fbpx

It’s all about Capacity, not Speed

For the past 5 years now, we’ve seen a huge growth in internet penetration in the country. At the same time, we’ve also seen the barriers to entry go down in favor of consumers, partly because of competition.

A friend asked me once why haven’t the residential speeds of ISPs been upgraded for a long time. Come to think of it, when I applied for my PLDT myDSL back in 2004, I was already paying Php1,995 for a 384Kbps connection. It was upgraded to 512Kbps a couple of years later, then to 1Mbps and now up to 2Mbps.

So in the span of about 6 years, my 384Kbps was upgraded to speeds up to 5 times (2Mbps). I’m not sure if that’s a huge jump in speed but I was hoping for a bit more.

I told my friend — it’s all about capacity, not speed.

Take this analogy for example:

Running an ISP is something like running an Internet Cafe, only simplified.

Another friend of mine and I run a small 10-unit internet cafe for a year now. Customers vary from the regular surfers (Friendster) and chatters (YM) to the heavy users (YouTube) and the hard core (online/network gamers).

Our total connection is a 4Mbps business line and on a regular day, with a good mix of customers, the individual workstations get a good share of the 4Mbps internet speed. Let’s say each one gets an equal 400Kbps — and all types the customers are satisfied with the Php15 per hour we charge them for that allocated speed.

If we upgrade our connection to 8Mbps, then offer Php25 per hour for the faster allocated speed of 800Kbps (8Mbps/10), very few customers will be opting/paying for the higher rates. Most will still stick tot he 400Kbps speed at Php15/hour.

So, what we do is concentrate on capacity — bump up our bandwidth to 8Mbps and increase the number of work-stations from 10 seats to 20 seats. We will still offer the 400Kbps to all of the 20 customers all at the same time.

The second scenario gets us more revenue than the first one. Capacity over speed.

I think it’s the same with the telcos. Telcos won’t make a lot more money for up-selling you from one plan to a higher plan. They make more money from selling more plan to more people. As such, they will concentrate more on expanding their userbase and taking a bigger piece of the market share than upgrading our bandwidth to the levels of South Korea or even Singapore.

If you look at the strategy of the new player, Wi-Tribe, it’s very telling. Yes, 4G is supposed to be faster but that doesn’t mean they will all give it out the entire bandwidth. The 1Mbps plan allows them to handle a large capacity of subscribers without choking their network.

My prediction is that, unless we get to the point that household internet penetration reaches 50% and above, we won’t be seeing affordable residential plans in the 20Mbps or higher.

Disclosure: PLDT/Smart is an advertiser on this blog.

Subscribe to Blog via Email

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

Join 561 other subscribers
Avatar for Abe Olandres

Abe is the founder and Editor-in-Chief of YugaTech with over 20 years of experience in the technology industry. He is one of the pioneers of blogging in the country and considered by many as the Father of Tech Blogging in the Philippines. He is also a technology consultant, a tech columnist with several national publications, resource speaker and mentor/advisor to several start-up companies.

31 Responses

  1. Avatar for Android Android says:

    hope that this giant providers realize the need to change the current situation with internet connection in our country…

  2. Avatar for jay jay says:

    which is better to improve speed and latency, upgrade your dsl to the next higher plan or buy a dual wan router and subscribe a 2nd isp provider?

  3. Avatar for Billboard Top 20 Billboard Top 20 says:

    Good business strategy elaborated. You really have an eye of a businessman, Yuga.

  4. Avatar for Web.com.ph Web.com.ph says:

    @John Alvero, unfortunately the mirror is getting unwanted traffic from Vietnam and saturating our international links. Fyi ASTI has been mirroring CentOS as well so we decided to disable it for now… doesn’t make sense to have 2 public mirrors.

