Analysis of Thai Internet

ANALYSIS OF THAI INTERNET

AND TELECOMMUNICATIONS POLICY FORMATION

DURING THE PERIOD 1992-2000

A Dissertation Presented to

The Faculty of College of Communication of

Ohio University

In Partial Fulfillment

of the Requirement for the Degree

Doctor of Philosophy

Busakorn Suriyasarn

June 2002

 2002

Busakorn Suriyasarn

This dissertation has been approved for the School of Telecommunications and the College of Communication by

Drew O. McDaniel

Professor of Telecommunications

Kathy Krendl

Dean of the College of Communication SURIYASARN, BUSAKORN Ph.D. June 2002. Mass Communication

Analysis of Thai Internet and Telecommunications Policy Formation during the Period

1992-2000 (335pp.)

Director of Dissertation: Drew O. McDaniel

The 1990s was a time of profound economic and political transformation for

Thailand. Through major events of economic boom and bust, 1992 political crisis, and democratization of politics, Thailand drafted a new constitution and undertook major political and economic restructuring. Within the context of Thai telecommunications policy restructuring from the beginning of the 1992 to the end of 2000, this study describes the development of Thai Internet and analyzes the policymaking process of telecommunications industry reforms. The study employs John W. Kingdon’s political model of policy process and J. P. Singh’s conceptual framework of factors determining telecommunications restructuring and state types in decision-making process to analyze the role of multiple policy forces and the role of the Thai state in network policy formation. While the main impetus for restructuring is Thailand’s aspiration to become the economic hub of Southeast Asia, a myriad of forces are found to be at work in telecommunications policy reforms. Economic integration and global liberalization agenda enforced by the WTO and the IMF have had direct impact on the country’s policymaking. Domestically, in the juxtaposition of maturing democracy and intensifying money politics, business interests become increasingly influential in telecommunications policymaking through more direct political maneuvering at the top levels. There is also a burgeoning influence from public interest groups and the Senate. The plurality of interests in the policy process hampers the ability of the state to direct policy outcome. In the system where policymaking is plagued by vested interests and political squabbles, the policymaking function of the state is seriously undermined and the development of Thai Internet suffers as a result.

Approved: Drew O. McDaniel

Professor of Telecommunications 6

ACKNOWLEDGMENTS

A long list of individuals provided time, encouragement, assistance and support during the course of this research. I would like to convey my thanks to those who granted me interviews in Thailand and my dissertation committee who provided guidance and constructive criticisms that made this research a better one. Special appreciation is owed to Professor Don Flournoy for copy editing work. Most notably, this research would not have been completed without my academic advisor, Professor Drew

McDaniel, whose unfailing support, encouragement, and exemplary discipline and professionalism have guided and inspired me throughout the course of my studies at Ohio

University. He has shown me through example the meaning of a good teacher and the practice of responsible scholarship. Even in my doubt and confusion, his patience and expectations helped sustain my confidence and encouraged me to strive to become a better student and a better scholar, for which I am in profound debt of gratitude. 7

TABLE OF CONTENTS

Page

ABSTRACT ...... 4

ACKNOWLEDGMENTS ...... 6

LIST OF TABLES ...... 12

LIST OF FIGURES ...... 14

CHAPTER

1. INTRODUCTION ...... 15 Rethinking Communication Research ...... 15 The Internet and Policymaking ...... 20 Statement of Purpose ...... 26 Chapters Overview ...... 27

2. LITERATURE REVIEW: COMMUNICATION RESEARCH AND POLICY STUDIES ...... 29 Political Economy and Communication Policy Studies ...... 29 Dependency and world systems perspectives ...... 32 Pluralist perspective ...... 34 Class power perspective ...... 35 Important Concepts in Communication Policy Research . . . . . 38 What is communication policy? ...... 38 Concepts in telecommunications restructuring ...... 40 Universal service ...... 40 Privatization ...... 40 Liberalization ...... 41 Commercialization ...... 41 Deregulation/Re-regulation ...... 41 Internationalization/Globalization ...... 42 Telecommunications Restructuring: From Monopoly to Competition ...... 42 Thai Communication Research and Policy Studies ...... 48 Politics of policymaking in Thai telecommunications . . . 56

CHAPTER Page

3. RESEARCH METHODOLOGY AND POLICY MODELS . . . . . 62 Data Gathering ...... 62 Secondary data ...... 62 Primary data ...... 63 Interview questions construction ...... 63 Interview procedure ...... 64 Field observations ...... 67 Data Analysis ...... 68 Transcribing, translation and transcription coding . . . . . 68 Keeping data updated ...... 69 Policy Models ...... 69 Kingdon’s political model of policy process ...... 70 Singh’s telecommunications restructuring factors and state characteristics ...... 75

4. HISTORICAL OVERVIEW OF THAI TELECOMMUNICTAIONS REFORMS AND EARLY INTERNET DEVELOPMENT ...... 83 Brief History of Telecommunications Regulatory Structure . . . . 83 Political and Ideological Contexts of Telecommunications Reforms ...... 86 Political environment ...... 86 Thai telecommunications reforms ...... 93 1997 constitution ...... 99 Readjustment of Eighth National Economic and Social Development Plan (1996-2001) ...... 102 WTO: Basic Telecommunications Agreement (BTA) . . . 104 Telecommunications Master Plan (1997-2006) ...... 107 Historical Development of Thai Internet ...... 109 Emergence of Thai Internet ...... 109 Early Internet community in Thailand ...... 112 Commercialization of Thai Internet ...... 114 IT 2000 Plan and NII development policy ...... 119

5. REGULATORY ANALYSIS OF THAI INTERNET INDUSTRY . . 122 Brief Internet Industry Overview ...... 122 State Monopoly and Sluggish Internet Expansion in the 1990s . . 130

CHAPTER Page

Implications of CAT’s monopoly for Thai Internet growth 132 Price controls ...... 132 32-percent free equity holding condition ...... 140 Anti-competitive restrictions ...... 142 Beginning of Thai Internet Growth and Emergence of Competition in 1999-2000 ...... 144 Factors favoring Internet growth in 1999 and 2000 . . . . 145 Establishment of the second domestic Internet exchange by NECTEC ...... 145 Economic rebound ...... 147 Growth in international and domestic bandwidth . 148 Competition and lower Internet access charges . . 149 Tensions between Market Competition and State Monopoly . . . 150 Regulatory control and international connection monopoly by CAT ...... 150 CAT’s explanations for 32-percent free equity holding . . 151 High leased-line costs ...... 152 CAT vs. TOT dispute over IP network leasing authority. . 155 Delayed domestic liberalization and regulatory vacuum . . 158 Key Industry Players: Who’s Got the Networks?...... 161 Commercial Internet Service Providers (ISPs) ...... 163 Domestic Networks ...... 166 Fixed-line telephone ...... 166 Fiber optic networks ...... 166 IP network ...... 167 Mobile & Wireless ...... 167 Mobile telephone ...... 167 Personal communication telephone (PCT) . . . . . 168 Wireless application protocol (WAP) ...... 169 International Networks ...... 170 International Internet connections ...... 170 Asian Internet Network (AIN) ...... 172 Asian ATM telecommunications services . . . . . 172 Satellite Networks ...... 173 International satellite services ...... 173 Domestic satellite services ...... 174 Foreign Partners in Thai Telecommunications ...... 174

CHAPTER Page

6. UNIVERSAL SERVICE AND ROLE OF THE THAI STATE . . . . 177 Thai Universal Service: “Telephone in Every Village”...... 179 Universal Access Act, B.E. 2543 (2000) ...... 188 Thai Public Internet Model: Restricted and Controlled Access . . 191 Thai Internet User Profile ...... 194 State Role in Internet Access Provision ...... 199 NECTEC-operated national IT development projects . . . 200 Government Information Network (GINet). . . . . 200 SchoolNet ...... 204 Agricultural Economics Office’s Rural Internet for Farmers Project ...... 213 RuralNet ...... 213 Public Internet Projects by TOT & CAT ...... 220 Thailand’s Internet Policy Task Force (IPTF) ...... 222

7. POLITCY POLITICS OF THAI TELECOMMUNICATIONS . . . . 224 NECTEC and NITC: New Think-Tanks in Policy Politics . . . . 224 Perceptions of NECTEC and NITC as new think-tanks . . 224 Software Park and politicization of NECTEC ...... 230 Telecommunications Liberalization, Private Participation and Corruption ...... 233 TOT’s three-million-line telephone project...... 236 Ministry of Education’s computer procurement scandals. . 238 The Rise of the Businessmen and Their Influence in Politics and Policy...... 241 Businessmen-turned-politicians ...... 242 Thaksin, Shin Corporation and Thai Rak Thai Party . . . 243 Formation of New Independent Regulatory Bodies and Irregularities ...... 248 National Telecommunications Commission (NTC) . . . . 249 National Broadcasting Commission (NBC) ...... 251

8. CONCLUSIONS ...... 254 Environmental and Institutional Policy Factors...... 257 External forces ...... 258 Domestic forces ...... 262

CHAPTER Page

Role of Ideas ...... 267 Policy Factors in Thai Internet Network Formation ...... 272 Characteristics of the Thai State as Policy Actor ...... 275 Implications for Future Role of the Thai State ...... 281

REFERENCES...... 286

APPENDIX A: Abbreviations ...... 309

APPENDIX B: Personal Communication References ...... 313

APPENDIX C: List of NITC Subcommittees ...... 315

APPENDIX D: Flow Chart Major Thai Telecommunications Operators . . . . 318

APPENDIX E: Universal Access Act, B.E. 2543 (200) ...... 320

APPENDIX F: NITC Order No. 15/1999 Appointment of Subcommittee on Thailand’s Internet Policy Task Force ...... 333

12 LIST OF TABLES

Table Page

2.1. Thai State Media System Compared to Public Service System and Free Market System ...... 53

3.1. State Decision-Making Process ...... 80

4.1. Thailand’s Binding Agreement with WTO in Telecommunications . . . . 107

4.2. Telecommunications Master Plan (1997): Goals and Policies ...... 108

5.1. Internet Indicators in Selected Southeast Asian Countries in 2000 . . . . 124

5.2. Internet Host Counts by Top-Level Domain Names in Selected Southeast Asian Countries (1994-2000) ...... 126

5.3. Internet Pricing and Monopoly in Selected Asian Countries in 1997. . . . 134

5.4. Comparison of Internet Pricing among Selected Asian Countries in 1997 135

5.5. CAT’s Median Pricing for Corporate Users (Effective March 1997) . . . 138

5.6. Monthly Individual and Leased-Line Rates by Thai ISPs in 1997 . . . . . 140

5.7. Growth of International and Domestic Bandwidth of Internet in Thailand (September 1992-March 2001) ...... 146

5.8. Thai IT Market Growth (1997-2000) ...... 148

5.9 Thailand’s Bandwidth Growth (December 1998-March 2001) ...... 149

5.10. TDRI Projection of Thailand’s Internet Growth (2000-2005) ...... 150

5.11. Comparison of Internet Pricing in Selected Asian Countries (2000) . . . . 152

5.12. Comparison of CAT’s Median Pricing for Leased Lines in 1997 and CAT’s Rates for International Half Circuits in 2000 ...... 154

5.13. Key Players in Thai Telecommunications Industry ...... 163

Table Page

5.14. Internet Service Providers (ISPs) in Thailand in 2000 ...... 164

5.15. Large E-Commerce Investors in Thailand in 2000 ...... 165

5.16. Market Shares of Mobile Telephone in Thailand (January 2000) . . . . . 168

5.17. Foreign Partnership in Thai Telecommunications in 2000 ...... 175

6.1. Telecommunications Indicators in Selected Southeast Asian Countries (2000) ...... 183

6.2. Fixed-Line Telephone Numbers Available and In Use in the Bangkok and Adjacent Areas and in Provinces (January 2000) ...... 185

6.3. Diffusion of Internet in Thailand by Region (August-October 1999) . . . 195

6.4. Number of Computers in Thailand (1995-1999) ...... 198

6.5. GINet Goals Before and After 1997 Economic Crisis ...... 201

6.6. GINet Service Charges (May 2001) ...... 203

6.7. Thai Schools in SchoolNet (1995-April 2001) ...... 205

6.8. SchoolNet Penetration (April 2001) ...... 206

6.9. SchoolNet Leased-Line Connection Charges Per Month (April 2001) . . 208

6.10. Statistics of RuralNet BBS Messages (June 1997-February 1998) . . . . 218

8.1. Characteristics of State in NII Policymaking Process: Comparison Among Singapore, Malaysia and Thailand ...... 278

14 LIST OF FIGURES

Figure Page

3.1. The Policy Cycle ...... 71

3.2. Kingdon’s Political Model of the Policy Process ...... 73

3.3. Factors Determining Telecommunications Restructuring ...... 77

4.1. Internet Connectivities in Thailand in December 1996 ...... 118

5.1. Growth of Internet Hosts by Top-Level Domain Names in Selected Southeast Asian Countries (1994-2000) ...... 127

5.2. Internet Connectivities in Thailand (May 2001) ...... 129

5.3. Costs for Doubling International Half-Circuit Speed in 2000 ...... 155

5.4. International Connectivity Map by CAT (April 2001) ...... 171

8.1. Process of Thai Internet and Telecommunications Policy Formation . . . 269

15 CHAPTER 1

INTRODUCTION

Rethinking Communication Research

The early and mid-1990s saw a ferment in the communication field. There was an increasingly pressing call for scholars to take a more assertive role in real-world communication policy debates (Noam, 1993; Rowland, 1993; Schiller, 1993; Schaefer,

1995; Rafaeli & Newhagen, 1996; McChesney, 1996). While studies in the engineering and computer sciences fields have been expectedly technical, influential policy work by economists and business scholars have often been administrative, principally focusing on problems of technical capacity and promise, and approached policy questions largely in terms of economic and market forces (Rowland, 1993). Economists and lawyers frequently made the case for a free market by framing antimonopoly arguments that favored specific interests. Meanwhile, communications scholars tended to underestimate their own role in influencing changes taking place in emerging communication systems

(Noam, 1993).

The issues surrounding information network development have been overwhelmingly complex and daunting. However, according to R. J. Schaefer (1995) the stakes involved are so high that the idea of leaving policy debates about new technological development to market proponents and power politics seems even more frightening. This is because, for communication scholars, staying out of this important policy process would mean “an abdication to scholarly interest in ethical communication structures and democratic institutions” (p. 5). Boonrak Khetmala (1996) complained

16 about the scarcity of Thai mass communication research and the poor quality of the

few studies that existed. A lack of appropriate ideological frameworks resulted in many studies failing to make a meaningful contribution to Thai mass media studies. These were “administrative” research projects produced in the private sector, designed to study how to maximize profits, or they were studies designed to solve specific problems within the economic or political structures, hence did not question or challenge the status quo

(Boonrak, 1996). Boonrak called for more qualitative research employing social, theoretical—more critical—frameworks for asking questions about the political, economic, cultural, as well as policy aspects of new media networks and structures.

In the increasingly integrated environment of the business and communication

networks, communication has become more central to the global political economy than

ever before. The centrality of communication in the new global order has demanded a

reexamination of the social relations among actors, i.e., state, capital, and civil society.

Amidst the transformation of the world economic system into a free, borderless system

based on free market ideology, the tension between capitalism and democratic

communication became a theme in several research works in the 1990’s (Schiller, 1993;

Doctor, 1994; Schaefer, 1995; Bailie & Winseck, 1997; Mosco & Reddick, 1997;

McChesney, 1993, 1996, 1997). On the research agenda were inquiries into the changing

social class relations (increasingly globalized structure and more divisive social

disparities) and the implications that these changes implied for communication studies.

From a critical perspective, communication research was put in a precarious

situation. The emergence of revolutionary new communication technologies overthrew

17 the traditional communication research paradigms and put the field into disarray.

Robert W. McChesney (1993, 1996, 1997) maintained that the new complexities

demanded at least a rethinking of the very field of communication, if not a restructuring.

“There is no alternative . . . but to do honest independent scholarship and instruction,

with a commitment first and foremost to democratic values. . . . The field of

communication needs to apply the full weight of its intellectual traditions and

methodologies to the daunting questions before us” (McChesney, 1996, p. 119).

W. D. Rowland (1993) pointed out four major characteristics of communication

research traditions with important implications for telecommunications studies: (1)

interdisciplinarity (i.e., integrative relationships among contributing perspectives,

relevant theories and applied practice in the social and behavioral sciences, business, law,

and the media professions); (2) criticism (i.e., systematic and sustained criticism, and inquiry about the role and impact of media in society and notions of social responsibility and ethical practice); (3) incorporation of all forms of contemporary media technology

(i.e., convergence of old broadcast media with common carrier telecommunications and

new information/computer technologies); and (4) notion of communication as socially

constructed (i.e., a tradition of inquiry into the histories and guiding forces into specific

communications technologies and into economic, social, and policy implications).

These inclusive, convergent, and interdisciplinary characteristics of contemporary

communication research, coupled with the diversity of research models within the

discipline (e.g., behavioral/functionalist [effects], media history, and critical studies), and

the momentum from prior reexamination of the field caused by Ferment of the Field

18 (1983), had great implications for communication research in that it moved away from the “dominant linear, transmission and atheoretical models” towards “interpretive, ritualistic and more historically and theoretically conscious approaches of both an older and newer era” (Carey, 1989, as cited in Rowland, 1993, p. 220). These approaches better articulated how media systems and communications technologies were the products of societies in a given place and time, imbued with societal- and institutional- specific belief systems, values, and constraints. The media systems were deemed neither neutral nor natural.

Contemporary communication research under this paradigmatic analysis hence established a perspective on the communication process that examined its principal elements in relationship to one another. In other words, communication research aimed not only to study the media and their technologies, but also the triangular interrelations among: (1) the media institutions and technologies; (2) the products and contents of media systems; and (3) the social conditions of their use and consequences (Rowland,

1993).

The institutional aspect of communication research examined, for instance, media organizations and structures, ownership and control, resources and technologies, as well as professional standards and models. The scope of these studies tended to be national and transnational, while the analysis tended to portray technologies industries in much the same way it did the traditional mass media, that is, as the products of human economic and political endeavors subject to specific social forces.

19 The second aspect, content and product, involved the critical and interpretive analysis of information produced within the media/communications systems, and examination of linkages between institutional sources of communication and social condition of their use. The third aspect of the triangular relationship, which concerned the social experience of the research, focused its attention on the way in which society

(public or private) used and was affected by the new communication. Thus, inquiry went beyond the traditional effects model to explore the broader social, cultural and ideological condition in which people lived and in which they themselves shaped and affected the communications systems in which they were part.

In his article “Reconnecting Communications Studies With Communication

Policy,” Eli Noam (1993) identified some future trends in communication policy research that could help communication scholars keep pace with the momentous changes in communication landscape that began to take place since the beginning of the 1990s.

These trends moved beyond existing frameworks. First, he thought the notion of nation- state would be weakened by the rise of internationalization, as telecommunications and mass media networks became more intensely organized globally, making it more difficult for a state unit to extend its powers beyond traditional frontiers and to assert itself as one unified cultural unit. Second, he thought the gradual replacement of the old self- contained monopolistic systems by the fragmented, partly competing and partly collaborating, network of networks would fundamentally change the media industries, making regulation a paramount issue to grapple with. Third, he thought the way in which the media and communication structures were being transformed would in turn

20 drastically alter the nature of future media products as well as their distribution. This

would have impact on national culture as well. Finally, he speculated that the increased

number of information channels would affect not only content, its neutrality, literacy,

culture, and creativity, but also ways of communicating (e.g., use of language), thinking,

interacting, and conducting social life.

How then should communication scholars proceed, asked Noam (1993). First,

according to Noam, the field of communications studies must be broadened to

incorporate point-to-point and computer communication, and not concentrate on just

traditional mass media. Second, communication scholars must move beyond the bounds

of pure academia and occasionally venture into the real world of production, government,

media business, or public-interest advocacy. Third, the field must overcome its insularity

and embrace a more multidisciplinary approach. Fourth, communication scholars must

get beyond the academic and ideological infighting within and across their disciplines

that seemed to dissipate disproportionate energy. And fifth, communications studies

must reestablish a stronger empirical and applied base within the discipline in order to

bring a collective reinforcement of theory, methodology, empiricism, and policy to the

field (Noam, 1993).

The Internet and Policymaking

The entrance of the Internet into the world of communication was explosive and contagious. The fragmented, rapidly evolving, and instantaneous nature of the Internet technology has not only transformed the social, economic, and political fabric of today’s society, but has also changed significantly the way in which governments and

21 policymakers deal with communications policies. There is no doubt that the Internet and the accompanying network technologies have propelled changes in social structures.

The potential benefits from this technology have been much talked about since its popular emergence in the early 1990’s. Its decentralized and equalized network structure has been presumed to encourage more democratic and more egalitarian participation by more people of different social strata in the communication process. Many social benefits have been imagined, conceived, and, in many cases, realized. Governments across the world were excited about this new technology in terms of its potential for national development and have sought ways to reap the potential of this new technology.

Following the introduction of the National Information Infrastructure: Agenda for

Action by the United States in 1993 and former US Vice President Al Gore’s enlarged vision of the Global Information Infrastructure (GII), several countries began developing similar plans. In Southeast Asia, Malaysia and Singapore were already ahead of the curve with their respective national plans. Malaysia launched Vision 2020 in February

1991 and Singapore launched IT2000 – A Vision of an Intelligent Island in March 1992.

Anticipating the worldwide diffusion of the Internet and information infrastructures,

Malaysia launched an ambitious national project, called the Multimedia Super Corridor

(MSC), in August 1995 (Sega, 1999, p. 341).

Thailand, an early Internet adopter, launched its national information technology

(IT) plan in 1995, entitled IT 2000 Social Equity & Prosperity: Thailand IT Policy Into the 21st Century. The white paper laid out policy objectives grounded on three pillars:

(1) better telecommunications infrastructure; (2) human resources development; and (3)

22 good governance. The IT 2000 Plan aimed to capture the full potential of the new information technologies and envisioned a balanced, equitable, and harmonious

“information society” (NITC, 1995a).

Advanced technologies are usually complex. Internet network technologies are a case in point. Because of the Internet’s complexity, policymakers have had difficulty sorting out its scientific, economic, and political importance. The general public is unlikely to understand its stake in such policies and therefore often ignores them or is confused by them. Government officials tend to endorse the technology-push view—the notion that if investment is made in the right technologies, a nation can be an economic leader in those technologies. In this view, by pushing the technology, other elements that make up economic leadership will follow, e.g., product development, jobs, skills, and growth (Olufs, 1999).

The advent of the Internet has challenged existing policies and regulatory paradigm where communication resources are managed and controlled by government monopoly or corporate and government oligopoly and production of mass media contents requires substantial capital and technical tools. The fragmented nature of the Internet network technology as well as the relatively easy and inexpensive access it provides to the masses has invalidated the assumption that only those with large capital can produce and distribute mass media. Now the Internet enables anyone to become a producer and distributor of mass media simply with an access to a computer, Internet connectivity and an easily acquired set of world wide web skills. With the former mass consumers having access to production and distribution of contents, monopoly or oligopoly of ownership

23 and control becomes increasingly difficult. While the Internet has a promise for great social improvement, its hard-to-control nature is a cause of concerns for governments and corporate powers that stand to have their historically exclusive access to the cultural production of the society being challenged. This has propelled widespread reexamination and revision of existing communication policy structures.

Policymakers have been forced to grapple with the new technological complexities and to evaluate how social and economic benefits can be reaped from them and what policy measures can be devised that will produce the most effective and efficient results for the society at large. In the case of Thailand, where even basic telephone services are still lacking among the majority of its large provincial population, the arrival of the Internet added a new dimension to the already tall order of policy restructuring efforts. The Internet poses the difficult question of how to assure universal service in an environment in which the state is expected to defer to private competition.

