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Asian Strategy & Leadership Institute Bank Pembangunan

THE 4TH NATIONAL UTILITIES SUMMIT 2007

Blazing New Trails: Developments, Strategies &Opportunities for a Profitable Future

Broadband Ambitions for Malaysia

Zamani bin Zakariah

Senior Director MyICMS DirectorateMalaysian Communications and Multimedia Commission

Kuala Lumpur29 August 2007


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AGENDA

1. Broadband status in Malaysia2. Malaysia Regional Internet Hub

3. Malaysia Digital Cities: A futureWorld of Broadband Connectivity


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APPLICATIONS/SERVICES & CONTENTS: DRIVERS FOR

BROADBAND DELIVERY VIA WIRELINE AND WIRELESSTECHNOLOGIES

Source: BT presentation BWF Europe 2006, MCMC

Broadband to

general

population

Ultra hi-

speed

broadband

Gaming

VoIP Video TelephonyVideoConferencing

Video- on-demand

HDTV

100kbps 1Mbps 10Mbps 100Mbps +

Multi-channel HDTV

xDSL

256kbps

Wireless (3G/HSDPA, WiMax, FixedWireless)

Fibre to the user

Medical Imaging

Digital Home

e-govt, e-transactions,

e-learning

InternetAccessApplication

Speed

Applications/ Services &

Contents

Last mile

infrastructure

(technologies)


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2003 2004 2005 2006

Source: NBP(MEWC), MCMC, McKinsey

Objectives of the NBP

Generate adequate broadband supply via

multiple technologies

Stimulate demand via content and applications Explore funding mechanisms

Identify and close regulatory gaps

Strategies Adopted

Reach critical mass from public sector adoption

Government departments

Schools University and research

Hospitals

Internet Community centres

Spill over benefits to private sector and homes

Policy and regulatory initiatives to promote

industry Intensify competition in the last mile

Encourage new entrants

Implement bitstream

Utilize USP (universal service provision) fund

National Broadband Plan 2004

NBP commenced

1

2

Total Broadband connections (000s)

Numbers as per NBP definition

National Broadband Plan (NBP) The

Vision

897

1,276

693

282

502

253

110

897

1,303

NBP

Actuals (xDSL,

FWA, Satellite)

Include 3G


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2006

MyICMS 886 :OVERALL STRATEGY FOR BROADBAND ASCATALYST FOR INDUSTRY DEVELOPMENT

Source: MCMC

Objectives of the MyICMS 886

to propel Malaysia in the delivery of

advanced ICMS services towardsimproving the quality of life of

Malaysian and at boosting

Malaysias global competitiveness.

towards building a ubiquitous service

environment.Strategies Adopted

Identified 8 key service areas, 8

types of infrastructure and 6 growth

areas as focus points for

development

Aims to create a catalystic cycle

enhancing investment in existing

services and infrastructure to

generate growth areas

MyICMS 886 (2006 2010)

1

2

MyICMS 886 HH penetration

1,300

MyICMS 886 Launched in Dec 2005

*Note: Reviewed (July 2007) target of 50%

household (HH) in 2010

2008

2,800 4,200

2010

25%

75%

50%

Total Broadband connections (000s)

MyICMS 886 Targets

*50%


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Services

1. High Speed

Broadband2. 3G & Beyond3. Mobile TV4. Digital Multimedia

Broadcasting

5. Digital Home6. Short RangeCommunications (e.g.RFID-based)

7. VoIP/InternetTelephony

8. USP - UniversalService Provision

Areas under other government agencies and industry sectors

1. Content

Development (e.g.education,entertainment, games)

2. ICT Education Hub3. Digital Multimedia

Receivers (set top box)4. CommunicationDevices (e.g. VoIPphones)

5. EmbeddedComponents &

Devices (e.g. RFID)6. Foreign Ventures

Growth Areas

Hard1. Multiservice

ConvergenceNetworks

2. 3G Cellular Networks3. Satellite Networks

Soft

4. Next GenerationInternet Protocol(IPv6)

5. Home InternetAdoption

6. Information & Network

Security7. Competence

Development8. Product Design &

Manufacturing

Infrastructure

MyICMS 886 Core Elements


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7Source: OECD,MCMC

Broadband Penetration 2006 (Per 100 Population)

