All change: Internet speeds and penetration are up, while efforts to promote IT-related skills, capacity and institutions continue

With the country working through its telecoms issues, Thailand’s internet connectivity is about to improve exponentially. Wireless speeds are on their way up and wireless access is expanding rapidly. The broadband offering has been fairly solid in Thailand given the lack of widespread 3G and 4G. For a number of years people in the urban centres and many of rural areas could get connected to a relatively fast and stable DSL line, and usage has been increasing steadily. However, as faster and better wireless becomes available, broadband use should rise. In the decade to 2012 the number of internet users grew by a healthy 17.4% a year. Anudith Nakornthap, minister of information and communications technology (ICT), said in July 2013 the number could double to 52m in that year alone due to the uptake of mobile broadband.

The impact of wireless on Thailand is especially pronounced. The country has historically had very low telephone penetration, with no more than 11 fixed lines per 100 people. Indeed, it has traditionally had fewer fixed-line connections per 100 people than Vietnam and Indonesia. Due to the lack of copper wire to homes, a natural limit to DSL connections was quickly reached. Among those who could get the product, it has been very popular. In 2013 72.85% of those with a phone had DSL with it (only 27.15% of people with fixed lines had only a phone and no broadband), according to data from the National Broadcasting and Telecommunications Commission (NBTC). But outside of those households with fixed lines, the service has been less widely available and less popular.

A Long History

The internet has a long history in the country. In 1987 Prince of Songkhla University established a dial-up connection with the University of Melbourne for email, while the Asian Institute of Technology set up a unix-to-unix copy protocol link with the University of Tokyo that same year. Thailand was first formally connected to the internet in 1988, but only at research and academic institutions – the country had 30 users with access to the internet in 1991. ThaiSarn Internet Services began in January 1994. It was formed by the National Science and Technology Agency, the Telephone Organisation of Thailand and the Communications Authority of Thailand (CAT). The first public access was offered that year.

As with the phone market, the internet has been dominated by state-owned telecommunications companies, Telephone Organisation of Thailand (now TOT) and the Communication Authority of Thailand (now CAT Telecom), and development has long been by concession. TOT formed two concessions: one was signed with True Corporation – in 1992 for 25 years and 2m lines – and the other with Thai Telephone and Telecommunications (TT&T) – a 25-year build-operate-transfer concession for 1.5m lines outside of Bangkok.

Service Providers

When the internet service providers (ISP) were formed, they had to gift 32% of their shares to CAT and they were under its operational control, with the state company’s representative taking the position of chairman and the ISP required to buy access to international circuits through CAT. A total of 18 ISPs were formed under this arrangement. Then, in 2001 the system was liberalised with the passing the Telecommunications Business Act, which established three types of licences: one for ISPs without a network, one for those with infrastructure and one for private networks. Three firms dominate fixed-line broadband: TOT, True and Jasmine International.

The relationships between the players have been complicated, and the broadband space has seen several disputes. In 2008 TT&T, which had until a few years ago been a major provider of broadband services, claimed to an arbitration panel that TOT, its concession owner, had introduced additional services on TT&T lines but had not shared the revenue. (True has a similar case against TOT.) In November 2008 the firm went into voluntary rehabilitation as it was unable to service its debts due to its heavy investments in broadband infrastructure. It faced further difficulties as shareholder and one-time parent Jasmine International began to attract broadband customers away. Jasmine International has become a major player in broadband. In the third quarter of 2013 Credit Suisse Equity Research estimated that the firm had 1.36m subscribers against True’s 1.75m and that it had likely passed TOT’s installed base – at 1.4m in 2012 – according to the company’s annual report. CS Loxinfo (with fewer than 2000 subscribers) and KSC (the country’s first ISP) have a more limited role in the market. True and TOT tend to dominate the Bangkok market, while True and Jasmine are most active upcountry.

Heavy Investment

Despite the ongoing battles, or perhaps because of them, the sector is one of great interest and heavy investment. Jasmine has been particularly ambitious in terms of its plans for broadband. It was scheduled to spend BT2bn ($65.4m) in 2013 and BT10bn ($327m) in 2014-16 to bring its network to more provinces and to make it available to more people. Market leader True was for a time seen as an easy target given the weak state of its balance sheet, but recently it appears increasingly resilient. The success of True’s infrastructure fund, launched in December 2013, could help bring the firm the financial strength to continue building and improving its network. In early 2013 True said it would increase its fixed broadband speed by 30% in June of that year, going from 10 Mbps to 13 Mbps, while its pricing would remain at BT599 ($19.60), according to TeleGeography. The goal was to compete with new mobile offerings by bringing consumers speeds 10 times faster than 3G services.

TOT has also been quite aggressive in broadband. Its concessions are coming to an end and it is looking for new income streams as those wind down. TOT approved spending BT2.6bn ($85m) in 2013 on the upgrading of its fixed copper line to fibre optic. Longer term the state company is hoping to invest BT20bn ($654m) in the creation of a nationwide fibre-to-the-home network with 3m ports. Meanwhile, Advanced Info Service said in 2013 that it wants to begin expanding in fixed broadband over the next five years.

