Too many players vie in Kingdom’s ISP industry

Like the telecommunications industry in Cambodia, the market for internet service providers (ISP), too, is overcrowded, leading industry experts to say that the situation is preventing new investment.

“There are too many internet service providers,” EZECOM chief executive Paul Blanche Horgan said.

“And the problem with that is the same as with mobile. If there are too many providers, they are just selling at a low price just to get cash flow to survive. Therefore, there’s no investment,” he said, adding that while EZECOM continues to invest, others may not be in a position to do that.

Data from the Ministry of Post and Telecommunications showed that at the end of 2012, Cambodia had 27 ISPs. Internet users in Cambodia numbered more than 2.7 million in 2012, an increase of 60 per cent compared to 2011, when there were 1.7 million users.

According to Blanche-Horgan, companies make significant investments in infrastructure only if they know they will achieve a return.

“If there is an open-ended number of licences available, then companies are unlikely to make the significant technical investments required to provide a quality service to consumers,” he told the Post.

“While a certain amount of competition is welcome, IT companies wanting to make significant technical investments also need a certain level of visibility and stability in the marketplace,” he said.

Sok Channda, president and CEO of MekongNet agrees that the industry is too crowded.

“From an investor’s perspective, it doesn’t bring sufficient return on investment as everyone is fighting in the limited customer base. This means if the industry is like that, no one wants to invest in the industry.”

Ban Borak, deputy managing director for Online, believes the Cambodian ISP market is much more crowded than the telco market. “If I were an investor, I would not enter into the current Cambodia ISP market,” he said.

Ban Borak says most people think that when there are many players, the price is cheaper, but it is actually the other way around.

“When there are many players, the amount of bandwidth purchased from upstream providers is spread into small amounts, therefore making the price go up rather than down, so the operator couldn’t really give a good price with good quality,” he said.

“Some ISPs have tried to sell their internet service at very cheap price at the [cost] of the quality.”

However, Ek Vandy, Secretary of State of Ministry of Post and Telecommunication told the Post that the ministry had raised no concerns over the overcrowding of ISPs.

“It is not much. And we cannot compare our ISPs to mobile phone operators because ISPs are playing a very crucial role in the development of the country, and improve the economy and education,” he said.

“And I don’t think the recent number we have is much, compared to our need. The more we have, the more help for the country.”

”What we are concerned about is how can we can catch up with the world development of the industry. I notice now some big companies are competing with each other by upgrading new technology, so this is really significant to our country’s development as well as economy and education.”

With the merger of Smart and Hello and the subscriber transfer of Thaicom’s bankrupt Mfone to local Mobitel, the telecom industry has already seen a decrease in players this year.

According to Sok Channda, the number of ISPs will also decrease in the future, which could happen through either mergers or bankruptcies.

“Three or four ISPs would be healthy,” she said.

Blanche-Horgan said it would take a maximum of five years until the provider count shrinks, with five being a healthy amount to make up the industry.

“EZECOM does not have any knowledge of any planned mergers. However, it stands to reason that – with such a high number of operators – some companies might well be talking to others with a view to consolidating,” he said.

By Anne Renzenbrink and May Kunmakarat  I   4 April 2013  |   The Phnom Penh Post