29.1

25.0

20.2

17.1 17.0

12.5

6.0

3.31.3

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

Korea

Hong

Kon

g

Japan

Germ

any

Sing

apore

Irelan

d

Klan

gVa

lley

Mala

ysia

Thailan

d

Selected Countries

Broadband

Penetration

BROADBAND PENETRATION: COMPARISON

WITH SELECTED COUNTRIES


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BROADBAND PENETRATION IN MALAYSIA COMPARED TOOTHER CITY STATES

Terengganu

Kelantan

Selangor

MelakaJohor

N Sembilan

Perak

Sarawak

Kedah

Pahang

Sabah

Labuan

Hong Kong

Singapore

WP Kuala Lumpur

Penang

Broadband penetration, 2006Percent households

Source: MCMC Selected Facts and Figures Q1 2007; OFTA-Hong Kong; IDA

Malaysia

3.2

68.0

52.4

12.034.5

21.3

19.8

10.8

10.7

9.3

7.6

7.3

7.2

5.4

4.6

4.9

4.6

BROADBAND PENETRATION IN WP KULALA LUMPURLAGS OTHER CITY STATES (SINGAPORE AND HONGKONG)


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2004 05 06 07 08 09 2010

Gap

Current

trajectory

MyICMS targets% Household

0

10

2030

40

50

60

70

80

1. To achieve the targets set , resolutions are

required to address current demand and supply

constraints

2. Correct demand stimulation will even help

Malaysia to achieve > 75% household penetration

3. Current DEL capacity cover 97% household with

80% of household already have at least 1 Mbps

capable copper

BROADBAND PENETRATION AND MARKET GROWTH

Source MCMC, McKinsey

Direct Exchange Lines (DEL) % Capacity used

CURRENT MARKET PACE WILL LEAD TO~35% HOUSEHOLD PENETRATION BY 2010


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CONSUMERS NEED FOR BROADBAND

Source: MCMC Malaysia Household InternetSurvey 2005

SupplyDemand

Market structure that can

balance the dual aims of

both promoting competition

(so as to keep the pricesaffordable) and ensuringefficient investment (so as

to attract infrastructureroll-out) is needed


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* Broadband prices less than 2% of income, at current price of USD 18 for 512 kbps

DSL service

** Triangulated using state level income vs. broadband penetration levels and nationalpenetration level

Source: Department of Statistics; MCMC; McKinsey

25.960K+

Mass affluent

45.218K-60K

Middle income

28.8


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BROADBAND PRICE vs. MONTHLY INCOME (2006)

Broadband Price per 100 kbps

0 0.01 0.01 0.02 0.04

0.66

1.82

0

0.5

1

1.5

2

Japa

n

Korea

Singap

ore

Germ

any

Hong

Kon

g

Mala

ysia

Philipin

es

Selected Countries

%o

fm

onthlyincome

Source: ITU Information Society Statistics Database. 9th Malaysia Plan

Malaysia average monthly

income ~ RM1645


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R2

= 0.6352

0

10

20

30

40

50

60

70

80

0 30 60 90 120 150 180 210

BROADBAND REVENUE/PRICING

Monthly Consumer ARPU (PPP adjusted)2005 (USD)

Broadband Connections per

household, 2005 Percent

Turkey

ThailandIndia Indonesia

Philippines

Greece

Malaysia

Hungary

Poland

Ireland

Czech

Republic

New

ZealandAustralia

Portugal

Hong KongSouth Korea

DenmarkNetherlands

SwitzerlandFinland

Canada

Norway

Belgium

IsraelJapan

USUKSingaporeFranc

e Austria

German

y Italy

Spain

Taiwan

SlovakiaChina

Source: ITU; Ovum; McKinsey

Sweden

RETAIL BROADBAND

PRICES ARE NOW

RELATIVELY LOW

COMPARED TO

INTERNATIONAL

BENCHMARKS

At current price levels,

Malaysias broadband

penetration could be

doubled based onaffordability criteria

Therefore, access price

is not the key issue

Attractiveness ofapplications and quality

of service need to be

focused as next stage


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GEORGETOWN

KUALA TRENGGANU

KANGAR

ALOR STAR

IPOH

SHAH ALAM

SEREMBAN

MELAKA

KUANTAN

KOTA BHARU

JOHOR BAHRU

KUALA LUMPUR

IskandarDevelopmentRegion

Klang ValleyBroadbandPush

NorthernCorridor (incl.Penang)

