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5 February 2015
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Thai digital economy needs 4G ? right now

Chatra Kamsaeng

The “digital economy” is a flagship economic initiative proposed by the military government. It boasts inclusive access to the internet for Thais and advanced information technology to be employed in various business sectors.

Youngsters use mobile devices to take pictures of Prime Minister Prayut Chan-o-cha during a visit to Government House. Efficient mobile internet connections will play a crucial role in boosting economic growth in the digital era?

But what does this policy need to be successful?

Globally, we are increasingly using communication applications for messaging, telephone calls and video conferencing.

Business transactions are made on the screen of a smartphone. There are now applications for various types of businesses, ranging from online marketplaces to matching freelance coders to IT projects. Thus, we can infer that efficient mobile internet connections will play a crucial role in boosting economic growth.

This takes us to what I think the single most important element of the “digital economy”: 4G technology.

When fully rolled out, mobile internet speeds can be five times faster on the 4G platform than on the 3G alternative. Internet connections via 4G technology have a peak downlink speed of 100 Mbit/s and an uplink speed of 50 Mbit/s as opposed to 21 Mbit/s (downlink) and 5.8 Mbit/s (uplink) for HSPA+ technology or 3.5G technology.

The employment of 4G technology means not only faster internet connections via smartphones and tablets, but also lower costs as the technology uses the most advanced bandwidth-sharing technology.
To be more specific, the cost per bit of transmitted data is halved compared with HSPA+ technology.

Furthermore, if operators opt for infrastructure sharing and network sharing, they can save a further 30% on the required capital investment and another 15% on operating expenses according to research by a business consultant.

Hence, the introduction of 4G technology has significant implications for consumers, which includes both individual and business users, as well as telecom service providers.
For consumers, 4G connectivity means a decrease in communications costs. The technology enables internet-based calls and video conferences via chat applications such as Skype, Line and Whatsapp because ultra-high speed means better quality of voice over internet protocol (VoIP).

Internet calls also consume low data, estimated at 0.4-1.0 MB per minute, and these chatting platforms normally charge their users nothing.

Moreover, an upgrade in telecom technology benefits business users, especially for travel-intensive and media industries. For example, a 4G network supports employees when they work off-site by allowing them to communicate, transfer large files and use cloud services with those at their desk. A survey found that 67% of organisations adopting 4G in the US saw increased productivity as a result.

Based on experiences overseas, cost savings for consumers are likely to be significant. On average, consumers can expect to pay 5.3% less on their monthly bill as the price of voice calls tends to fall as much as 9%. Cost savings in Thailand might even be greater as traditional calls are subject to a relatively high interconnection charge (IC) at 45 satang per minute.

In addition to less expensive services, 4G opens up new business opportunities as its high speed allows video streaming on mobile devices.

This can promote digital content and new ways of advertising as well as tele-education for remote areas of the country where high-quality teaching cannot be reached physically.

Unsurprisingly, mobile data traffic is projected to surge by roughly 60% per annum through to 2018 due largely to 4G rollout globally.

Greater transmission capacity at a lower cost also changes the landscape of the telecom market. Specifically, incumbent telecom operators are challenged by numerous chat applications who provide voice communication for free.

Application developers face relatively low investment costs ranging from $3,000 (98,000 baht) to $250,000 per application (based on an estimation by Crispy Codes) compared to 4G infrastructure investment, which is about $750 million for initial 4G investment in the UK (according to Capgemini).

Thus, competition in the internet-based communication service market is fierce, unlike that in the traditional infrastructure-based services which naturally have only a few competitors.

Nevertheless, telecom operators can still benefit from the introduction of 4G. As LTE facilitates better access to large-data usage and to chat applications, telecom operators can maintain their market powers in the infrastructure layer.

Experience from overseas suggest that they can increase their revenue from data services by 7% on top of their 3G technology.

While advanced economies have been launching their 4G telecommunication systems since 2009— Singapore was the first among Asean countries deploying 4G in 2011. To date, only three Asean states do not have 4G technology yet: Myanmar, Vietnam and Thailand (In Thailand’s case, 4G is currently provided under a trial licence only).

The delayed deployment of the technology no doubt costs Thailand dearly. Therefore, the spectrum auction for 4G (hopefully we’ll get it right this time) should be arranged as early as possible so that Thailand can catch up with its neighbours who are already way ahead of us.

Deployment of 4G technology facilitates a better business environment and is a necessity if the Thai economy is to grow.

The extent of the benefits lies in the degree of applications and adoption of the technology by individuals and businesses. Policies which support its transition are therefore as crucial as the policy that gets 4G present in the country.

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Chatra Kamsaeng is a researcher with the Thailand Development Research Institute (TDRI). The views expressed are his own. Policy analyses from the TDRI appear in the Bangkok Post on alternate Wednesdays.

First published: ฺBangkok Post, February 4, 2014

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