| TELECOMMUNICATIONS
With
the National Telecommunications Commission finally in place, all
sides are optimistic that solutions to several problems will emerge
quickly, enabling them to make longer-term plans and address rising
competition
by KOMSAN TORTERMVASANA
Catching the new wave
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Information and communications technology fairs
are frequent crowd-pleasers in Thailand.
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The
telecommunications industry enters 2005 with a sense of optimism,
with all eyes on the new National Telecommunications Commission
(NTC), whose seven members face the challenge of clarifying the
rules of the game.
And not a moment too soon, since Thailand is committed under a World
Trade Organisation agreement to opening its telecoms industry to
full competition for local and foreign players in 2006.
One of the big challenges facing the NTC will be to define the future
roles of the two giant state telecom enterprises: TOT Corporation
and CAT Telecom. Under the new regime they are expected to be licensed
like every other business, but exactly what licences they should
hold is a subject of debate.
It was simpler a decade ago when the Telephone Organisation of Thailand
operated domestic telephone services and the Communications Authority
of Thailand had the monopoly on international long-distance, while
also running the postal service, which has now been spun off as
a separate business.
Today the corporatised TOT Corporation and CAT Telecom have overlapping
activities in every sector of the communications business, from
broadband Internet to mobile phones and even international direct
dialling. Each also holds third-generation bandwidth that could
be very lucrative.
These are in addition to the 30-plus concessions the state enterprises
have granted to private operators. Frequent complaints from the
operators focus on unfair financial terms and the tendency of the
state enterprises to continue acting as regulators even though they
are direct business rivals.
But private operators have managed, despite the policy vacuum that
has existed for years, to expand their businesses at a pace that
TOT and CAT, with their antiquated, civil-service decision-making
approach, could never achieve.
Two state projects that crawled closer to fruition in 2004 serve
as good examples of the hurdles facing TOT and CAT. TOT Corporation
has been attempting to add 565,000 fixed lines to its network ever
since former president Sutham Malila expressed a wish in 2000 to
shorten the long waiting list for numbers. Three presidents have
since come and gone, and not a single new line has been added.
The 8.05-billion-baht project received cabinet endorsement in November
2003, with a recommendation that work be completed within 15 months
or by February 2005. But as of December 2004, authorities were still
trying to decide whether to accept the winning bid by a consortium
led by Siemens of Germany. The price Siemens quoted was one billion
baht higher than the figure from runner-up Italian-Thai.
Surapong Suebwonglee, the Information and Communications Technology
(ICT) minister, subsequently asked Siemens to lower its price, and
the group proposed a one-billion-baht reduction. He also appointed
his own consultant to screen Siemens' technical proposals as well
as those of the groups that felt they had not been treated fairly
by TOT. If the consultant determined that the proposals of other
bidders also met the terms of reference, a new bid could be called.
And people who have been waiting for TOT phones should be prepared
to wait some more.
Equally hapless has been the saga of CAT Telecom's mobile phone
expansion plans. The project was aimed at upgrading CDMA base stations
in 51 provinces to CDMA 2000 1X EVDO technology compatible with
the network now provided by Hutchison CAT Wireless Multimedia in
the 26 central provinces.
A group consisting of Canada's Nortel and Real Time (a subsidiary
of SET-listed United Communications Industry Plc) won the first
bid two years ago, quoting a price of 32 billion baht.
Dr Surapong and others declared the price outrageously high and
officials went back to the drawing board to draw up new terms of
reference on more than one occasion. The latest terms call for CAT
Telecom to operate and market the nationwide service, since authorities
felt the existing marketing agreement for the Hutch CDMA service
was disadvantageous to the state agency. At any rate, the bid will
not take place until 2005 and no one is holding his breath for an
outcome.
If 2004 was not marked by significant network expansion by local
telecoms players, it provided consumers with plenty of satisfying
developments in the form of lower-cost services.
Playing an active role in bringing about low-cost services was the
ICT ministry. For example, it encouraged TOT Corporation to introduce
international direct dialling (IDD) service to compete with CAT
Telecom's international call service. The move brought international
call rates down significantly, to as low as nine baht a minute for
several popular destinations.
TOT also began offering Voice Over Internet Protocol (VOIP) service
to compete with CAT, forcing rates down to seven baht a minute.
The ICT ministry was also active in encouraging private operators
to bring broadband Internet costs within reach of more people. Companies,
notably True Corporation, responded enthusiastically once they saw
the extent of the demand. The availability of low-cost broadband
has pushed the subscriber base up from a few thousand two years
ago to an estimated 300,000 at the end of 2004.
Against this backdrop, the NTC is gearing up to start work in earnest
in 2005, with 300-400 staff seconded from the Post and Telegraph
Department. It established as its priorities the classification
of telecom services, licensing framework and interconnection regime.
