Miguel A. L. Paraz <map@iphil.net>
IPhil Communications
Philippines
Stimulating Internet activity in Asia-Pacific countries is not solely the responsibility of the government and its agencies. Private enterprise has an important role to play, especially if Internet Service Providers (ISPs) are deregulated and are allowed to compete. The advantages, disadvantages, and experiences gained through this competitive environment will be discussed from the experience of one commercial network operator in the Philippines.
The international part of the Internet, as opposed to the U.S.-centric point of view, is becoming more important from a personal, human vantage point. More laymen and nontechnical people around the world are getting their own Internet connections. The global increase in Internet use challenges the countries' network infrastructures, the pool of people necessary to maintain them, and the governments that have to maintain the critical balance between progress and control.
Internet development can be observed, but not measured, in the hard facts and figures that make up demographics and statistics. Various factors help determine whether a country has a single connection to the Internet, or many; if a country has considerable content to contribute to the Internet, or none; and if the country's Internet growth exceeds or lags behind the standards set by the rest of its region, or the world.
The framework we will develop here shall show how to manage the technical and nontechnical aspects of a commercial Internet provider within the conditions present. We will take this lesson by lesson, leading up to the conclusion at the end.
The Philippines has been colonized by the United States, which made English a native language for the educated classes. This made it easier for information technology workers to pick up the necessary skills from foreign sources.
Geographically, the country is composed of over 7,000 islands. Because of this, the people speak various dialects and develop a strong sense of regionalism. This can even exceed the feeling of national identity, since the entire archipelago did not have an identity as a single country before the coming of Western colonization through the Spanish conquest in the 16th century. Historians even point out that the Philippines has closer ties to the West than to its fellow Asian countries.
These geographical characteristics have led to a traditional political and cultural centering around the capital, Manila. It also leads to problems in internal telecommunications. Connections between the islands are carried out through microwave radio links instead of higher capacity submarine cable. Telecommunications itself had been, until 1992, controlled by a virtual monopoly.
Another noteworthy factor in Philippine Internet history is the presence of a large overseas Filipino community. Filipinos abroad got together on the Internet prior to its existence within the Philippines. This spearheaded its eventual entry by developing technology and know-how that would later be imported back into the country, and by promoting Filipino discussion and content on the Internet.[1]
Lesson: A country's Internet history cannot be separated from its political, economic, and cultural history, and its characteristics as a nation. An Internet provider must understand these factors before it connects and represents a segment of the country to the world.
Prior to the Internet, the Philippines did not have a publicly- available TCP/IP data network. The various data networks in operation prior to the coming of the Internet were run by private companies or groups. The government itself did not even develop per-agency networks, much less a single integrated infrastructure.
Live Internet connections were enjoyed by the offshore offices of transnational companies. These offices got their access as part of their connectivity to the companies' private networks. Connectivity for universities, research, and nongovernment organizations were obtained through batched dial-up connections or by the X.25 network. There were also commercial e-mail providers that operated through long-distance connections to the U.S. They typically charged for the connection by volume.[2]
Since 1986, hobbyists have been operating bulletin board systems (BBS), which eventually got connected and formed local dial-up networks. These served as the catalyst for cyberspace developments , since they exposed technical-minded people to the possibilities and trained them in netiquette and the online way of life. These systems eventually connected to international BBS networks such as Fidonet, allowing them to receive e-mail and download shareware programs and informational files. [3]
Lesson: Pre-Internet exposure to networking technologies builds up a knowledge base that shows how to apply them to the local situation.
