Malaysia taking steps to reduce broadband rates

 A new consortium, Konsortium Rangkaian Serantau Sdn Bhd under the Entry Point Projects (EPPs), has been set up to buy international bandwidth for Internet traffic to lower the costs of Internet protocol (IP) transit, according to Information, Communication andCulture Minister Datuk Seri Utama Dr Rais Yatim.

The announcement confirmed a StarBiz report on March 23 that a consortium was being set up to buy international bandwidth for Internet traffic in bulk in a bid to reduce IP transit cost.

StarBiz reported that the consortium may build and own an undersea cable network or partner other cable networks for capacity in a private-public partnership to address the problem of high IP transit cost.

The reduction of IP transit cost is part of the “extend the regional reach” initiative under the Economic Transformation Plan. IP transit cost is the cost service providers pay to carry Internet traffic around the world but because most sites are hosted in the United States, traffic volumes to the US are high.

The consortium comprises 24 members including Telekom Malaysia Bhd (TM), Time Dotcom Bhd, Maxis Bhd, Celcom Axiata Bhd, DiGi.Com Bhd,U Mobile Sdn Bhd, Green Packet, YTL Communications Sdn Bhd,RedTone International Bhd, OCE, Fibrerail Sdn Bhd, Jaring, Sacofa, Sarawak Information Systems, Fibrecomm Networks (M) Sdn Bhd, and V Telecoms.

Fiberail and Fibrecomm are subsidiaries of TM.

“The main objective in setting up the consortium is to lower the broadband subscription cost for users through cost savings as the subscription cost of international bandwidth capacity accounts for 40% of the total cost of providing broadband services.

“To achieve the cost savings, the consortium will buy the capacity in bulk as well as plan and manage the international submarine cable on behalf of its members,” Rais said at a briefing to announce three all-new EPPs under the National Key Economic Area (NKEA) Communications Content and Infrastructure (CCI) yesterday.

The other two projects announced are the tracking and tracing of swiftlet nests using radio frequency identification technology and the enhancement of basic infrastructure in rural areas.

From left: Time dotCom Bhd CEO Afzal Abdul Rahim, National Key Economic Area, Communications Content and Infrastructure (CCI) director Dr Fadhullah Suhaimi Abdul Malel, Veterinary Services Department director-general Datuk Dr Abdul Aziz Jamaluddin, Datuk Seri Utama Dr Rais Yatim, Deputy Information, Communication and Culture Minister Datuk Joseph Salang Gandum and Malaysian Communications and Multimedia Commission chairman Tan Sri Khalid Ramli at the signing ceremony.

According to filings with Bursa Malaysia by various service providers, the authorised share capital of the consortium shall be RM10mil divided into 10 million ordinary shares of RM1 each and may be increased from time to time in accordance with the memorandum and articles of association of the consortium.

The initial issued and paid-up share capital of the consortium is RM240,000 comprising 240,000 ordinary shares of RM1 each, of which each party holds an equivalent of 10,000 shares of RM1 each issued at par value in the consortium.

The parties have also agreed to commit an additional capital contribution in cash of RM40,000 each by subscribing to 40,000 ordinary shares of RM1 each, at such later time as may be determined by the consortium's board of directors.

Although broadband subscription costs are expected to be lower, Rais expects the service level would continue to be improved at the same time.

To a question, he said that given the number of parties involved in the consortium, the cost should naturally come down. However, he did not have a specific time when the lower subscription cost for broadband would come into effect.

“I cannot tell you now when the real results will be seen and the CCI will be closely monitoring this,” Rais said, adding that the project did not involve public funds as it was a private sector initiative.

DiGi said its participation in the consortium would enable additional IP transit and domestic bandwidth capacity to be available in Malaysia at a lower cost.

“This will consequently benefit consumers in terms of price and experience for Internet and broadband services,” it said.

Maxis said the consortium would enable all its members to enjoy lower bandwidth cost due to bulk purchase and economies of scale.

TM said its participation together with its subsidiaries in the consortium was in support of the Government's initiative under the Economic Transformation Programme, which would enable additional bandwidth capacity for Malaysia in anticipation of increasing demand requirements at lower costs.