Worapat Patram Senior Telecommunication Analyst Interconnection Institute, National Telecommunications Commission

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1 Internet Policy Guidelines to Bridge the Digital Divide in Thailand 44 th Annual Conference of the Japan Section of the Regional Science Association Effectiveness of ICT Policies towards Sustainable Economic and Social Development Worapat Patram Senior Telecommunication Analyst Interconnection Institute, National Telecommunications Commission Abstract: This paper is aiming to describe the past and present situation of internet provision in Thailand, and also identity the problems and obstacles which currently exist. Those problems and obstacles has created a digital divide between the urban and rural area, and therefore, need to be resolved to reach the goal of providing the internet service to all the un-served areas in order to build a knowledge-based society in Thailand. 1. Introduction For a long time, the State Enterprises have controlled and dominated Internet provision in Thailand. There were previously 18 Internet Service Providers, all of which were concessionaires under the former state-owned enterprise, namely, the Communication Authority of Thailand (CAT). After the establishment of National Telecommunications Commission (NTC), an independent telecommunications regulatory body, there have been a number of drivers used to provide cheaper and faster internet access in order to proliferate the broadband penetration. Apart from that, the Ministry of Education has also set up a policy to bridge a digital divide between the urban and rural area with the ultimate goal of creating knowledge-based society for every regions in the country. A number of researches had been conducted under the NTC supervision to investigate the problems and obstacles in both demand side and supply side. Examples of such problems and obstacles are the low penetration rate of PC in rural area, unaffordable price of access for low income groups, lack of knowledge in English proficiency, lack of network coverage in many remote areas, etc. Following from the problems and obstacles identified, the NTC has decided to issue many rules and regulations to resolve the problems, mainly in the supply side, in order to lower the price to an affordable level and expand the internet network to the unserved area. Not only that, the NTC has also set up strategies to increase the number of international internet gateway providers, promote free and fair competition in the internet market, and regulate the interconnection pricing. Such actions taken by the NTC has resulted in a cheaper and faster internet access. The number of broadband subscribers has increased from 192,003 in 1Q2005 to 442,728 in 4Q2006 as a result of that. 2. Internet Situation in Thailand Previously, internet service in Thailand is recognized as an international telecommunication service in which the government has a statutory monopoly in ownership and

2 operation. Another word, Thai Government has absolute control over the privileges to own and operate these kinds of service, both internet service providers and internet access provider. Therefore, any company from the private sector who intends to supply these services must only obtain the granted licenses in term of Build-Transfer-Operate (BTO) concessions from the direct responsible authority. In compliance with The Telegraph and Telephone Act and the Communications Authority of Thailand Act 1976, the CAT, represents the public sector, is directly responsible for authorizing licenses to internet service providers and internet service carriers. In 2004, following the establishment of a Ministry of Information and Communication Technology (MICT), there has been a drive to provide cheaper and faster Internet access, and to increase both broadband and dial-up penetration. Whilst ADSL provision prices are now competitive, in reality, without paying a much higher premium for dedicated bandwidth, the speeds are still relatively slow due to the bottleneck at the international gateway. By the end of 2005 broadband Internet users in Thailand totaled 0.62 million (437% from 2002 to 2005) and Internet users 7.6 millions (16.6% from ). PC and Internet penetration is low outside of Bangkok. VoIP, whilst available, is technically illegal. Table 1: Thailand Internet Statistic Source: National Statistic Office (NSO), NECTEC, and Service Providers extracted from Kasikorn Research Institute 3. Problems and Obstacles Problems in Policies and Regulations Prior the liberalization in 2004, the former state-own enterprises, namely, TOT and CAT were designated by law to provide basic telecommunication to the rural areas. However, under the small subsidy from the government and lack of competition, both organizations were slow in

3 rolling out the telecommunication facilities. Only 1.4 million lines were installed from 1954 to The government recognized the problem and decided to set up a law to invite private investment under the Build-Transfer-Operate (BTO) model. This solution could, however, only solve the problem in the low-cost area because the private operators did not have any kind of obligations to provide telecommunication facilities to the high-cost area. Consequently, the universal service problem, which happened in the past, still remains. After the liberalization of telecommunication industry, the NTC has stipulated the regulations to enforce all the network operators to provide basic telecommunication service to the rural areas, however, internet service was not included in the implementation plan. Problems in Supply Side Telecommunication investment is the same as other public utility services, such as electricity and water, where the amount of investment is considered to be significant. To get the money worth, one must consider many factors such as size and demand of target areas. When the commercial analysis is considered, it is almost impossible for any telecom operators to riskily expand their network to the high-cost area without any kind of subsidy from the government. This can be illustrated in the following tables. Project Number of lines installed Total Budget Used (Million Bht) Average Cost per Line (Million Bht) Rural Telephone Project ( ) 5,439 1, Rural Public Telephone Project in sub-district level 44,254 6, ( ) Rural Telephone Project in Village Level 116,693 15, ( ) Total 166,386 23, Source : TOT Public Company Limited Average Revenue per Line 480 Baht From the table above, the average cost per line in the rural area is approximately 140,000 Baht (4,000 USD), comparing to the average revenue per line, which is approximately 480 Bahtmoth (13.71 USD). In order to reach the break even point, it would take roughly 24 years (not including tax, operating cost, and maintenance cost). The average revenue per line in the urban areas is as high as 7,500 Baht per month. This illustrates that the difference between the urban area and rural area is much difference revenue-wise, and the commercial investment in the rural area is nearly impossible without government subsidy. Apart from the lack of telecommunication infrastructure, there are some other concerns in the rural areas which are considered to be obstacles to the expansion of the network as well, such as lack of electricity grid, lack of roads, and etc. This kind of problem needs to be resolved as a first priority before rolling out the telecommunication facility.