Better, Faster

Akamai Technologies, the US internet content delivery company, has noted some significant trends in the sector. In the second quarter of 2013 Thailand’s broadband adoption rate was up 191% from the first quarter of the year. In terms of broadband adoption, it was ranked an impressive 39th in the world by Akamai, ahead of Taiwan, Australia, Malaysia, China, Indonesia and India. It ranked 22nd in terms of connection speeds, coming in with an average peak speed of 33 Mbps, which placed it ahead of Malaysia, the Philippines, Vietnam, China and Indonesia. Speed is up 73% on the year, the biggest increase amongst the major economies of South-east Asia.

The market is evolving rapidly. The price per Kbps has plummeted in the past few years from BT1.30 ($0.04) per Kbps in the first quarter of 2008 to BT0.09 ($0.002) per Kbps in the fourth quarter of 2013, according to NBTC statistics. The number of broadband subscribers has risen from 5032 in the first quarter of 2003 to 4.9m in the fourth quarter of 2013. The household broadband penetration rate has gone from 0.03% in early 2003 to nearly 25% at the end of 2013. However, Frost & Sullivan sees the broadband growth plateauing, with household broadband penetration rates going from 24% at the end of 2013 to only around 28% at the end of 2014. The company says that most of the efforts will go into making existing networks faster rather than more extensive and recommends that the country adopt a national broadband plan to get more of its people connected. ICT2020, which was submitted to the Ministry of Information and Communication Technology (MICT) by technology-related government bodies in 2010, calls for a competitive ICT sector, a smart ICT-oriented government, green ICT, an ICT competent workforce, and a universal and secure ICT infrastructure.

Government Plans

Some substantial plans have, however, been discussed by the government. The MICT said in 2012 that it would like to spend BT80bn ($2.6bn) in an effort to reach 80% of the nation with fibre by 2015 and 95% by 2020. The so-called Smart Network plan would work together with private industry in public-private partnerships to help overcome last-mile issues. A National Broadband Network Company would be formed to manage the relationships between government and industry. The MICT would like to improve the country’s international rankings with respect to IT. In 2013 Thailand was ranked 59th in the World Economic Forum’s Networked Readiness Index. That is up considerably from the previous year’s 77th, but the country still ranked low in a few key sub-indexes: 72nd in individual usage, 75th in individual readiness and 85th in infrastructure environment.

In some respects the government has been quite successful in pushing connectivity solutions. The MICT reported that it had managed to install 290,000 free Wi-Fi spots around the country by late 2013, more than its goal, established in 2012, of 250,000 hotspots by 2013. At this rate, the country will have 310,000 spots available in 2014. Some critics point out that while offering benefits, the Wi-Fi solution is not a true, robust expansion of connectivity. Each access point offers download speeds of 2 Mbps, but only to a maximum of 15 users at a time and for 20 minutes per login.

Protest Impact

The recent protests have had an impact as well, resulting in funding problems for TOT. Because parliament has been unable to meet, it has not been able to source new financing for its fibre-to-the-home ambitions, and has had to use its own cash flow to support the project. TOT will seek National Economic and Social Development Board permission for the expansion and is hoping for a June 2014 roll-out.

Mobile Broadband

Mobile broadband is set to expand quickly over the next few years, not only because of the Wi-Fi project but also due to the rapid roll-out of 3G and 4G services. The 3G auction in 2012 and the planned 4G auction in late 2014 will bring capabilities that will allow for a fast broadband experience without ADSL or fibre to the home, eliminating last-mile issues for most of the country and allowing for easier deployment. For a time, the case for a fixed system over wireless was easy to make. In a 2012 report CIMB noted that the technologies were close, but that a fixed-line system still had a small advantage in terms of cost and speed. Unlimited fixed-line connections between 3 and 7 Mbps could be had for between BT490 ($16) and BT590 ($19.30) per month. HSPA connections could be had for less (as low as BT149, $4.90, a month) and were faster at 42 Mbps, but had caps of under 500 MB of transfer. At the same time, faster speeds were available on fixed-line plans, up to 100 Mbps, but at a cost: True was charging BT4999 ($163) for unlimited access at that speed. However, the situation could quickly change to being in favour or wireless at the margins. While fixed broadband speeds of to up to 145 Mbps are now possible, long-term evolution (LTE) technologies could bring a competitive 100-Mbps offering, and LTE Advanced, which is being considered by Thai authorities, has theoretical speeds of up to 1 Gbps.

