Enhancing ASEAN's Connectivity

6. Connecting Southeast Asia through Broadband

6 ConneCting SoutheaSt aSia through BroadBand Arne Jeroschewski, Andre Levisse, Lorraine Salazar, Robert Tesoriero, and Shaowei Ying1 introduction As the average global mobile phone penetration rate approaches 83 mobile phones per 100 people,2 it is increasingly clear that ubiquitous broadband access provision is the next frontier in information and communication technologies (ICT) for all developing countries. Broadband access is a key driver of economic and social development. Its effects are profound and pervasive. The direct economic benefits of broadband stem from the immediate value of the investments made in building the network through increased expenditures in industries such as construction and equipment supply. This, in turn, creates a multiplier effect in industries — such as telecommunications and media — that rely on the network. Indirectly, an investment in a broadband Connecting Southeast Asia through Broadband 73 network has three major benefits. First, foreign investors — including multinational companies — are more likely to gravitate toward markets that are supported by a solid, fast, and reliable broadband infrastructure. Second, in the long term, greater broadband connectivity can lead to improvements in economic productivity and business efficiency (i.e., economic transformation towards the services sector). Third, investment in broadband infrastructure facilitates human capital formation by easing access to and the transfer of knowledge. This, in turn, promotes the development of a more highly-skilled workforce, leading to further improvements in efficiency and productivity. Estimates show that if broadband penetration in emerging markets reaches approximately 50 per cent (the average level of European penetration), it would generate approximately 10 to 15 million jobs and create an estimated US$400 billion in GDP. In Asia alone, projections suggest that roughly 5 to 8 million new jobs would be created and that approximately US$150 to 180 billion would be added to the GDP (equivalent to a 1 per cent increase in GDP).3 People in aSean Want to be online ASEAN member states can be categorized into three groups in terms of their mobile, broadband, and PC penetration levels, as shown in Figure 6.1. The groupings reflect the different levels of development within ASEAN. The more economically affluent member states — Brunei, Malaysia, and Singapore — belong to the first group and have high levels of mobile, broadband, and PC penetration. Group 2 is comprised of middle-income countries Indonesia, the Philippines, Thailand, and Vietnam, which are characterized by high levels of mobile penetration, but low levels of broadband and PC penetration.4 Finally, Group 3 is comprised of Cambodia, Laos, and Myanmar, which have low levels of mobile, broadband, and PC penetration. Despite low household broadband penetration levels, consumer demand for Internet access and services is strong in Southeast Asia. The number of Internet users is growing faster than the total number of Internet subscriber accounts. Affordable public access points, such as Internet cafes, fill the gap, as shown in Figure 6.2. In Indonesia, for instance, about 7,500 “Warnets” or Warung Internets provide Internet access to people living in Java for around US$0.60 cents per hour, or 0.2 per cent of monthly household disposable income. In the Philippines, 74 Arne Jeroschewski, Andre Levisse, Lorraine Salazar, Robert Tesoriero, and Shaowei Ying Figure 6.1 Varying degrees of telecom development across aSean Countries Source: Informa Telecoms and Media, World Cellular Information Service, October 2011. Connecting Southeast Asia through Broadband 75 Figure 6.2 despite Low household Broadband Penetration, demand for internet Services is evident by Wide use of internet Cafes Source: Pyramid Q1 2011; Press; Freedom House. 76 Arne Jeroschewski, Andre Levisse, Lorraine Salazar, Robert Tesoriero, and Shaowei Ying Internet cafes charge about US$0.60 cents per hour (about 0.09 per cent of monthly household disposable income). Finally, the same is true in Thailand where Internet cafes charge between US$0.65 to US$1.70 per hour, comprising about 0.3 per cent of monthly household disposable income.5 What do Southeast Asian consumers do when they go online? Interestingly, people in Southeast Asia are some of the world’s most frequent users of popular social networking sites like Facebook and Twitter. In 2010, as Figure 6.3 shows, Indonesia, the Philippines, and Singapore were among the top ten Twitter users. Similarly, the Philippines and Indonesia are among the top ten markets of unique Facebook users, ranking third and fourth, respectively. With the rising number of Internet users in Southeast Asia, there is significant opportunity for local companies to...