BY VERONICA S. CUSI, Businessworld

THE PHILIPPINES was the second fastest-growing market for broadband worldwide in 2006, according to a study by UK-based research and consultancy firm Ovum.

This was primarily due, however, to the fact that broadband is just taking off in the country, and Ovum said growth could be significantly higher if regulators allow more competition that would lead to cheaper services.

Greece took the top spot in the study, and the other countries in the top ten list were Indonesia, India, Ukraine, Ireland, Thailand, Vietnam, Russia and Turkey.

Total broadband growth in the Philippines from 2005 to 2006 was at 157% while Greece’s was 168%, Datamonitor affiliate Ovum said. The Philippines had 127,942 subscribers in 2005 and this number grew to 329,216 as of end-2006.
This was despite the fact that “broadband uptake has been slow in the Philippines”, which Ovum traced to costs and limits on foreign investments.

“There is no cable infrastructure in the country and the national regulator is limiting foreign investment in the network infrastructure and mass-media services,” the study noted.

The cost of broadband services in the Philippines is also expensive relative to average monthly disposable incomes of subscribers. The highest monthly fee in the Philippine market in 2006 was $96.08, with the lowest at $17.28. In comparison, the highest monthly fee available in Greece was $60.91 while the lowest was $10.31.

The high price of broadband services in the Philippines, as well as in Vietnam and Indonesia, has resulted in penetration lags in consumer broadband among these countries, Ovum said.

Digital subscriber line (DSL) was still the dominant broadband technology used in the Philippines. Cable made up only a small portion, roughly 13%, of the market.

But prospects in the next five years were upbeat as Ovum observed trials for other broadband technologies and greater competition.

“While a low starting figure is partly attributable to high growth, there is a positive outlook for the country’s broadband market,” Mr. Coham said.

The number of subscribers is expected to increase to 1.89 million by 2011 from around 127,000 in 2005 for a compounded average growth rate of 63%.

Mr. Coham told BusinessWorld that a combination of regulation and competition would bring down the cost of broadband, making it available to the mass market.

“The national regulator has to be more involved … to lower wholesale price,” he added.

The study noted that market leader Philippine Long Distance Telephone Co. (PLDT) was facing “growing competition”.

The study said PLDT had a 77% market share and Lopez-owned Bayan Telecommunications, Inc. (Bayantel) with 11%.

“We see growth in competition from other providers; we see competitive offerings from other players. At some time, PLDT and Bayantel might be forced to drop pricing to make [their services] attractive to a larger proportion for the market,” Mr. Coham said in a phone interview.

Ovum noted that PLDT is already conducting trials of another broadband technology, fiber-to-the-home (FTTH), in Metro Manila.

FTTH can enable speeds of up to 100 megabits per second (mbps) compared to the current maximum rate of 5mbps.

However, Mr. Coham said he does not expect this kind of broadband to be commercialized in the next few years.

“While these services will be limited to the high-end market, they do suggest innovation is taking place in the Philippines which, combined with a potential for wireless services … and greater competition, should lead to further broadband growth,” the study noted.