Smarthone Use

In many ways the market has gotten ahead of the bandwidth. Between 2012 and 2013 smartphone and tablet penetration more than doubled, the former going from 17% to 34%, while the latter increased from 2% to 7%, according to a mid-2013 report by Ericsson. This was the fastest growth in the region. The Ericsson survey, however, also found that connectivity was still an issue, with 40% of the respondents saying they connected to the internet by Wi-Fi and 20% using mobile data. According to market research firm GfK, January to September 2013 year-on-year smartphone sales growth in value terms in Thailand was 114%. Nielsen, in a mid-2013 report, was more optimistic than Ericsson, putting the smartphone penetration rate at 49%, ahead of India, Indonesia and the Philippines. According to Nielsen, Thais are active users of their devices. They spend an average of 209 minutes a day on their smartphones, more than Indonesians and Filipinos but slightly less than Malaysians (249 minutes). They also spend quite a bit of time watching videos. Of those surveyed, 22% had watched a video on their mobile in the past 30 days, more than Indonesians and Filipinos. Google reports that Thais now spend more time online than they do watching TV.

Social Networking & E-Commerce

Social networking is also popular in the country. As of September 2013 Thailand had a total of 24m Facebook users, according to Tech In Asia, an increase of one-third since May 2013. Other services are also getting a lot of traffic. Bangkok’s Siam Paragon Mall was the most Instagrammed location in the country in 2013, while the Suvarnabhumi airport was number nine. Thailand was the number-two location for mobile messaging app Line, with Japan being the number one.

E-commerce seems also to be picking up, mostly on the back of increasing bandwidth. The Thai E-commerce Association predicted in late 2013 that full-year e-commerce revenue would be up around 30% from BT119.64bn ($3.9bn) in 2012. According to Japanese e-commerce company Rakuten, the rise of debit cards, and the fact that the banks are allowing them to be used for online transactions, is helping.

Hard Drives

Thailand makes an estimated 40% of the world’s hard drives, with the floods in 2011 leading to a rise in the average price per gigabyte of hard-drive storage. However, most of the technology being used is imported and there is concern that not enough innovation is being done domestically. Some areas of potential strength have been identified. The Software Industry Promotion Agency (SIPA) notes that the local digital content market – games and animation – was worth BT18bn ($588.6m) in 2013. The agency, which supports the creation of digital content, sees that number increasing to BT30bn ($981m) in three to five years.

Still, the IMC Institute, which conducts research on ICT in Thailand, says that the economy is critically short of people with ICT skills, especially those who can work with Facebook apps, cloud computing, database and mobile application development. Greatly in demand are skilled staff competent in iOS and Android. The concern is the country will not be able to keep up with more advanced economies in the region after the establishment of ASEAN Economic Community in 2015. “We have a lot of good innovation, but we have trouble turning them commercial,” said Jumrad Sawangsamud, the director of the RFID Institute of Thailand.

Research & Development

Like many countries in the region, Thailand is working to promote IT-related skills, capacity and institutions. E-government is one area of focus as it works to boost bureaucratic efficiency and at the same time encourage the development of technologies domestically. The push began more than two decades ago with the formation of the National IT Committee (NITC) in March 1992 and with IT2000, the country’s first national IT policy, devised in 1996. That was followed in 2001 by IT2010 and then in 2011 by IT2020, which targets five areas: e-government, e-industry, e-commerce, e-education and e-society. With public and private efforts, the country has built up considerable momentum in technology. IDC predicted in 2012 that the Thai IT market would become the largest in the region, overtaking the existing leader, Singapore.

Software development is of particular interest. According to estimates, Thailand already has 300 active firms in the sector and more than 40,000 programmers. In recent years the country has become one of the top targets for firms outsourcing their coding needs. Thailand’s animation sector is also strong and growing. An increasing number of graduates are entering the sector, and the government is providing support. The Software Industry Promotion Agency would like Thailand to become a regional hub for software and animation development, while the Board of Investment targets software and animation in addition to data centres, in terms of IT investment. Private and public-private initiatives are crucial to this. The country has 70 incubators, a science park, a software park and an umbrella organisation, the Thai Business Incubators and Science Parks Association, which was formed in 2009.

Meanwhile, in 2011 Mobile Technology for Thailand was established by nine members, public and private, including Intel and Microsoft, with the aim of increasing the number of mobile app developers locally. The group provides facilities, knowhow and training. While venture capital dried up in Thailand following the dotcom crash, it seems to be returning to the country.

More broadly, Thailand would like to increase its commitment to research. It spends around 0.25% of GDP on research and development (R&D), according to World Bank data, which is less than some of its main competitors, including Malaysia (1%) and Singapore (2%). The government is not only worried about the massive technology deficit the country runs every year, buying more intellectual property than it sells, but it sees the lack of a commitment to R&D as one of the causes of the middle-income trap. To encourage the creation of technologies, the government is supporting public-private partnerships, building science parks and innovation clusters, and offering incentives.

Outlook

Broadband, whether it is via fixed line or mobile data, is expected to advance rapidly over the next few years both in terms of speed and connectivity. While the dream of a nationwide broadband backbone probably will not be realised as envisioned, most of the country will be getting high-speed connections in one form or another. The question is whether the country can become a creator of new technology, rather than just a user and manufacturer of it. As in most developing economies, this is the vital next step.

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The Report: Thailand 2014

IT & Telecoms chapter from The Report: Thailand 2014

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