4 After the NTC has liberalized the internet market in 2005, the internet market was vigorous with many new ISPs. From the economic point of view, such market should be considered as a competitive market and the service price should be lower accordingly. However, that was not the case. The price of internet service was still as high as before the liberalization of internet market. The reasons of such problems can be identified as follow: Monopoly in International Internet Gateway (IIG) and Internet Exchange (IX) CAT Public Company was a former state-owned enterprise responsible for all the international telecom activities. However, after the liberalization, the NTC still give the priority of this particular service to the CAT in order to allow a transition period for CAT to adjust to the competitive market. Consequently, the CAT IIG monopoly price still remains. CAT also bundle its IIG service with Internet Exchange (IX) service and not allow those interconnecting parties to buy half circuit even though the interconnecting parties can buy the international circuit outside Thailand with cheaper price and better quality. Comparison of IIG Pricing between Thailand & Singapore Bandwidth Price (BahtMonth) (Mbps) Thailand Singapore Difference 1 100,000 8,400 91, ,375 76, , ,000, ,000 3,330, ,500, ,000 Source: CAT & Pacific Internet (Singapore) Interconnection to local network From the survey conducted by the NTC, many operators who owned the local access network have squeezed the leasing price offered to the competing ISPs while providing a cheaper price to its affiliates. Not only that, the quality of service is also lower from what is given to its affiliates as well. Circle of Internet Service Problems in Thailand High Investment Cost and Digital Divide between Urban and Rural Most ISPs are concentrated in the urban area Low Competitive Level No incentive to expand network Low Penetration Rate cannot benefit from the economy of scale Unaffordable Service Price

5 Problem in Demand Side Lack of Computer When the number of internet penetration in Thailand is considered, it can be found that less than 15% of the population has access to the internet service and only 5% of that number is the broadband access. One reason behind the problem is the unaffordable price of computer which is much higher than the average income of household. Lack of Local Contents From the statistic, most of the population in Thailand, particularly in the rural area, is agriculturist and fisherman. Internet knowledge seems to be out of scope for their dairy life. In the past, the government did not success in trying to create an appropriate local content to match the local interest. One reason is because there was no survey conducted to examine the interest of each target rural areas which is much different from the urban area. Lack of Internet Knowledge In order to effectively implement the policy to facilitate the access to internet service, one of the issues which cannot be ignored is to build knowledge and skill on the use of internet to the locals. Again, from the statistic, most of the heavy users are those who range in the age of while the number of internet usage for the people who range above or below that is much lower. High Service Price and Low Quality of Service The internet service price on the dial up mode in Thailand is considered to be lower than many countries in Asia. From the information received from TOT, it describes that users who live in the coverage area can easily dial 1222 to connect to internet with access fee of 3 (0.085 USD) Bahts per call and service fee of 2 Bahts (0.057 USD) per hour. However, users who live outside the coverage area need to use alternative mode, such as satellite to access to internet which is much more expensive. 4. Policies and Strategies Internet as Mandatory Service in USO Implementation Plan Considering that the world is now moving toward the information era and convergence, when everything is on IP, the NTC should consider and include the internet service as basic telecommunication in the USO implementation plan. Internet is now accepted as a tool to create a knowledge-based society. Consequently, everyone should have an equal right to access into this powerful knowledge container. Facilitate Alternative Technologies Currently, the development of technologies, particularly in the telecommunication industry, has created many new innovations which can be deployed to reach the un-served area more easily, for example, WiMax and Broadband Power Line (BPL). However, to facilitate the deployment of these new technologies, all the responsible parties, including government, research institute, telecom regulator, and private operators must actively work together and collaborate on the project. The NTC may take the position as a host and set up the action plan for short and long term.

6 Internet Friendly Regulation The research from the American Enterprise Institute on the topic of Regulation and Internet Use in Developing Countries has shown that the countries which stipulate strict internet licensing and pricing regime would have a higher service price than those countries that does not. From the research, the NTC should stipulate the rules and regulations based on appropriateness of the market and incentive for market entry. Policy to Facilitate Competition To facilitate the efficient competition in the internet market, the regulator must clearly recognize the value-chain of the internet provision. Many new ISPs are clearly in the position that needs to interconnect with other network operators to deliver their service to the customer. With that, the regulator must clearly stipulate rules and regulations on access and interconnection for internet in order to build a level playing field. Effective Regulatory Regime for Infrastructure Sharing Because the telecommunication business is the capital intensive business and also the telecommunication resources are limited resources, many incumbents are reluctant to allow the interconnection to their network facilities. However, sharing of facilities can reduce the network redundancy. Policy to Facilitate Use of Internet Previously, the government implemented the top-down policy where each district takes the federal policy into account and tried to implement it accordingly. However, such approach was not success because the policy was not matched the interest of the locals. The mismatch created a difficulty to persuade locals to involve with the plan. Alternative approach, bottom-up policy, should be considered by dividing the plan in to three steps as shown in the following figure: Source: Alcatel Telecommunications Review 3 rd Quarter 2004 Partnership Center All the responsible parties should create collaborative network to distribute internet service to the locals and also facilitate the use of internet in many important activities. In addition to that, the change agent in each area should be assigned to provide assistance to their locals.