Broadband: Asia's balancing act

Japan and Korea currently lead the pack in broadband development across Asia, but developing countries in the region such as Malaysia and China, are stepping up efforts to close the gap.

According to Frost & Sullivan, the Asia-Pacific region is experiencing the most aggressive growth in broadband access services worldwide.

Subscriber base is increasing, and service performance, affordability, and innovations are also improving, the research company noted. In 2004, there were already 65.4 million broadband access services subscribers in the Asia-Pacific region, comprising 13 countries.

Growing at a compound annual growth rate of 28.3 percent, Frost & Sullivan projected that the number of broadband subscribers in the region will top 292 million by 2010.

"The broadband market leaders in the region are primarily Korea and Japan. Following behind are Singapore, Hong Kong, Taiwan and Australia," said Foong King Yew, ICT (infocomm technology) practice program director at Frost & Sullivan Asia-Pacific, during a telephone interview.

However, in developing markets such as India, Thailand and the Philippines, broadband penetration is still low because of poor broadband infrastructure and affordability issues that are hampering adoption rates, he said.

"[These] broadband markets are clearly not moving at the same speed," Foong said. "This is putting a brake on the overall broadband market in the region."

According to Ridhwan Bakar, Frost & Sullivan's Asia-Pacific ICT industry analyst, while broadband subscriber growth has slowed in Korea and Japan--thanks to highly saturated markets--the level of broadband development in those countries is still advanced compared to other Asian nations.

Japan's broadband household penetration rate was 41.7 percent in 2004, and is expected to double by 2010, Bakar said. Korea maintains its reputation as the world's most wired nation, with a household penetration rate of almost 80 percent.

In addition, both countries are already enjoying average broadband access speeds of more than 30 Mbps (megabits per second). Their broadband content industries are also much more developed compared to the rest of the Asia-Pacific region, he added.

Bakar attributed this to the fact that both Korea and Japan have established strong intellectual property protection, which fosters the creation of broadband content.

"In addition, [users in those countries have] low level of English proficiency [which] means they prefer domestic content over foreign ones," he explained. "That's a key driver of the Internet content industry in Korea and Japan."

The development of a strong broadband content industry is important in negating the effects of declining average revenues per user (ARPU), for broadband access, in the fiercely competitive markets of both countries, Bakar noted.

"While ARPU for broadband access in Korea and Japan are declining, total broadband spending is not," he said. "When service providers include revenues from IPTV (Internet Protocol TV) and IP telephony, their overall ARPU will be more substantial in future."

Foong added that in developed markets with high levels of competition, broadband access as a standalone service has become a commodity. "It's difficult to sustain such a business model, and so players in Korea and Japan are trying to build an ecosystem of content providers for IPTV and music downloads," he said.

"They are pitching themselves as lifestyle service providers, like what Softbank is doing in Japan--to provide value-added services on top of basic broadband access," he added.

Same play, different ballgames
The landscape is different in developing markets, where broadband infrastructures are not up-to-scratch, according to Foong. "Development is still hampered by poor network infrastructure and the high cost of rolling out copper lines," he said.

To bridge the broadband divide between these nations and Japan and Korea, the Frost & Sullivan analyst advised developing countries to deploy wireless broadband technology in order to reach the masses, without incurring hefty costs in laying wires. Government assistance or subsidies could also bolster broadband uptake, he said.

Mock Pak Lum, CEO of 1-Net Singapore, underscored the important role governments play in broadband development. Set up to build and manage the country's national broadband infrastructure SingaporeOne, 1-Net is currently a wholly-owned subsidiary of Singapore's incumbent broadcaster MediaCorp.

Mock noted that broadband in Singapore only started to take off when the local government liberalized the telecoms industry in April 2000, driving prices down.

Prior to that, after SingaporeOne was completed in 1996, the number of broadband users remained small, he said. According to a study by the Japanese Institute of Global Communications, there were about 100,000 broadband subscribers in 2001, or less than 4 percent of households in Singapore.

Mock said: "It didn't help that [the country's incumbent] SingTel was not too keen on promoting broadband services on its ADSL (Asymmetrical Digital Subscriber Line) network, because of worries that the move may cannibalize its leased circuit business."

"Also, there wasn't much content available at that time," he said. "What do you do with so much bandwidth? It's a chicken and egg issue--the content providers will not have enough business if there aren't many broadband users."

With Singapore's recent plan to develop a next-generation broadband network with access speeds beyond 1Gbps, the Infocomm Development Authority of Singapore (IDA) is looking to ensure the new network will not end up a white elephant.

According to an IDA spokesperson, iN2015, Singapore's latest infocomm roadmap, will help transform sectors such as digital media, education and healthcare using infocomm technology. "When this happens, we expect even more compelling applications and services to fill the new broadband pipes," she said, in an e-mail.

"While no one knows for sure what applications specifically will come about in future, trends suggest that exponential growth in network traffic will continue and ultra-high speed broadband pipes are the necessary conduits for the future," she added. "More people can be expected to use bandwidth-intensive applications like high-quality video distribution, peer-to-peer video conferencing, and online education. Other new bandwidth-intensive services and applications coming up, like HDTV and IPTV, make clear the need for a next-generation network and the need to provide for it."

But until broadband infrastructures, especially in developing countries, can offer minimal service levels, content providers will have to contend with providing users with a lower level of broadband experience.

In Malaysia, for instance, a large number of users expect service quality to meet at least 70 to 80 percent of the advertised performance, but are only being assured of "best-effort" connection speed under current network traffic conditions, according to a Frost & Sullivan report Broadband Landscape in Asia-Pacific.

Other factors such as aged copper wires, are also affecting the network performance, noted the report which was released early this year.

In addition, "due to the lack of basic computer literacy, service providers also have to deal with a variety of complaints caused by [security] viruses that affects the users' surfing performance".

According to the Frost & Sullivan report, China also faces problems with its broadband infrastructure. "The instability of broadband access and the limitation in access speed are among the top list of consumer complaints in China," the report stated. "This again restricts their acceptance of broadband-based contents and applications."

Currently, network access contributes to the majority of broadband revenues in the country. In contrast, content and applications have been the weakest part in the Chinese industry, Frost & Sullivan noted.

While service providers are driving content development, China's broadband users--mostly on 512Kbps connections today--are ill-equipped to enjoy richer content because broadband applications such as IPTV, typically require bandwidths of at least 2Mbps.

Despite the challenges ahead, both China and Malaysia--like Singapore--have unveiled national broadband efforts.

Malaysia introduced its National Broadband Plan in 2003, with the hope of providing broadband connection speeds of 20Mbps by next year. But Frost & Sullivan noted that the initiative is not sufficient to achieve the global broadband hub status which the country is seeking. "Such a hub requires other factors to be in place as well, including knowledge skills and entrepreneurship, the availability of high-quality international access at best prices, and an array of content and application services."

The Chinese government, on the other hand, is taking advantage of major events to increase broadband penetration and the development of broadband-based applications. Partnering with telco China Netcom, the government is aiming for Beijing 2008 Olympics to be a "Broadband Olympics" and targeting for every household in Beijing and its nearby regions, to have broadband access before 2008.