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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.



Abe is the founder and Editor-in-Chief of YugaTech. You Can follow him on Twitter @abeolandres.

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31 Responses

  1. DMNL says:

    I would to think of it as both – speed i.e. latency + capacity. Let’s say you have capacity of 12mbps but your ISP’s international peering is bad, you will not be able to reach capacity.

  2. markmarcelo0210 says:

    this is true…

  3. Jon says:

    I do love to get the fasted connection speed possible today, but frankly, right now, we still don’t need that much. A steady 1mbps connection is more than enough for most average users. That connection speed could cater to almost everything we need such as video streaming, surfing, online gaming, etc.

    Having a 2mbps connection is even better. P2P downloads would finish really fast. We still don’t practically need more than that, IMO. What we need is connection stability and consistency. Fix that, and you’d be getting a lot of happy subscribers. Be honest with the speed advertised. Don’t say unlimited, if it really isn’t (eg. Wi-tribe capping) and up-to speeds that we all know almost never reaches that advertised speed.

    If ISPs would be honest with their subscribers, I suppose we wouldn’t mind paying a little bit more for a truly reliable service.

  4. bokoi says:

    @Jon
    Honest po mga ISPs… kaya nga when they advertise, they will always include the ever familiar “up To” prefix to the speed value… hehe

  5. jade bryan says:

    PLDT = low latency with lower speed with the same costs
    Globe = high latency with higher speed at low costs

    So most of them are not for speed, it really depends on the type of users. Average users/customers much supply with low latency net providers. So if more gaming ka, better go with low latency.

  6. Jercouzen says:

    Regarding latency, if you play local MMOs, then yes, PLDT may *seem* better (6ms ping is godly.. lol). But that’s only because all our local MMOs are hosted at the Vitro datacenter, by PLDT. Try playing on international servers however, and you will see it’s pretty much the same as any of our local ISPs.

    Choosing an ISP is a matter of physical location (where you live) as one ISP may perform better than the other depending on area. A little research is required though, but it’s not rocket science. Just stay away from old copper distributed networks when possible, and go with whatever ISP offers more forward-looking infrastructure.

  7. BrianB says:

    This is obviously what we are looking for ward to.

  8. Beni says:

    Their enterprise customers dictate how much bandwidth an ISP truly needs to provision. Residential customers take up only a small niche of their income/bandwidth.

  9. Jon says:

    @boknoi

    Haha. Yeah, very honest. Kaya nga ang daming nagrarant sa forums and blogs dahil sa naguumapaw na honesty nila.

    I agree with @Beni. There is still currently not much demand for high-bandwidth Internet connections today. However, I see that there would soon be a rise in the need of such. This is because of IPTV, or video streaming. Services like PLDT’s watchpad may be a kickoff for a demand in “legal” video streaming consumption. Pag HD na ang norm dito, then we’ll be needing blazing speeds.

  10. Ardz says:

    I agree with Jon. Most of us don’t mind the speeds. The important things are stability and consistency. The government should create a law wherein telcos should be able to provide whatever they guarantee on their networks. Telcos should advertise ‘guaranteed speeds of’ instead of the misleading ‘speeds of up to’.

  11. fjordz says:

    I also agree with Jon.

    When I was in college, I was wondering why we have this slow internet connection as compared to our neighboring countries. Though I was told that its because of the facilities (cables to optical fibers), I realized that it may be because we really don’t need such speed since were only using the internet when browsing, chatting and video streaming. You’re right that 1MBPS up to 2MPBS is enough for this kind of usage.

  12. Herce says:

    Actually ISP speeds have gone DOWN, which makes your point Yuga. I used to have 6mbps on residential PLDT DSL. They down graded me to 3mbps last year and said that it was now the fastest speed.

    So your point is a good one, that capacity is the issue. As PLDT’s subscriber base got larger, they probably couldn’t offer the 6mbps plan anymore.

    I couldn’t disagree with Jon more! I can name 32 friends who would kill for faster internet speeds. Of these 4 switched to skycable’s 12mbps plan and 1 lucky dog was able to subscribe to Globe’s fiberline offering (lives in Forbes). I think Jon is trying to speak for a young sector that can’t afford faster speeds at the moment. I think he is wrong for that group, though, as that younger group will get richer and will want faster speeds.

    However, I am speaking for an older 35-50 group who need faster speeds at home to telecommute and work with clients and an office that is global. For us, speed is critical.

    More than that, saying 1mbps is so shortsighted as to be myopic. Faster consumer speeds are required for progress! Without fasater speeds, a whole host of domestic consumer technology and domestic revenue generating industries, which are already extremely profitable in other countries in Asia, can not happen here.