An industry executive said he expected new licences for services
that did not depend on radio spectrum such as Internet service providers
and IDD gateway providers, to emerge quickly under the new regulator.
The original licences were going to expire very soon and the NTC
could issue new ones without having to decide the matter jointly
with the still non-existent National Broadcasting Commission.
Coming soon to a tiny screen near you ...
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Mobile phones are fast becoming a new medium
suited to many kinds of content.
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THE CELLULAR
PHONE is fast becoming a new outlet for media and entertainment,
having evolved from a mere mobile communication device to lifestyle
icon. The resulting race for high-speed wireless content and application
access is increasing the complexity of operators' strategic business
planning.
The most prevalent media available on mobile phones in Thailand
today are games, polyphonic ringtones and music, live sports matches,
and some news. Yet the most popular application remains SMS (short
messaging service), with some 14 million messages sent daily by
the country's 25 million mobile phone users.
Television shows in particular have helped to stoke SMS fever, generating
more than one billion baht in non-voice revenues monthly for all
operators, in addition to the shares paid to programme producers.
Local operators are hoping to build more lucrative revenue streams
from applications such as MMS (multimedia messaging service), video
streaming and Internet browsing as the wireless society develops.
With handsets that are almost like laptops in terms of functionality
now in widespread use, the challenge will be to identify the types
of wireless services people will pay to use.
Major mobile phone operators are recognising the potential of becoming
"integrated wireless service providers" and have embraced
a market-driven approach as opposed to the previous technology-driven
strategy.
Cellular companies are building relationships with media outlets
and content developers in a bid to offer trendy services and a wide
range of information and entertainment for the country's existing
two million GPRS users.
The country's largest operator, Advanced Info Service (AIS), has
set up two operating units for value-added business: wireless service
development and wireless service marketing, to encourage data communication
in a more user-friendly manner.
"We targeted our non-voice revenue to exceed 10 billion baht
in 2005, up from an expected eight billion baht in 2004 and 5.2
billion in 2003," says Kittsanan Ngampatipong, executive vice-president
for marketing at AIS. The company's total revenue was estimated
at 130 billion baht in 2004.
Second-ranked
DTAC, meanwhile, is in the process of restructuring its value-added
business in a bid to expand aggressively into the booming mobile
applications market.
Co-chief executive officer Sigve Brekke said DTAC planned to launch
a slew of new mobile applications and content in the next 12 months
to boost its non-voice revenue after having focused on network improvements
in 2004.
"We expect the amount of revenue from our non-voice services
to account for 6% of total revenue in 2004, and that figure would
rise to 10% in 2005," Mr Brekke said.
Third-ranked player TA Orange also expanded aggressively into high-speed
mobile data download services with an aim to double its non-voice
revenue to 700 million baht in 2004.
TA Orange plans to install Edge technology _ basically an always-on
Internet connection via a mobile phone _enhancing
its WiFi and broadband technology. Target customers are mainly younger
users.
Despite the ample room for growth in the non-voice market, most
local operators have yet to invest in the 3G technology needed for
high-speed and greater bandwidth needed for a real wireless data
communications, saying they need to choose the right technology
and standards.
As well, they need to be certain of market demand on a commodity
scale, since 3G infrastructure is far from cheap. Most operators
believe that Edge will be the first real test of whether data services
will fly.
For voice traffic, the greatest growth potential now lies in the
untapped first-time mobile phone users in provincial areas, while
companies will use more sophisticated customer relationship management
programmes to hang on to existing users.
AIS and DTAC have similar subscriber acquisition strategies for
the lucrative grassroots segment in 2005, as it is expected to become
"the single driving force" for building overall subscriber
totals.
Cellular companies expect demand for mobile phones to rise 20% in
2005 with some 5-6 million new subscribers. The country's mobile
phone penetration rate could rise to 50% from 41% at the end of
2004. Pre-paid users, who account for 80% of the entire subscriber
base, will continue to dominate. But it's a low-margin proposition
_ average revenue per prepaid user, at just 250-300 baht per month,
is one-quarter of the postpaid figure.
At the end of 2004, AIS was expecting to see 15 million customers
on its network, representing a 58% share of the market, with DTAC
at seven million and Orange at three million.
AIS expects to sign up between two million and three million new
subscribers in 2005, while DTAC is looking to capture at least 30%
of all first-time mobile phone users in a direct-sale approach over
the next one or two years, a figure projected at 10 million. TA
Orange hopes to add one million more subscribers.
An industry analyst at KGI Securities (Thailand) Plc said competition
in the mobile sector today was all about innovation and creativity,
with operators competing on personalisation services to add value
and build their bottom lines.
The media industry will be a driving force for cellular services
because of its marketing capabilities.
"In the near future, there will be all kinds of different mobile
phone tariff services to cater to more segments of customers,"
the analyst predicted.