The country's first public Internet network is being operated by the Philippine Network Foundation. It got connected to the Internet via a 64 kbps link to Sprintlink in March 1994. The foundation is a consortium of private and public institutions that manages what was then the country's only gateway to the Internet. These institutions included government agencies, especially those affilited with the Department of Science and Technology, universities, and some commercial companies.[4]
The situation became conducive to the entry of more Internet service providers (ISPs) when the government decided to deregulate its telecommunications policies. Prior to this, the legal status of ISPs, and whether they were classed alongside telecoms companies, was not clear. Companies that operated mobile cellular facilities or international gateway facilities were mandated by law to install 300,000 and 400,000 telephone land lines, respectively. This was because the government committed to spearheading the growth of basic telephone service by making operators of profitable telecommunications services take the responsibility. The Public Telecommunications Act of the Philippines, signed into law in March 1995, lifted these restrictions for value added service providers that made use of the facilities of licensed carriers. [5] Our company[6] took advantage of this as we had a clear position from which to position our services.
Lesson: Regardless of the present conditions and a laissez-faire attitude, government policy always affects the growth of ISPs.
With this move, the government made it clear that the playing field was open to anyone who wanted to jump into the game, and it was initially entered by established telecommunications and information technology companies who were considered the traditional pioneers in entering what was thought to be a capital-intensive business. [7] Other companies, including ours, joined the ISP club, but instead of selling directly to individual users, they sold instead to other companies with Local Area Networks (LANs). LAN connectivity was a harder sell for these ISPs because while the Internet was new to the country, the investment required was not yet justifiable. This became easier as companies with existing e-mail and networking systems wanted to merge these with Internet connectivity. The advent of the "Intranet" buzzword hastened the rush to get connected.
More importantly for the Internet business, some providers began selling bandwidth to other ISPs, which became second-tier providers or resellers. Some companies worked by offering franchises to prospects on the basis of their geographical area; others put restrictions on resale, while others placed no conditions on their customer's provision of Internet connectivity. Our company did not offer franchise arrangements and allowed customers to set their own rates and create their own services, except that they could only cater to individual users. We ourselves only sold corporate services and did not enter the retail Internet business.
This wave of Internet access providers showed that the Internet was good business. It spurred on the growth of ISPs, and ISP users, throughout the land.[8]
Lesson: The commercial environment offers many choices on what to sell and what to buy from. Find your place.
As of this writing (April 1997), there are more than 100 providers in the Philippines, each of them offering different types of service. Some of them offer "online" or BBS services; others offer low-cost e-mail. There are even nonprofit organizations who cater to specific clients.
Because of competition, rates for end-users have been lowered, even as prices have stabilized to form an "industry standard rate." Some already offer unlimited access, but at much higher rates than in the U.S., which is to be expected. [9]
The growth rate of commercial ISPs has tapered down in Metro Manila, since the potential subcriber population seems to be adequately served by the current number of providers. On the other hand, this spells a move of ISP growth to the other major cities besides Manila, and then to the other provinces. Since the decision to establish an Internet service is dictated by economic feasibility, and not by a central planning agency, enough user demand in an area will bring about service.
Lesson: In the commercial ISP environment, you will differentiate your service according to what you offer and where you are. You cannot sell everything to everyone.
Of the more than 100 ISPs, around 20 have their own international connections. These are mostly leased lines over submarine cable to the U.S., with connection speeds ranging from 64 kbps to E1 (2048 kbps). Aside from the U.S., connections are also made to Hong Kong and Singapore. The U.S. connections are either made to ISP/telcos such as MCI, Sprint, and AT&T/BBN Planet, or to parent offices or affiliates in the U.S. who then have their own Internet connection through other U.S.-based ISPs. Our company started with a single link to Sprintlink, and has since added two more links to MCI. For diversity and access to regional connections, we are planning to connect to another provider within Asia.
Within the country, ISPs have many choices of leased line carriers, thanks to the deregulation of the telecommunications industry. However, these domestic connections can be problematic, especially within urban areas that have poor facilities, or when connecting to other cities and provinces where there is not enough business for the telco to maintain decent support facilities. The typical leased line speed is 64 kbps; it is currently not normal to order higher speed lines that may not be available. The growing demand for internetworking, for both the Internet and intranets, is challenging the telcos to increase their capacity and offer services more suited to the changing environment. We are experiencing this problem because we connect to provinces where there is Internet demand, but the telco does not have the proper service as their infrastructure plans did not take the Internet into account.