  5. Avatar for John Alvero John Alvero says:

    I can confirm that Bayantel and Globe are connected to the IX but not gigabit.

    valkyrie:~# traceroute 203.177.112.167
    traceroute to 203.177.112.167 (203.177.112.167), 30 hops max, 40 byte packets
    1 125.212.66.2 (125.212.66.2) 8.697 ms 5.070 ms 5.568 ms
    2 121.96.0.138.BTI.NET.PH (121.96.0.138) 24.129 ms 26.647 ms 24.661 ms
    3 121.96.0.138.BTI.NET.PH (121.96.0.138) 25.098 ms 24.042 ms 25.588 ms
    4 GW3-7606-Gateway2.bti.net.ph (202.78.97.194) 27.569 ms 34.390 ms 33.766 ms
    5 innove-ix-peer-border-2.bti.nte.ph (202.78.121.25) 35.425 ms 36.825 ms 34.464 ms
    6 120.28.0.149 (120.28.0.149) 33.989 ms 40.764 ms 37.903 ms
    7 120.28.0.22 (120.28.0.22) 38.678 ms 39.064 ms 36.186 ms
    8 120.28.0.25 (120.28.0.25) 52.447 ms 53.595 ms 48.251 ms
    9 120.28.0.166 (120.28.0.166) 50.010 ms 53.120 ms 51.463 ms
    10 120.28.0.238 (120.28.0.238) 48.767 ms 40.821 ms 41.109 ms
    11 * 203.177.112.167 (203.177.112.167) 49.193 ms *

    and MRTG

    http://mrtg.globequest.com.ph/mrtg/network/202.78.121.25.html

    Although traffic still is nowhere near half of 100mbps.

    @Web.com.ph I am a client of your company and im impressed of the service. mirror.web.com.ph is my favorite (is it still up)? I’m not sure of its my filter blocking me or the your site is really down.

  6. Avatar for Web.com.ph Web.com.ph says:

    We operate web hosting servers at Vitro Data Center and VIX is indeed peered with major telcos and ISPs. Our clients on non-PLDT networks have found our hosting service fast due to the low latency.

    I believe it is a mix of capacity, speed and latency. Wouldn’t it be nice if we had fewer hops to our favorite US-based websites?

    Disclosure: Web.com.ph is an ePLDT business partner for hosting and colocation services.

  7. Avatar for John Alvero John Alvero says:

    Hello Sherwin,

    What happend to PhIX? From what i remember, InfoCom now PLDT is a founding member along with some of the biggest names in the industry (although most of them died some time ago).

    Our demand for foreign content vs. internet connectivity costs make sense. Do we have something like Philippines’ State of the Internet report? Maybe these things can be included.

  8. Avatar for sherwin sherwin says:

    @John Vitro Internet Exchange is another exchange run by PLDT for pay, most of the current MMORPG games played here in the Philippines are hosted there. ISP’s pay a monthly fee to be able to connect to that network. PLDT being the dominant carrier somehow has the “correct” business strategy not to peer, since if they peer with other ISP’s, they’re making that ISP better in terms of connectivity and reach. It’s insensitive but makes business sense.

    Internet in the Philippines are expensive and small in bandwidth because of our nature, we are mostly english speaking and likes hollywood, mtv and english contents etc, hence we get our content from the US content providers or generally, outside the country.

    Our Asian counterparts are different in a big way, they speak their own language generally. Hong Kong, China and Taiwan speaks/reads chinese and likes Chinese content same with Koreans for Korean content, Japanese, Malaysians and Indonesians etc. Their dependency on expensive international capacity is not that big as compared to us.

    To give an idea, a typical internet capacity from Manila to Hong Kong or Manila to US would cost a telco around $40-$80/month for 1Mbps and that is already the wholesale price. That doesn’t include pa everything that makes a network works :)

    Broadband penetration also is not as good in our country due to our geographical topology, we’re dispersed expanding many islands making backhauling of traffic from the south/north to Manila expensive.

    A good quality of experience in broadband is a mix of capacity and speed, that’s why our bandwidth is expressed in Kilobits/Megabits/Gigabits per Second.

  9. Avatar for John Alvero John Alvero says:

    Hello Sherwin, its unfortunate that PLDT is doing that. But it may be part of their business strategy. Maybe one day, PLDT will peer with other ISPs when they are able to put better content. Btw, what is the name of the IX that you are talking about?

    Other countries like Hongkong, Singapore, Korea has far better internet than ours and they are all (like us) non-state-side. How is this? Is it because those countries are asian distribution points?

Leave a Reply
JOIN OUR TELEGRAM DISCUSSION

Your email address will not be published. Required fields are marked *