KOTA KINABALU

KUCHING

Industrial parks/FTZs covered

State Capitals covered

Non populated areas


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CURRENT ISSUES AND CHALLENGES

Thrusts Issues

Compelling reasons for broadband remain

uncertain

Lack of local content Lack of attractive e-government applications

Availability:broadband forgeneral

population

High SpeedBroadband in

select areas

Reach of multiple infrastructures still limited (e.g.,

HSDPA just launched, WiMax licenses recently

issued)

Attractiveness

Supply

Demand

Economics very challenging

Needed to keep competitiveness of Malaysia vs.

other countries


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MEWC, MCMC, INDUSTRY HAVE TAKEN ACTION TO

ADDRESS THESE ISSUES

Award of WiMAX spectrum (2.3 GHz)

Monitoring of WiMAX, 3G and HSDPA roll out

Tower sharing T1, T2, T3

Leveraging on current capacity of copper

Mandate Broadband Under USP Programme

Promote Facilitative Role Of Local Authorities

Availability

Broadband for

general

population

(upto 1 Mbps)

License last mile solution provider (14 licensees)

Fiber roll out under KVBP

TM roll out Metro-E

State initiatives (Melaka, Kedah, Penang)

High Speed

broadband

(HSBB)

Increase PC penetration

Connecting community programs

KVBP (Klang Valley Broadband Push) pilot projects

E-government (eKL), E-commerce, E-education

Free hot spots in public areas (k-Perak, Cyberjaya)

Content stimulation initiatives

Attractiveness

- Demand

creation

Actions undertaken


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EXPLORING BREAKAWAY INITIATIVESInitiatives being considered

To increase speed of penetration, further encouraging of last

mile infrastructure competition needed

We are evaluating:

Incentives (e.g., subsidize subscriptions)

Regulatory enforcement (e.g. rollout compliance)

Potentially shared build-out for new technologies (e.g.,

WiMax)

Availability-Broadband for thegeneral population(upto1 mbps)

Selection required as nationwide rollout too expensive e.g. start

in Klang Valley, Johor Bahru and Penang

Government support necessary to ensure viability and speedy

rollout even for selected areas Declare fibre connectivity as essential utility for new housing

areas

Exploring optimal roll out model

Evaluation criteria: Lowest cost, fastest deployment, highest

adoption, effective competition Models explored: NIIMCO, PPP, Private Sector-led etc

Hi-speed broadbandin selected areas

Government to drive push

E-government Act with public commitment and funding

Attractiveness stimulate local content

Funding mechanism(s) necessary

Streamline agency coordination

Attractiveness-Demand creation


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Malaysia Regional Internet HubEstablishing MyIX (Malaysia Internet Exchange), launched on 15

December 2006

Boomerang effect: domestic traffic routed via multiple international

gateways (neighbouring/distant countries), due to lack of peeringbetween local providers, high costs of leased lines, etc. large

foreign exchange outflows.

Small local ISPs struggling to gain a footing, subsidizing the

business of large global providers.

To become a transit hub for global ISPs who are routing traffic to the

region

>50% of Malaysian transit traffic routed via neighbouring country;

issue of amount of domestic traffic that is routed locally

CMA 1998 states Malaysias aspirations to be aglobal communications hub

CMA 1998 states Malaysias aspirations to be aglobal communications hub


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TURNING THE TIDE OF TRAFFIC BACK TO MALAYSIA

11 A level playing field created for the smaller players. Peeringwith other ISPs was crucial and a neutral internet exchange

was imperative

22 With healthy competition among different ISPs, the pricingcould be expected to decline further, with better QoS. This

would further induce the growth of the industry by attracting

more consumers, and hence more potential players.

