[UgaBYTES] Fwd: [ciresearchers] [CAnet-news] Lessons from the land of cheap broadband in Hong Kong

[Ndaula Sulah]

Dear All, this could be useful learning | Sulah

http://green-broadband.blogspot.com/ or http://billstarnaud.blogspot.com

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[Excerpts from CNN article. While HK density is a factor, it still does not
account for the huge price differential in Internet pricing between HK and
elsewehere in the world. I love the quote "The telecom industry tends to
commoditize people. Our strategy is to commoditize bandwidth". - BSA]
Lessons from the land of cheap broadband in Hong Kong

http://brainstormtech.blogs.fortune.cnn.com/2009/11/13/lessons-from-the-land-of-cheap-broadband/?source=yahoo_quote<http://brainstormtech.blogs.fortune.cnn.com/2009/11/13/lessons-from-the-land%0A-of-cheap-broadband/?source=yahoo_quote>



City Telecom's 400,000 customers pay $13 a month for 100 megabit synchronous
broadband. And they get a money-back guarantee: If they don't clock 80% of
the promised speed, the company pays them twice their monthly fee.



If you live within coverage area of Verizon's FiOS <
http://www22.verizon.com/Residential/FiOSInternet/Plans/Plans.htm>
 service (VZ <http://money.cnn.com/quote/quote.html?symb=VZ>), you pay as
much as $150 a month for up to 50 megs downstream and 20 upstream.

How can City Telecom possibly offer service that's more than twice as fast
at less than 10% of the price?

Density is a blessing

It's partly geography and partly vision. While Hong Kong has 7 million
inhabitants, only a small fraction of the island's mountainous terrain is
developed, which means everyone basically lives on top of each other. The
population density is 16,380 people per square mile - versus 640 in Japan
and 80 in the US. That makes every customer far cheaper to serve. "We have a
phenomenal network built at $200 per home. Verizon is talking about a cost
of north of $1,000 per home," Lai says. "We built ours at one-fifth the
cost."

Of course building the network in the first place required vision. City
Telecom was founded 17 years ago as an international calling-card company by
two cousins who plowed in 100,000 Canadian dollars to get started. They
could have leased lines to get into Internet-service business the way many
carriers do, but that would have meant encountering the same last-mile
bottleneck. So, they built their own $400 million network over a decade.

And now the company is on a tear. The largest IP service provider on Hong
Kong, PCCW <http://www.pccw.com/eng/> , has about 1 million customers,
according to Lai, but is growing at a fraction of the pace. It added only
3,000 in the last six months, compared to 41,000 for City Telecom. PCCW
recently slashed its prices to match City Telecom, but still can't come near
the speeds. But can City Telecom really make a business out of cheap
broadband?

Innovation trumps incumbency

Lai insists the company already has. "The network is cash flow positive
since 07. We're debt free with 10% revenue growth and 30% EBITDA growth," he
says. "Our stock is up 200% in 12 months, and the market is starting to
realize what we're doing."

All that success, Lia adds, is a result of having a Big Hairy Audacious Goal
and doing everything possible to achieve it. "The telecom industry tends to
commoditize people. Our strategy is to commoditize bandwidth, to make 100
megabits the industry norm in Hong Kong," he says. "Our plan is to win by
offering the best service at the lowest possible cost structure. Thirteen
dollars is not a lot, but if you scale it and drive your cost base down,
it's a beautiful business to be in."

If only some US telecom executives felt likewise.

BTW: And I would say African telecoms executives too.


-- 
Executive Director
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