As the tension between state monopoly and private competition begins to grow, state responsibility to the public is put to a test.

The 1990s was a time of profound political and economic transformation for

Thailand. Thailand entered the 1990s riding on an economic crescendo—the growth rates from 1985-1995 were the highest in the world (Bello, Cunningham & Poh, 1998).

Yet, still at the height of its reputation as a “model” for developing economies promoted by the World Bank and the International Monetary Fund, in 1997 the country plunged into a sudden economic downfall following the crash of its financial market and the steep

24 devaluation of the Thai baht—a crisis that brought down the entire region to a near recession.

Within the same decade Thailand politically matured from a semi-democratic polity to a more open democratic system with more participants in the political process amidst occasional political turbulences, constitutional activism, and growing civil society.

Along with the economic boom and bust, it survived one military coup and widespread pro-democracy protests against the military and subsequent bloody crackdowns, and experienced an intense revitalization of constitutionalism. The extensive constitutional amendment process was largely inspired by political rejuvenation as a result of the popular protests against military takeover of government in the 1992 election.

Constitutional amendments, which involved widespread public reviews, resulted in the

1997 Constitution being considered one of the most democratic constitutions in the Thai history. Within this context of global integration and domestic politico-economic systemic reforms, major economic and political restructuring took place. Since the early

1990s, Thai media and telecommunications industries faced greater policy liberalization and privatization of many services.

The triumph of the Thai public led by democratic forces over the military in 1992 translated into more democratic policies. For example, private ownership of Thai television was allowed for the first time in 1994 as a measure to prevent total takeover of the public media by the government and to assure the public right to information. The strengthening of Thailand’s democratic political process resulted in an expanded public sphere where more social groups have begun to debate, negotiate, and influence others to

25 achieve their respective interests. The history of the liberalization process of Thai telecommunications was characterized by the competition among several policy forces, including the military, state officials, politicians, and business groups (Sakkarin, 2000).

However, as a young democratic regime, Thailand has not yet reached a stage at which interest groups play by well-developed democratic rules.

At the end of the twentieth century, politics in Thailand still remained in the stage at which political association means more about association of material interests than association of ideology. Because policy is essentially political, policymaking in Thailand has been plagued by money politics and corruptions, particularly those involving major infrastructure projects that involve a large amounts of capital, and hence economic rents

(Pasuk, 1992; Pasuk & Sungsidh, 1994; Sakkarin, 2000). As the government faced outside pressures influencing national economic policies in the wave of globalization, it has been confronted with increasingly divergent forces in the domestic arena. Business gained more influence in the political process as political patrons, while the old guard like the military lost its dominance in politics. The Thai public, rejuvenated but still relatively young, have become more and more interested in public affairs.

In this environment the Internet arrived and developed in Thailand. The policy formation process of the Internet, like other public policies in the country, is subject to these varieties of forces. The concern of this study is to find out how policymaking involving the Internet has been influenced and shaped by the changes within the Thai telecommunications, how telecommunications policy has changed within the last decade,

26 and how the Thai state has coped with the social, political and economic aspects of the policy.

Statement of Purpose

This study examines the process of Thai Internet policymaking within the larger context of Thai telecommunications restructuring from the beginning of the 1990s leading to the year 2001. Specifically, the study aims to explain the development process of Thai Internet and telecommunications policy reforms and understand the interactions of forces influencing its formation. The study also examines, from a policy perspective, how the Internet has been treated in Thailand as a new communication technology and how the Thai government has played a role as a policymaker and as a guide in the

Internet policy development process.

It is hoped that the study will not only provide an analytical policy perspective on

Thai communication network formation, but also contribute to the small but growing body of knowledge in communication policy research in Thailand. Ultimately, by studying the workings of multiple forces in telecommunications restructuring and Internet development process, the study is expected to develop further understanding of

Thailand’s telecommunications politics, particularly in the way in which it influences the development of the Internet and network technology in the country. Also, in response to the call to bring communication scholarship out of its insularity and into real-world relevance, this study will be considered to have achieved its goal if: (1) its findings inform Thai policymakers, facilitate their decision making, and help them in finding a constructive approach to the development of the Internet and network technology in

27 Thailand; and (2) it encourages and stimulates further research on Thai telecommunications policy.

Chapters Overview

This report is divided into two parts, Part I Overview, and Part II Analysis. Part I comprises three chapters: Chapter 2 Literature Review, Chapter 3 Research Methodology and Policy Models, and Chapter 4 Historical Overview of Thai Telecommunications

Reforms and Early Internet Development. Part II comprises four chapters: Chapter 5

Regulatory Analysis of Thai Internet Industry, Chapter 6 Universal Service and Role of the Thai State, Chapter 7 Policy Politics of Thai Telecommunications, and Chapter 8

Conclusions.

Chapter 2 reviews the literature in communication policy studies and discusses scholarly views on communications policy research that appeared following the emergence of new information and network technologies in the early 1990s. Chapter 2 also describes some important concepts in communication policy research and discusses the status of Thai communication studies. Chapter 3 describes research methodology used in data gathering and analysis. It explains the two policy models employed in the research analysis, explores basic assumptions in telecommunications policy analysis, and poses specific research questions. Chapter 4 gives a historical overview of Thai telecommunications regulatory structure and the political and ideological contexts of the telecommunications reforms that took place during the 1990s. Chapter 4 also describes the early stages of development of the Internet in Thailand.

28 Chapter 5 provides regulatory analysis of the Thai Internet industry with extensive discussion on state monopoly, emergence of competition, and the tensions between the two. The chapter also discusses key players in the Internet industry and operators that are in control of Thailand’s telecommunications networks. Chapter 6 discusses the issue of universal service vis-à-vis the role of the Thai state. It analyzes how universal service policy was formed and implemented with regards to public Internet access expansion. It examines the roles of several Thai state agencies in providing

Internet access to the Thai public. Chapter 7 discusses the politics of Thai telecommunications with a focus on Internet policy formation and telecommunications regulatory reforms from the mid-1990s to mid-2001. It examines the roles of key state and non-state actors (state policy agencies, state telecommunications operators, business groups, bureaucrats, and politicians) and how they interacted and influenced the process of Thai telecommunications and Internet network policy formation. Chapter 8 concludes the study by answering the research questions, providing analysis of Thailand’s Internet policy formation and telecommunications regulatory reform process in the decade leading up to the year 2001.

CHAPTER 2

LITERATURE REVIEW COMMUNICATION RESEARCH AND POLICY STUDIES

This chapter discusses the relevance of a political economy approach to communication policy studies and research that arose as a result of changes in telecommunications network technologies, providing different perspectives in communication policy theories. The chapter then provides brief descriptions of some important concepts in communication policy studies and concludes with discussion of

Thai research in communication policy and telecommunications political economy.

Political Economy and Communication Policy Studies

Maschoed Bailie & Dwayne Winseck edited a book, Democratizing

Communication? Comparative Perspectives on Information and Power (1997), which contained a collection of articles on the discourses of communication, power, and democracy. Employing critical theory perspectives such as political economy, historical analysis, critical analysis, and discourse analysis, the authors in the volume explored and analyzed the social, political, and economic determinants of communication. Among the authors, Vincent Mosco & Andrew Reddick (1997) noted that public policy can not be reduced to market reform questions. Mosco & Reddick provided an overview of the political economy approach to communication and policy studies, suggesting that as new communication technologies and services have become central in state policymaking, the political economy perspective become increasingly relevant to the studies of communication policy in that it helps communication scholars understand the social 30 implications of technological changes, the forces behind these changes, as well as the social dynamics that shape the social landscape.

In a narrow sense, Mosco & Reddick (1997) defined political economy as “the study of the social relations, particularly the power relations, that mutually constitute the production, distribution, and consumption of resources, including communication resources” (p. 12). This narrow definition has some heuristic value in calling attention to the institutional aspect of communication such as the producers, distributors and consumers, although it presents some ambiguity about how these entities can be identified. In a more general sense, they defined the political economy as “the study of control and survival of social life” (ibid). Based on these definitions, political economy can be considered a study of how social/organizational groups control and adapt to the process of social change and how they produce what is required for social production and continuity. By their nature the control processes are essentially political, while the survival processes are economic. Whereas the general definition bears strength in its inclusiveness of all human activity, its weakness lies in its ability to distinguish human political economy from general survival and control process.

Mosco & Reddick drew on the work of Golding & Murdock (1991, as cited in

Mosco & Reddick, 1997) to elaborate on the main characteristics of the political economy approach that hold crucial relevance to the studies of communication, social transformation, social totality, moral philosophy, and praxis. The social transformation emphasis involves examining the dynamic forces within the socio-economic system that influence social change, while social totality refers to the examination of the whole social

31 relations (i.e., economic, political, social, and cultural). For contemporary political economy, commitment to moral philosophy means reliance on democratic ideals that extend beyond the political realm to encompass the economic, social and cultural domains that tend to be shaped by the capital requirements. Following the tendency of this approach to engage in a broad and encompassing scope of inquiry is the corollary characteristics of social praxis—the combination of theory and practice—that naturally occupies the central place in political economy.

Political economy has a high degree of relevance to communication research. Its inclusive and interdisciplinary approach into the research investigation, as well as its focus on change, equip researchers with tools to handle the fast-changing world of telecommunications. What’s more, its emphasis on praxis provides a suitable response to the call for more active involvement by communication scholars in the real world of policymaking. In fact, the political economy perspective has informed a growing body of recent communication policy research (Petrazzini, 1995; Mody, Bauer & Straubhaar,

1995; Bailie & Winseck, 1997; Geray, 1999; Political Economy of Telecom Regulation,

1999).

The political economy perspective to communication research emerged partly in response to failures of the modernization or developmentalist paradigm to address the needs of developing countries in national development. The modernization paradigm of development came under severe criticism by developing countries in the 1960s. Among the major criticisms are the Western-biased perspective of modernization (this paradigm originated in the West), overemphasis on internal (domestic) factors and ignorance of

32 external (international) factors that hinder development and its centralized, one-way, top-down policy approach (Singhal & Sthapitanonda, 1996). The role of communication in this paradigm is perceived in a linear, cause-effect-oriented model, in that mass media are considered as “magic multipliers” or major vehicles for disseminating information motivating social change to a diverse public within a short period of time, while development is particularly measured by higher per capita income and higher standards of living through industrialization and improved social organization (Rogers &

Sevenning, 1969, as cited in ibid, p. 11).

Dependency and world systems perspectives

The main stream of research on the political economy of communication in the developing countries draws largely on dependency, world systems, and international neomarxian political economy. The dependency and world systems perspectives attempt to “incorporate communication into an explanatory paradigm congenial to mainstream intellectual and political interests” (Mosco & Reddick, 1997, p. 17). Since the media are considered as important resources, media growth is viewed as an index of development.

These perspectives challenge the fundamental premise of the modernization/ developmentalist model, particularly its technological determinism, its ignorance of the imbalance of global power relations, and the multilayered class relations between and within the First and Third Worlds.

In North America, studies in this research strand have been greatly influenced by two founding figures, Dallas Smythe and Herbert Schiller. According to Mosco &

Reddick (1997), Smythe taught the first course in the political economy of

33 communication at the University of Illinois and was the first of four generations of scholars in this research tradition. Schiller, an oft-quoted source in communication policy research, worked for a period of time with Symthe. The North American strand draws on institutional and Marxian traditions, and has been driven by a sense of injustice that the communication industry has become subordinate to world powers with transnational corporations at the center.

Among the most recently outspoken in the North American tradition is Robert W.

McChesney (1993, 1996, 1997). Renewing the world systems perspective, McChesney specified some tendencies of the current global capitalist order that he deemed detrimental to the development of democratic communication systems. These tendencies include deregulation, deterioration of the public sectors, weakened power of labor, economic instability, environmental deterioration, and widening economic stratification.

Key in the current system is the power of transnational communication corporations, who, in the ease of transborder flows of capital, are able to influence governments to adopt and implement policies which promote their interests through supranational arrangements such as the North American Free Trade Agreements (NAFTA) and the

World Trade Organization (WTO).

World systems scholars have argued that communication policymaking in developing countries is influenced by international pressure and global media corporations. The structure of ownership and design of national communication infrastructure are often made to accommodate global corporate interests (Schiller, 1989;

Boyd-Barrette, 1993, as cited in Lamnadi, 1999, p. 15). However, because of their focus

34 on criticism of the modernization paradigm which leans heavily on the imbalance of global power relations, the dependency and world systems perspectives have been criticized for ignoring the internal factors—the role of domestic actors and the internal class and political dynamics—that influence communication policymaking. For instance, the issues of inequity in the class-based system, corruption, and government’s own failures in implementing developmental programs are said to be have been overlooked

(Singhal & Sthapitanonda, 1996). Also, an underlying assumption within these perspectives that the relationships between the First and the Third Worlds are uni- dimensional caused a failure to explore the differences in political systems and traditions across nations (Fejes, 1986, as cited in Lamnadi, 1999, p. 16).

Pluralist perspective

Also emerging in response to the modernization paradigm was the pluralist paradigm. Amidst the growth of the humanistic/interpretive and cultural approach to social sciences and the awakening of problems of earlier development projects, scholars began to reconsider the role of communication in development in the mid-1970s. This perspective rejects the economic-based notion and the notion of universality of development. It sees development as a more social-oriented and a more participatory process of social change. The role of communication is envisioned to be more diverse, local, interactive, and participatory. Communication is perceived to empower the public to think and to develop programs that respond to their specific needs (Singhal &

Sthapitanonda, 1996).

35 Communication policy decisions in the pluralist—also called participatory— perspective are thought to be a compromise reached by competing stakeholders in the policy decision making process. From this perspective, power relations often do not persist and control frequently changed hands. After a decision is made by a set of power relationships, a new set replaces the previous one (Lester & Stewart, 2000). Government is seen as one of the many role players in policymaking, whose role is to arbitrate among the competing interests (Rideout & Mosco, 1997, as cited in Lamnadi, 1999, p. 17).

Despite the growing popularity of the pluralist perspective in policymaking, it has not avoided criticisms. Because this perspective gives weight to the individual power of multiple forces in a social system, it does not accurately reflect the fact that various participants in the policy process in developing countries, which often do not operate by democratic and participatory rules, do not have equal access to resources. In addition, its reliance on market forces and its promotion of liberal and democratic ideals has earned itself a criticism of having the “utopian ideology” (Serveas, 1991, as cited in Singhal &

Sthapitanonda, 1996, p. 20), and its applicability for developing nations has been questioned.

Class power perspective

Coming out of the European Frankfurt School stream of research was the class power perspective. Connected with the value of public service, this perspective attempts to integrate communication research with various neomarxian theoretical traditions

(Mosco & Reddick, 1997). The class power perspective challenges the pluralist notion that the state is an independent arbiter of differences among competing interests (Rideout

36 & Mosco, 1997, p. 88, as cited in Lamnadi, 1999, p. 21). Class power scholars have argued that the elites, comprising mainly business and corporate power and state policy authorities, are the principal actors and the major driving force in the policy process.

Among the staunchest critics of the corporate power in the communication policymaking process in Western countries are Herbert Schiller (1989) and Robert W. McChesney

(1993, 1996, 1997; Herman & McChesney, 1997). Schiller and McChesney argued that powerful corporations are the ones influencing deregulation and privatization in the media and telecommunications industries and that governments are the ones responding to and supporting corporate demands. Free market and capitalism are made synonymous with freedom of speech and democracy. Hence, from this perspective, government officials are considered to be allies of corporate interests. The public and other interest groups do not play a significant role in the policymaking process conducted in the capitalist framework. This leads to a weakness in its analysis in failing to account for a number of individual national political systems where the state authority remains strong and the power of business groups is not well-developed.

As new media and communications technologies diffused along with the expansion of free market on the global scale, several scholars have become increasingly critical of the capitalist ideology and its role in public policymaking. Some disagree with the government’s shifting responsibility to the private sector for developing national information infrastructure (NII), pointing out the gloomier side of the new information society speculated to be the result of free-market-driven policies. Central to the criticism are the widening gap between the “information rich” and the “information poor” and the

37 erosion of democratic ideals in the face of rising corporate power (Flor, 1993; Doctor,

1994; Schaefer, 1995; Martin, 1995; McChesney, 1996, 1997).

McChesney argued that in this new world order where capitalism reigns supreme and the concept of public participation in the policymaking process is largely truncated, the range of legitimate debate has shrunk substantially, (e.g., the result of corporate influence on the government’s public policymaking). Socialist and capitalist states alike are now effectively pursuing the same policies, to better compete in the world market.

McChesney denounced the U.S. Telecommunications and Reform Act of 1996, which promotes deregulation and market competition, as “perhaps one of the most corrupt pieces of legislation in the U.S. history, the bill was effectively written by and for business” (1996, p. 104).

Criticisms of the free market system seem to focus on its inherent structure which leaves control of resources in the hands of the capitalist elites—i.e., large corporations— and puts the majority at a disadvantage. According to Feenberg (1991, as cited in

Schaefer, 1995) the “haves,” which comprise the minority, are made up of those equipped with knowledge, technical expertise and access to the new technologies. In contrast, the

“have-nots,” who make up the majority have neither knowledge, skills, nor access to exploit the new technologies. Richard J. Schaefer added that as “the managers and experts run the system in their own interests or those of their capitalist benefactors”

(1995, p. 7), the craftsmen and artisans of the past become the alienated and deskilled workers of the new era.

38 In the capitalist/democratic system, according to Ronald D. Doctor (1994), diffusion of economic and social forces determines access to knowledge and the power associated with possession of knowledge. Hence, access to knowledge, which enables effective manipulation of information, is limited to those with economic resources.

Within this inherently inequitable economic structure, Doctor believed that “Information

Democracy” is important because as the society progresses toward the information age, a widening gap between the information rich and information poor increasingly puts people, cultural heritage and democratic institutions at risk. Doctor defined Information

Democracy as:

a socio-political system in which all people are guaranteed meaningful opportunities to benefit from access to information resources. Information Democracy involves empowerment of individuals. It means giving people the information tools they need to participate in the decision-making structures that affect their daily lives (p. 9).

Important Concepts in Communication Policy Research

In understanding policy changes in the telecommunications industries, it is important to understand some concepts that are key in the telecommunications policy process. Some key concepts briefly described below represent important entry points into understanding recent telecommunications reforms across the world.

What is communication policy?

Policy means different things to different authors. Communication policy, as usually discussed in policy research, is thought of in terms of large-scale, national-level public policy and as an action or a series of actions by government. Thomas R. Dye defined the term public policy as “what governments do, why they do it, and what

39 difference it makes” (1992, pp. 2-4). Actors in public policy, however, are not limited

to national governments, but cover a range of multilevel institutions and social groups.

Since communication has traditionally been considered a “strategic” industry and, as a

result of recent technological revolution and communication becoming central to

economic activities, in turn propelling the needs for private investment, for most

countries communication policymaking has only very recently begun to emerge out of

what was formerly an exclusively government’s domain to involve more actors from both

the public and private sectors. The beneficiaries of communication policies are now seen

in the increasingly differentiated groups of stakeholders, rather than the old, unified,

collective public. Along this line, James Anderson defined public policy as “a purposive

course of action followed by an actor or set of actors in dealing with a problem or matter

of concern” (1990, p. 24).

Communication policymaking is generally a response to questions arising from

new situations or newly identified problems. Hence, depending on what questions

emerge from the perspective of those involved in communication policymaking, policy is

defined in accordance to the questions. For example, for McChesney, communication

policymaking is an answer to the question of the actual control and purposes of

communication technology. He defined communication policymaking as “the process by

which society answers” two sets of questions: “who will control the technology and for

what purpose” and the corollary “who will not control the new technology and what

purposes will not be privileged” (1997, p. 58). Given several actors involved the process of policymaking, especially in democratic political systems where economic and political

40 power is open to competition and negotiation, policy process often reflects such competition and negotiation. A question with a focus lens on policy actors in communication will likely reveal various interests attempting to wield influence in an array of institutions that contribute to communication policies (Olufs, 1999, p. 4).

Concepts in telecommunications restructuring

Universal service

Universal service entails the concepts of “affordability” and “universality” of services. Closely connected to the public service philosophy, universal service is generally defined as a provision of services—often publicly subsidized—to all citizens at affordable rates. Central is the notion of equitable distribution of resources (Laffont &

Tirole, 2000, p. 219). Recently, emergence of new, innovative services has required a new look at this concept within the context of competition. While many countries still grapple with the question of whether universal service extends to services such as the

Internet, some countries have already begun to extend the concept of universal service to include the provision of new, high-speed information services to public institutions, such as schools, libraries and medical facilities, as well as the general public through direct or indirect subsidies (Crandall & Waverman, 2000).

Privatization

The privatization process is usually defined as a process in which the state transfers state-owned assets or activities to private ownership and control. Privatization therefore can include “the public offering of shares, private sale of shares, sale of

41 government assets, management/employee buyout, new private investments in a [state- owned enterprise], and lease and management of contracts” (Petrazzini, 1997, p. 16).

Liberalization

Liberalization expands the number of participants or competitors in the established market—often a monopoly—by lowering barriers to entry on all or part of the market (Petrazzini, 1997, p. 16-17; Mosco & Reddick, 1997, p. 24). Liberalization is generally a less dramatic and less controversial process than privatization and spans over a longer period of time. Particularly in less developed countries, liberalization often involves new and value-added services which are by and large undeveloped markets, hence causing less controversy.

Commercialization

Commercialization takes place when the state replaces regulation based on a public interest philosophy with the one based on market ideology. In practice, the adoption of market ideology means shifted emphasis from providing equitable, standard services to all (in order to achieve universality of service), to greater emphasis on market position, profitability and increasing investment and revenues (Mosco & Reddick, 1997, p. 24).

Deregulation/Re-regulation

Deregulation was originally conceived as a process through which government intervention in the markets can be reduced by dismantling legal controls in order to provide adequate conditions suitable for healthy competition. In the telecommunications sector, however, achieving a healthy competitive environment often means re-regulation

42 of the sector, i.e., changing rules and laws that do not necessarily dispense the role of

government. Therefore, today most countries employ both deregulation and re-regulation

in managing telecommunications service operations (Petrazzini, 1997, p. 17).

Internationalization/Globalization

Internationalization links the state to other states and integrates it into global

economic and political systems. In this process, the state’s authority also shifts to that of

the regional trade alliances such as NAFTA and the Asia-Pacific Economic Cooperation

(APEC), the inclusive regional arrangements such as the European Union (EU) and the

Association of Southeast Asian Nations (ASEAN), and the international planning

organizations such as the World Trade Organization (WTO), the World Bank, and the

International Monetary Fund (IMF).

Telecommunications Restructuring: From Monopoly to Competition

Over the past two decades restructuring of telecommunications sectors has occurred globally with different outcomes among developed and developing countries (Urey,

1995). Once unshakable monopolies, state-owned telecommunications entities in many countries have been or are being transformed into competitive industries. There is little doubt that in the 1990s a momentous wave of privatization was surging on a global scale.

The renewed faith in privatization and private capital started to reverse the trend toward state ownership that began at the turn of the twentieth century in Britain, France,

Germany, and other industrialized nations. The pendulum swung away from monopoly regulatory regimes towards competition (Bande, 1995).

43 The interventionist philosophy as well as the notion of natural monopoly took precedence following the Great Depression in the 1930s, which was one major phenomenon internationally viewed to represent the failure of market ideology. The failure of the marketplace was in turn perceived to necessitate the intervention by the government to ensure smooth functioning of the national economy and justify national ownership and operation of telecommunications networks (Bande, 1995).

