Malaysia lowers broadband targets

MALAYSIA--The slow uptake of broadband services has led the Malaysian government to revise its earlier optimistic penetration targets, prompting industry observers to call for market reform.

The government had previously set a target of 75 percent adoption rate by 2010, but only 11.7 percent of Malaysia's 5.5 million households currently have broadband access, up from 7 percent in 2005.

This disappointing state of affairs recently prompted a Cabinet Committee chaired by Deputy Prime Minister Najib Tun Razak to revise the target down to 50 percent by 2010.

However, the Association of the Computer and Multimedia Industry of Malaysia (Pikom) said the government should instead use an internationally recognized benchmark in establishing the broadband penetration target.

It is proposing the government sets a goal to achieve at least 3.0 broadband subscribers per 100 inhabitants by 2010. Compared to comparable economies, Malaysia lags behind its peers in terms of broadband subscribers per 100 inhabitants.

"A broadband service provider reported that its total broadband customer base was 864,000 in 2006," said Pikom chairman David Wong, in an e-mail interview with ZDNet Asia. "Against a population of 27 million, this is mathematically insignificant and works out to 0.32 broadband subscribers per 100 inhabitants."

In contrast, developed countries such as Denmark, Finland, Sweden and Korea have at least 26 broadband subscribers per 100 inhabitants. "Malaysia fares poorly even when compared against economies like Greece, Turkey and Mexico. Greece has 4.6 broadband subscribers per 100 inhabitants, Turkey has 3.8 and Mexico 3.5," Wong said.

To improve the quality of broadband services, Pikom said telcos in Malaysia should follow the lead of countries such as South Korea and Japan, in upgrading to fiber networks.

Wong explained: "Fiber-to-the-home (FTTH) and fiber-to-the-building (FTTB) subscriptions have gain prominence. We are not seeing FTTH being rolled out here. Instead, it would be fair to say our copper infrastructure is being stretched."

Pikom is also concerned over repercussions of the Malaysia's costly, yet poor-quality broadband services. The Association has proposed that the cost of broadband usage for consumers be reduced immediately to create a critical mass of broadband users.

Wong said Malaysia's Internet industry is stunted because of the nation's broadband shortcomings. "The greatest segment harmed by our broadband inadequacies is electronic commerce, online service-based providers and online content segment of the ICT industry," he said.

"Malaysians are frustrated when they click to watch a streaming video and are forced to wait while buffering repeatedly takes place, and this is [just] one of many examples," he noted.

Much of the brickbats concerning broadband services have been directed at Telekom Malaysia (TM), which has 94 percent of Malaysia's broadband subscriber market or a base of more than 1 million subscribers.

At a recent media briefing to outline initiatives to improve its broadband services, TM Malaysia Business CEO Zamzamzairani Mohd Isa made an appeal: "We are doing things to improve our service. But we seek your patience."

Calls to open market
Industry observers say some of the problems may stem from TM's dominant market position, and the apparent protection the telco enjoys as a government-linked company, especially on issues such as the unbundling of last-mile access.

Pikom argued that the current "oligopolistic, monopolistic situation for telecommunication backbone and broadband services will doom us all".

In a discussion with government officials last April, Pikom urged the Malaysian government to open up the telecommunication and fiber-optic pipelines owned by government-linked telcos and make the network accessible to all technology providers. This, it said, will reduce the cost of broadband services for consumers.

Hafriz Hezry, an investment analyst with TA Securities Holdings, said: "I believe de-monopolization plays a critical role in furthering the development of a technology, as this would lead to a more market-driven and commercial-based industry."

In an e-mail interview with ZDNet Asia, Hafriz said the introduction of WiMax could resolve, to some extent, the problem of the last-mile access which TM seeks to protect.

"WiMax provides an alternative to existing services. Increased industry competition, be it in the form of a substitute product or direct replacement should benefit consumers," he said.

In March this year, the Malaysian Communications and Multimedia Commission ignored the country's top telcos such as TM and Maxis, and instead awarded WiMax licenses to four lower-tier telcos. The licensees have until the end of 2007 to roll out their WiMax services to 25 per cent of the population, in the areas allocated.

However, there are indications that this target may be too ambitious. Hafriz pointed out there has not been much development in the WiMax deployment so far. "For example, [one of the licensees] Green Packet is currently facing trouble in securing sites for their transmitters, hence the delay in rolling out its services," he added.

In his Budget Speech 2008, Malaysia's prime minister outlined several new initiatives to help spur the country's broadband penetration rate, including investment allowance, import duty and sales tax exemptions on hardware equipment.

Lee Min Keong is a freelance IT writer based in Malaysia.