TM to introduce new business models, usage based pricing within 3 years
By Karamjit Singh October 25, 2016
- Usage based pricing offers consumers choice, is a global trend says CEO
- In talks with global players to set up mirror sites in its Iskandar data centres
“I BELIEVE in terms of empowering the customer, it should be a choice for them, and it’s how the market is moving, not just in Malaysia but the rest of the world as well,” says Telekom Malaysia Bhd’s (TM) group CEO, Zamzamzairani Mohd Isa (pic) in revealing that TM will eventually move to usage based pricing as it introduces new business models and moves away from fixed pricing for its broadband packages.
He gives a two to three year time frame for this to happen and says it has nothing to do with Friday’s budget announcement, referring to the Oct 21 Budget 2017 speech by Finance Minister Najib Tun Razak where it was announced that consumers of fixed broadband services will enjoy better value. “I’m pleased to announce effective January 2017, fixed line broadband service providers will offer services at a higher speed for the same price,” said Najib who further added that prices for the 5MB package will be lowered by 50%.
“Ideally customers won’t feel it [usage based] in terms of pricing but in terms of enriching their experience it will be better without having to break their pockets,” he says of the impending business model change.
The announcement of cutting prices by 50% and offering higher speeds however has some in the market nervous over the possible hit to TM’s earnings with some immediate reactions coming various brokerages. While, AllianceDBS head of research Bernard Ching is of the opinion that the impact will be minimal. “Prices reduction could refer to new affordable packages being introduced," UOB Kay Hian head of research Vincent Khoo thinks the move will be negative for TM, “as the move is seen to cap ARPU uplift in the near term.”
To add clarity to the budget announcement Zamzamzairani was speaking at a press conference yesterday to announce TM’s Broadband Improvement Plan where it was revealed that its home customers will be enjoying higher broadband speeds at a better value. Two other TM executives, Bazlan Osman, executive director/group CFO and Imri Mokhtar, executive vice president, Consumer & SME were present as well.
Speaking to DNA after the press conference, Bazlan acknowledges that the upgrading of speeds will cost TM from the point that it will have to increase its international bandwidth access as most of the content users consume are based in servers outside of Malaysia.
“However we are in talks with some global players to bring their servers to sit in our Iskandar data centre, which is certified Tier 3 and we have another new one coming up in Cyberjaya.” He adds that some global players like Akamai already have their content sitting in servers in Malaysia. This lowers TM’s cost of providing access to the content.
And, while it used to be that over 80% of TM’s customers would access content based overseas, that ratio today has come down to around 50% now says a TM executive. However the volume of content consumed by each household has also gone up dramatically with average monthly data usage of 150 GB per household. “To put that into context, it is watching Youtube non-stop for 31 days,” says Imri.
There’s an international bandwidth cost to TM in providing its customers with access to content based overseas and in increasing their speeds. While their costs will go up, Bazlan notes, “there is still room for us to entice some of our 4.3 million fixed line customers to take up broadband as there is very little incremental cost to us to serve them. It is about offering them value added services and today, with our mobility piece in place (via webe), we can also provide them a convergence experience.”
According to Bazlan, not many Unifi or BBGP switch on Hypp TV and that the offering of higher speeds will give them an opportunity to enjoy Hypp TV. “We are looking at the upside to the average revenue per customer through offering them connectivity and value added services.” BBGP stands for Broadband for General Population and refers to the lower speed Streamyx packages which start from 1MB.
Imri also points to the possible upside of attracting users from their competitors. But the immediate target is to upgrade the 40% of their Streamyx customers who are still on 4MB and lower, plans and the 32% of Unifi customers who are on plans of 10MB and lower (table below).
Speed bump ahead for those expecting doubling of speeds
TM broadband consumers, of which there are 2.37 million (900,000 Unifi and 1.4 million Streamyx) who are taking the budget example of the doubling of speeds for 5MB as a blanket rule, are in for a major speed bump as Imri reveals that rather than a doubling, customers will be upgraded to the immediate next package on offer. For Streamyx that means those on 1MB will move up to 2MB while for those on the Unifi Advance Plan 30 will be moved to the next plan which is the Advance 50.
However there still are Unifi customers who are still holding on their 5MB, 10MB and 20MB plans and they all will be upgraded to 30MB because from Jan 2017, that will be the entry level plan for Unifi, leading Zamzamzairani to say, “30 will be the new 5”.
“We need users to move up to higher speeds so they have the opportunity to enjoy value added services not available at lower speeds and we can entice them with other higher value added services,” adds Zamzamzairani. “I believe in the future, people will talk about their experiences [online] and not about connectivity.”
Smart Home services will be among these higher value services/experience and also 4K video which needs access speeds of between 25MB to 50MB.
The upgrades in speed will happen in stages beginning January and will be dependent on the network as in certain locations there could be technical constraints to increasing customer speeds. Upgrades will also not be automatic. Beginning December, TM will be calling each and every one of their broadband customers to inform them and seek their approval to upgrade them while keeping to the current pricing they are paying. To TM, this immediately translates to a lower cost the customer is paying for their broadband.