More recently, the market ideology has regained its strength and the centrally planned economy has become discredited as a result of government corruption and the ideological influence of the Margaret Thatcher government in Great Britain (Bande,

1995). This trend has in no small part been propelled by integration of the global economy that subsequently eroded the ability of the state to dictate national policies

(Mody & Tsui, 1995). The movement toward the privatization of public utilities began worldwide in the mid-1980s and has maintained momentum ever since. According to

Trebling (1995), there were at least five significant factors that led to the promotion of the privatization movement: first, the widespread disenchantment with performance of the public sector in the public utility industries after World War II; second, the need for foreign capital for infrastructure expansion; third, the impact of telecommunications surpluses being appropriated for redeployment elsewhere in the national economy, thereby worsening the capital shortage problem; fourth, the necessity to expand telephone and telecommunications systems increasingly required for various sectors of the economy against the need to keep prices low, a conflict which exceeds the capability of the public

44 sector to provide adequate service; and fifth, the politicization of labor in the public utility industries (p. 311).

These factors were particularly relevant for developing countries where privatization has taken shape in terms of transactions, transfer of assets, industry restructuring, and regulatory oversight. In some cases as in Latin America, while restructuring may or may not have taken place, privatization took place as public monopolies became private monopolies, i.e., shares of the state-own properties were sold and/or distributed to foreign investors and the general public. In other cases, as in Asia, changes occurred through liberalization of entry designed to encourage competition in the industry. The regulatory role of the government in all these changes covers a spectrum from nonintervention to comprehensive oversight of pricing and performance (Trebing,

1995, p. 310).

In developed and developing countries alike, opening of entry to telecommunications markets seems increasingly prevalent. In the United States, where a free-market is arguably the most heavily advocated, the 1996 Telecommunications Act has allowed the regional Bell operating companies (RBOCs) to enter the long-distance market and opened the local telephone markets to competition. In Canada, all telecommunications markets have been opened to competition, while in the United

Kingdom, the telephone industry was privatized as early as 1984 and the market subsequently opened to competition, triggering the same trend across the European region. By the beginning of 1998, twelve of the fifteen European Union countries opened all their telephone services to competitive entry (Crandall & Waverman, 2000, p. 1).

45 Much of the impetus for restructuring the telecommunications industry, according to Gwen Urey (1995), originates within large corporations dominating the industry in the industrialized countries. Therefore, restructuring is driven more by domestic forces in the industrialized economies, as opposed to external forces in the developing ones. In addition, other specific forces related to the globalization of the economy, specifically international institutions such as the World Bank and the IMF, as well as regional and international trade arrangements such as NAFTA, EU, APEC and the pivotal WTO, have had significant impact on the way in which telecommunications industries in most countries are being transformed.

So, given the prevalent changes occurring in the telecommunications industries on a grand scale, how are these changes affecting the policy process in each given country?

This question is a loaded one since, although privatization is perhaps the most publicized if not the most prevalent reform, telecommunications restructuring and reforms have taken many shapes. This is the case in Southeast Asia, the area which concerns this study. Privatization, liberalization and deregulation policies diverge in the region depending on the flexibility of each nation’s culture and the ability of its political institutions to accommodate structural changes (Jussawalla, 1995; Blasko, 1998).

The Association of Southeast Asian Nations (ASEAN) countries have collectively looked to Japan as a model (Jussawalla, 1995). In the Japanese model, there are two conflicting views on the role of telecommunications in the macroeconomy. One, largely held by the Ministry of International Trade and Industry (MITI), views telecommunications as part of the overall electronics industry and therefore should move

46 toward strengthening that sector. The other view, held by the Ministry of Posts and

Telecommunications, sees telecommunications technologies as a means to achieve social

objectives and therefore should be publicly sponsored. According to Jussawalla, neither

the two-prong Japanese model nor the free-market-driven American model is applicable

to the ASEAN nations.

Jussawalla (1995) argued that the inapplicability of the two models are due to the

disparities within ASEAN in the levels of economic growth, the aspirations of

policymakers in pursuing export-oriented development strategies, and the political

doctrines. In March 1992, Singapore launched the IT2000 – A Vision of an Intelligent

Island to expand information networks and provide state-of-the-art technology to

Singaporeans (Saga, 1999). Through Singapore Telecoms and the National Computer

Board, both state-owned, Singapore has pursued a completely centralized strategy to

deliver the most sophisticated information technology to its citizens and has achieved the

status of “intelligent city” of Southeast Asia. Singapore Telecoms provides both

domestic and international telephone services, including data, fax, paging, cellular phone

and videotext, while the National Computer Board has facilitated tremendous growth in

expanding computer services in commerce, including computerizing the stock exchange,

SIMEX, and TRADENET, strengthening Singapore’s entreport position. Shares of

Singapore Telecoms were offered on the market in 1993 (Jussawalla, 1995, p. 169).

Malaysia, espousing similarly ambitious policy aspirations to modernize the

nation through advanced information technology, opted for both public and private sector

operations. Malaysia began its efforts to expand its telecommunications infrastructure in

47 the late 1980s. In 1987, Syarikat Telekom Malaysia (STM) was corporatized with the government retaining 100 percent ownership (Petrazzinni, 1997, p. 147) and in 1991,

STM shares were sold on the Kuala Lumpur Stock Exchange (KLSE). The partial privatization of STM, now called Jabatan Telekom Malaysia (JTM), turned JTM into a profitable business. Through this opening up of the Malaysian telecom markets, private telecommunications service providers and equipment suppliers were provided an opportunity to compete in the cellular telephone markets as well as in bidding for several large investment contracts (Jussawalla, 1995).

While aggressive reforms were taking place in Malaysia and Singapore backed by well-focused government directives, the experience in Thailand and Indonesia has been different. Thailand and Indonesia have pursued efforts to liberalize their telecommunications markets by inviting private sector investments since the late 1980s.

Indonesia introduced a revenue-sharing scheme and has recently begun to undertake a joint operation scheme (Sega, 1999). Thailand has adopted the build-operate-transfer

(BOT) and the build-transfer-operate (BTO) formula in concession contracts into which its two telecommunications operators, the Telephone Organization of Thailand (TOT) and the Communications Authority of Thailand (CAT), entered with the private sector in several joint ventures to provide basic telephone and cellular services (Blasko, 1998).

Efforts to privatize Thailand’s TOT and CAT in the late 1980s and the early

1990s were hampered by political complications. The privatization plan of the TOT by the Chatichai administration in 1989 was met with strong opposition, e.g., diverging interests of different political factions in the government coalition, strong opposition from

48 the TOT’s top managers who had close links with the military, and opposition from the

TOT’s labor union.

The privatization failure was not unique to the TOT but was also experienced in

other state-own enterprises such as the Energy Generating Authority of Thailand

(EGAT). Attempts to privatize EGAT were met with a similar fate, opposition from the

small but strong union and the powerful military who dominated boards of directors of

most of Thailand’s high revenue-generating state enterprises. A local political analyst

wrote in 1990 that privatization in Thailand was “simply an economic and political

impossibility . . . as Chatachai [sic] is rapidly discovering, pursuing the programme is

tantamount to political suicide” (The Financial Times, 1990, March 26, as cited in

Petrazzinni, 1997, p. 138). In February 1991, the Chatichai government was overthrown

by a military coup.

Thai Communication Research and Policy Studies

Thailand was subjected to a long period of military authoritarian rule shortly after the change of political system from absolute monarchy to constitutional monarchy in

1932 through the late 1980s when it slowly began to move towards democracy under civilian rule within a multi-party parliamentary system. During military authoritarian rules, Thai media, particularly broadcast media, were largely under government and military control. However, it must be noted that the experience of print and broadcast media has been different in Thailand in terms of history of ownership and control. While

Thai newspapers grew out of the higher circles of the royal court and missionary communities to the larger public through diverse private ownerships and holding various

49 political views, Thai radio and television have largely grown within the military- dominated state domain. And whereas the Thai press has been relatively free from state control (except in periods of acute political upheavals during political coups or some stringent authoritarian regimes), the broadcast media have been used as a tool for government and military to disseminate information and propaganda.

An American missionary Dr. Dan Bradley established the first newspaper in

Thailand, Bangkok Recorder, in 1844. Bangkok Recorder printed general domestic and international affairs and lasted only one year. It was revived 20 years later and became the Royal Gazette under the patronage of King Mongkut (Rama IV). The Royal Gazette was used to publicize royal decrees and related affairs. The first daily newspaper, Siam

Daily Advertiser, was established in 1868. Before the revolution from absolute monarchy to constitutional monarchy in 1932, Thai print journalism was already robust with 60 newspapers and 160 magazines due to commercialization and development of printing technology. The western ideas and values, including the notion of free press, introduced by King Chulalongkorn (Rama V) may have contributed to relative tolerance of the press. However, extraterritorial treaties also protected the foreign press. In King

Chulalongkorn’s reign missionary and Thai journalists were already calling for civil rights and freedom, e.g., freedom of religion (Protestant), education and women’s rights, although a Thai journalist named Thianwan was jailed for 17 years for his radical views in demanding freedom for slaves and women. During the 1932 revolution, newspapers in the kingdom took various positions (Thitinan, 1997). Thai broadcast media only emerged in the 1930s. Radio Bangkok was transferred from the Department of Post and Telegraph

50 to the Department of Propaganda after it was established in 1933 (which later became the Public Relations Department (PRD)). Radio Bangkok was renamed Radio Thailand in 1941. In 1951, 20 percent of radio and television system was operated by the PRD and

56 percent by the military. The Broadcasting Act B.E. 2498 (1955) and subsequent government’s decrees allow radio and television transmission exclusively to state agencies (Ubonrat, 1992). In this context, freedom of the press and control and ownership issues became principal concerns for the Thai media academics.

Political developments in the 1990s brought about some significant changes in the

Thai mass media industry. A significant milestone in Thai broadcast media history came in 1992, when the public participation in the pro-democracy uprising against the military translated to several new developments, including more emboldened press, birth of talk radio and call-in radio, and increased interest in news and information-oriented programs.

More salient, however, was the intense state control of media during the May 1992 massacre that sparked public interest and subsequent fervent debates on media policy reforms, in particular on the ownership structure of electronic media. The 1992 political and media crisis helped push the government to allow private ownership of television in

1993. The first privately-owned television, iTV, began operating in 1997, although two private Ultra High Frequency (UHF) stations were bid and two public UHF stations were allocated to the PRD. 1 This development revealed a new political fact that the

1 For more detailed accounts of media censorship during May 1992 and subsequent development, see Busakorn Suriyasarn (1997, February), May 1992 pro-democracy protests and impact on Thai media, in

“Thai Telecom” section at http://busakorn.com.

51 government was no longer in the position to command absolute control over national media mechanisms.

Prior to the 1992 unrest, Thai media enjoyed relative freedom from the government. This was particularly true for the print media, which were regarded as among the freest in Southeast Asia. Even after the military coup which ousted the first truly elected civilian Chatichai government for “excessive” corruption, non-governmental organizations, academics, and other social groups were still able to use print and broadcast media to express their opposition to the military junta government and to call for constitutional amendments. In the early-to-mid-1990s, following economic liberalization and diffusion of new communication technologies, Thailand saw a proliferation of media, from publishing, radio and television broadcasting, cable and satellite television, to fax and portable phones, the last two of which helped keep the

1992 protesters in contact with each other and eventually brought down the military takeover. The same decade also witnessed the introduction and expansion of point-to- point communications networks: telephone, wireless technologies and the Internet. The changing regulatory atmosphere subsequent to the 1992 crisis was felt in the collective efforts by politicians, academics, mass media, and the public to campaign for reform in the national media ownership structure.

Within this environment complex new communications systems evolve.

However, despite a seemingly progressive development in the Thai communications industry, a more clearly-defined framework needed in formulating national policy guidelines has been lacking. In their book Botbat Khong Rath nai Thang Dan Suesarn

52 Muanchon [Role of Government in Mass Communication], Ubonrat, Worapoj, Visanu,

& Mukarin (1996) observed that recent initiatives to liberalize the radio and television industries advanced without clear policy directives and appropriate oversight. According to Ubonrat et al., several initiatives and regulatory changes were conducted and approved rather haphazardly, for instance the initiative to allow advertising on the previously noncommercial Public Relations Department-run TV Channel 11, the bidding process for private companies to operate news programs for TV Channel 5 and Channel 9, as well as other concessions within governmental agencies such as the Public Relations Department

(PRD) and the Mass Communication Organization of Thailand (MCOT) which operate and oversee a large portion of national radio and television networks. They argued that the changes were by and large results of intricate political-corporate workings and were influenced by personal inclinations of individual government officials rather than by official national policy directives.

Ubonrat et al (1996) characterized the Thai electronic media ownership and control system as a “state system”—a dual system owned and controlled in part by the government and in part commercialized—that serves the interests of the owners, not the public interest. Table 2.1 presents a summary and an adaptation of Ubonrat’s comparisons and contrasts the Thai “state system” with the “public service” and the “free market” systems.

Thailand saw a rapid expansion of radio and television networks in 1960s. This was a direct result of the enactment of the Broadcasting Act B.E. 2502 (1959), which allowed commercialization of radio and television. The 1959 Broadcasting Act enabled

53 the government agencies and the military to offer concessions to private companies or individuals to operate radio or television programs for a duration, normally from five to ten years.

Table 2.1.

Thai State Media System Compared to Public Service System and Free Market System

Public Service System Free Market System Thai State System public = citizens public = consumers public = target for propaganda as well as services

1. aims to serve the public as 1. aims to advocate rights and 1. aims to legitimize the ruling citizens and uphold their rights freedom of the public as government and make profits and freedom within participatory consumers within capitalistic democratic ideology ideology (and make profits)

2. the state is responsible for 2. the state has no role in 2. state often intervenes in the providing information and providing information and process of providing information preserve national culture preserve the national culture; the for its own interests; the private private sector is entitled to sector provides apolitical freedom of expression information and viewpoint

3. state as provider and regulator 3. state as regulator in spectrum 3. state as both provider and in financing, spectrum allocation allocation and licensing regulator and program quality operations

4. government monopoly or 4. susceptible to corporate 4. under political, bureaucratic government-private duopoly business power and influence control and corporate power

5. free from government control 5. competition for provision of 5. oligopoly of government and services private companies

6. funded by tax revenues 6. funded by private capital 6. funded by national budget and through advertising (and advertisement subscription services)

Note. Adapted from Botbat Khong Rath nai Thang Dan Suesarn Muanchon [Role of State in Mass Communication], by Ubonrat et al., (1996), Bangkok: Nithidham.

54 According to Ubonrat Siriyuvasak (1992) the commercialization of Thai radio and television in the 1960s arose within a brokerage system, first adopted by the military, in which operating contracts were awarded to entrepreneurs or advertisers who were not necessarily program producers but who were prepared to operate under the kickback condition, i.e., giving a percentage of airtime sales to the military.

Ubonrat (1992) argued that this ownership structure dictates that the media entrepreneurs buy and sell airtime to independent program producers through a brokerage system without regard to quality of the programs. Also, with independent program producers placed at the bottom of the power hierarchy, the station needs no clear policy that defines how the programs may serve public interest. This ownership and operation pattern drew attention of advertisers and quickly enabled Thai radio and television broadcasting to achieve nationwide coverage in the late 1970s and 1980s respectively.

With more and more commercial interests being represented in the radio and television networks, the allocative control began to slip from state agencies such as the PRD and the military owning the media outlets into the hands of the advertisers and media entrepreneurs (Ubonrat, 1992). As a result, in the media oligopoly of the state and the private concessionaires, Thai broadcast media became little more than the profit-making machines for the private interests and the propaganda machines for the state.

Seeing the foregoing problems in the so-called state system of Thai media,

Ubonrat et al (1996) and other media scholars such as Boonrak Boonyaketmala (1996) called for a new system that allowed for more public participation in media ownership as well as a communication environment conducive to democratic development. They

55 suggested that the transformation from state-controlled ownership to public participation can gradually be done through privatization of the media. From a larger sectoral and national economic perspective, privatization of state-owned enterprises became an answer to state control in the 1990s. These scholars believed that by minimizing state control through increasing private participation, the enterprises would be forced to be responsive to the public. In the telecommunications sector, privatization was considered since the late 1980s. However, apart from a few major research institutes and policy agencies such as the Thailand Development Research Institute (TDRI) and the

Bank of Thailand, which conduct studies on the national policy level, Thai media scholars have not expanded their research interests to telecommunications policy but focused largely on broadcast media policy.

The almost undivided attention of Thai communication scholars to the issue of media control and ownership can be explained partially by Thailand’s media history as discussed above and partially by the fact that telecommunications and media have been until only recently viewed as separate industries. The telecommunications and media convergence is a new phenomenon and has yet to create a strong impact on the Thai media and communication research. A comprehensive study concerning Thai telecommunications was conducted by a Thai scholar Sakkarrin Niyomsilpa (2000).

Sakkarin analyzed power relations among telecommunications stakeholders during the late 1980s and the 1990s and demonstrated how the power relations transformed overtime. The next section provides a brief summary of Sakkarin’s analyses of telecommunications politics in Thailand.

56 Politics of policymaking in Thai telecommunications

Throughout the late 1980s and the entire 1990s, efforts to privatize the Telephone

Organization of Thailand (TOT) and the Communication Authority of Thailand (CAT) were unsuccessful, plagued by power struggles among interest groups consisting of political parties; technocrats in policy entities such as the National Economic and Social

Development Board (NESDB); government agencies in charge of policymaking, the

Ministry of Transport and Communications (MOTC) and the Post and Telegraph

Department (PTD); growing business interests; the military which has historically dominated TOT and CAT boards of directors; and the labor unions of the two state- owned enterprises (SOEs).

Sakkarin (2000) wrote that throughout the period of Thailand’s telecommunications reforms power relations were transformed and alliances shifted among these interest groups. Overtime, some among the anti-reform coalition were over time removed or changed their position. For instance, while the technocrats, the MOTC and political parties have generally been pro-privatization and/or pro-liberalization, the military, the TOT and the CAT boards and the labor unions formed an anti-privatization alliance during the first reform period (from the late 1980s to the early 1991). This alliance was largely based on a shared interest in preserving the state monopoly: the military tried to retain its control over state enterprises for rent benefits through their positions on the SOE boards; the TOT and the CAT executives benefited from traditional rent-sharing and protection from the military; and the labor unions used their bargaining

57 power to put pressure on the government to maintain the status quo in exchange for generous state enterprise welfare and fringe benefits (Sakkarin, 2000).

The bargaining power of the military and the labor unions were strong during the

1980s. However, the military’s influence over policy dwindled during the Chatichai government (1998-1991) amidst the rise of political parties and the strengthening of the parliament, as well as the growing influence of corporate interests in politics. The military did not regain much of its influence even after it ousted the Chatichai government in order to take control of a large fixed-line telephone project. Much of the military’s previous control over large public projects was further chipped away by the rising alliances between the politicians and the corporate interests. Despite its ability to take back the government by force through the 1991 coup, the military junta struggled to maintain its influence. It was unable to even get its own hand-picked care-taking prime minister Anand Panyarachun, a politically independent and highly respected businessman and former diplomat, to increase its defense budget.

As the country moved towards democratization in the 1990s, the military was increasingly considered by the Thai society as a representation of the old guard and an anti-democratic element. This change in societal attitude towards the military institution forced the Thai military to adapt its role and eventually to become more professional by the end of the 1990s. The turning point in the military’s role in Thai politics was marked by the 1992 “Black May” or the bloody military crackdowns of pro-democracy protesters against General Suchinda Kraprayoon in May 1992. The Thai public was outraged by the military’s blatant control of the media and the way in which it suppressed the

58 protesters with brute force. After Suchinda was ousted from politics (as a result of

King Bhumipol’s intervention—as highly publicized through international media), the military basically lost its credibility and its position as influential power broker. After

Chuan Leekpai and the Democratic Party took over the government following the 1992 crisis, Chuan began professionalizing the military by giving himself the Minister of

Interior portfolio—the portfolio traditionally under the military control.

On the other hand, the labor unions of the TOT and the CAT remained a force to be reckoned with, but became dominated by other more powerful political and corporate interests. The TOT and CAT executives themselves came to accept privatization as a necessary condition for their survival, particularly in light of Thailand’s commitment to the WTO to full liberalization by 2006.

Compared to privatization, liberalization efforts in Thailand are deemed to have been more successful (Petrazinni, 1995). Among the staunchest supporter of liberalization has been the top policy body, the National Economic and Social

Development Board (NESDB). The Sixth National Economic and Social Development

Plan (NESDP) (1987-1991) opened the way for the private sector to invest in and operate part of telecommunications services. The Seventh NESDP (1992-1995) emphasized more heavily on economic liberalization and called for intensive expansion of national infrastructure to facilitate and to stimulate growth. The wave of liberalization that flushed over the globe, including Asia, also helped push Thailand towards the direction of a more liberalized economy. Thailand as a country on the rise in the early to mid-

1990s realized the necessity to liberalize its markets, not only out of the commitment to

59 the GATS (General Agreement on Trade in Services) and the World Trade

Organization (WTO), and its agreement on trade and services with regional cooperation

like APEC and AFTA (ASEAN Free Trade Agreements), but also out of its ambition to

be an economic center for mainland Southeast Asia, in particular in the areas of finance,

transport and communications.

Although these ambitions were dashed after the infamous 1997 economic crash,

the pressure to liberalize the economy became even more pronounced following the

placing of conditions for the country to speed up economic reforms and hasten the

liberalization process in exchange of the $17 billion rescue package by the IMF. As

power struggles persisted, the pro-reform and anti-reform coalitions negotiated. Both

internal and external pressures mounted to quicken the pace of telecommunications

infrastructure development. A compromise was reached—in the form of the build-

transfer-operate (BTO) scheme. This BTO arrangement has avoided a prolonged struggle

between the coalitions that were holding onto state monopoly and those that wished to

quicken the pace of telecommunications infrastructure development. This arrangement

allowed the state monopoly to continue, and the private sector to invest in the operation

of the national telecommunications networks and services. In addition, the country

benefited from a more rapid pace of infrastructure expansion through private investment and avoided the usually cumbersome process of repealing and amending many telecommunications laws.

In a BTO arrangement, the private company or concessionaire initially funds and

installs the assets then immediately transfers all assets to the government concessioner,

60 which in turn leases the assets back to the company for a fee. The company then operates the systems/services and shares profits with the concessioner (Blasko, 1998).

Initially the BTO scheme was applied in relatively small telecommunications projects such as cellular and paging services. However, it quickly became a central means—a driving force—for the Thai telecommunications expansion (Sakkarin, 2000).

One significant result of the BTO scheme adoption was a rapid expansion of local telecommunications businesses, which grew from small operators of value-added services to major enterprises providing both basic and valued-added services domestically and which later broadened to include neighboring countries. The most successful of these in acquiring government telecommunications concessions was the Shinawatra Group, the chief executive of which, Thaksin Shinawatra, became Thailand’s prime minister after his party, Thai Rak Thai, won the January 2001 election. Starting as a small computer supplier for IBM in the 1980s, Shinawatra quickly grew through a series of lucrative

BTO concessions, facilitated by family ties to the Thai government bureaucracy, police and business, to become Thailand’s largest telecommunications conglomerate, having interests in virtually all areas of Thailand’s telecommunications and media by 2000, with an exception of fixed-line telephone.

Besides Shinawatra Group, later known as Shin Group, other BTO concessionaires that became large telecommunications conglomerates through fixed-line telephone, mobile phone, Internet service provider and other value-added concessions include TelecomAsia (fixed-line telephone operator in Bangkok, a subsidiary of Charoen

Pokepand Group, agribusiness giant); United Communications (UCOM), parent of

61 DTAC mobile operator; and Loxley and Jasmine, parent companies of TT&T, upcountry fixed-line telephone operator. (See Appendix D – Major Private

Telecommunications Operators in Thailand.)