Eventually a self-sustainable industry will emerge with a

balanced number of players

33

This would also give local players a leverage whennegotiating with international carriers, and more

international carriers would be attracted to Malaysia. The

aspiration of becoming a global hub would be realised

44

Local content and application providers could benefitfrom the growth of the industry. Potential for catalysing

further content development


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HAVING OWN LOCAL EXCHANGE POINT IS MORE

EFFICIENT

TMNet AS4788

SingTel AS7473

Maxis AS9543

Time AS9920

MIX Jaring AS2400

DiGi AS4818

The Internet Traffic Model (In the absence of IXP) The Internet Traffic Model with an IXP

TMNet AS4788

SingTel AS7473

Maxis AS9543

Time AS9920

MIX Jaring AS2400

DiGi AS4818

HutchisonAS9304VerioAS2914 VerizonAS701Teleglobe/VSNLAS6453International carriers

HutchisonAS9304VerioAS2914 VerizonAS701Teleglobe/VSNLAS6453International carriers

Increasingnumber of smallerISPs


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CARRIER-NEUTRAL EXCHANGE: CATALYST TO ACHIEVING OBJECTIVEOF REDUCING COSTS TO SMEs AND IMPROVING QoS

Domestic traffic no longer needs to

travel outside the country before

reaching its destination

ISPs can connect at the carrier-

neutral internet exchange site to

peer and transmit traffic; Only a port

charge paid to NIPI and a local

leased line connection is required

With nationwide rollout of NIPI

(multiple site cross-country), ISPs

only connect at the nodes they wish

to transmit traffic to

Reduced costs to the SMEs11

Traffic latency for local traffic is

vastly improved due to the decrease

of number of hops between the

source and the destination

This also means increased quality

of service for the customer. As a

result of this, this could further

increase the broadband penetration

In addition, a greater number of

players will be motivated to join the

market to provide their services due

to the increased demand

Improved quality of service22

addresses issues pertaining to peering, backhaul and connectivity costs which are holding

back the industry.

equips Malaysias service providers with a neutral, ubiquitous platform to deploy services.

provides the vital catalyst to achieve governments ambitious initiatives (MyICMS & NBP)

addresses issues pertaining to peering, backhaul and connectivity costs which are holding

back the industry.

equips Malaysias service providers with a neutral, ubiquitous platform to deploy services.

provides the vital catalyst to achieve governments ambitious initiatives (MyICMS & NBP)


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MyICMS 886 and the MSC Vision(MSC Multimedia Super Corridor)

Transform

Malaysiainto

aknowledge

society

Phase3

2020

NextLeap

GrowMSC

IntoaGlobal

ICTHu

b

2010

1996

2004

Create

MultimediaSuper

Corridor(MSC)

DeliveradvancedICMServices

Ubiquitousservice

ImproveQualityOfLife

BoostGlobalCompetitiveness

MyICMS886

Leapfrog into

Leadership inthe

Knowledgeeconomy


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Malaysia Digital Cities: A Future World of Broadband Connectivity

MSC Cybercities and Cybercentres


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Klang Valley Broadband Push (KVBP)

Accelerate meeting MyICMS 886 broadband targets Create model metropolis to be emulated in other states

Winning comparisons to other city states (Singapore,

Hong Kong, etc.)

Facilitate turning the Klang Valley into an MSC* area

Complement e-KL initiatives

(* multimedia super corridor)


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The Klang Valley


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Promotion of broadband through awareness;

broadband complaints centre

Broadband Awareness

Offering broadband service to disabled groupUrban Undeserved Community

Improve broadband infrastructure and services in

key public institutions

ICT Facilitation

Create demand for broadband infrastructure and

applications (Identified 5 libraries)

U-Library

Increase and promote broadband services,

utilisation and online content/applications

Hotspots

Creating a municipality with world class

communications infrastructure supporting

broadband service. (Identified 4 local authorities)

Model Local Authority

DescriptionProjects

Showcase for mobile broadband technology;

platform to trial innovative applications/contents

Putrajaya-Shah Alam Mobile

Broadband Highway Project

KVBP Phase 1


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THANK YOU

Zamani bin Zakariah

Senior Director

MyICMS 886 Directorate

Malaysian Communications and Multimedia CommissionTel: +60 3 8688 8370/1

Fax: +60 3 8688 1005

e-mail: [email protected]

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