration has to identify its weaknesses and where its potential to expand lies. There are different types of factors and barriers that can affect Internet usage and to identify these, countries need to conduct qualitative as well as quantitative market research. So-called quantitative factors comprise the infrastructure, including telephone lines, mobile phones and PCs, and Internet access prices. Qualitative factors, on the other hand, are less obvious because they are not directly linked to the Internet market but call for a more profound look at a country's culture and social structure. Because the language, the literacy rate and the user's need for specific content as such have nothing to do with the telecom market, it is also easier to miss these factors. While quantitative factors analyze the supply (market) side, qualitative factors look at the demand (user) side.

Role of the ITU

The workshop concluded with a discussion of the possible role of the ITU and other international organizations. It was agreed by all that the workshop had proved useful, for the exchange of information and for the development of co-ordination mechanisms. The countries of the region have a lot to learn from each other, and the case studies and data gathering work that ITU has done in the region is invaluable. The participants expressed the hope that similar workshops could be held in the future, especially on topics like connectivity, interconnection and extending access.