This chapter has discussed various theories and concepts of communication policy studies and shown how political economy is relevant to the study of communication policy. It has provided background of Thai media studies and Thai telecommunications political economy. It is evident from the discussion provided here that the issue of ownership and control has been salient in the Thai media studies. Amidst the strengthening of parliamentary politics, democratization and rising civil society, the power relations in Thailand’s political sphere are changing—with the weakened influence of the military, the rise of business interests in the media and the telecommunications arena, and the forming and shifting of alliances among interest groups attempting to yield influence in the policy process. Within the context of the fluidity of internal power structure and the looming external forces of economic liberalization and globalization, this study aims to explain the evolution of the Thai telecommunications and Internet policymaking.

The next chapter discusses research methodology and policy models used to analyze the process of policymaking of Thai telecommunications reforms and Thai

Internet development.

62 CHAPTER 3

RESEARCH METHODOLOGY AND POLICY MODELS

This chapter describes research methodology and policy models applied in the

research analysis. The chapter discusses data gathering and data analysis, and explains

applications of policy models, basic assumptions, study purpose and scope, and research

questions.

Data Gathering

Primary and secondary data were collected during the research through “library research” and semi-structured personal in-depth interviews.

Secondary data

Due to the nature of the research, a large amount of secondary data were gathered

during library research activities. Data from library research included printed and online

materials: news reports, research articles in academic journals, statistical data, official

publications, and research publications by relevant national and international policy and

research institutions. Institutions, which were major sources of data, included, but were

not limited to, the National Information Technology Committee of Thailand, National

Electronics and Computer Technology Center of Thailand, Thailand Development

Research Institute, Bank of Thailand, Communication Authority of Thailand, Telephone

Organization of Thailand, and the International Telecommunication Union in Geneva.

63 Primary data

Primary data were collected in Thailand during July to September 1998, and

December 2000 by means of 28 individual personal in-depth interviews, three field

observations, and participation in meetings and seminars. (The list of interviewees is

attached as Appendix B.) The interviews were the principal source of information for views and perspectives on various policy interests on the subject, while field observations and participation in meetings were largely conducted in order to obtain the proper context for data gathered from secondary sources and from personal interviews. The interview process is explained immediately below, followed by a description of the field

observations and types of participation.

Interview questions construction

Based on the topical concepts arising from the global and Thailand-specific

literature reviews, a set of interview questions was prepared for potential interviewees.

In the interviews, this set of questions was used as a “check list” or a “topic list,” i.e., a

guide to make certain that important topic areas were covered. In addition to the standard

“topic list,” additional open-ended questions were developed according to the area of

expertise of each individual interviewee. The list of topic list included:

1. Interviewee’s role and participation in Internet development in Thailand

2. Interviewee’s perception of Internet rate of growth in Thailand

3. Interviewee’s evaluation of government’s role in Thai Internet development

and satisfaction

64 4. Role of Communication Authority of Thailand (CAT) and Telephone

Organization of Thailand (TOT)

5. Role of National Electronics and Computer Technology Center (NECTEC) and

National Information Policy Committee (NITC)

6. Interviewee’s knowledge of IT 2000 Plan and views

7. Internet-related projects initiated or under implementation in interviewee’s organization or under interviewee’s charge

8. Impact of 1997 economic crash on interviewee’s agency/company or projects

9. WTO agreements and impact on company, organizational and national plans

10. Views on Internet and social change

Interview procedure

1. Selecting Interviewees

The researcher identified important players in the Thai Internet and telecommunications policy process based upon references to their roles in a preliminary literature review of policymakers, office holders and leaders in the industry. Simply put, these were the players who had “made news” and were well-known in the industry and the policy area. Also, in identifying possible players beyond this first group, the researcher relied on snowball strategy by asking primary interviewees to identify other potential stakeholders. The “snowballed” interviewees were selected based on and references and names which arose in the field who were not previously known to the researcher but who might provide crucial perspective into the research investigation.

Therefore, some interviews led to unplanned field observations and discussions.

65 2. Interview Profiles

The interviews were conducted during July through September 1998. Twenty-six

(26) individual interviews were conducted with policymakers, business and industry leaders, leading policy researchers in relevant areas, heads of major telecommunications agencies and state enterprises, independent and well-known Internet users/activists, interest group and NGO leaders, and implementers of selected Internet programs.

Seventeen (17) interviews were conducted in Bangkok, two (3) in Nakorn

Pathom, three (3) in Mae Hong Sorn, one (1) in Chiang Mai, and two (2) in Lampoon.

Each interview was conducted in the native language of the interviewees: three (3) in

English and (23) in Thai.

Because of the two-year gap between the interview stage and the research report stage, the researcher conducted follow-up interviews with some interviewees via electronic mail during the time of writing (late 2000 to mid-2001). In addition, the researcher returned to conduct three (3) more interviews with policymakers in Bangkok in December 2000, as well as collect additional publications on the subject.

3. Conducting the Interview

The researcher had some prior—mostly “virtual” or email—contact with several interviewees before traveling from the United States to Thailand to conduct the first round of interviews. (Some were “virtual acquaintances” known from her participation during the early years (1994-1995) of the Thai newsgroup, soc.culture.thai.) This group of interviewees included policymakers and those working in research institutions, i.e., the

“think tank group.” The “think tank” group made up more than half of the total persons

66 interviewed. Others included industry leaders such as executives of state telecommunications operations, private telecommunications and Internet companies, and independent researchers and experts. In general, the interviewees in this group were quite open and willing to participate in the interviews and gave liberal amounts of time to the researcher. The interview duration ranged from one hour to 2.5 hours. Interviews were mostly conducted at the interviewees’ offices.

The second group of interviewees was composed of individuals interviewed during field observation. This group made up about one-third of all interviewees. Most were interviewed at their job site in public Internet access projects, namely the RuralNet

Project in Nakorn Pathom, and Mae Hong Son Rural SchoolNet in Mae Hong Son. The descriptions on these field observations are given in the section immediately following.

This group of interviewees was also cooperative and helpful, quite willing to provide information.

During the interviews, the researcher was a regular visitor at the National

Information Technology Committee (NITC) offices, where most important policymakers in the substantive area were located. The researcher spent time with some employees to gain familiarity with their work in the agency, including those who were not formally interviewed but who assisted the researcher in getting relevant documents, and provided tips, organizational insights, or further contacts.

One problem that arose during the interview process was obtaining appointments with a few politicians and business executives who were on extremely busy schedules and were unavailable for interviews. Also, proximity with a certain group of

67 interviewees could be interpreted as problematic in that the researcher could be influenced by the recommendations to interview or not interview certain potential interviewees. This was particularly true in making a decision to interview certain politicians who were said to be “uninformed” or “unhelpful” by many insiders, but who, theoretically, by their positions, should have had a part in the policymaking process. Due to time limitations, coupled with difficulties in getting an appointment with certain potential interviewees, the researcher decided to forego contacting two or three such individuals.

Field observations

Three field observations were conducted during the entire period the researcher was in Thailand for the interviews in 1998. The first field observation, conducted on July

12, 1998, was a full-day Internet Legal Reform Seminar at Thammasat University in

Bangkok in which leaders in the telecommunications and Internet industry participated, as well as policymakers, government officials, business executives, and research scholars.

The researcher was invited to join the seminar by one of the early interviewees.

The second field observation was of on the RuralNet Project, a project of the

Institute of Rural Development associated with Chulalongkorn University. This pilot project received funding from the Ministry of Agriculture and Cooperatives to expand

Internet access to local farmers in several provinces adjacent to Bangkok. Again, this project was introduced to the researcher by one of the early interviewees and mentioned by some others who were not interviewed. In addition to spending time at the Institute of

Rural Development, the researcher followed the RuralNet team on two occasions (August

68 4 and August 19-20, 1998) on their assignments to evaluate the project in Nakorn

Pathom Province, each in a different district. One of the trips was an overnight stay. On

both occasions the researcher had opportunities to observe how the project was

implemented, and to meet and interview some operators and the beneficiaries of the

project.

The last field observation took place on August 28-29, 1998, in a northern

province of Mae Hong Son, where a pilot project under the tutelage of the National

Information Technology Committee (NITC) was underway to provide Internet access to

remote rural schools. The researcher was invited to observe the status of the project

together with NITC officers. The field observation on this project, which was an

overnight trip, involved one night and one full day of seminar and brainstorming sessions

among participating school leaders, technical experts from Chiang Mai University and

Bangkok with NITC officials as overseers and organizers of the program.

In all field trips, field notes were taken and tapes were recorded when appropriate.

Data Analysis

Transcribing, translation and transcription coding

All tapes were transcribed verbatim in original language. The transcription was

done carefully to reflect as closely to the original interview as possible. Transcripts were

reviewed in their original language, thematized, and noted accordingly. Passages in the

transcripts, that were not originally in English, were translated—all by the researcher—to

English when quoted or used in the research report. In the data analysis stage, topical

observations were noted and compiled and then reviewed collectively. Interviewees’

69 observations from the interview transcripts and researcher’s own observations taken

from field notes that fell on the same topic were grouped together and re-reviewed and

analyzed in the context of the theoretical concepts and research questions constructed

during the literature review.

Keeping data updated

The data analysis process was repetitive and continuous, in particular in terms of

industry development and policy development. To keep informed about industry or

policy changes, the researcher came to depend on online news reports by Thai

newspapers on the Internet, in particular the Bangkok Post and The Nation newspapers—

both English-language newspapers. The researcher found of particular use the Bangkok

Post online archive (http://scoop.bangkokpost.co.th/bkknews/query.asp), which provides free access to news reports searchable from 1996.

Policy Models

For theoretical analysis, the researcher employed a policy model called the

Political Model of the Policy Process adapted by Dick W. Olufs, III (1999) from the

original John W. Kingdon policy model. A conceptual framework developed by J.P.

Singh (1999) called Factors Determining Telecommunications Restructuring was used as

a supplement to the Kingdon model. A concept of the state decision-making process by

Singh was also applied in examining the role of government in the policy process.

70 Kingdon’s political model of policy process

Policy is best seen as a process or a series or pattern of activities or decisions that are designed to remedy some problem (Lester & Stewart, 2000). Public policy has special characteristics; it is “formulated, implemented, and evaluated by authorities in a political system” and is always subject to change on the basis of new information about its effects (ibid, p. 4). The reality of the policy development process is often very involved and complex, and not always easy to identify. More often than not, many policy activities are not readily apparent to those outside of the specific policy circle; pieces of legislation are passed quietly or a policy implementation is not known to the public until it has succeeded or failed. Nevertheless, policymaking can be described, albeit somewhat simplistically, as follows:

a “conveyor belt” in which issues are first recognized as a problem, alternative courses of action are considered, and policies are adopted, implemented by agency personnel, evaluated, changed, and finally terminated on the basis of their success (actual or perceived) or lack thereof (Lester & Stewart, 2000, p. 5).

Following the above definition, the policy process can hence be seen as a cycle. The concept of policy cycle was first made known by John W. Kingdon (1995) and is depicted in Figure 3.1 below.

Policy process is by nature political and in an open political system often involves a wide variety of political actors, e.g., government institutions at the local and national levels, societal agencies, business organizations, and the general public. In fact, policy process engages not only institutions and human agencies, but also events that can, and often do, influence how policies are introduced, formulated, contested, and changed.

This is particularly true in the case of telecommunications policy, the process of which is

71 often complex and may require a long duration of time and several generations of

players. Telecommunications policy study therefore requires a model that lends itself to

historical analysis, in that it encompasses changes in officials, organizations, ideas, and

decisions over a long period of time (Olufs, 1999).

A PROBLEM FOR GOVERNMENT

STAGE 6: STAGE 1: POLICY AGENDA TERMINATION SETTING

STAGE 5: STAGE 2: POLICY POLICY CHANGE FORMULATION

STAGE 4: STAGE 3: POLICY POLICY EVALUATION IMPLEMENTATION

Figure 3.1. The Policy Cycle

Note. From Public Policy: An Evolutionary Approach, 2d Ed. (p. 5), by James P. Lester

and Joseph Stewart, Jr., 2000, USA: Wadsworth.

John W. Kingdon (1995) developed a model that addresses precisely these

complexities, first, by describing policymaking as a series of processes as demonstrated

in Figure 3.1 above, and, second, by providing an inclusive method whereby different

72 policy forces can be examined and analyzed simultaneously. Using a variant of the garbage can model, Kingdon described the ripening of an idea—how an idea becomes a policy. According to Kingdon, policy is not the product of a clear or rational process, but, like a garbage can, is a container of several separate products and processes thrown in together. In the garbage can, the different processes mix and interact, and in rare instances produce a usable product. The different products thrown in the garbage are analogous to the ideas that enter the policy process; they are of varied types, coming from many different sources. In the policy process, like in the garbage can, the processes

(containing different streams of ideas and policy actions) converge on a similar idea and in turn mature into a policy.

Figure 3.2 below demonstrates the main concepts in Kingdon’s political model of policy process. The model shows how three separate streams, the “problem stream,” the

“policy stream” and the “political stream” develop and converge at the “policy window.”

In short, the problem stream consists of government officials who deal with indicators of problems, focusing events and feedback on existing policies, all within the context of budgetary concerns. The policy stream consists of policy specialists who can be a tightly-knit community focused on a narrow policy area or a fragmented community sharing the same area of policy interest. The political steam covers a larger public arena, comprising a wide spectrum of societal institutions and events, from the public mood, election results, pressure group campaigns, changes in administration, and ideological distribution in the government (Olufs, 1999).

feedback on existing programs

indicators focusing events

The Problem Stream

budgets

tightly-knit The Policy Stream Policy fragmented Window changes of administration election results public mood

The Political Stream

pressure group campaigns

ideological distribution in Congress

Figure 3.2. Kingdon’s Political Model of the Policy Process

Note. Adapted from Agenda, Alternatives, and Public Policies, by John W. Kingdon,

1995, Boston: Little Brown, as cited in Dick W. Olufs, III, 1999, fig. 1.1, p. 7.

The Kingdon political model of policy process is highly applicable to the policy study on Thai telecommunications and Internet policy development for three reasons: (1) the model applies to an open political system like Thailand, where there are many policy actors; (2) the model enables a historical as well as institutional policy analysis, which is particularly relevant in the Thailand’s case where a range of events occurred and resulted in major social, ideological and institutional transformations during the time the policy formation took place in the 1990s; and (3) the model is inclusive in that it provides a broader perspective, i.e., it does not limit itself to just human and institutional policy

74 factors, but also allows for the possibilities of other policy factors that carry ideological implications for the policy process.

The Kingdon model emphasizes the role of ideas. It does best in depicting how ideas get plugged into the policy process in democratic politics through policy actors, through grassroots groups whose ideas may influence public officials, through the mobilizations within the government, and through powerful interest groups or government bureaus. This inclusive and historical perspective steers the analysis in this model toward changes taking place in the early stages of the policy process, how ideas and activities in the policy process influence one another or even cross over and, over time, influence those in other streams. Because of its focus on the formative stages of the policy process, this model does not attempt to provide any predictions of future directions of the policy.

The role of ideas is also discussed in another model by J. P. Singh (1999).

However, while Kingdon provided a model that is oriented towards policymaking in a democratic political system, Singh’s model provides a conceptual framework that is oriented towards telecommunications policymaking in developing countries, with special attention given to the role of the state in the policy process.

75 Singh’s telecommunications restructuring factors and the state characteristics

J. P. Singh in his book, Leapfrogging Development?: The Political Economy of

Telecommunications Restructuring (1999), offered two useful concepts for studies of telecommunications restructuring in developing countries. First, Singh provided an analytical political economy framework of the policy factors and their relationships in the telecommunications restructuring process. Second, Singh identified three types of state characteristics in the state decision-making process.

Singh explained the process of telecommunications restructuring within the context of linkages among several environmental factors (economic conditions, technology, and ideas) and institutions such as the state and interest groups. The three environmental variables provide the context for telecommunications restructuring and help explain the origins of preferences among state and interest groups. In other words, economic conditions, and changes in ideas and technology explain the motivations for telecommunications restructuring. The economic conditions factor is described in terms of domestic production structure (state monopoly or other types of services provision) and globalization. According to Singh, there are two levels at which ideas may influence the restructuring process in developing countries. First, at the sectoral level, there may be policy emulation or ideational competition that leads to adoption of particular ideas.

Second, at a broader, ideological level, there are ideas or ideologies that guide policymakers who form macroeconomic policy which “trickles down” to the telecommunications sector. Less frequently, however, there may also be ideas that gain acceptance among academics or society groups and get “trickled up” to political

76 leadership. One significant implication of the technological factor is that technological change often challenges the existing regulatory system and creates a new constituency for provision of services and equipment. As a result, technological changes bring in new interest groups and user groups. The interest groups are divided into two levels: (1) the macro level, or macroeconomic and sectoral, level, such as coalitions of state, business, and interest groups; and (2) the micro or sub-sectoral level, which Sigh refers to as “user groups” or “clubs,” i.e., large and small business users, exporters, urban and rural residential users, government administrations, and social delivery systems (e.g., education and healthcare services) (Singh, 1999). As depicted in Figure 3.3, economic conditions, technology and ideas “define the environment in which the politics of clubs, collective action, and state decision-making are played out” (ibid, p. 12).

In attempting to answer the questions on the linkage between sectoral and macroeconomic restructurings and the success of the structuring efforts (by the state) within the context given above, Singh made two corollary arguments.

1. The scope, pace, and sequencing of restructuring initiatives in telecommunications are shaped by: (1) the access of clubs (or user groups) to the state;

(2) collective action by telecommunications clubs and other sectors at a macro level; and

(3) differences in restructuring initiatives depending on state characteristic in decision making.

Economic Technology Ideas Conditions

State Interest Groups Maneuverability Responsibility Telecom Other Interest Clubs Groups

Underlying Social Coalition Defining State-Interest-Group Relations

Restructuring Options Including Service Enhancement, Liberalization, Privatization

Figure 3.3. Factors Determining Telecommunications Restructuring

Note. From Leapfrogging Development?: The Political Economy of Telecommunications

Restructuring (fig. 1.1, p. 13), by J. P. Singh, 1999, NY: State University of New York

Press.

2. Most developing states are “unable to resolve the myriads of pressures they

face for telecommunications restructuring efforts to accelerate or “leapfrogging2

2 The term “leapfrogging” is used in telecommunications literature in three ways: (1) “to imply that telecommunications can help developing countries skip over the stages of development and become members of a postindustrial society”; (2) as an “engine of growth”; and (3) “to signify skipping over the technological frontier or product cycle” (Singh, 1999, p. 5).

78 development.” Instead, they are often characterized as “dysfunctional” and being

almost always special-interest driven. “Micro-heterogeneous and macro-plural pressures

on the developing states usually result in piecemeal, slow, and capricious restructuring”

(Singh, 1999, p. 4).

According to Singh, developing state behaviors in policy are unpredictable

because political institutions in developing countries do not have highly developed

characteristics like those in the developed countries and are generally characteristically

unique. It is also wrong to assume that a particular regime would necessarily adopt a

particular development strategy. However, in order to gauge the behavior or the role of a

given developing state in telecommunications restructuring (which applies to service

enhancement, liberalization and privatization, as well as the accompanying

organizational, regulatory and policy changes), Singh identified three state types

(catalytic, dysfunctional, and predatory) based upon two state characteristics, state

“maneuverability” and state “responsibility.” These two state characteristics can explain how state autonomy (the degree to which the state is independent from interest groups or

the population at large in carrying out its action) and its development agendas are

impacted by state capacity (its effectiveness in carrying out its actions which is often

dependent upon its financial, human and other resources) and the degree of its legitimacy

(Singh, 1999).

Singh defined “maneuverability” as the state’s ability to impose its own agenda

and shape societal choices, while taking into account state capacity and resources, and

state embeddedness in societal relations. State “responsibility” is defined as the state’s

79 commitment to development within the context of state capacity and the construction of its legitimacy. In the context of its telecommunications industries, Singh clarified the definition of “state” by pointing to its multiple roles as a “policymaker,” a “service provider,” and a “user.” Because the three functions are normally performed by different state agencies with varying clout, explained Singh, “harmony of interests [within the state] cannot be expected,” (1999, p. 42). Singh summarized the characteristics of each of the three state types in telecommunications restructuring as follows:

1. A catalytic state (with high degrees of maneuverability and responsibility) will not only meet user demands but also play a dirigiste role in shaping future preferences including those of powerful special interests (which, while present in catalytic states, are seldom able to dominate state agendas) resulting in fast, comprehensive, and demand-led restructuring. 2. A dysfunctional state (with low degree of maneuverability and varying degrees of responsibility) meets the demands of a few or many user groups who dominate the state although provision is neither efficient nor optimal (and contingent on the state effectively arbitrating coalitional pressures where they are plural). 2a. Subsidiary argument: A dysfunctional special-interest-driven state with myriad pressures (at club and coalitional levels) is most prevalent in the developing world. This accounts for the slow, piecemeal, elite or supply-driven nature of telecommunications restructurings in developing countries. 3. A predatory state (with a high degree of maneuverability and absence of responsibility) seldom meets user demands or takes any developmental initiatives. (Singh, 1999, p. 21-21).

As depicted in Table 3.1, Singh provided examples for each type of state:

Singapore and South Korea for catalytic states, while Mexico and Malaysia are considered “near-catalytic.” Examples for dysfunctional states include Brazil, China and

India during 1967-1995. Myanmar and Congo are given as examples for predatory states.

80 Table 3.1

State Decision-Making Process ______State Type Maneuverability Responsibility Examples ______Catalytic High High Singapore, S. Korea ______Near-Catalytic Mexico, Malaysia

Dysfunctional Low Variable Brazil, China India (1967-95)

Predatory High None Myanmar (Burma) Congo (Zaire) ______Note. Maneuverability: The state’s ability to impose its own agenda and shape societal

choices. Responsibility: Commitment to development while helping the state increase its

legitimacy. Adapted from Leapfrogging Development?: The Political Economy of

Telecommunications Restructuring (Table 2.2, p. 43), by J. P. Singh, 1999, NY: State

University of New York Press.

Basic Assumptions in Telecommunications Policy Analysis

Relying on Kingdon’s political model of policy process and Singh’s conceptual framework of factors determining telecommunications restructuring and state types in decision-making process, the researcher developed a case-specific study design. First, a set of basic assumptions about telecommunications policymaking was drawn.

Assumption No. 1. There are multiple policy forces and actors influencing the process of policymaking. These factors are environmental, institutional, and human.

81 Assumption No. 2. Ideas play an important role in the development of the

policy process.

Assumption No. 3. There exist relationships among policy actors who may or

may not share the same interests.

Assumption No. 4. State is a multi-faceted entity that serves at least three

functions in the context of telecommunications policy, as policymaker, as service

provider and as user.

Assumption No. 5. State’s effectiveness in policymaking is impacted by its

maneuverability and responsibility or its ability to impose its own agenda and shape the

social choices and its commitment to national development.

Based on these basic assumptions, research questions were posed for the designed

study.

Research Questions

Grounded on the basic assumptions derived from the policy models, the study answers the following research questions:

1. What environmental and institutional factors were present in the Thai Internet and telecommunications policy formation process?

2. How were ideas channeled into the policy process of Thai Internet development and telecommunications reforms?

3. What were the relationships among the policy forces and in what way did their interactions impact the policy outcomes concerning the development of the Internet in Thailand?