"Promotional tariff packages and special privileges will become
the standard for customers before deciding to sign up for any services.
I mean, how many people will use an operator's service on the basis
of the number of their base stations?"
The mobile industry still had substantial room to grow as it was
becoming one of the most sought-after media for multimedia and data
services, after movie, television and computer screens.
_ SRISAMORN PHOOSUPHANUSORN
Feeding the `need for speed' frenzy
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Not only do mobile users want data on the go,
they also want it at top speeds.
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BROADBAND CONNECTIVITY
has begun to emerge as a dream marketing machine for telecommunications
companies, fixed-line telephone operators in particular, who see
computers as hubs for online home digital entertainment.
Broadband got a major boost in 2004 with True Corporation taking
the lead as an early adopter of high-speed Internet technology over
its copper telephone lines. The company quickly built a base of
enthusiastic users with offers such as free modems and rates as
low as 590 baht a month for unlimited broadband Internet access
at a shared connection speed of 256 kilobytes per second.
A year ago, broadband subscribers in Thailand numbered only 30,000.
By the end of 2004, the figure was approaching 300,000, with consumers
lured by prices that have fallen 100-fold over two years.
Of the total subscribers, 90% live in Bangkok, where fixed-line
operator True is the dominant provider. The figures show that Thais
are increasingly willing to pay more for faster services, and broadband
access revenues are quickly becoming an important source of income
for traditional fixed-line providers faced with declining sales
in the voice business segment.
Another reason for growth is that wider broadband availability and
a greater selection of ever-improving bandwidth-intensive content
services. The penetration of Java-enabled handsets, meanwhile, is
helping spread the popularity of mobile games and downloads.
Major industry operators predicted that the number of broadband
users in Thailand would reach one million or more by the end of
2005, driven by the entry of new broadband operators coupled with
aggressive price promotions and growing demand for high-speed wireless
access.
Meanwhile, the number of Internet users is expected to top 10 million
at the end of 2005, an increase from about eight million at present.
Market leader True expects to double its broadband subscriber total
in 2005 to 400,000 by investing more than 100 million baht in coverage.
Provincial fixed-line operator TT&T is set to offer broadband
Internet services for multimedia in major provincial areas, with
an aim to more than triple its broadband subscribers to 50,000 over
the next 12 months.
Mobile operators, meanwhile, are tapping faster speeds to offer
their customers real-time wireless data and entertainment content
to compete with the fixed-line broadband providers.
In the race to provide consumers with ever more attractive Internet
and telephone service, a range of new technologies and standards
has evolved, promising high-speed Internet and data access that
is cheaper and speedier than that on existing networks. The technology
race has been going on for some time in the fixed-line market, with
the transformation from traditional telephony to Voice over Internet
Protocol (VoIP), which uses the Internet to send. But recently,
the technology has begun to cross boundaries into the wireless market.
Most broadband in Thailand is between 256K and 1 Mbps. It takes
speeds of 34 Mbps to truly deliver video over IP, provide IP telephony
and have enough left over for an army of live webcams and IP radio.
True has taken the lead in offering to help householders and developers
of new residential projects to wire up for its broadband connection
for access to the Internet, video clips, telephone and a series
of home entertainment services. TT&T and leading Internet provider
CS Loxinfo are taking an active role in building up their online
content. True and TT&T have also linked up to expand their basic
wire-line communications services into the broadband segment, with
an aim to create a common, cross-network service platform nationwide.
TT&T has 1,500 to 1,600 broadband switching networks in the
provinces, with a total capacity to accommodate up to 30,000 Internet
broadband ports. True, meanwhile, has a total capacity to cater
to 200,000 broadband users.
In parallel with the introduction and further development of 3G
mobile telephony standards, many technology standards such as WiFi
and WiMAX are being developed as a different kind of radio access
for existing networks, whether they be fixed-line or mobile. Mobile
phone operator TA Orange, the cellular flagship of True Corporation,
has introduced its high-speed Internet connectivity, using a combination
of WiFi and GPRS (General Packet Radio Service) technology, on mobile
phones, laptop computers and personal digital assistants (PDAs).
Advanced Info Service estimates that it has one million active GPRS
users, compared with 700,000 for DTAC and 250,000 for Orange.
In the long-running contest, the challenge for operators will be
to continue to perform well under significantly bigger customer
loads.
An industry analyst at Phatra Securities said, "The growth
of high-speed connections without a corresponding increase in connectivity
will be a key problem for broadband providers."
However, broadband providers say red tape at CAT Telecom has already
led to traffic congestion and limitations on bandwidth capacity
are holding up their expansion plans.
CAT Telecom is the only legal Internet gateway provider and no new
gateway licences have been issued yet by the National Telecommunications
Commission. But CAT Telecom has said the company planned to quadruple
broadband capacity in the very near future.
_ SRISAMORN PHOOSUPHANUSOR
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