Basic telephone service is lacking, though the government mandate[5] to put additional lines is already producing results. Nevertheless, the overall interest in the Internet is pushing those who are limited by infrastructure challenges to take up other alternatives such as software development and integration and content development. Local telephone connections are subject to a flat rate in most parts of the country, though the system will be shifting to metered service. This has already drawn protests from consumer groups and Internet users. Those most badly hit are groups using dedicated, 24-hour connections to the Internet via the phone line to make up for the unavailability of leased lines. These users may be forced to switch to leased lines, or if not available, give up their dedicated connection. Connections within Metro Manila can achieve 33.6 kbps, though people looking forward to 56 kbps connections will be disappointed because channelized services are not available. Other connection technologies such as ISDN and frame relay are not available, though they have been announced by some.
Technical support for ISP hardware is available, since the major hardware vendors are represented in the country. Many software companies also have a presence, while those who rely on free operating systems such as Linux have the support of a local community. However, many of the companies offering commercial support are new to the requirements and challenges of the ISP business, and often market inappropriate products suited more for the U.S. ISP business while omitting those that are applicable to the Philippine situation. Our company combined the best of both free and commercial software by using freely available products and selling support, integration and consultancy services.
Lesson: In the commercial environment, or any ISP environment, you buy service as well as sell it. Add value to what you sell.
As competition leads to ISP growth, it brings about small ISPs that buy access from larger providers. They are called community networks, but not because they serve a real-life geographical community. They are called such because they serve a small number of users and can provide customized, customer-oriented service, as opposed to the large, "generic" ISPs that sell to the mass market. This is possible because there are no official barriers to entry [10], and aside from the telecommunications problems, there is no lack of resources. Community-oriented ISPs generally rely on free operating systems and software.
This type of service provider delivers the best penetration of the Philippine, and the Asian, Internet market because it gets more people involved with the network, as Internet professionals and as users. Separating the retail aspect from the core network operations allows the provider to focus on its core competency and build upon it. Our company acts as the core network provider, taking care of Internet connectivity-related issues while designing a plan for our customers according to what they want to do. For us, the customer's "community" can be their existing customer base, if they already have a business. It can be a geographical area, for a walk-in provider. Or it can be a fresh new service provider who wants to offer customized service. For all these customers, we are building a business network that offers value- added service on top of basic connectivity.
Lesson: Don't just build communities; be part of the community.
The Internet scene has been described as one with both active cooperation and active competition. While the competitive ISP environment sees providers running head to head to gain subscribers, or racing to provide access to new areas, the cooperative aspect keeps this under control. The first inkling of formal ISP cooperation was the establishment of the Philippine ISP Mailing List [11]. Although it was formed to discuss matters of common concern and to strive toward cooperation, it has also evolved into a technical forum, a political issue sounding board, and a general chat area among the people who make the Philippine networks run. The participants include Filipinos and non-Filipinos from around the world who are interested in seeing how the Philippine networks are proceeding. I started the list in December 1995, without expecting the great interest that would follow it.
The Philippine Internet Service Organization (PISO) [12] was formed within the first half of 1996, tackling issues of common concern and acting as a single voice representing the industry. It is a nonprofit organization composed of a Board of Trustees and a general membership. While the members are from different competing ISPs, they manage to work together as an industry association to spearhead its various causes. Our company is a founding member of the organization and hosts its mailing lists.
At the time of this writing, the technical parallel of PISO, the Philippine Network Information Center, or PH-NIC, is being formed. It will take care of managing resources such as IP address allocation, coordinate operational issues within the emerging Philippine network, and act as a framework for other technical matters. By playing a key role in starting the center up, we realize the importance of this technical resource for the local community.
Lesson: Other providers are part of your ISP community.
