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Abstract -- Launching Internet Services in Asia: The Hong Kong Experience Commercial and Business Aspects Track
C1: The Internet for Business

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Launching Internet Services in Asia: The Hong Kong Experience

Wong, Pindar ( pindar@hk.super.net)

Abstract

The focus of this paper is to share the experience gained with launching one of Asia's first commercial internet service providers: Hong Kong Supernet. It identifies the factors which have contributed to its success, and discusses serious limitations in its long term growth as a regional provider. Its conclusion is that without regional coordination among providers in Asia, each will quickly reach a glass ceiling which will throttle the long term viability of the Asian Internet Business.

It is hoped that the shared experience will stimulate discussion which will identify those commercial and political factors which will need to be addressed in order to circumvent the issues raised and build a sustainable regional information infrastructure of value.

Established in 1993 Hong Kong Supernet is the largest and fastest internet service provider in Hong Kong with approximately 80% market share. Services are offered at close to US prices -- whilst the cost for its international bandwidth is around 50 times more expensive than that available in the States.

Of the 600 multinationals that have regional headquarters in Asia, more than 50% are active in Hong Kong and nearly 500 use the territory as their Asian telecommunications hub. All major trunk fibre routes which traverse Asia pass through Hong Kong, which is complemented by Asia's largest satellite earth station. The territory has one telephone line, on its all-digital network, for every two of its 6 million people and local calls are free. International tariffs are among the lowest in the world. Supernet has capitalized on Hong Kong's role as the communications hub of Asia and its ties with a high-tech university to build its successful Internet business in an extremely cost conscious society.

Before Hong Kong Supernet began operation, there was not a widely used and affordable Internet service available. Cost was a prohibitive factor for the use of online services, despite the fact that local calls were free. Hong Kong Supernet began operation with dial-up tariffs as low as USD$1.25 an hour, for all connection speeds up to 19.2kbps, for all protocols. We did not differentiate between methods of connecting and chose not to charge differently for different services. Each customer could have up to 25 Unix logins for less than the monthly cost of owning a pager ( one resident in 10 has a pager, 90% of all business in HK have less than 25 employees ). Combined with extensive free training and support, a critical mass of customers was quickly obtained.

Our customer base of 50% commercial entities has extensive trade links throughout the world and especially the Asia-Pacific rim. Our reputation for service quality and affordability, coupled with their desire to communicate with their Asian business partners, lead to enquiries from seven of our neighbouring countries to provide Internet services to them.

After investigation we found that it was almost always cheaper for each Asian country to lease a connection back to the US, even though local traffic was to be fostered (e.g. China <-> HK <-> Taiwan). Thus there is a double bandwidth penalty over two slow trans-Pacific links when higher bandwidth intra-Asia communication is required. Transiting the US for Asian regional traffic, automatically bandwidth limits countries to those who have the ability to pay. Their ability to pay is determined by the speeds which are commercially provided by the local telco and the ability of the local economy to sustain the high trans-Pacific costs involved.

It is feared that countries with not as economically favourable environment as Hong Kong will take considerable time before they obtain 'critical mass' and contribute to the Global Information Infrastructure. Moreover, international tariffs are such that even with sufficient capital, more leading-edge and bandwidth intensive applications will be forever out of reach for those in the developing countries of the Pacific Rim (e.g. market price for a standard T1 circuit is USD$80,000 per month). It is anticipated that regional coordination will be required to try and avoid this situation in the best interests of all parties concerned.

This paper will help the reader better understand the Hong Kong Internet phenomenon, so as to take whatever may be applicable in the local environment.