82 4. What were the characteristics of the Thai state in their role(s) in telecommunications restructuring and the formation of the Internet policy?

5. What implications do the policies concerning the Internet and telecommunications have on the future role of the Thai state?

The following chapters attempt to find answers to these questions. Chapter 4 gives a historical and contextual overview of telecommunications regulatory systems and telecommunications reforms, political and macroeconomic environment, and the early stages of Internet development in Thailand. Chapter 5 provides regulatory analyses of the Thai Internet industry, with discussions on commercial Internet development, state monopoly, the tension between market competition and regulatory restrictions, and emergent players in the industry. Chapter 6 addresses the issue of universal service and the role of state as policymaker and provider of public services. Public Internet programs are discussed. Chapter 7 analyzes the politics of Thai telecommunications after the emergence of the Internet, with attention to the roles and relationships of main policy actors—state, politicians and business interests. Chapter 8 concludes the study by providing analyses in response to the research questions.

83 CHAPTER 4

HISTORICAL OVERVIEW OF THAI TELECOMMUNICATIONS REFORMS AND EARLY INTERNET DEVELOPMENT

This chapter describes the historical and political contexts in which Thai telecommunications reforms and Internet development took place. The chapter begins with a discussion on the history of Thai telecommunications regulatory structure, followed by an extensive exploration into the political and ideological environment of the

1990s pertinent to telecommunications. Privatization and liberalization process of Thai telecommunications, 1997 constitutional amendments, the Eighth national development plan, WTO agreements, and Telecommunications Master Plan is described. Finally, a historical perspective into early development of the Internet in Thailand, including the emergence of the Internet in Thailand, early Internet community, commercialization of the Thai Internet, and Thailand’s national information technology development plan, known as the IT 2000 Plan, is described.

Brief History of Telecommunications Regulatory Structure

Since the late 19th century, the Thai government has been providing telecommunications services on the basis of state monopoly. The Post and Telegraph

Office (PTO) was first established in 1883 under the royal decree of King Chulalongkorn.

In 1891, the PTO was split into two separate departments of posts and telegraph

(including telephone), and recombined as the Post and Telegraph Department (PTD) in

1897 (Srisakdi, 1994). The PTD was in charge of postal, telegraph and telephony services. Promulgated in 1934, the Telegraph and Telephone Act, B.E. 2477 entrusted in the PTD “monopolistic rights and authority for the installation, maintenance and

84 provision of telegraph and telephone services” (Telegraph and Telephone Act, B.E.

2477, 1934, as cited in Blasko, 1998, p. 512, footnote 46; Vision 900, 1993).

In 1954 the telephone division was again separated from the PTD and, enabled by the Telephone Organization of Thailand Act, B.E. 2497 (1954), became the Telephone

Organization of Thailand (TOT). Two decades later, forced by rising demands for services and limited capacity of the TOT, the Communication Authority of Thailand

(CAT) was founded as a result of the Communication Authority Act, B.E. 2519 (1976), as a national body under the then Ministry of Communications (Srisakdi, 1994;

Communications Authority of Thailand 16th Anniversary, 1993). Through PTD, TOT

and CAT, the Ministry of Transport and Communications (MOTC) controlled all parts of

the postal and telecommunications industry and acted as planner, coordinator, investor,

manager, operator, and regulator (Blasko, 1998).

The PTD was established as a regulatory department within the government under

the MOTC and retained responsibility for radio frequency spectrum allocation, licensing,

and international postal coordination and cooperation. TOT and CAT, on the other hand,

were created as state-owned enterprises (SOEs) controlled by the board of directors with

approval from the MOTC, and were largely responsible for providing domestic and

international telephone services respectively. Although the responsibilities of TOT and

CAT were understood to be separate, a closer inspection of the two agencies’ charters

revealed no specific clauses that indicated that each agency was exclusively charged with

specific service provision, e.g., TOT with providing domestic telecommunications

services and the CAT with international telecommunications services. In fact, the TOT’s

85 charter granted TOT the power to provide “all services in connection with telephone activities” and to fix rates of charges for “any services rendered in connection with telephone activities” (Blasko, 1998, p. 513). On the other hand, the Communication

Authority Act, B.E. 2519, though widely known to have been enacted to empower CAT to oversee international telecommunications networks, contained no such language

(Blasko, 1998).

In the absence of well-defined division of responsibilities, the activities of

Thailand’s telecommunications duopoly sometimes duplicated and overlapped. In practice, TOT, considered the backbone of national telecommunications networks, was in charge of providing domestic local and long-distance public telephone networks. TOT’s responsibilities include domestic long-distance (which also included calls to immediate neighboring countries), telephone lines, leased circuit services, and value-added services, as well as setting telephone rates and establishing regulations concerning telephone equipment and services. CAT was responsible for domestic postal services, public international telephone services, domestic and international public telegraph and telex services, international leased circuits, cellular telephones, international facsimile, and data packet services (Blasko, 1998). Since the commercialization of the Internet in 1995,

CAT also began acting as a sole Internet industry regulator.

The overlapping functions of the three major agencies made the relations among them complex and their conflicting responsibilities difficult to unravel. In addition, although all were under the government’s control, they often lacked the structure for cooperation and sometimes competed among themselves. What’s more, these

86 overlapping functions and interlocking relations, coupled with political interferences

(from military, political parties, labor unions, and business interests) that complicated

decision-making and management of these agencies, later created conflicts, presented

constraints for structural and regulatory reforms, and impeded optimal development of

Thailand’s telecommunications industry (Busakorn, 1995).

These intertwined operating and regulatory functions among Thai telecom state

agencies were expected to end once the new regulatory body, the National

Telecommunication Commission (NTC), came into establishment by late 2001.3

Promulgated by the Telecommunications Act, B.E. 2543 (2000) and dictated by

Thailand’s agreement with the World Trade Organization (WTO), the NTC, once

established, will be the sole body responsible for all aspects of regulating the country’s

telecommunications sector. Meanwhile TOT and CAT will no longer have any

regulating authority and will become only operators among other private competitors. At

the time of writing the two agencies are expected to be privatized in 2002.

Political and Ideological Contexts of Telecommunications Reforms

Political environment

Thailand emerged from the 1980s as a so-called semi-democracy. After five

decades of military domination in politics since the change from absolute monarchy to

constitutional monarchy in 1932, the Thai parliamentary system began to strengthen in

3 By late 2001 the establishment of the NTC was still in limbo due to the Senate’s opposition to the selection process of the NTC panel. The final selection of the NTC panel was expected to be accomplished in 2002.

87 the 1980s during a long period of political stability—(i.e., largely free of political coups)—under the Prem Tinnasulanond government. Towards the end of the 1980s power began to shift from the exclusive domain of the military to the parliament, with greater political participation of political parties and civilians. Coinciding with the period of rapid economic growth of the late 1980s and the early 1990s, business groups increasingly participated in politics, initially as patrons of politicians and allies of bureaucrats and eventually as politicians themselves in the 1990s. In a multi-party parliamentary system, Thai politics has seen a large number of political parties with no one party having absolute majority. Thai political parties were generally not driven by distinct political ideals but by association of interests. Politicians were known to frequently change party association in order to increase their chances of having a coveted seat in the cabinet. As a result, Thai politics became increasingly characterized by various interest groups vying for important cabinet posts—i.e., with potential to oversee many lucrative deals. Many elected politicians have also been known to leave their government offices (often ministerial posts) with massive wealth. Vote buying, seen as a kind of business investment, intensified as Thailand’s economy was bubbling (Pasuk &

Baker, 1998). Corruptions were rampant with more and more capital-intensive government contracts. Large public infrastructure government projects became a source of political squabbles and scandals. In 1991, the first truly elected civilian government of

Chatichai Choonhavan was ousted by a bloodless military coup. The military’s justification for the coup—which was largely unquestioned by the Thai public—was

“excessive corruptions.” It was speculated that the real reason for the military to topple

88 the Chatichai government was the military’s attempt to regain control over the 2-

million-line telephone contract (Sakkarin, 2000).

The 1990s was a politically and economically turbulent time for Thailand. After a

decade of economic prosperity, political democratization, and gradual reduction of

military intervention in politics, Thailand was struck by a momentous event in 1992.

Pro-democracy protests led to the overthrow of the military junta in May 1992 when

General Suchinda Kraprayoon angered the public by breaking his promise not to enter

politics and accepted the invitation of the pro-military government coalition to become

the prime minister. The 1992 popular uprising was a major turning point in Thailand’s

modern history not only because it effectively removed the already weakened military

from politics, but also because it spurred the public interest in political reforms and

moved the country closer towards democratic participation. To prevent similar tragedies

from happening again, the media, academics and NGOs led the country to call for

constitutional amendments to require the prime minister to be an elected member of

parliament.4 The 1992 incident marked the beginning of democratic maturity for the Thai

4 Traditionally the prime minister position was usually offered to a respected figure who was an outsider (of ruling political parties) or whom the ruling coalition accepted as a neutral figure with sufficient influence and authority to manage negotiation and compromises among various coalition interests. This personality politics is exemplified by several of Thailand’s prime ministers who were non-elected politicians and were invited to become prime minister, such as Prem Tinnasulanond and Anand

Panyarachun. General Suchinda Kraprayoon was “invited” to become prime minister by the pro-military coalition in 1992 but evidently was not accepted by the public, resulting in the large-scale protests calling for his resignation in May 1992.

89 political system, whereby public policy issues gained attention and were debated widely among different segments of the society. Meanwhile, electoral politics continued to develop. More political parties grew stronger, although still not fully developed in terms of political ideology. Local business groups expanded through a deluge of foreign investments and loans in the first half of the 1990’s. As the Thai economy seemed unstoppable with an average growth rate of 10 percent per year, money politics grew intense. Business interests and politicians formed alliances to create business opportunities through a growing number of large government infrastructure projects, particularly in the telecommunications sector.

However, the economic momentum suddenly changed in July 1997, when the country was hit by one of the worst economic crises in history. The baht which had until then been pegged to the U.S. dollar was floated and rapidly tanked amidst heavy currency speculation, the result of unsuccessful defense against the speculation by the Chavalit government. The devaluation of the Thai baht sent the world economy (with the exception of the United States) to the brink of recession and Asia to near-bankruptcy.

Thailand was harshly reawakened to its fragile economic success and weak fundamentals: a political system full of corruptions, financial mismanagement at the highest level, and lack of sound economic principles and management skills.

The newly aware Thai public became convinced that the only way to create a transparent and accountable government was through expansive political reforms.

Picking up momentum from the 1992 political liberalization, the 1997 crisis further deepened the public’s attention to governmental affairs. Financial mismanagement and

90 corruption involving high-level executives, public officials and politicians, as in the controversial case of the Bangkok Bank of Commerce (BBC), caused the public to scrutinize more carefully governmental affairs and the conduct of public officials. This led to the establishment of the Counter Corruption Commission, which would play a significant role in several cases of corruptions and grafts by public officials, including major political figures such as former minister Sanan Kachornprasat and the prime minister elect Thaksin Shinawatra in 2001. Government transparency became a key concept circulating many levels of the society.

The economic measures imposed by the IMF did not yield positive results for many Thais, however. Especially those Thais engaged in thriving entrepreneurial enterprises were hard hit by the crisis; the lack of palpable positive results caused resentment. Apart from the corrupt political system at home, a lot of blame was placed on foreign currency speculators and hedge funds managers who, many Thais believed, contributed to the eventual free fall of the Thai baht in July 1997, wiping out all of

Thailand’s foreign reserves. The political reawakening coupled with resentment against these foreign forces led the Thai society to turn inward and to engage more seriously in self-examination. A broad consensus emerged that political reform was fundamental to economic reconstruction, i.e., systemic overhaul of politics was a prerequisite to a meaningful change that would in turn bring about a sustainable economic system

(Overholt, 1999).

During the late 1980’s and the early 1990’s, the Democratic Party under the leadership of Chuan Leekpai was considered a leading force for democratization. It was

91 considered favorably—at least by the urban middle class—as a leading party capable of presiding over the country’s progress towards economic prosperity, and to a more mature democracy when it was elected to lead the country after the ouster of General

Suchinda in mid-1992. After the economic downfall in 1997, the Democratic Party under

Chuan was again chosen to bring the country to recovery. Under the stewardship of

Tarin Nimmanhemin, a leading technocrat, as finance minister, the Chuan government was widely commended by the international community for its serious implementation of the financial and economic restructuring programs. However, because the general Thai public did not feel positive results of the recovery, resentment against the Chuan government increased. As a result, Chuan and Tarin became increasingly depicted as the obedient servants to foreign interests, namely the IMF. The economic liberalization programs opened doors for foreign companies into the Thai home markets, causing anxieties among those who felt their interests were being encroached and the urban and rural poor who were hard hit by the economic crisis but did not feel any relief from the implementation of the IMF-imposed measures. Despite, or rather because of, its comprehensive economic restructuring measures and obedience to the IMF, the

Democratic Party was condemned for its perceived failures to lead the country to recovery. The Chuan government and the Democratic Party were characterized as an old ineffectual political order that bowed to foreign interests and neglected the poor.

This collective sentiment was clearly demonstrated in the January 2001 general elections, in which the new Thai Rak Thai (Thai Love Thai) Party led by a successful telecommunications tycoon won by a landside. With solid funding from large

92 corporations like Shin Corp, political marketing savvy and populist policy campaigns,

Thai Rak Thai was able to quickly establish itself as a new alternative to the Democratic

Party. Thai Rak Thai’s reformist slogan “Think new, act new, for every Thai” positioned the party as a fresh political representation with the interests of the people at heart (as opposed to the interests of the foreign powers catered by the Democratic Party). The policies pitched during the election campaigns and implemented by Thai Rak Thai after it won the election included several public assistance programs aimed at the large rural and low-income constituents: universal low-cost (30-baht per visit) medical coverage, one- million-baht-per-village investment funds, and loan relief for farmers. While a segment of the Thai educated middle class and loyal Democratic constituents doubted the viability of Thai Rak Thai’s populist policies, personal wealth of Thaksin, the Thai Rak Thai leader, was seen as a proof of his talents and success by a large popular base, particularly those severely affected by the economic downturn. Thaksin’s quick CEO-style of leadership was also a refreshing quality against Chuan’s intellectual but slow and often deemed ineffectual style. To a large sector of electorates Thaksin and Thai Rak Thai presented hope for quicker economic recovery.

Whether the new choice of leadership elected by the Thai people will bring about any meaningful change and lead the country to economic recovery remains to be seen at the time of this research. But one thing is certain: the turns of events during the 1990’s had great ramifications on the process of policymaking in Thailand’s telecommunications industry.

93 First, the political reawakening put the government’s policymaking and the politicians’ involvements in business deals in all sectors under serious political scrutiny.

For example, the army-owned TV and radio networks were audited by the government in order to estimate their real income and to determine their financial contribution to the state coffers (Sakkarin, 2000). Second, the validated mistrust in government bureaucracy, coupled with the strong wave of economic liberalization, led to a widespread regulatory reform in most sectors, particularly telecommunications. The

1997 economic crash brought a new ideological concept into the Thai politics: accountability and transparency. In political and economic restructuring, the idea of independent regulating body has been introduced. It became crucial in the view of reformists (e.g., political activists, academics) that political powers be separated from economic operation. For instance, establishment of new independent regulatory bodies like the National Telecommunications Commission (NTC) is expected to solve many entanglements of vested interests in the telecommunications sector and to minimize state control over public resources and political officials’ abuse of power and authority.

Thai telecommunications reforms

Since the mid 1980s, Thailand has gone through two phases of telecommunications reform, each with a distinctive trajectory (Sakkarin, 2000). The first phase, from 1986 until the military toppled the Chatichai government in 1991, was characterized by the continuation of a state monopoly and the beginning of deregulation and limited private participation. In this phase, the military remained a dominant force in politics along with the bureaucrats and the politicians. Business interests were an

94 emerging force. The second phase, which began with the 1991 military coup and

continued to the end of the 1990s decade, was characterized by a move from state

monopoly to broader deregulation and liberalization of the industry, as well as a

proliferation of Thai telecommunications business enterprises and their increased

involvement in telecommunications politics.

Thailand began seeking consulting services in restructuring of state-owned

enterprises (SOEs) since the very early 1990s. In efforts to explore restructuring

alternatives, Thailand received guidance from the World Bank in developing a

telecommunications master plan to reorganize and separate the regulating from the

operating functions in the SOEs. The separation of functions was to be supported by

establishment of a new, independent regulating body then conceived as the National

Communications Board (NCB). As a result, TOT and CAT would only function as

operators and openly compete with the private operators (Blasko, 1998).

State-owned enterprise (SOE) privatization

The privatization of TOT and CAT had been on the government policy agenda since the late 1980’s but had encountered a lot of resistance particularly from the two state-owned enterprises (SOEs), their labor unions, and the military that controlled the boards of directors of the SOEs. TOT was advised by the World Bank to consider selling a significant percentage of its equity to a potential strategic partner as a first step towards privatization. However, due to internal resistance, privatization efforts in Thailand were largely unsuccessful (Petrazinni, 1995). The TOT and CAT privatization deadlines kept being postponed to later and later dates. In mid-2000, TOT and CAT were still in the

95 process of hiring consultants to assist in the details of privatization such as asset

valuation and the status of employees after privatization. By mid-2001, the TOT and

CAT privatization was still not accomplished. This is despite the passages of the

Corporatization Act in late 1999 and the Telecommunications Act in early 2000. Under

the Corporatization Act, TOT would become TOT Co Ltd, and CAT would split into two

companies, CAT Telecommunications Co Ltd and CAT Postal Co Ltd. The three

companies would remain state-owned under a holding company and all of their shares

would be held by the MOF. The new companies then would offer no more than 25

percent of the shares to strategic partners through international bidding, 22 percent to

private placement and 3 percent to staff, with the remaining 50 percent retained by the

MOF. Eventually the MOF was to decrease its share to below 50 percent. TOT would

then list on the Stock Exchange of Thailand, while CAT planned to issue a stake to

private investors in 2002 (Vivat, 1999; Vivat, 2000c).

Liberalization of Thai telecommunications industry

Efforts to move towards full liberalization of the Thai telecommunications market had met with some success by the mid-1990s (Petrazinni, 1995), although still considered slow, causing frustration among private investors and operators. The coalition (mainly the military, the SOE labor unions, and the SOE executives) resisting a dismantling of the telecommunications state monopolies was finally overwhelmed and yielded to internal political and business pressures as well as commitments to international trade agreements and pressure from international agencies (Sakkarin, 2000). Yet, liberalization of the Thai domestic telecommunications markets set for October 2000 missed several deadlines and

96 continued to face obstacles well into 2001. Bureaucratic red tape and political

squabbles in the process of establishing the new telecommunications regulating body, the

NTC, were largely to blame for the further delay of eventual market deregulation.

The government telecommunications incumbents like TOT and CAT have few

incentives to rush towards liberalization because, although by 2000 they were stripped of

regulating authorities and became only operating agencies, they were still receiving

significant shares of revenue from private concessionaires of many build-transfer-operate

(BTO) concessions—as many as 30-40 percent in some cases. As a result, while the country awaited the establishment of the NTC, only five out of 36 concessions granted to private operators by TOT, CAT, and Ministry of Transport and Communication (MOTC) were in the process of conversion by the end of 2000 (Suphaphan & Mongkol, October 5,

2000; Vivat, 2000a). Agreements on terms of conversion were not reached by the concession-giving state agencies and the concessionaires and Thailand’s telecommunications liberalization went through another change of administration in 2001 without much success.

The conversion of existing BTO concessions is seen as instrumental in the

liberalization process of the Thai telecommunications sector in that it is expected to bring

all telecommunications operators to a leveled playing field, to ensure free market

competition in preparation for full liberalization in 2006 as dictated by the WTO

agreement. By converting the concessions, it is meant that both the government and the

concessionaire agree to abandon the BTO revenue-sharing scheme on the condition that

the concessionaire pays an agreed amount to the government to compensate for the

97 revenue share the government is entitled to during the period of the concession. Then

after the compensation is paid, the concessionaire is free to apply for a new operating

license from the new regulatory body, or go into a joint venture with the state agency that

formerly granted it the concession. Within the existing BTO system, there is a great

range of revenue-sharing terms among the concessions given to private operators by the

TOT, the CAT and the MOTC.

The revenue-sharing BTO scheme had been adopted by the Thai government in

the late 1980s as a compromise to accommodate several interest groups; it provided

opportunities for private investment and private participation operation to speed up the

sorely needed telecommunications infrastructure expansion, while at the same time

allowing state monopoly to continue. The concession conversions would turn many

existing BTO concessions—which many concessionaires consider unfair competition—

into licensed agreements or joint ventures between the private operators and the SOEs.

The Thailand Development Research Institute (TDRI) proposed a concession conversion

framework, recommending that the concessionaire pay a lump sum compensation to the

government before the conversion, with the amount calculated based on projected

revenue until the end of the concession period (Vivat, 2000a). However, because the

lump sum payment required would be substantial as some concessions run as long as 30

years, it is not surprising that the TDRI framework was rejected by the private operators.5

5 After Thaksin took office in early 2001, there was a hint of a new conversion framework that would propose compensation payment by the concessionaires calculated based on projected revenue until the year 2006, instead of until the end of the concession period.

98 Disagreements between TOT and CAT and the concessionaires over the term of

compensation led to no concession conversion being accomplished by mid-2001.

Through the series of BTO concessions granted to private operators during the

1990’s, a private sector in Thai telecommunications had emerged. Local

telecommunications businesses proliferated as the Thai economy quickly surged forward

and telecommunications industry experienced greater liberalization. Moreover, as the

political systems became more democratic and civilian-led political parties gained more

power over the traditionally powerful military, business influence significantly increased.

Political parties and businesses strengthened alliances to push for more open markets and

more opportunities for private participation in the telecommunications industry. Towards

the late 1990s, the business sector grew to be a formidable force in the Thai policymaking process, while the military was edged out of telecommunications politics. According to a

Thai telecommunications policy scholar Sakkarin Niyomsilpa (2000), the Thai telecommunications industry survived battles between pro-reform and anti-reform coalitions, each of which comprised shifting alliances and changing positions and ideas on the issues of privatization and liberalization. The issue of telecommunications politics and the interactions among interest groups are discussed in greater detail in Chapter 7.

The next section discusses constitutional amendments that pertain to telecommunications.

99 1997 constitution

The 1990s decade was a politically turbulent, economically trying, and

ideologically rejuvenating time for Thailand. Public reactions to the May 1992 bloody

crackdowns of the pro-democracy protesters marked a watershed in Thailand’s modern

history. The total blackout of all state-run television stations during the crisis provoked

strong criticisms from the public and the print media on government controls over media

outlets. Public anger over the military junta’s suppression of information during the

crisis spurred the burgeoning political democratization process in the early 1990s.

Subsequent to the successful overthrow of the junta government in 1992, the Thai public

wanted to make sure the new election in September 1992 was free and fair.6 Political

discourse surrounding and following the May 1992 incident was filled with issues

concerning public rights to information, individual rights and freedom, government

transparency, empowerment of local authorities, citizens’ rights to participate in the

decision making process, and free and fair elections.