The lack of a centralized Internet connection for the country has its share of problems. The most obvious effect is the lack of interconnection between local ISPs. This was initially not an issue with the foreign-centric mindset of Internet users, who just wanted to access foreign Web sites. But as the local Internet grew, this situation became a problem. Users wanted to send large files to each other or access local Web sites, which suffered from the poor performance offered by two trips over an international link. Talk about an Internet exchange point has been going on for quite some time, with different parties making plans to serve as the hub for the growing Philippine Internet. This culminated in the operation of the first Philippine Internet Exchange or Metro Manila Media Access Point [13]. As of this writing only a few of the largest providers, including our company, have hooked up to this facility, but more are expected to interconnect through this or other interconnection points being planned. The goal of having exchange points is to unite the nationwide networks of the various ISPs to form a truly Philippine network that is independent of U.S. connections. Local interconnection also makes it possible to develop locally based multimedia content, such as streaming audio and video, which are not practical over the crowded international links.
The Philippine Congress currently has a proposal, through a House bill sponsored by Rep. Leandro Verceles, Jr., to interconnect its various agencies through the networks of private ISPs, to spare government from the expense of building its own network. It gives the government a greater role in stimulating ISP interconnectivity, while at the same respecting the ISPs' indepedence.
Another pressing problem is the lack of bandwidth. This applies for connections both external and internal to the country. The high cost of international links to the U.S. [14] makes it necessary for the ISP with a direct link to oversubscribe and oversaturate the connection. Innovations such as proxy cache networks [15] make it possible to squeeze better performance out of the available bandwidth, and ISPs also keep local resources of frequently accessed files to improve access time. The trend in developing locally housed local content will also lead to more local accesses, bypassing the international links. At the present many Web sites with local content are housed in the U.S. because the lack of local interconnection makes it faster for local users to to connect abroad. Nevertheless, economies of scale allow ISPs to pay lower rates per kilobit/second for their international links if they order larger capacity. The installation of new international circuits over submarine cable also increases the supply of bandwidth, making it more affordable.
Another problem in sustaining the Philippine Internet's growth is a common one - the lack of know-how. The competitive environment helps alleviate this by developing people who have the enthusiasm to learn the tricks of the trade, rewarding them with the chance to join one of the many growing Internet-related companies or even start their own if so inclined. Local mailing lists have already been set up to address the issues of computer and network security, as well as general system administration, reflecting the growing interest in these crucial topics.
Lesson: Grow with your country's network, so you become an indispensable part of it.
According to Ruth and Schware [16], "the primacy of the end user is particularly applicable in the context of Internet implementation in emerging countries." While a survey of Philippine Internet user attitudes has yet to be conducted, the empirical evidence shows the fact that users have a choice drives the providers into offering better services. Many ISP marketing campaigns are targeted into swaying the loyalty of existing Internet subscribers, and companies applying for corporate-level connectivity can request proposals from different connectivity providers to determine who can best answer their needs.
Many of the people who run the Philippine networks come from the BBS community or from the research and educational sector. As the Internet community is young, people fresh out of school are those who run it, by quickly picking up the knowledge that is not learned anywhere but on the job.
People and organizations looking for statistics on the Philippine Internet are disappointed because there are no accurate statistics. There are no completed results yet for surveys of the local Internet population, only "guesstimates" carried by various parties. Nevertheless, the figure is important to gauge the commercial viability of Internet-related ventures, such as e-commerce and Intranet deployment. Another related topic, also discussed on the PH-ISP mailing list [11], is how ISPs make money and help other factors in the economy develop.
Who is the average Philippine Internet user? Since no formal study has been conducted, the observations here are drawn from experience. Dial-up TCP/IP users seem to make up the largest percentage, though institutional users within universities also make a large proportion. The country's low telephone density and the low penetration of household computers lower the dial-up growth rates.
Lesson: Satisfy what the users want, within the constraints of your environment.
