IDD rates in M'sia to drop by 99%?

KUALA LUMPUR--International direct dialing (IDD) rates could plunge by as much as 99 percent following the revocation of cellular access fees and the introduction of Internet-based telephony services in Malaysia.

This prediction was made by MalaysiaStreet.com in a recent sectoral market report.

"Regulation on cellular services has been liberalized with repercussions likely to be greater than currently perceived," said Yeoh Keat Seng, co-founder and chief executive officer (CEO) of the financial portal.

If rates were to go downhill, state-controlled Telekom Malaysia would lose far more than its peers, Yeoh added.

Against this backdrop, competition in cellular services has escalated while the industry is also seeing the advent of new players as voice over Internet protocol (VoIP) can now be offered by non-telcos.

"The government's recent decision to revoke the ATUR Automatic Telephone Using Radio Regulation 1986 means all call charges and access fees are no longer regulated and cellular companies are free to compete as they see fit," Yeoh added.

He said the decision would not cause the cellular companies' average revenues per unit (ARPU) to collapse overnight as the RM60 monthly access fee was all along a ceiling and not a floor, price.

"There was a reluctance to permanently slash access fees as the telcos needed it to supplement their call charges. However we have no doubt that with the ATUR revocation, tariffs will come under increasingly greater pressure as competition escalates."

WorldSec International Ltd research manager Loke See Ooi however, is skeptical IDD rates in the country will drop by that wide a margin (99 percent) when many telcos here still rely on voice-based telephony services as their bread-and-butter.

"Such a huge drop is questionable. The IDD rates will very likely drop but perhaps not by that much. I believe it can only happen when telcos start offering other forms of services such as data and video, from which they can make money," he said.

This, Loke added, would only kick in when the communications industry in Malaysia reaches the 3G platform where users can access the Internet wirelessly at high speed, and even download video and multimedia broadcasts with high resolution.

However, to move into 3G technology, local telcos have to overcome several issues apart from having to invest a huge capital to revamp their networks from the current 2G/2½G platform.

"Rapid technological advancement and the fact that telcos here are just coming out of the economic recession, are two major factors which will determine how they approach 3G," Loke said.

He added that in terms of 3G licences, there is a high possibility the Malaysian government would pose minimal charges on them and not exorbitant rates as practised in Europe.

"Amongst the local players, Maxis and Telekom are probably best financed and prepared for 3G. It's still a question of how the others will embrace 3G given their existing financial capacity."

Another local analyst however believes MalaysiaStreet.com's forecast of a potential 99 percent drop is not unrealistic in terms of VoIP-based offerings.

"Given the fact that telcos such as Time and Digi were already offering 50 percent to 70 percent discounts on their VoIP services prior to the government's revision on Internet-based services, it is not unlikely the drop in rates could reach 99 percent," she said.

She also expects cellular services--particularly with the ATUR revocation--to further stiffen competition against fixed line providers in terms of long distance calls.

"Cellular services have all along posed as competition but even more so now especially as the (cellular) players are likely to come up with more aggressive packages soon."

Telekom Malaysia still holds the majority of the market for long distance fixed line services despite the introduction of the Equal Access regime last year which lets the public access other fixed line providers' networks for long distance and international calls.