For most of the 1990s up to 1997, a new constitution was being drafted, with

unprecedented public debates and input from different segments of the society. Once

completed in 1997, the new constitution revealed several progressive democratic features

concerning citizen’s rights and state responsibilities. New principles concerning

individual freedoms include, for example, individual right to public information (Article

58), individual right to participate in the decision-making process of the state (Article

6 The results of the May 1992 election were perceived to be manipulated and tainted by heavy vote buying.

100 60), and individual rights to file petition and be informed of is result (Article 61) and to sue a state agency or authority (Article 62). With respect to state policies, the new features include the state’s responsibilities to allocate adequate budget for the independent administration of the Election Commission, the Ombudsmen, the National

Human Rights Commission, the Constitutional Court, the Courts of Justice, the

Administrative Courts, the National Counter Corruption Commission, and the State Audit

Commission (Article 75), encourage a free economic system through market forces

(Article 87), and decentralize powers and provide equitable public utilities and facilities and infrastructures (Article 78) (Somkid, 1997). Among the important new features in the 1997 Constitution were those concerning the development of telecommunications and information industry spelled out in Article 40 and Article 78. These two Articles were consistently cited as significant by a number of interviewees, particularly those among industry experts and policymakers.

Article 40 was fundamental in setting a new direction for the development of

Thailand’s telecommunications, media and information industries. It set a new standard and framework for regulations. Article 40 specifies that radio and television frequencies are public resources and hence shall be used in the interest of the public. More importantly, it puts an end to Thailand’s long tradition of state control over these resources by stipulating establishment of a new, independent regulatory body. The new regulatory body will manage radio and television frequency allocations and supervise

101 telecommunications business under the free and fair competitive regime.7 By shifting

to the new independent body regulatory authority currently distributed among several

state agencies, namely CAT, TOT, and the MOTC, the state monopoly over Thailand’s

telecommunications industry was set—at least in theory—to be effectively dismantled.

Article 40: Transmission frequencies for radio or television broadcasting and radio telecommunication are national communication resources for public interest. There shall be an independent regulatory body having the duty to distribute the frequencies under paragraph one and supervise radio or television broadcasting and telecommunication businesses as provided by law.

In carrying out the act under paragraph two, regard shall be had to utmost public benefit at national and local levels in education, culture, state security, and other public interests including fair and free competition.

In conjunction with this Article, the Radio and Television Frequency Allocation

and Telecommunications Services Act, B.E. 2453 (2000) was approved by the cabinet in

March 2000.

Article 78 put an end to Thailand’s century-long tradition of centralization of

government’s power. It emphasizes decentralization of administration, empowers local

authorities, and stipulates equal rights of all citizens to public utilities, facilities and

information infrastructures.

Article 78: The State shall decentralise powers to localities for the purpose of independence and self-determination of local affairs, develop local economics, public utilities and facilities systems and information infrastructure in the locality thoroughly and equally throughout the country as well as develop into a large-

7 Due to pressure from media activists, academics and non-governmental organizations, two regulating bodies were later agreed to be established: the National Broadcasting Commission (NBC) would regulate the broadcasting industry and the National Telecommunications Commission (NTC) would regulate the telecommunications industry.

102 sized local government organisation a province ready for such purpose, having regard to the will of the people in that province.

In September 2000, the cabinet approved the Universal Access Act. It was then drafted as a bylaw to this Article of the Constitution (NITC, 2001).

Within the context of separation between regulating and operating authorities and stipulation of the state’s responsibility to provide equitable access to information infrastructure, Article 87 provides a method to achieve these goals: free competition.

Article 87: The State shall encourage a free economic system through market force, ensure and supervise fair competition, protect consumers, and prevent direct and indirect monopolies, repeal and refrain from enacting laws and regulations controlling businesses which do not correspond with the economic necessity, and shall not engage in an enterprise in competition with the private sector unless it is necessary for the purpose of maintaining the security of the State, preserving the common interest, or providing public utilities.

However, as stated in the latter half of the Article, although free competition is specified as the main driving force of the economic system, participation of the state can still be preserved in economic activities in protection of the public interest and in provision of public utilities. Especially after the 1997 economic crisis that set the Thai economy back many years, competition was seen as the most powerful, if not the only, ideological and economically practical force in Thailand’s future economic strategy.

Readustment of Eight National Economic and Social Development Plan (1998-2001)

The 1997 economic crisis precipitated by the failure of Thailand’s financial sector caused the country to reevaluate and rethink its economic strategy. From the pre-crash mode of easy lending, lax fiscal discipline and relatively opaque management—a style branded “crony capitalism,” the pressures were intense from foreign investors and the

International Monetary Fund (IMF) for more transparent management and fiscal policies.

103 In its failed attempt to defend the value of the baht, the Chavalit government lost most

of the country’s US$ 37 billion national reserves. As a result, the country was forced to

seek assistance from the IMF. In exchange for the US$ 17 billion rescue package,

Thailand subjected itself to the IMF austerity measures and major economic

restructuring.

Following acceptance of the rescue package, Thailand readjusted its Eight

National Economic and Social Development Plan (1996-2001). Among the key measures for economic restructuring was a measure to increase the role of the private sector in the economy by decreasing state monopoly and privatizing state enterprises, and a measure to adjust and prioritize infrastructure development plans within budget limitations by increasing investment and management efficiency (NESDB, 1998, chapter 1). In addition to closing down 56 finance companies as an immediate measure to restore confidence in the financial sector (NESDB, 1998, chapter 3), Thailand complied with other IMF conditions to improve economic efficiency as follows:

1. Adjust macroeconomic framework and investment framework for the

immediate term (1997-1998) to comply with IMF conditions and the country’s economic

and social revitalization program in the last three years of the Eight Plan (1999-2001).

2. Recognize the importance of economic sustainability by conducting

appropriate policies and measures to revitalize the financial sector and to create fiscal

discipline in both short term and long term.

104 3. Accelerate structural transition from labor-intensive economy to value- added economy employing sciences and technology in preparation for the changing global economic environment. (NESDB, 1998, chapter 4)

As part of the third condition, increase in private investment through privatization of state-owned enterprises is a recommended measure to reduce state monopoly and to increase state revenue, while decreasing its investment burden and strengthening the economy. The readjusted Eight Plan suggests specific legal preparations to support the measure including the development of a Privatization Master Plan and a Corporatization

Law (NESDB, 1998, chapter 3).

WTO: Basic Telecommunications Agreement (BTA)

Thailand is a member of the World Trade Organization (WTO) and a party in the

General Agreement on Trade in Services (GATS). Telecommunications is one of the ten industries that Thailand agreed to liberalize. The Basic Telecommunications Agreement

(BTA) is a process initiated in 1994 to extend GATS commitments to voice communications. The BTA negotiation was concluded in February 1997, with 69 countries signing the agreement and 61 countries committed, in whole or in part, to the

“Regulatory Reference Paper” (Kelly, May 6-7, 1999).

Thailand was one of the few countries among the 75 by the end of 2000 that accepted the “Reference Paper” only partially. However, Thailand was under increasing pressure to accept it in full, not only because of its membership in the WTO but also because of pressures from regional partners as with ASEAN and APEC (Xavier, October

2, 2000).

105 The Regulatory Reference Paper contains agreements on the following key

regulatory principles:

1. Competitive safeguards – Appropriate measures shall be maintained to order to

prevent anti-competitive practices by suppliers in telecommunications such as engaging

in anti-competitive cross-subsidization and withholding information from other suppliers

that is essential in providing services.

2. Interconnection – A supplier providing public telecommunications transport

networks or services must allow the users of another supplier to communicate with its

users and to access services. In brief, interconnection must be provided under non-

discriminatory terms, as cost-oriented, transparent and timely. Also, additional network

termination points must be offered to the majority of users upon request at cost-oriented

rates. The procedures and rates of interconnection must be made available publicly.

Finally, a service supplier requesting interconnection with a major supplier must have

recourse in the case of dispute.

3. Universal service obligations – Universal service obligations are left to the discretion of member states and should be no more burdensome than necessary.

4. Licensing criteria – Licensing criteria must be made publicly available and the

process of which transparent.

5. Independent regulatory authority – Independent regulatory authority must be established in order to separate regulatory from operating functions.

106 6. Allocation and use of scarce resources –The procedures for allocation and

use of scarce resources must be objective, timely, transparent, and non-discriminatory

(Kelly, 6-7 May 1999; Xavier, October 2, 2000).

After the BTA went into effect on February 15, 1997, implementation of the BTA began on April 5, 1998. However, in the case of Thailand, October 1999 was originally agreed upon as the deadline for full liberalization of domestic telecommunications markets, but due to lack of readiness in both the state and private sectors, the deadline was moved to October 2000. For full liberalization of international telecommunications markets, Thailand has been working to comply with the 2006 deadline.

Thailand’s binding agreements with the WTO in telecommunications are highlighted in Table 4.1.

107 Table 4.1

Thailand’s Binding Agreements with WTO in Telecommunications

Agreements Compliant Conditions Deadline Basic Telecommunications 2006 Comply with liberalization Public domestic and international conditions when telecommunications services in telephone, telecommunications-related laws telegraph, facsimile and telex are in effect. CAT remains the sole • Foreign partners cannot hold more rights holder to link to Intelsat and than 20% shares of registered capital Inmarsat. • No more than 20% foreign ownership

Value-added Telecommunications 1993 Data transfer and delivery over telecommunications networks and other services beyond basic telecommunications, e.g., equipment sales, radio and television production • Foreign partners cannot hold more than 40% shares of registered capital • No more than 40% foreign ownership

Note. From Ministry of Commerce, as cited in Rewadee & Apiradee, 2000a, p. 1.

Telecommunications Master Plan (1997-2006)

Thailand’s Telecommunications Master Plan struggled through a series of political changes, having been proposed, scrapped and revised numerous times until its final draft was approved in November 1997. Even after the approval, which followed the economic crisis, revision of the plan was sought by the previous MOTC minister, Suthep

Thueksuban, arguing the plan was not suitable for changed economic situations (Vivat,

1999).

108 The main goals set in the Master Plan were in accordance with policies

described in Table 4.2.

The Master Plan specifies important policy implementations as follows:

1. Establish National Telecommunications Commission (NTC) and National

Broadcasting Commission (NBC).

2. Privatize TOT and CAT.

3. Convert concessions awarded to private operators.

4. Open telecommunications market. (Rewadee & Apiradee, October 2, 2000).

Table 4.2.

Telecommunications Master Plan (1997): Goals and Policies

Goals Policies 1. Provide adequate telecommunications 1. Liberalize telecommunications industry by access. bringing monopoly to an end and increasing 2. Ensure international standard services. the role of the private sector. 3. Ensure that service charges are reasonable 2. Separate regulating authority from operating for both providers and consumers. authority. 4. Promote Thailand as a competitive market 3. Privatize TOT and CAT. and as regional hub for telecommunications. 4. Promote R&D, HR development and legal infrastructure in telecommunications. 5. Develop Thailand to become telecommunications regional hub.

Note: Adapted from “Thailand’s Readiness for Telecommunications Liberalization,” by

Rewadee Rattananubal and Apriradee Somboontanon, 2000, October 2, Bank of

Thailand, p. 3. Retrieved March 6, 2001 from the World Wide Web: http://www.bot.or.th/BOTHomepage/DataBank/Real_Sector/Service&Other/Article/10-

2-2000.Th-I-1/telecom-free.pdf.

109 Historical Development of Thai Internet

Emergence of Thai Internet

As in most countries, the Internet in Thailand began in academia. The Thai

Internet developed slowly in the late 1980s and the early 1990s and was largely limited to

academics, researchers, engineers, and computer professionals until commercialization in

1995.

The Thai Internet had its official debut in 1987 when the first electronic mail

activity occurred between the Prince of Songkhla University (PSU) in southern Thailand

and the University of Melbourne, Australia, with assistance from the Australian

International Development Plan (IDP) (Palasri, Huter & Wenzel, 1999). A year prior, a

computer science professor at the Asian Institute of technology (AIT) and a University of

Melbourne graduate, Kanchana Kanchanasut, was the first Thai to use email. Towards the end of 1987, using Unix to Unix CoPy (UUCP) Kanchana and her Japanese colleague connected to the University of Tokyo and the University of Melbourne severs by dialing up from a phone line to THAIPAX, an X.25 service hub provided by the CAT.

Subsequently, they were able to connect to UUNET in Virginia, USA (Kanchana, personal electronic communication, August 27, 1997, as cited in Palasri, Huter &

Wenzel, 1999, p. 9).

In early 1988, with financial and technical assistance from the Australian IDP

three Thai universities, PSU, AIT and Chulalongkorn University (Chulalongkorn), set up

the Thai Computer Science Network (TCSNet), which was the first email network in

Thailand. PSU and AIT servers (sritrang.psu.th and ait.ait.th) subsequently functioned as

110 the main local gateways for Thai academics to the University of Melbourne's server

(munnari.oz.au) (Palasri, Huter, & Wenzel, 1999). By 1991, two more universities were connected, namely Thammasat University and Kasetsart University. Again, with assistance of the Australian Academic and Research Network (AARNet), Thammasat set up MHSNet with a 14.4Kbps modem—then Thailand’s fastest, making MHSNet

Thailand's newest gateway connecting with Australia, replacing PSU and AIT (ibid).

Meanwhile, NECTEC, a government agency newly established to promote the development of computer technology, ran its own network, called the Inter-University

Network (UniNet), also on X.25. Before the end of 1992, there was a need for the Thai networks to make a transition from UUCP to full Internet Protocol (TCP/IP), resulting in an agreement between MSHNet and NECTEC’s UniNet to merge (Thaweesak, personal electronic communication, September 5, 1997, as cited in Palasri, Huter & Wenzel, 1999, p. 13). This merger in turn gave birth to ThaiSarn (The Thai Social/Scientific, Academic and Research Network) which was a collection of interconnected academic and research sites, allowing Thai academic and research communities to connect by information- exchange via computer (Waltham, June 24, 1996).

ThaiSarn was funded by the national budget and technically supported by

NECTEC’s in-house lab, the Network Technology Laboratory (NTL) and participating sites (Palasri, Huter & Wenzel, 1999). Bangkok-based international computer vendors such as IBM (Thailand), Digital Equipment Corporation (DEC-Thailand) and Hewlett

Packard (HP-Thailand) donated servers for testing to the ThaiSarn network, while

Shinawatra Datacom donated some of its leased line circuits. In addition, because

111 Thailand did not have a local exchange or any international leased circuits at the time,

HP (Thailand) and DEC (Thailand) provided independent nodes locally (hp2hpth.co.th and decth.co.th) for data transfer within ThaiSarn. Therefore, the data between the two nodes were routed first through the two corporate hubs in the United States and then re- routed back to their destinations in Thailand. However, shortly thereafter, Chulalongkorn

University, one of the original members of TCSNet, acquired a 9.6 Kpbs leased line to

UUNET, and the HP and DEC nodes were removed (Thaweeksak, 2001; Palasri, Huter &

Wenzel, 1999, p. 14).

Connecting through CAT’s domestic and international half-circuits,

Chulalongkorn became a new gateway for members of TCSNet, now known as ThaiNet, comprising Chulalongkorn, AIT, Chiang Mai University and Assumption University. As a courtesy, Chulalongkorn also permitted ThaiSarn members to access the Internet via its local leased line through NECTEC, giving an opportunity for ThaiSarn members to upgrade their dial-up connections to TCP/IP (Palasri, Huter & Wenzel, 1999). With

Chulalongkorn and NECTEC as two main hubs and after both upgraded to 64 Kbps international leased circuits to UUNET in late 1993, ThaiSarn became a full TCP/IP network in mid-1994, reaching 27 institutions and 34 sites, mostly universities and government agencies (Thaweesak, 2001). The typology of Internet development in

Thailand hence centered around these two institutions and did not change much until commercialization in 1995 (Palasri, Huter & Wenzel, 1999).

112 Early Internet community in Thailand

Before the arrival of Internet Protocol and the PINE email system, there were only

100 email users in 1992, using UUCP (Palasri, Huter & Wenzel, 1999). However, even before that time, a number of computer-savvy Thais and foreign expatriates were already participating in as many as 50 electronic bulletin board systems (BBSes) (Thaweesak,

2001), although ownership of modems and communication equipment was not permitted by law (Dawson, personal communication, August 17, 1998). Among popular BBSes were BBS1 run by a Thai BBS pioneer, Woody Koman, WildCat by Alan Dawson,

Bangkok Post’s summary page editor, and SalaThai by Jamie Zellerbach, an American-

Thai computer professional. Some BBSes connected to FidoNet in Singapore and some to UUNET in USA.

The early development of the Thai Internet community was typically supported by individual contributions. Trin Tansetthi, who was at the time a software architect for

DEC (Thailand) and later became president of Thailand’s first commercial Internet

Service Provider (ISP) Internet Thailand, was among Thailand’s Internet pioneers and was in no small part responsible for bringing Thailand’s first gopher, ftp, Usenet news, and web servers to Internet users in Thailand. The number of Internet users in Thailand increased from hundreds in 1992 to over 20,000 by mid-1994 (Palasri, Huter & Wenzel,

1999, p. 14). Trin and other Thai and foreign expatriate volunteers, formed the NECTEC

Email Working Group to contribute their technical knowledge to the growing Thai

Internet community. An incentive for the working group was a free email account on

NECTEC’s server (nwg.nectec.or.th).

113 Before the arrival of the web-based Internet, in 1991 Trin, a Thai early

Internet pioneer, proposed to his then employer, DEC (Thailand) the idea of a public

access network (PubNet) to serve the small but growing community of academic and

research users. In response, Trin received a VAX machine to start PubNet that was

designed to better connect multiple network systems with common protocols. Alan

Dawson offered his Wildcat software-based BBS to connect to ThaiSarn’s UNIX-based

network. Through Dawson’s machine, PubNet was able to distribute a free Usenet feed from ThaiSarn to BBSes. PubNet was largely operating on a free-of-charge, or minimal cost-recovery basis (to recover costs of international calls to FidoNet in Singapore or the

US). It was a sustainable public access network until around 1994, when arrival of the more colorful World-Wide-Web drew a large number of BBS users from the text-based

BBS-based PubNet, causing it to eventually fail financially (Trin, personal communication, August 27, 1998; Dawson, personal communication, August 17, 1998;

Palasri, Huter & Wenzel, 1999).

The Internet community in Thailand began to grow more rapidly in the mid-

1990s. After commercialization in early 1995, estimated growth of commercial Internet

usage in terms of individual users and corporate node connections was at a rate of 23

percent per month in 1995. By the end of 1995, there were at least 60 corporate nodes

with independent Internet domains connected to commercial ISPs. The total number of

Internet users in Thailand was estimated at 100,000 persons, the majority of which had

their access via their corporate nodes. About half of the total estimated users were

114 associated with research or academic institutions. Only 10 percent (10,000) were

found to be individual users served by commercial ISPs (Waltham, June 24, 1996).

Commercialization of Thai Internet

Commercialization of the Internet in Thailand came rather slowly (NECTEC,

1999). This was at least partly attributable to the state’s monopolistic regulations of the

telecommunications industry. Until the new regulatory body, the National

Telecommunication Commission (NTC) comes into existence,8 the Communication

Authority of Thailand (CAT) will still maintain its monopoly in international half-

circuits, while private entities are prohibited from owning telecommunications equipment

and from communication reselling.

While the Internet was expanding in the educational and research community in the early 1990s, growing demand in the private sector was not addressed until early 1995.

After six months of feasibility study, CAT and TOT, the Thai telecommunications duopoly, approved a joint venture proposal from NECTEC to commercialize the Internet.

In February 1995, Internet Thailand Co Ltd was established as a state joint venture between CAT, TOT, and the National Science and Technology Development Agency

(NSTDA), a parent agency of NECTEC, with CAT and TOT holding 33 percent each of the total shares and NSTDA 34 percent. Internet Thailand Service Center (ITSC)

(http://www.inet.co.th/) received an operating license from CAT and started operating as the first commercial Internet Service Provider (ISP) in March 1995 (Thaweesak, 2001).

8 As of mid-2001, the establishment of the NTC was yet to be finalized due to disagreement between the Senate and the NTC selection committee on the selection procedure of the NTC members.

115 Even though Internet Thailand is officially regarded as the first commercial

ISP in Thailand, some industry insiders consider Internet KSC Thailand to be the first true commercial ISP pioneer. Internet KSC, founded by Assumption University computer science professor Srisakdi Charmonman, was reported to have been in operation as a commercial Internet provider before Internet Thailand was established, with subscribers mainly concentrated in Assumption University (Zellerbach, personal communication, September 9, 1998; Cooper, personal communication, July 10, 1998).

Three months after the establishment of Internet Thailand, CAT began allowing private sector organizations to operate as ISPs and issued the second license to Internet KSC in

June 1995. Internet KSC, or KSC Comnet, as it was known at the time,

(http://www.ksc.net.th/) was a joint venture of Assumption University, Thai Sugar

Group, and Ban Chang Group (now replaced by Jasmine International). There is a significant difference between the conditions under which Internet Thailand and Internet

KSC were issued licenses. That is, while Internet Thailand had a real 33 percent investment capital from CAT, Internet KSC had to hand over 32 percent of its share to

CAT without receiving real investment and in effect had to accept CAT as an automatic joint venture partner. This free 32-percent stake handout to CAT was a licensing condition imposed on Internet KSC and all other ISPs to come. The ramifications of these conditions are discussed in length in Chapter 5.

In August 1995, CAT granted another license to LoxInfo, a joint venture of three private firms (Loxley Information, Wattachak Group, and Advanced Research Group)

(Thaweesak, 2001). These first three ISPs became the largest and the most sustainable

116 commercial ISPs in the country, being among a minority of ISPs posting operating

profits in 1999 and 2000 (Srisamorn & Soonruth, February 4, 2000). At the end of 1996,

more than ten ISP licenses had been awarded but only five were in operation, including

Internet Thailand, Internet KSC, LoxInfo, Samart Cybernet, and Thaksin Cybernet

(Bangkok Post Database, July 3, 1996).

The state-initiated commercialization of the Internet was expected to stimulate

Internet growth in Thailand. In late 1994, the Internet Society ranked Thailand Number

Six in Internet growth in the Asia-Pacific region after Australia, Japan, Taiwan, Korea

and New Zealand and slightly ahead of Singapore and Hong Kong. However, less than a

year later, with SingNet promoting Internet use in the business sector, Singapore quickly

surpassed Thailand and has stayed ahead ever since (Thaweesak, 1995). According to the

Internet Software Consortium’s top-level Internet domain survey, by July 1995 Thailand

had 2,481 hosts and 94 active domains, compared with 8,208 hosts and 114 domains in

Singapore, and 1,087 hosts and 85 domains in Malaysia (http://www.isc.org/ds/WWW-

9507/dist-bynum.html). Similarly, the January 1996 ISC host count revealed that

Thailand was beginning to lag behind Malaysia as well, while Singapore was leaping

ahead at an exponential speed: 22,769 hosts and 276 domains in Singapore; 4,194 and

245 in Malaysia; and 4055 and 130 in Thailand (http://www.isc.org/ds/WWW-9601/dist-

bynum.html).

Despite the seemingly slow growth compared to the two neighboring countries,

from the perspective of Thailand’s Internet and IT think tanks, NECTEC and the National

Information Technology Committee (NITC), IT development in Thailand was "perfectly

117 on course" and growth was deemed considerable (Waltham, June 24, 1996).

According to the Bangkok Post, the Thai IT industry was surging toward 23 percent growth in 1996 (Borisuthitoun & Waltham, 1996). Several ISPs began providing services in large provinces outside Bangkok. Internet Thailand, Internet KSC and

Loxinfo expanded services to Pattaya and Songkla (Had Yai) in Southern Thailand and joined Samart Cybernet in Chiangmai, the largest city in the North (Bangkok Post

Database, July 3, 1996). Figure 4.1 shows Internet connectivity in Thailand in 1996.

The early growth projection proved to be optimistic. The Thai IT industry registered growth only at 11 percent, instead of the 23 percent forecast in 1996. The beginning of economic slowdown and political uncertainty in 1995 and 1996, and slow private investment in particular, took the blame for lower than expected growth. Personal computer sales were not satisfactory. PC sales were at the level of some 300,000 units—

50,000 units fewer than projected for 1996. In terms of Internet users, the 1996 figures indicated an increase in commercial Internet subscriptions—40,000 from 10,000 in 1995

(Waltham & Daraneyavaja, December 1996).