The demographics for potential Internet users indicate that walk-in access facilities such as "cybercafes" are a promising way of getting more users online. Since walk-in facilities are constrained by geographical region, walk-in ISP businesses in different locations are not competitors. There is no danger of saturation in terms of market penetration, since a new walk-in location will cater to users in the area. Walk-in sites are currently common in commercial centers and university areas and offer other non-Internet services, such as CD-ROM use and general computer rental. They also commonly accompany dial-up ISPs outside the Metro Manila area because the user base there is less likely to meet the prerequisites of remote access.
Lesson: Walk-in access is not the only trend in delivering Internet to your users. Find the others.
The Internet has already penetrated the Philippine mass media, with newspapers and radio stations online, and mentioning the fact. This Net-enthusiasm is matched by the number of Web developers in the country - enough for it to be termed a cottage industry. Local Web sites, whether professionally developed, or created in-house, have been initially targeted to an audience outside the country. This is changing, though, as the increasing number of local Internet users look for local content. However, local electronic commerce has not yet taken off, and local Web hosts have yet to offer merchant accounts as part of their regular services. Attitude changes, such as an increasing amount of small businesses hooked up to the Net, may influence a shift, though retail exporters selling to a global market may find it more important.
Lesson: Know the trends in relating Internet business with real-life business.
Increased access to the Web has also brought about concerns from certain sectors about online content. The hype about "cyberporn", and the possibility that Filipino people were prostituted through the Internet, influenced Senators Blas Ople and Orlando Mercado to conduct a hearing on the matter in 1995. After the hearing, attended by representatives of the industry, the conclusion was made that the entire matter was overblown. The specter of censorship in today's democratic atmosphere reminded one of the Martial Law days in the 1970s, and was a blemish in the government's hands-off support for the Internet. Nevertheless, the issue rose to the surface again in 1996 when Senator Gregorio Honasan filed another bill[17] addressing the issue, sparking continuing debates about Net censorship on PH-ISP.
Prior to the censorship debate, there have been discussions, especially on one of the oldest locally-hosted Philippine Internet groups, RP-Internet[18] about whether the Internet was appropriate to the local setting. Connecting to the Internet, according to some, was an inappropriate use of resources, when other matters within the country, such as economic development, were more worthy of national attention. Making the Internet a commercial venture, however, makes this an academic argument since building the network infrastructure has been made a task for commercial enterprise.
Lesson: Prove that the Internet is appropriate for your country with real-life examples.
The Philippine ISP scene is a contrast to other countries within the Asia-Pacific region where the ISP environment is controlled by government regulation. Discussions on whether a free-wheeling unregulated ISP marketplace is appropriate for an Asian country have been conducted[19], though it is this author's opinion that the creativity, dynamism and enthusiasm of the ISP crowd is due to the free competition.
As with much of the region, interconnection with other Asian countries is done through the US. This is due to the tariff structure which makes it cheaper or just as expensive to connect to the US as it is to other countries, and also to the fact that much of the Internet traffic comes from and is destined to the US. Nevertheless, changes in traffic patterns, and cable pricing, will make the network more Asia-centric. Direct links from the Philippines to the high-traffic hubs of Australia, Hong Kong, Japan and Singapore are to grow in importance.
Having a commercial ISP environment makes it possible for end-users to enjoy better service since the various ISPs have to be competitive or lose business. It makes it more viable for companies to obtain corporate connections, since their consultancy and integration needs can be served by their ISP or by networking consultants. These companies then indirectly push more end-users to get connected, stimulating the industry into growth.
By separating Internet service provision from basic communications, the differences between the two businesses are resolved since the former often requires the creative approaches that the latter tend to lack. In fact, much of the growth of the Internet industry can be credited to entrepreneurs, or "ants"[20], who have the vision and the drive to deliver their best in this young industry.
The problems that face the commercial enterprises working in a competitive environment turn into opportunities for creative growth and development, fueling the rest of the IT industry, the economy as a whole, the region, and the world.
The growth of Philippine ISPs can be seen at this list of Philippine ISPs.
Other material, including a sampling of ISP rates, is available at Ching's Cyberplace.