    We are already behind our neighbors in this region. We used to be the #1 economy in SE Asia. Now we are at the bottom. Withotu progress, such as faster consumer speeds, we will never be able to catch up again.

  13. Jon says:

    @Herce

    Who wouldn’t want the fastest connection? Any one would. But let us be realistic here. Not all can afford corporate-like connections, and not all of us need those speeds for work / business.

    I do agree that faster speeds is indeed needed for growth. I did mention that AS OF NOW, we still have no practical use for such speeds. Who knows, maybe in 2-3 years time, we would be needing it.

    My only point was, that ISPs should focus more on improving stability and reliability of their service, before anything else.

  14. fr0stbyte says:

    Consistency na lang sana ang i-improve nila. It’s really hard to get consistent speeds throughout the day. Like say, when I try to watch a YouTube video back when the average speed for SmartBRO was 512kbps eh constant and walang buffer sa video. Nowadays you can’t do that anymore. They say na mas mabilis daw ang internet nang SmartBRO ngayon pero you’ll end up buffering streaming videos.

  15. John Alvero says:

    Yuga, do you advertise a 400kbps speed per workstation? If so, at 400kbps per workstation you get a 1:1 contention ratio. You can add up another set of 10 (total of 20) workstations to give you a 2:1 contention ratio.

    In the ISP world, it is usually 20:1 to 40:1 ratio or even higher, this is where they make money. To provide cost effective plans, the connection is CONTENDED or in simple terms shared.

    If you are using a PC based router in your internet shop, you can find out how much bandwidth is actually consumed at any given time. (MRTG,iptraf,etc)

    The whole idea is is based on the premise that not all users will be able to consume all of his allocated bandwidth 100% of the time. Now, these days, it is very easy to do this (think of p2p and stand alone torrent appliance).

    The next question is, do we really need high bandwidth for individual users? probably no/yes. For p2p, you can probably make use of high bandwidth. But for ordinary file downloads such as FTP, HTTP it depends on the source you are downloading from if they can support that high speed download (upload on their side).

    As for realtime traffic such as VoIP, 64kbps/call is already using a good codec, throw in a good latency and you will be fine.

  16. I can still remember… when I watch the movie Hackers… when 14 kbps modem is considered fast… hmm.. those where the days.. or was it 28 kbps?!

    gotta watch the movie again!!!

    heheh..

  17. I can still remember… when I watch the movie Hackers… when 14 kbps modem is considered fast… hmm.. those where the days.. or was it 28 kbps?!

    gotta watch the movie again!!!

    but seriously, almost all people with PLDT landline already have a DSL connection… so it’s starting to be a common thing for house hold to have a broadband connection.

  18. Pam says:

    @jade bryan
    It’s unfair to say that Globe delivers high-speed connection but with high latency. If you would go out and try to compare cafes subscribed to PLDT, BayanTel and Globe by playing MMORPG games like KOS, SF, etc. you will see or rather feel, that Globe and BayanTel connections lags less than those using PLDT.

    The problem is, most pinoy online games today uses PLDT for their servers (and for client based RPGs ie. Garena for DotA and L4D, most gamers are subscribed to PLDT), and PLDT doesn’t provide their local gateway to other Philippine ISPs. Other ISPs need to go through a longer route before reaching PLDT, the reason why subscribers from other ISPs, not only Globe, get high latency from these games.

    Anyway, you really don’t need a high-speed speed for online gaming. You can even play an online X360 game on a 512Kbps connection. It’s all about latency and your connection’s consistency.

  19. John Alvero says:

    In my observation (i might be wrong), local peering links are congested. It is almost always better to go the long route. :)

  20. sherwin says:

    @John Alvero, PLDT doesn’t peer kase with other telco’s here in our country. If you want to peer, then you have to be their customer, paid peering. That’s why everthing outside PLDT’s network would have to go via an international route and back. Globe, Digitel, ETPI, Bayan are all interconnected via gigabit connections locally. Local content outside Vitro Internet Exchange is also lacking. PLDT’s watchpad is for PLDT only, Bayan/Skycable’s Iwantv is for their subs only.

    Telco’s cannot give out bigger bandwidth packages cheap because we are so dependent on international routes/cables which doesn’t come cheap, though it is getting cheaper every year, it hasn’t reached a sweet spot wherein upgrading subscriber’s bandwidth drastically would be profitable.

  21. 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?

  22. 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.

  23. 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.

  24. 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.

  25. 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.

  26. 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.

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

  28. 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?

  29. Android says:

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

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