118

Figure 4.1. Internet Connectivities in Thailand in December 1996

Note. From Internet Information Research Center, NECTEC. Retrieved January 5, 2001 from the World Wide Web: http://ntl.nectec.or.th/internet/map/1996/19961227.gif.

119 IT 2000 Plan and NII development policy

Like most other countries, as new communications technologies emerged and the new Internet-driven information networks became accepted as the path to a prosperous future, Thailand realized the potential of new information technology (IT). In 1995, it launched the first national IT policy through a white paper, entitled IT 2000 Social Equity

& Prosperity: Thailand IT Policy Into the 21st Century, which came to be known as the

IT 2000 Plan. The IT 2000 Plan aimed to capture the full potential of new information technologies and envisioned a well-educated population, a more balanced social and economic equity, and a new direction from which to build economic strength and social harmony.

In short, Thailand aspired to achieve the status of an “information society” (NITC,

1995a). The IT 2000 Plan consisted of three pillars: (1) better telecommunications infrastructure, (2) human resources development, and (3) good governance (NITC,

1995a). Two relatively new but important agencies under the guidance of the National

Science and Technology Development Agency (NSTDA) within the Ministry of Science,

Technology and Environment (MOSTE) were then charged with carrying out projects aimed to promote IT development.

National Electronics and Computer Technology Center (NECTEC)

The NECTEC was established in 1987 to promote the development and competitiveness of Thailand’s electronics and computer as well as IT industries through research and development (R&D) programs and R&D funding services to universities.

By 1999, it operated 12 laboratories, two service units, and two subsidiary companies

120 (Internet Thailand and Trade Siam). NECTEC’s laboratories are specialized in several technologies, including telecommunications, networking, software, linguistics and knowledge science, automatic systems, electro-optics and microelectronics. The center was assigned an additional responsibility in 1992, IT policy planning, in its new role as the National Information Technology Committee’s secretariat (Thaweesak, 1999;

NECTEC, June 25, 1998).

National Information Technology Committee (NITC)

The NITC was established in 1992 to oversee the policy aspects of IT development and deployment in Thailand. The committee’s responsibilities were wide ranging, from providing policy recommendations and devising development plans in human resources and IT development, telecommunications infrastructure development, and regulatory and legal amendments, to IT promotion, R&D services, and providing solutions for problems in the national IT development (NITC, 2001). The NITC steers various IT developments through various subcommittees. The number of NITC subcommittees grew from eight in 1995 to 20 in early 2001, seven of which involved development of IT-related laws (data protections, computer crime, electronic transactions, digital signatures, electronic funds transfer, universal access, and intellectual property) (NITC, 1995b). Other committees concern IT policy planning, human resource development, IT legal infrastructure, IT research and development, IT utilization in the public sector, IT for the disabled and disadvantaged, IT public awareness, electronic data exchange (EDI), later named Thailand EDI Council, and promotion of software and information industry. Among the more recently formed subcommittees are the

121 subcommittees on e-Thailand development, Globe project, and Thailand’s Internet

Policy Taskforce (NITC, October 30, 2000). Members of each subcommittee are representatives from public and private agencies, with representatives from NECTEC appointed as secretary or assistant secretary. (A full list of NITC subcommittee is attached as Appendix C.)

National IT development projects

Responding to the IT 2000 Plan and through the operating units within the

NECTEC, several NITC-initiated national IT projects have been implemented since the mid-1990s. Among the most significant national IT projects implemented as a result of

NITC’s initiatives were SchoolNet, Software Park, Government Information Network

(GINet), Electronic Commerce Development, TradeSiam (Thailand’s National EDI

Service Provider), and IT Law Development (Thaweesak, 1999). More specific details on SchoolNet, GINet and IT law development are discussed in Chapter 6, and the

Software Park project is discussed in Chapter 7.

This chapter has presented a historical perspective on Thai telecommunications regulatory structure and discussed the political and ideological contexts of Thai telecommunications reforms. It has also described the early stages of development of the

Internet in Thailand during the early to mid-1990s. The next chapter examines in greater details the regulatory aspects of the Thai Internet industry. It analyzes the role of state agencies and the tensions between state monopoly and market competition in the late

1990s.

122 CHAPTER 5

REGULATORY ANALYSIS OF THAI INTERNET INDUSTRY

In this chapter, the regulatory implications for Internet development in Thailand are explored. The chapter starts with a brief overview of the Thai Internet industry, followed by a discussion of the role state monopoly played in the sluggish growth of the

Internet in the country in the 1990s, and a discussion of the beginnings of growth of the

Thai Internet and the emergence of market competition in 1999 and 2000. Tensions between market competition and state monopoly based on state regulatory control and an international connection monopoly is discussed in the following section. Finally, key industry players are identified and described.

Brief Internet Industry Overview

For most of the 1990s the Internet industry in Thailand was marked by the tight grip of state monopoly, which resulted in a slow access expansion and a lingering development of the commercial sector of the Internet. Although the Internet was commercialized in 1995 (as discussed in Chapter 4), the number of Internet users remained small, especially when compared to neighboring Singapore and Malaysia.

Only towards the year 2000 did the Thai Internet industry begin to experience growth and achieve some semblance of real market competition: access fees dropped; more users got connected; high-speed broadband services emerged; and foreign interests began buying stakes in local Internet Service Providers (ISPs).

As the commercial Internet industry expanded, Internet use in Thailand was estimated to have grown at an average of 50 percent per annum in the late 1990’s (Winn,

123 June 2000). The number of commercial Internet users doubled from 600,000 in 1999

to 1.2 million in 2000, with a count of 2.3 million in March 2001.9 Total commercial

Internet revenue increased from 522 million baht in 1997, to 900 million baht in 1998, a

72% increase over the previous year, and 1.3 billion baht in 1999 an additional 35% increase in 1999 (Sasiwimon, August 4, 1999; Karnjana, September 22, 1999;

Sasiwimon, December 8, 1999; ITU, 2001). Dial-up Internet access charges dropped two-thirds, from an average of 45 baht per hour in 1997 to an average of 15 baht per hour in 2000 (from $1.13 to $0.38 at 40 baht = US$1) (Waltham, February 26, 1996;

Karnjana, 2000)

As access fees fell, more content and services became available, and large businesses began planning e-commerce activities; inroads into e-commerce remained slow for most small and medium enterprises (SMEs)—the backbone of the Thai economy. In 2000, Thai SMEs were still crippled by high costs for connections and lack of knowledge and understanding of e-commerce (Charoen, 2000a). Although leased line charges dropped over the years they were still higher than in those most countries in the region.

9 The International Telecommunications Union (ITU) reported the 2000 figure for Internet users in

Thailand at 1.2 million. The ITU Internet statistics corresponded with those provided by the Internet

Software Consortium (ISC), which were widely used as standard figures. In March 2001, however, the

Internet Information Research Center of the National Electronics and Computer Technology Center in

Thailand reported 2.3 million commercial Internet users, according to the figures from the ISP Club. ISP

Club statistics usually relied on self-reported figures from individual commercial Internet Service Providers

(ISPs), hence the reliability of this 2.3 million figure should be considered with this in mind.

124 Based on the statistics given by the International Telecommunication Union

(ITU), by the end of 2000 there were just about two percent of this 1.2 million of 60.6

million using the Internet, compared to 15 percent in Malaysia, 30 percent in Singapore

and about one percent in Indonesia and the Philippines (see Table 5.1).

Table 5.1

Internet Indicators in Selected Southeast Asian Countries in 2000

GDP Internet hosts Internet users Estimated PCs Total per Country pop capita Total As % of Total As % of Total As % of (mil) (US$) (1000) pop (1000) pop (1000) pop (1999) Indonesia 212.09 675 26,762 0.01 1,450 0.68 2,100 0.99

Malaysia 23.26 3,607 68,248 0.29 3,500 15.05 2,440 10.49

Philippines 75.33 1,030 19,484 0.03 1,000 1.33 1,480 1.96

Singapore 4.02 21,881 175,779 4.38 1,200 29.87 1,941 48.31

Thailand 60.62 2,038 63,447 0.11 1,200 1.98 1,471 2.43

Note. From “Internet Indicators,” by International Telecommunication Union. Retrieved

April 15, 2001 from the World Wide Web:

http://www.itu.int/ti/indutryoverview/at_glance/Internet00.pdf.

As seen in Table 5.1, the number of Internet users, Internet hosts, and personal computers (PCs) are positively correlated with the number of gross domestic products

(GDP) and negatively correlated with the size of the population. The richest but smallest country of the group, Singapore, had the highest diffusion rates of PCs (48%) and

125 Internet usage (30%), whereas the poorest and largest country, Indonesia, had the lowest diffusion rates of PCs (1%) and Internet usage (0.68%). Thailand, a middle- income and a medium-size country, did not do as well as Malaysia, which was just about one-third the size and almost twice richer. The PC penetration rate was at least four times and the Internet usage rate over seven times higher in Malaysia than in Thailand in

2000.

Somkiat Tangkitvanich and Duenden Nikomborirak (June 1997), researchers at

Thailand Development Research Institute (TDRI), observed that Thai Internet development lagged at least one to two years behind that of Singapore and Malaysia where Internet took off in the mid-1990s. This observation is validated by the host count statistics which indicate that the 1998 host count of 20,527 under Thailand’s top-level domain .th was comparable to those of Malaysia in 1996 (25,200) and Singapore in 1995

(22,769). (See Table 5.2.) However, towards the end of the decade, as Malaysian

Internet hosts grew steadily and Singaporean hosts skyrocketed, Thai Internet hosts finally took off and began to grow at a faster rate than those in Malaysia. The host count for Thailand doubled from 20,527 in 1998 to 40,176 in 1999. By the end of 2000, the number of Thai Internet hosts was very close to that of Malaysia, both above the 60,000 level.

126 Table 5.2

Internet Host Counts by Top-Level Domain Names in Selected Southeast Asian

Countries (1994-2000)

Year Indonesia Malaysia Philippines Singapore Thailand (.id) (.my) (.ph) (.sg) (.th) 1994 177 1606 334 5252 1728 1995 2351 4194 1771 22769 4055 1996 9591 25200 3628 28892 9245 1997 9603 32269 4313 57605 14378 1998 15448 47852 9204 67060 20527 1999 21052 59012 12394 148247 40176 2000 26727 68248 19448 175799 63447

Note. From “Internet Domain Survey,” by Internet Software Consortium. Retrieved April

10, 2001 from the World Wide Web: http://www.isc.org/ds/.

As shown in Figure 5.1, it is clear that among the five countries, growth of

Internet hosts in Singapore was substantial, three times larger than that of Malaysia and

Thailand by the end of 2000. At the same time, growth of Internet hosts was slow in

Indonesia and Philippines where the 2000 figures for Internet hosts remained where those of Thailand, Malaysia and Singapore were two to five years earlier.

127

200000 180000 160000 140000 Indonesia 120000 Malaysia 100000 Philippines 80000 Singapore Thailand 60000 40000 20000 0 1994 1995 1996 1997 1998 1999 2000

Figure 5.1. Growth of Internet Hosts by Top-Level Domain Names in Selected Southeast

Asian Countries (1994-2000)

To give a helpful list of references to understanding the Thai Internet industry in the

1990’s and the early 2000’s, the main characteristics of the industry can be roughly summarized as follows:

• Thai Internet industry was regulated through a state regulating and operating

agency, the Communication Authority of Thailand (CAT), which issued ISP

licenses and had a monopoly as a wholesaler of Internet international

connections.

• In May 2001, there were 18 Internet Service Providers (ISPs) providing

Internet access and services to individual and corporate customers.

• There were two domestic Internet exchanges provided by state agencies,

namely the National Internet Exchange (NIX) by CAT and the Internet

128 Information Research Exchange (IIR10) by the Internet policy and

planning agency, the National Electronics and Computer Center (NECTEC).

• There was only one international Internet gateway (IIG) provided by CAT.

All commercial ISPs were required by CAT to connect to the global Internet

network through the IIG.

• There were four non-commercial Internet hubs provided by NECTEC, which

served mostly educational and research communities, including PubNet,

ThaiSarn, SchoolNet, and UniNet.

• International mega-carriers such as Teleglobe, Global One, Concert, AT&T,

and Thailand’s own ThaiCom satellites, provided optical fiber and satellite

links between local ISPs and global Internet networks.

Figure 5.2 depicts Thai Internet connectivities around NECTEC’s Internet Information

Research (IIR) exchange and CAT’s National Internet Exchange (NIX), and

CAT’s International Internet Gateway (IIG). Thailand’s Internet connectivities map is maintained and regularly updated by the Internet Information Research Center of

NECTEC and is available for viewing at http://ntl.nectec.or.th/internet/map/current.html.

10 IIR was formerly known as PIE (Public Internet Exchange).

129

Figure 5.2. Internet Connectivities in Thailand (May 2001)

Note. From Internet Information Research Center, NECTEC. Retrieved May 7, 2001 from the World Wide Web: http://ntl.nectec.or.th/internet/map/current.html.

130 State Monopoly and Sluggish Internet Expansion in the 1990s

The majority of the persons interviewed in late 1998 agreed that Internet

development in Thailand had been slow, especially in comparison with its neighbors

Malaysia and Singapore. A lack of a governmental long-term vision, absence of well-

defined national policy strategy and direction, and, in particular, monopolistic restrictions

imposed by CAT, were cited as the most serious impediments to rapid Internet growth in

the country. A restrictive regulatory environment and lack of a well-defined policy

became industry concerns since the emergence of commercial Internet in the mid-1990s.

In 1996, industry executives expressed dissatisfaction with the “hands-off” approach of

the Thai government in national information technology (IT) development. By that time,

the complaints already made up a long list: the government’s lack of vision, guidance and

focus in IT planning and policy; and, more pointedly, the lack of cohesive IT standards

for both short- and long-term IT strategy and a shortage of IT human resources (Bangkok

Post Database, December 1996).

Pichet Durongkaveroj (personal communication, July 30, 1998), former Director

of the National Information Technology Committee (NITC) and later Director of the

Electronic Commerce Research Center (ECRC), agreed that the Internet penetration in the country was slow. However, Pichet elaborated that it was hard to evaluate growth of

Thai Internet because Thailand “never had a clear goal,” unlike Malaysia, Singapore and

Taiwan. Meanwhile, the executives of some major ISPs felt that the Thai government lacked understanding of the Internet business, which further resulted in lack of clear and effective national policy direction (Trin, personal communication, August 27, 1998;

131 Vivatvong, personal communication, July 7, 1998). Along the same line, the

executives of the Internet policy think-tanks (NITC and NECTEC) pointed to the lack of

government commitment to providing resources necessary to policy development and

implementation (Pichet, personal communication, July 30, 1998) and to technology

development (Thaweesak, personal communication, August 24, 1998). Thaweesak

Koanantakool, Director of NECTEC, gave an example of the lack of commitment of

Thailand’s leadership to building infrastructure at an early stage. Whereas Malaysia and

Singapore had at least two E3 (90 Mbps) lines in 1998, he said Thailand had much

smaller capacity. By late 1998, Thailand’s international bandwidth was still at under 40

Mbps level and only reached the 50 Mbps level in early 1999.

Criticisms by most industry participants of the slow growth of Thai Internet were

targeted at CAT, the state Internet regulator. Many industry experts and members of the

commercial sector argued that CAT monopoly presented a serious barrier to entry, caused

market distortions, and deterred foreign investment. CAT required all ISPs to have an international link through its International Internet Gateway (IIG) and prohibited ISPs from reselling bandwidth. As a result, it allowed no competition in Thailand’s relatively high-priced leased-line market. The high costs of leased lines and CAT’s 32-percent free equity-holding condition11 imposed on each ISP had been cited as reasons for high

Internet pricing which further limited Internet growth in Thailand. Implications of

CAT’s regulations on Thai Internet development are discussed next in greater details.

11 The “32-percent free equity holding condition” is the condition in which each ISP is required to

offer 32 percent of the company equity to CAT free of charge.

132 Implications of CAT’s monopoly for Thai Internet growth

In late 1998, when most interviews were conducted, criticisms concerning CAT’s control and restrictions in the Internet industry consistently ran through virtually all interviewees’ analyses of Thai Internet, particularly by those who were industry experts, policymakers, and ISP executives. Presidents of two major ISPs, Internet Thailand and

Loxinfo, cited CAT’s monopoly of international half-circuit connections, as the cause of overpriced leased-line connections in Thailand (Trin, personal communication, August

27, 1998; Vivatvong, personal communication, July 7, 1998). From the perspective of

ISPs, which were required to lease international half-circuits from CAT, the fact that

CAT did not buy international connection at bulk rates, (i.e., buying in large volume) caused Thai ISPs to pay higher access charges for international leased lines. Also, unlike in Malaysia and Singapore where the government subsidized expansion of access, the

Thai government was deemed to be “unsupportive of the private enterprises” in the

Internet industry (Vivatvong, personal communication, July 7, 1998). The impact of

CAT’s regulatory control and market interventions on the development of the Thai

Internet industry from 1995 to the late 1990s, can be explained in three major aspects: price controls; the 32-percent free equity holding condition; and anti-competitive restrictions.

Price controls

Before competition began to have market impact in 2000, high Internet pricing had been one of the major characteristics of the Internet industry in Thailand. In their research on Internet pricing and competition in Thailand, Somkiat and Deunden (June

133 1997) identified monopoly as one of the two major factors affecting Internet penetration rates in a given country, with the other one being national gross domestic product (GDP). Internet pricing in relation to state monopoly in monopolistic and non- monopolistic Asian markets in 1997 is compared in Table 5.3.

As shown in Table 5.3, Internet pricing in monopolistic markets in general tended to be higher than in competitive markets, Singapore being a slight exception. Internet pricing in Thailand in both dial-up and leased-line markets were clearly higher than those in other Asian countries, particularly in the leased-line market. Even when compared to other monopolistic markets like Indonesia and Taiwan, Thailand’s leased-line rates were still significantly higher, at least three times higher than those in other two countries.

Leased-line rates were substantially more expensive in Thailand than in other competitive

Asian markets: about four times higher than the rates in Malaysia, South Korea, and

Hong Kong, and over three times higher than the rates in Singapore.

134 Table 5.3

Internet Pricing and Monopoly in Selected Asian Countries in 1997

(Unit = USDa)

Country Dial-up (20 hrs) Leased Lines (64 Kbps) Monopoly Set-up charge Monthly rate Set-up charge Monthly rate Thailand 11.54 33.65 3,076.92 3,205.13 Yes Indonesia 22.59 25.75 821.36 1,232.03 Yes Taiwan 3.60 22.12 107.91 953.24 Yes Malaysia 22.82 12.30 595.24 892.86 No South Korea 11.20 22.40 111.98 667.97 No Hong Kong 12.32 19.78 251.94 695.95 No Singapore 9.26 17.35 300.93 1,018.52 No

Note. an = Calculated at exchange rate 25 baht = 1 USD. Dial-up monthly rate calculated based on 20 hours. From “Raignan pon karn wichai ruang sapap karn kaeng-kan lae raka ka borikarn internet nai prathet thai [Research Report: Competition and Pricing of the

Internet in Thailand]” (Tables 1 and 3), by Somkiat Tangkitvanich and Duenden

Nikomborirak, 1997, June, Bangkok: TDRI. Retrieved January 13, 2001 from the World

Wide Web: http://www.info.tdri.or.th/report.doc.

Table 5.4 compares Internet pricing in dial-up and leased-line markets among the same seven Asian countries using Thailand as the pricing index. The individual dial-up monthly subscription rate in Thailand was higher than that in Indonesia by 23.5 percent,

Taiwan by 34.3 percent, Singapore by 48.4 percent, and Malaysia by 63.4 percent.

Average Thailand’s leased-line monthly fee was higher than in neighboring countries, by

62-79 percent.

135 Table 5.4

Comparison of Internet Pricing among Selected Asian Countries in 1997

(Thailand’s Price Index = 100)

Monthly Leased Lines Monthly Dial-up Country (64 Kbps) Monopoly Price Index Difference Price Index Difference (%) (%) Thailand 100 0.0 100 0.0 Yes Indonesia 76.5 23.5 38.4 61.6 Yes Taiwan 65.7 34.3 29.7 70.3 Yes Malaysia 36.6 63.4 27.9 72.1 No South Korea 66.5 33.5 20.8 79.2 No Hong Kong 58.8 41.2 20.6 79.4 No Singapore 51.6 48.4 31.8 68.2 No

Note. From “Raignan pon karn wichai ruang sapap karn kaeng-kan lae raka ka borikarn internet nai prathet thai [Research Report: Competition and Pricing of the Internet in

Thailand]” (Tables 1 and 4), by Somkiat Tangkitvanich and Duenden Nikomborirak,

1997, June, Bangkok: TDRI. Retrieved January 13, 2001 from the World Wide Web: http://www.info.tdri.or.th/report.doc.

It is curious that Thai Internet pricing was much higher than in other countries in the region, even in monopolistic markets like Indonesia and Taiwan. Although monopoly was a factor in higher Internet pricing, there were other factors at work in the case of

Thailand. Somkiat and Deunden (June 1997) suggested that, in addition to monopoly, extensive market interventions by CAT were responsible for artificially high Internet pricing in Thailand. According to Somkiat and Deunden, CAT’s market interventions were evident in three aspects:

136 1 CAT’s monopoly in and overcharging for international half-circuit

connection;

2. CAT’s pricing intervention by setting “median” pricing and maximum charges

for ISPs for their individual and corporate users, where the lowest charges

could be no more than 40 percent of the set median pricing; and

3. CAT’s arbitrary condition of 32-percent free equity holding and reserved right

to interfere in ISP management’s decision making12 (Somkiat & Deunden,

June 1997, p. 8).

The prices for Thai leased lines demonstrated in Table 5.3 above were the prices

already “discounted” to ISPs by CAT, after it yielded to government pressure to cut down

domestic half-circuit prices by 25 percent in March 1997 from 120,000 baht to 90,000

baht per month ($4,800 to $3,600 at exchange rate 25 baht = 1 USD) for a 64Kbps

domestic leased line. The March 1997 “discount” caused domestic leased lines to be

cheaper than international half-circuits (Trin, personal communication, August 27, 1998).

Once CAT announced the 25-percent price break, there remained some

uncertainties. First, CAT did not release any official new price list and there were press

reports on ISPs’ complaints about the discount not being honored.13 Second, the newly

discounted price list gave a higher discount percentage to lower speed connections with

proportionally much lower percentage of discount to higher speed connections, serving as

12 In practice ISPs’ executives reported that CAT did not use its reserved right to interfere in ISPs’ management decisions.

13 “ISPs complain CAT not giving discount for leased circuit,” Prachachart Thurakij, June 2-4,

1997, p. 22, as cited in Somkiat & Deunden, 1997, p. 8.

137 a disincentive for ISPs to expand their network capacity. Third, CAT did not give any commit to continuing the discount for any specific period. Nor did it reveal any discount formula or rationale. So it was unclear if or how CAT’s leasing rates were related to its purchased prices (Somkiat & Deunden, June 1997).

Trin Tansetti, President of Internet Thailand, explained the history of CAT’s idiosyncratic pricing structure for leased lines. CAT’s leased-line pricing pattern, which dissuaded ISPs from buying higher speed connection, went back to the beginning of

Internet commercialization in Thailand. That is, after Internet Thailand was established in 1995, it needed 512Kbps connections. In order to prevent congestion at the 512Kbps connection speed, an artificially high price was set for the 512Kbps leased lines.

