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November 30, 2000

From Our Correspondent: Hirohito and the War
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Asiaweek Time Asia Now Asiaweek technology

OCTOBER 22, 1999 VOL. 25 NO. 42

With a Little Help From a Foe
In the Philippines, a controversial plan to meter local calls could speed development of cable Internet access


Waiting for high-speed Internet access may beat the alternative - big phone bills
Edwin Tuyay for Asiaweek
Filipinos have been surfing the Internet in increasing numbers since 1995, but not always happily. Unreliable telephone circuits, slow network access speeds, long waits at Internet service providers, and dropped connections are chronic irritants that many have come to accept with a shrug.

Things can always get worse. A controversial plan by the country's dominant telephone company to charge per-minute fees for local calls threatens to strangle Internet use by making it prohibitively expensive. But in an ironic twist, Philippine Long Distance Telephone's intent to "meter" the phone system may provide an unexpected incentive to struggling communications companies offering high-speed Internet access via cable-TV networks. If the technology spreads, the infrastructure-poor Philippines could in a few years find itself on the same technological footing as Hong Kong and Singapore, where most residents already have the option of high-speed Net connections.

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The mere threat of metering "is a great market advantage for us," says Beda Mañalac, vice president for business management at Destiny Cable Inc. The five-year-old firm, a cable-TV operator with about 30,000 Manila customers, began offering Internet-over-cable in July as an alternative to conventional dial-up access. About 1,000 people and businesses already have the service, which provides data transmission speeds at a minimum rate of 256 kilobits-per-second, 4.5 times faster than the speediest phone circuit. Destiny is swamped with subscribers, who are signing up more quickly than the company can accommodate them. "We're working through a backlog of 8,000 applicants," says Mañalac. "We get 2,500 calls every day." Destiny expects to have 200,000 customers by 2005.

Cable access could be a welcome consumer alternative if Philippine Long Distance Telephone (PLDT) carries out its metering plan. One of the reasons Internet use has grown so rapidly is because it is cheap - and it is cheap mainly because, in most cities around the world, there is no per-minute charge for calls to local Internet service providers. This practice, along with so-called "all-you-can-eat" Net access plans, allows surfers to stay online without worrying about running up huge bills.

But phone companies, facing greater competition in long-distance markets, have for the last several years been pushing for regulatory approval to charge for local calls. Public opposition has been strident, and so far most telcos have backed down. Although it has the go-ahead from government, PLDT scrapped a plan to begin metering in April. It has not given up. "A usage-based tariff will still be an option, and may be revived in the first or second quarter in 2000," says Antonio Samson, PLDT executive vice president for corporate services. Dipak Jethwa, research head of OCBC Securities, says he expects metering will become a reality in the Philippines within two years.

And that "will be disastrous for the development of the Internet," predicts Manny Amador, president of the Philippine League for Democratic Telecommunications, an anti-metering group. "People would definitely use [the Net] much less because you'd always be aware of the clock ticking away." Should metering go into effect, service that is now affordable would become pricey for middle-class consumers and would be completely out of reach of the county's impoverished masses, according to the Philippine Internet Service Organization.

Eyeballing the estimated 1 million Filipinos already online, cable operators spy another revenue source and are stepping up the pace of investment. SkyCable, the country's largest cable network with more than 200,000 subscribers, says it will roll out Internet access this November, retrofitting its facilities to handle digital signals as demand warrants. "We do expect phone metering to be a big boost to our business since it makes it easier for customers to justify connecting to the Internet via cable," says Russell Sy, marketing head for SkyCable's high-speed services. Even PLDT, which already operates a cable-TV system and an Internet service provider, is planning to offer cable Net access, "maybe before the end of 1999," says Samson.

"I think everyone is hoping cable Internet will take off," says Chin Wong, editor of ComputerWorld Philippines, a trade publication. "It's much faster and it will bypass the phone lines." Adds Nomeriano dela Cruz, vice-president for information technology at Manila's University of the East, one of Destiny's big cable-access customers: "This is the future." For the Philippines, the future could arrive sooner than expected.

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