It all started with a bombshell. Early August, MPT –which own the largest broadband subscriber base- launched a new FTTH offer at extremely attractive price.
Slight problem: the offer is only available in a couple of streets downtown. The public operator states it will extend the offer to every township in Yangon and Mandalay before end of 2018.
Social media is the new war zone
Nevertheless, this announcement generated a wave shock on the broadband market and since then, we have seen flourishing a series of unprecedented promotions.
Kinetic wakes up from the dead with a very aggressive pricing.
#မိသားစုမ်ားအတြက္ျမန္ႏႈန္းျမင့္ #အိမ္သံုးအင္တာနက္? အထူးအစီအစဥ္?လူၾကီးမင္းတို႔အတြက္ Kinetic Internet မွ…
AGB decides to double the speed on all its packages.
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Welink offers free installation through its “Shwe program”.
ခ်စ္ရတဲ့ ကာစတမ္မာတုိ႕ေရ …..ေဟာဒီက ေရႊပရိုဂ၇မ္က ေတာ့ ေတာင္ၾကီးေရာ ရန္ကုန္ျမိဳ႕မွာပါ ရရွိေနပါျပီအကန္႕အသတ္နဲ႕မို႕…
Myanmar Speednet waives installation fees and offers 2mbps for 49,000Ks per month.
ျမန္မာျပည္ရဲ့ သီတင္းကြ်တ္ပြဲေတာ္ ကာလ အတြင္း Myanmar Speed Net ၏ သီတင္းကြ်တ္ Promotion ျဖင့္ လက္ေဆာင္ Extra Bandwidth…
Myanmar Speednet is definitely a good example of the complete craziness the broadband market has become in Myanmar.
Speednet started servicing customers in May 2017. At that time, the new player offered 2mbps for 95$/month and charged installation fees 250 US$. 4 months later, the same ISP is waiving completely the installation fees and giving away 2mbps for 49,000Ks/month. This is a 160% price reduction in just 4 months!
There is indubitably a wave of panic among the service providers in Myanmar. Most of them saw their business plans collapse as the number of license holders exploded in the market. Too many ISPs, too little clients. 4G price are going down as fast as 4G speed is going up. Service providers need to go agressive on pricing to maintain their customer intake and limit the loss.
With the last MPT announce which clearly translate its firm intent to get back into the broadband market, it is understandable to see anxiety growing among the service providers.
Though, we strongly believe that the current level of price and promotion is not healthy and will more likely have deadly consequence for most of the Myanmar ISPs. And here is why.
Reek of desperation
We have always pointed out that installation fees are a big barrier to entry which partially explain the low penetration of broadband in Myanmar. This is not that we fancy repetition but reducing installation fee is one of the key selling point that ISPs need to play around with.
For fiber to the home, this barrier to entry could be an impossible equation. Indeed, installing and maintaining FTTH is costly. According to our sources, it costs between 100 to 150$ to install a single home fiber customer inside a building. This cost does not even include the WiFi router.
Saying that, there is always the possibility to subsidize this installation fee and recover the investment on the recurring fee (monthly fee and/or annual fee). In Myanmar, that sounds like a risky business considering there is no system in place to recover bad debt. Unlike businesses, consumers are highly unfaithful and more likely to jump from a promotion to another ignoring their initial commitment. Subsidy leads to bad debt which means there is a non-negligible probability to not recover its money back.
This is the main reason why it looks highly dangerous to see fiber providers such as Myanmar Speednet or Welink completely waiving installation fees. Knowing prices are dropping heavily and competition is launching promotion after promotion, there is a good chance that the end customer will not be fully committed and end up signing a new contract after a few months. The ISP will be left alone with no return on investment.
Even in Europe or in the US where annual commitment are usually honored, rarely service providers waive the fiber installation. There is always a cost involved which is pushed back to the customer.
It is definitely good news to see broadband finally affordable for Myanmar consumers. However, the current pace of price reduction and promotions can be destructive for the market. It is also more likely that the performance will rapidly drop as the ISP will have to severely contend the service to make it sustainable and aligned with its internal costs.
It is sad to see that none of the existing ISPs have decided to own “quality” instead of “price”. We can also regret that none of the existing ISPs managed to provide more than a dumb pipe, VoIP and TV will definitely be a plus.
ISPs that wish to survive need to hold tight to their objectives and stay away from the siren’s song of this silly price war. The main target for consumer ISPs shall be stickiness and this goes through the delivery of value added services, unique value propositions, outstanding technical support, payment made easy and finally a strong brand.
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Herbert is a nom de plume.
I am an experienced telecom professional blogging about the fastest growing Internet market in the world: Myanmar.