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By Joyce Fan

When describing the Philippine telecom market, Mr. Ernest Cu, President and CEO of Globe, painted such a picture to WinWin: "The Philippine market is SMS heavy, with over 1 billion messages sent a day over a total of 70 million SIMs. In contrast, our nation' s voice business is miniscule–MOU averages just 18 minutes compared with, say, 120 minutes in Cambodia. Prepaid services dominate, and ARPU is as low as 3 USD. We even have low denomination products of 10 US cents." So, what is the way out? In this respect, Mr. Cu outlined Globe' s innovative promotional approach to broadband services. 


An eye on broadband 

In addition to the mentioned characteristics, mobile penetration in the Philippines was 75% at the end of 2008. Mr. Cu explains that "Though growth rates are very high, ARPU is decreasing and the churn rate is increasing, which indicates that the market is approaching maturity." This presents huge challenges for operators. How can they identify new customer demands and establish fresh developmental methods and revenue streams? 

For Globe, the nascent broadband market presents a golden opportunity. According to Mr. Cu, Filipinos are Internet savvy: they like surfing, gaming, and social networking. "As of early 2008, only 8% of all Filipino households had broadband access, representing just 1.1% of our 92 million population. So, the potential for connecting the Philippines through broadband is vast." 

The Philippines comprises an archipelago of 7,107 islands. Combined with the complexity of private land ownership, it has proved next to impossible to develop a robust wire infrastructure and the price of terminals has limited broadband development. Globe thus sees wireless broadband as the key area to tap into: "As Netbooks and connections become less expensive, the market is set to grow very quickly. We can reach subscribers at much lower fees than we could through traditional wire services." 


Building momentum with broadband 

Only around 1.1% of Filipinos enjoyed broadband access in early 2008 and, by the first quarter of 2009, Globe' s broadband subscriber base was just 287,180. Mr. Cu has set target to increase this number to half a million by the end of 2009. How will Globe achieve this? Who will be connected with Globe' s efforts? How is the company' s plan progressing?

• Three-layer framework 
  
  Mr. Cu describes Globe' s technological strategy as three tiered: "Firstly, as is the case with most countries, DSL on the wire line or GPON is adopted for fixed broadband. However, as the Philippines' market demographic yields a lower ARPU due to relative levels of wealth, we intend to deploy WiMAX to achieve fixed home wireless broadband. With Huawei' s help, we' re reaching the home market wirelessly through WiMAX." 
  
  Secondly, one of the continuing characteristics affecting mobility in the Philippines is that most voice and SMS traffic is carried on 2G networks, while the bulk of traffic in the 3G network is broadband. Globe is consolidating its UMTS network and providing 3G services at 900MHz and 2100MHz to meet increased subscriber demand. Indeed, network enhancement must continue as the company steps up its 3G product sales under the brand Tattoo. As Mr. Cu states, "We' re working with Huawei to examine how its SingleRAN product can help us. We' re trialing the solution in a rural suburb of Manila to deploy 900MHz UMTS and thus achieve wider coverage, which we' ll later supplement with 2100MHz as necessary." 
  
  Globe is expanding its Wi-Fi infrastructure throughout the country: "We have a limited Wi-Fi footprint today, and I think it could be used as a good add-on for the consumers to be able to provide indoor coverage through Wi-Fi rather than going through WiMAX."

• WiMAX: the right fit 
  
  WiMAX is clearly positioned in Globe' s broadband strategy to get people connected and bypass inadequate wire resources. "We' re very confident that WiMAX can be utilized for a very specific application rather than as a technology to replace the existing 3G platform. We see that it has a very nice place in the market for that particular application." stated Mr. Cu. 
  
  The fixed wireless broadband services facilitated by Globe' s WiMAX will benefit two consumer groups: (1) Internet cafe users who lack home access to wire or wireless solutions, and (2) Users who have no other choice. Globe offers an unlimited WiMAX product package at 795 Pesos (16.5 USD) for 512Kbps and 995 Pesos (20.6 USD) for 1Mbps. "We believe that these customers will return home as terminals become more readily available. By the end of this year, you' re likely to see us packaging terminals and services together for consumers." For the second group, whose rural locations limit choice due to very small telcos and poor wire infrastructures, Mr. Cu comments that: "This underserved segment has been using their current broadband connectivity because they had no choice; it was the only thing available. Globe wants to give them a choice. The take-up for our WiMAX services in those areas is increasing." 
  
  With Huawei' s help, Globe launched its WiMAX services in February 2009 through its cluster format WiMAX network, which was systematically rolled out city by city. This system ensures that coverage is maximized rather than randomly dispersed. "We strongly believe in our product; we offer a 30-day money back guarantee. With proper execution, Globe has attracted its target segments in the specific rollout areas. According to Mr. Cu, "Our overall customer satisfaction rate in WiMAX is above 90% and we are happy to note that there have been a lot of switchers especially in South Luzon." In the near future, Mr. Cu explains that: "We plan to accelerate rollout and deploy 1,000 sites by the end of 2009. We also aim to reach a point to where people can buy the product off the shelf and install it themselves. This will vastly expedite WiMAX distribution."

• Aggregated applications: more opportunities 
  
  In terms of broadband service strategies, operators seek to be service providers rather than just pipe providers. To this end, they are cooperating with third parties who offer a variety of broadband service business models. Unlike the much more developed U.S. and Western Europe terminal markets, Globe has had to adapt its handset strategy to the reality of the Philippine market. 
  
  Globe has established partnerships with a lot of content owners like Yahoo! and Friendster, the biggest SMS platform in the Philippines. Globe is also developing its own portals to help aggregate popular sites such as Twitter, Facebook, Friendster, and Multiply into one site to simplify management for subscribers. Mr. Cu mentions that: "Also in that site, we have what we call "Barkada" a Filipino word for group, or "Tambayan" a place for the group to hang out and share. This way, people can hang out with friends while still keeping in touch with all of their social networking sites all in one location. Though the site is still under development, some parts are up and running under the Globe portal. Eventually both web and mobile users will be able to access it. Of course, we need to glam up the site to attract users and ensure it can be accessed by subscribers with low end phones in the future."

The proven choice 

The broadband sector is starting to deliver on its promise of becoming the next major growth point in the telecom industry. Globe' s broadband strategy has been proven by sound market performance. According to its 2009 Q2 report, Globe' s broadband momentum from 2008 has been sustained through its wireless broadband services. The broadband business posted significant year on year growth with revenues increasing 59% from 855 million Pesos to 1362 million Pesos (17.1 to 27.24 million USD). Cumulative broadband subscribers more than doubled to 379,309 at the end of second quarter of 2009. Wireless broadband subscribers now account for about 54% of the total broadband subscribers, up 19% from 2008. 

As Globe' s 2008 annual report states: "While many challenges remain, we are encouraged by the strong performance of our broadband business. This will provide us with the strong forward momentum to build scale, improve profitability, and narrow the gap versus competition."




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