However, Internet bandwidth increased and the initial pricing standard adopted by CAT

(to avoid congestion at 512Kbps) became no longer necessary. Still, CAT continued to use the same pricing scheme to set tariffs without adjustment despite frequent comments and suggestions (Trin, personal communication, August 27, 1998).

The idiosyncratic pricing system imposed by CAT was interpreted by the industry as either a lack of understanding of network technology or its unwillingness to encourage

ISPs’ network expansion. Table 5.5 below shows CAT’s March 1997 discounted price list for corporate users. As seen on the price list, the 1997 median pricing for the

512Kbps lines remained disproportionately high, at $25,000 compared to $9,000 for

256Kbps lines (180 percent higher than the price of the 256Kbps lines).

By late 1998, CAT cancelled its minimum pricing (up to 40 percent of the set median price) but retained the maximum ceiling. Somkiat (personal communication,

138 August 24, 1998), an Internet industry expert at TDRI, questioned whether CAT’s

Internet price controls through median pricing induced price collusion among ISPs.

Table 5.5.

CAT Median Pricing for Corporate Users (Effective March 1997)

Traffic Extra Maximum Service Start-up Monthly Monthly Connectivity allowed Traffic Chargesb (bps) (US$)a (US$) (Thai Bt) (MB) ($/MB) (US$) UUCP Dial-up 144 144 3,600 40hrs 3/hr n/a IP 9.6K Leased Line 540 540 13,500 1,300 0.40 720 IP 14.4K Leased Line 720 720 18,000 1,900 0.40 900 IP 19.2K Leased Line 900 900 22,500 2,500 0.40 1,800 IP 28.8-63.9K Leased Line 1,800 1,800 45,000 3,700 0.40 3,600 IP 64K Leased Line 3,600 3,600 90,000 8,400 0.40 6,300 IP 128K Leased Line 6,300 6,300 157,500 16,600 0.40 9,000 IP 256K Leased Line 9,000 9,000 225,000 33,200 0.40 25,200 IP 512K Leased Line 25,200 25,200 630,000 66,400 0.40 75,600 IP 513K-2M Leased Line 75,600 75,600 1,890,000 265,400 0.40 151,200

Note. an = Calculated at exchange rate 25 baht = 1 USD. bn = The lowest charges can be

no more than 40 percent lower than the median pricing. From “Raignan pon karn wichai

ruang sapap karn kaeng-kan lae raka ka borikarn internet nai prathet thai [Research

Report: Competition and Pricing of the Internet in Thailand]” (Table 6), by Somkiat

Tangkitvanich and Duenden Nikomborirak, 1997, June, Bangkok: TDRI, as cited in

Palasri, Huter & Wenzel, 1999, p. 39.

Somkiat argued that the announced pricing, especially with the set minimum

pricing, revealed the bottom-line prices to all ISPs, hence creating a possibility for tacit

collusion in terms of maximum ceiling. A tally of subscription and access charges by

ISPs following CAT’s March 1997 median pricing announcement, revealed that most

ISPs set their rates according to CAT’s median prices—900 baht for 20 hours of graphic

139 dial-up service14 and 40 baht/hour for each extra hour, and 90,000 baht for 64Kbps

leased line.

Table 5.6 shows monthly subscription rates in 1997 for individual dial-up and leased line users. As seen in Table 5.6, major ISPs such as Internet Thailand, Loxinfo, and KSC Internet set their individual dial-up monthly rates at 800-900 baht per 20 hours.

The two ISPs charging less than 800 baht per 20 hours were A-Net and Asia Infonet, both newcomers. For the 64Kbps leased-line service, five out of eleven ISPs including

Internet Thailand, the largest provider in the corporate user market, charged the 90,000 baht median pricing. Loxinfo and Siam Global Access charged 70,000 and 76,500 baht per month respectively, whereas Asia Infonet charged 54,000 baht, the lowest rate allowed by CAT.

Therefore, it may be concluded that CAT’s price controls through median pricing had at least some impact on how Thai commercial ISPs set their rates. Yet, the evidence that a few ISPs, particularly smaller and newer players, set their rates lower than the suggested median prices, suggests that commercial Internet in Thailand was beginning to move towards more competition.

14 600 baht for 20 hours per month text dial-up service ($14.4 at 25 baht = 1 USD), and 25 baht

per hour ($1.2) for each extra hour.

140 Table 5.6

Monthly Individual and Leased-Line Rates by Thai ISPs in 1997

Individual Service Leased Line Service ISP a Monthly - 20 hrs Hourly Rate (64Kbps) (Baht) (Baht) A-Net 749 37.50 90,000 Asia Access 799 39.95 n/a Asia Infonet 600/300 for student 30.00/15.00 54,000 Idea Net 800 40.00 80,000 Line Thai 900 45.00 90,000 Info News 600 (10 hrs) 60.00 90,000 Internet Thailand 900 45.00 90,000 LoxInfo 900 45.00 70,000 KSC Internet 800 40.00 90,000 Siam Global Access 800 40.00 90,000 Samart Cybernet 800 40.00 90,000

Note. an = Calculated from the monthly rate. From “Raignan pon karn wichai ruang sapap karn kaeng-kan lae raka ka borikarn internet nai prathet thai [Research Report:

Competition and Pricing of the Internet in Thailand]” (Table 6), by Somkiat

Tangkitvanich and Duenden Nikomborirak, 1997, June, Bangkok: TDRI. Retrieved

January 13, 2001 from the World Wide Web: http://www.info.tdri.or.th/report.doc.

32-percent free equity holding condition

Under CAT’s rules, all ISPs were required to be a joint venture with CAT as a

condition of gaining an operating license. Additionally, in exchange for a revenue-

sharing concession which was a common condition for built-transfer-operate (BTO)

concessions CAT customarily awarded to private telecom operators, each ISP must set

aside 32 percent of its joint venture equity for CAT free of charge and three percent for

CAT’s employees to purchase at par value. These disincentives for ISPs were further

141 exacerbated by another law, the Public-Private Joint Venture Act, which required cabinet approval for any government-business joint-venture investment over 5 million baht, which led to presenting bureaucratic delays when the joint venture wanted to increase investment capital. These initial capital limits prevented most ISPs from increasing their capital, which was almost uniformly pegged at 15 million baht upon being granted license (Thaweesak, June 24, 1996; Winn, June 2000).

Somkiat and Deunden (June 1997) argued that CAT’s 32-percent free equity holding condition pushed Internet access costs in Thailand up by 20 percent, which ISPs passed along to their consumers. With one-third of their equity being allocated to CAT without real investment, ISPs were forced to set a higher goal for profit than would be required had the free equity holding condition not been imposed. Somkiat and Deunden demonstrated the impact on ISP pricing under the free equity holding condition using the following formula:

______

P = Prices of Internet services without CAT’s free shares P’ = Prices of Internet services with CAT’s free shares C = Real operational cost of an ISP X = Expected returns projected by an ISP

ISP’s operation without CAT’s free shareholding condition can be expressed as P-C = X (1)

With CAT’s 1/3 free shares, an ISP maintains its projected returns by setting a new price (P’) with the new pricing adjustment expressed as 2/3 (P’-C) = X (2) (1) = (2) results in 3 P = 2P’+C (3)

Assuming X = expected profit, in a normal, no free shareholding, condition (P-C)/C+X (4)

142 or C = P/(1+X) (5)

Use (5) in (3) 3 P = 2P’ + P/(1+X) (6) or P’/P = (2+3X)/(2+2X) (7)

From (7), if denotative values of X = 0.2 and 0.3 (expected profit at 20 and 30 percent), CAT’s free equity holding in an ISP increases an ISP’s operating costs by 8-20 percent over the real operating costs. ______

It is assumed that the increased operating costs were passed on to consumers in higher

service charges. In addition, a TDRI research specialist Deunden (in Srisamorn &

Soonruth, February 4, 2000) believed that the 32-percent free equity holding condition

discouraged ISPs from revealing true revenue figures. Deunden speculated that ISPs

siphoned money from their revenues to evade delivery of profits to CAT.

Anti-competitive restrictions

Besides price distortions and free equity-holding licensing conditions, regulatory

restrictions imposed by CAT were largely anti-competitive. Industry leaders,

researchers, policy experts and the press viewed CAT’s restrictive regulations as a thinly

disguised effort to protect its monopoly. Central to CAT’s hold on the Internet industry were its regulatory role as the licensing authority of Internet services and its operating monopoly in international voice communication. CAT was not shy about protecting its turf. In 1998, it threatened a lawsuit against a major ISP, Loxinfo, over the company’s plan to provide Internet telephony services. The move effectively halted other ISPs’ plans to do the same.

143 In its warning to Loxinfo, CAT cited the ISP joint venture contract, which

specifically stated that the ISP could not break CAT’s monopoly in other areas of

international communication. The contract also specified that communication via

Internet must be in text mode only (Srisamorn, August 26, 1998). In May 2001, despite

unofficial use of foreign services such as Net2Phone and Dialpad.com, Internet telephony

remained illegal. These services provided extremely low-cost PC-to-PC and PC-to-

phone, (e.g., one baht per minute to or from the U.S., as opposed to CAT’s regular

telephone rates of 30 baht per minute or more). CAT’s executives were open about the

reason behind the agency’s fierce protection of Internet telephony: CAT intended to

reserve the Internet telephony service for itself since it was considered a potentially

significant source of revenue.

In 1999, CAT began providing an international calling service on voice over

Internet Protocol (VoIP), called PhoneNet. Through PhoneNet CAT gained about four to

five million baht per month and began to rack up more revenue from the service in 2000

(Kanchana & Suphaphan, August 25, 2000). CAT’s PhoneNet rates were set at about

half of its regular international phone rates, for instance 18 baht ($0.45 at 40 baht =

1USD) to the U.S. and Canada, 20 baht ($0.50) to Australia and New Zealand, 22 baht

($0.55) to Singapore and Japan, 26 baht ($0.65) to China, 28 baht ($0.70) to Western

Europe, and ($0.98) to Argentina.15 These Internet-based international long distance rates were still substantially higher than those offered, for instance, by Singapore’s

SingTel at 5 cents to New York (Gunawardana, Withers & Tangkitvanich, 2000).

15 For up-to-date CAT’s PhoneNet rates, see http://www.cat.net.th/rate_phonenet_singtel.html.

144 In 2000, CAT got into a dispute with TOT over the TOT plan to lease its IP

(Internet Protocol) network to ISPs. CAT heavily opposed the move, citing it as a

violation of its ISP licensing authority and exclusive bandwidth reselling rights. The two

state-authority dispute was brought for arbitration to the Ministry of Transport and

Communications, the top industry regulator. The CAT vs. TOT dispute is discussed in

further detail in a later section of this chapter.

All in all, under CAT’s tight regulations during the early period of

commercialization, from 1995 to the late 1990s, the Thai Internet grew slowly, due to

high pricing in both dial-up and leased-line markets. The 32-percent free equity holding

condition imposed by CAT was argued to have distorted the commercial market by

raising access prices and hampering the industry growth as a whole. CAT’s behavior as

the state regulator can be described as protective and predatory to market competition.

CAT exercised its regulatory control and protected its monopoly in international

connection with strong force. The next section discusses Internet growth in 1999 and

2000 and the emergence of commercial competition in the Thai Internet industry.

Beginning of Thai Internet Growth and Emergence of Competition in 1999-2000

Expansion of international bandwidth began very slowly, from 64 Kbps in 1993 to 2 Mbps in 1995 to 32.5 Mbps by the end of 1997. Thailand’s international bandwidth connection to global Internet only began to grow in 1999, doubling from 50 Mbps to 100

Mbps within the year, and to 407 Mbps in March 2001 (NECTEC, 1999, p. 8, Table 1;

IIRC, 2001). Domestic bandwidth also saw a dramatic increase towards the year 2000, from 336 Mbps in 1999 to 682 Mbps in March 2001. Accordingly, the data volume

145 within the country rose almost 200 percent during the same period. At the primary domestic Internet exchanges, NECTEC’s IIR, the daily data volume grew from 6.1 Mbps in 1999 to 17.6 Mbps in 2000 and jumped to 49.6 Mbps in January 2001 (Thaweesak,

2001; IIRC, 2001). Rapid growth of Internet hosts in Thailand during 1999 and 2000 can be explained by several developments in the same period.

Factors favoring Internet growth in 1999 and 2000

Establishment of the second domestic Internet exchange by NECTEC

Established in late 1997, the Public Internet Exchange (PIE) provided an alternative to CAT’s National Internet Exchange (NIX), which was unable to handle the large number of ISPs because of its limited capacity, under 20 Mbps in late 1997 to early

1998 (see Table 5.7). In fact, in line with CAT’s monopolistic regulations, no other entities, public or private, were allowed to provide network services to commercial ISPs, and the right to provide international telecommunications connection was reserved solely for CAT. With enthusiastic cooperation from ISPs, NECTEC exploited a legal loophole by making itself a “subscriber” of all ISPs, allowing all ISPs to connect domestically to

PIE “free of charge” under a research contract, instead of ISPs being subscribers to

NECTEC’s PIE, which was prohibited by law. Because charging for services outside

CAT’s provision would violate CAT’s monopolistic rights, ISPs shared the costs for routers connected to the backbone of PIE, which later became known as the Internet

Information Research (IIR) exchange (Thaweesak, personal communication, August 24,

1998). As shown in Table 5.7, NECTEC’s IIR domestic exchange increasingly became the more dominant domestic exchange over CAT’s NIX soon after its inception in late

146 1997. By mid-2000, the IIR had become the de facto domestic Internet exchange of

Thailand, with NIX carrying less than five percent of domestic data traffic.

Table 5.7

Growth of International and Domestic Bandwidth of Internet in Thailand (September

1992-March 2001)

Total International Total Domestic Exchange Bandwidth

Year/Month Bandwidth (Mbps) (Mbps)

To Thailand From Thailand To IIR To NIX To IIR + NIX

2001/03 526.625 407.375 657.125 25.188 682.313 2000/12 267.5 170.062 587.375 25.187 612.563 2000/09 228.25 161.25 558.5 25.187 583.688 2000/06 203.75 153.75 469.5 20.437 489.938 2000/03 199.25 153.25 346 116.687 462.688 1999/12 118.25 66.25 250.125 116.187 366.313 1999/09 81.5 61.5 238.125 109.437 347.563 1999/06 62.875 50.875 230.125 109.437 339.563 1999/03 50.25 46.25 227.375 109.437 336.813 1998/12 37 37 227.25 108.562 335.813 1998/09 35.625 35.625 226.375 108.562 334.938 1998/06 29.875 29.875 224.375 108.562 332.938 1998/03 34.25 34.25 222.125 15.062 237.188 1997/12 32.5 32.5 211 12.562 223.563 1997/09 22.9375 22.9375 n/a n/a n/a 1996/12 10.25 10.25 n/a n/a n/a 1995/09 4.77 4.77 n/a n/a n/a 1995/08 2.5625 2.5625 n/a n/a n/a 1993/06 00.13 00.13 n/a n/a n/a 1992/09 00.01 00.01 n/a n/a n/a

Note. From Internet Information Resource Center, NECTEC. Retrieved April 9, 2001 from the World Wide Web: http://ntl.nectec.or.th/internet/int-bandwidth.html.

147 The total domestic bandwidth of IIR doubled within the year 2000, from a 300Mbps level in the beginning of the year to a near 600Mbps level by the end of the year. IIR served the needs of Thai ISPs for increasingly larger bandwidth, since CAT was unable or unwilling to do so. By March 2001, CAT’s domestic Internet exchange, NIX, had an insignificant four percent (25Mpbs) of Thailand’s domestic bandwidth, with the rest

(657Mbps) belonging to NECTEC’s IIR.

Economic rebound

After the economic crash in late 1997, the Thai economy was finally on the way to recovery in 1999. In 1998, some major IT projects, particularly those by the government, had either halted or experienced reduced funding. The IT market was in a slump. In 1997, Thailand’s IT market registered a total revenue of 42.6 million baht, which dropped to a mere 25.9 million baht in 1998, a 39 percent drop. The market recovered with 35.1 million baht total revenue in 1999, and 40.4 million baht in 2000, increases of 35 and 15 percent over the previous year respectively. The largest increase in 1999 was in the PC and workstation markets (56 percent, from 11.1 million baht in

1998 to 17.4 million baht in 1999), after a major slash of 1998 over the previous year (to

11,132 million baht from 23,503 million baht in 1997 or a 53 percent drop). (See Table

5.8.) Although the 35 percent growth of the IT market in 1999 can be partly attributed to the Y2K conversion (Thaweesak, May 23, 2000), the 15 percent total growth in 2000 was a healthy sign of a rebound, with 19 and 23 percent increases in the PC and workstations category and the packaged software category respectively.

148 Table 5.8

Thai IT Market Growth (1997-2000)

Category 1997 Change 1998 Change 1999 Change 2000a Change Systems 4,093 34% 2,465 -40% 2,704 +10% 2,612 -3% PC & 23,503 +9% 11,132 -53% 17,406 +56% 20,573 +19% Workstations Packaged 6,861 +22% 5,126 -25% 6,289 +23% 7,744 +23% Software 8,200 Services +24% 7,229 -12% 8,739 +21% 9,384 +7%

Total 42,646 +15.6% 25,953 -39% 35,137 +35% 40,413 +15%

Note. an = Estimated. From The Association of Thai Computer Industry (ATCI), The

Association of Thai Software Industry (ATSI), and The Computer Association of

Thailand (CAT-VG), as cited in Thaweesak, May 23, 2000.

Growth in international and domestic bandwidth

The growth of the IT market was also evident in expansion of bandwidth,

both international and domestic. The international “pipe” going out of Thailand to the

global networks grew from a mere 37Mbps in 1998, to 170Mbps by the end of 2000, a

360 % increase in two years. It then doubled within a period of just three months to

407Mbps by March 2001. Table 5.9 shows Thailand’s international and domestic

bandwidth growth from December 1998 to March 2001.

149 Table 5.9

Thailand’s Bandwidth Growth (December 1998-March 2001)

Bandwidth Change Change Change (Mbps) 12/1998 12/1999 12/2000 3/2001

International To Thailand 37 118 +219% 267 +126% 527 +97% From Thailand 37 66 +124% 170 +158% 407 +139%

Domestic At IIR & NIX 336 366 +8% 613 +67% 682 +11% Note. From Internet Information Resource Center, NECTEC. Retrieved April 9, 2001

from the World Wide Web: http://ntl.nectec.or.th/internet/int-bandwidth.html.

Competition and lower Internet access charges

In 1999 and 2000 the Thai Internet industry experienced more competition. The number of ISPs increased from about a dozen in 1997 to 18 in 2000. Internet access charges also came down, both for individual and corporate users. The basic dial-up access rate came down from an average of about 45 baht per hour in 1997 and 1998 to as low as 15 baht in 2000 (US$1.13 to US$0.38 at exchange rate 40 baht = 1 USD). Several

ISPs also offered pre-paid Internet access packages at special rates of 10 baht per hour or lower. In 1999, the first “free” ISP, EZNet, joined the market, targeting students and schools, but the number of subscribers remained small and the quality of service was reportedly lacking (Karnjana, May 12, 1999; Charoen, May 29, 2000).

The TDRI projected Internet expansion in Thailand would reach four to five percent of the population (or 2.8 to 3.2 million) in 2005, depending on economic growth rates, from 2 to 6 percent a year (see Table 5.10). This projection seems rather

150 conservative considering that a conservative count of the number of Internet users had already reached 1.2 million by the end of 2000. (The Thai ISP Club reported number of

2.3 million commercial Internet users in April 2001).

Table 5.10

TDRI Projection of Thailand’s Internet Growth (2000-2005)

Year 2000 2001 2002 2003 2004 2005 Population 62.41 62.91 63.43 63.96 64.49 65.40 (mil) Hypothesis 1: economic growth 2% per annum Hosts 32,547 42,296 55,254 72,570 95,832 127,258 Users 712,769 926,277 1,210,067 1,589,275 2,098,730 2,786,951 Users as % of 1.14 1.47 1.19 2.48 3.25 4.26 pop % Growth - 30.0 30.6 31.3 32.1 32.8 Hypothesis 2: economic growth 4% per annum Hosts 32,547 42,406 55,839 74,342 100,116 136,441 Users 712,769 928,683 1,222,879 1,628,097 2,192,546 2,988,050 Users as % of 1.14 1.48 1.93 2.55 3.40 4.57 pop % Growth - 30.0 31.7 33.1 34.7 36.3 Hypothesis 3: economic growth 6% per annum Hosts 32,547 42,516 56,436 76,199 104,752 146,780 Users 712,769 931,096 1,235,956 1,668,753 2,294,058 3,214,472 Users as % of 1.14 1.48 1.95 2.61 3.56 4.92 pop % Growth - 30.6 32.7 35.0 37.5 40.1

Note. From Thailand Development Research Institute.

Tensions between Market Competition and State Monopoly

Regulatory control and international connection monopoly by CAT

On June 28, 2000, the CAT board of directors approved the cancellation of CAT’s

32% free equity-holding condition, which had been a major source of industry complaint ever since the Internet was commercialized in 1995. This decision came after five years

151 of restriction on Thai ISPs. However, the free equity-holding condition placed upon

ISPs was not resolved because of a disagreement between CAT and the ISPs on the valuation of their shares. ISPs wanted to buy the shares back from CAT at the going book value or bandwidth, but CAT wanted the shares to be valued according to their future growth prospects. In December 2000, CAT was ordered by the cabinet to hire independent legal and financial advisors to prepare a share valuation study (Charoen,

December 6, 2000).

CAT’s explanations for 32-percent free equity holding

CAT publicly defended its position on its website. The agency’s one-third free equity holding policy was not the agency’s idea. According to CAT, the idea was first introduced by Internet KSC when it was seeking a license from CAT. Internet KSC offered a 32% stake as a joint venture partner with CAT (and became Thailand’s second commercial ISP following Internet Thailand and the first to receive a license with the equity-holding condition). CAT then adopted the 32-percent free equity holding model and applied it with all other ISP license seekers. CAT argued that over 50 percent of its earnings went into government coffers to be used for national development. With respect to its high service fees, CAT said it had reduced fees and its charges for Internet access in

Thailand were not more expensive than other countries in Asia. Moreover, the high cost of international circuits made it difficult to reduce service charges, it said. Also, CAT explained that high international traffic increased the fees that local ISPs had to pay to foreign telecommunications carriers (CAT, 2001b).

152 High leased-line costs

Although it is true that dial-up Internet service fees came down to a level comparable to other countries by 2001, leased line costs in Thailand remained high in

2000. A 2000 joint study by the TDRI and the ITU revealed that CAT’s 64Kbps leased line cost US$600 more than those in Singapore, the country with the next most expensive leased lines, i.e., US$1,533 in Thailand per month compared to $910 in Singapore (see

Table 5.11).

Table 5.11

Comparison of Internet Pricing in Selected Asian Countries in 2000

(Unit = USDa)

Country Dial-up (20 hrs) Leased Lines (64 Kbps) Set-up charge Monthly rate Set-up charge Monthly rate Thailand - 12.63 1,621.05 1,533.34 Indonesia 6.16 14.34 n/a n/a Taiwan 6.42 12.84 n/a n/a Malaysia - 10.82 - 519.37 South Korea - 17.29 129.58 736.95 Hong Kong 6.37 17.55 n/a 303.53 Singapore 23.44 3.50 311.03 909.61

Note. an = Calculated at exchange rate 38 baht = 1 USD. From Thailand Development

Research Institute, 2000, as cited in Gunawardana, Withers & Tangkitvanich, 2000, p.10.

CAT’s 2000 international leased line rates were peculiarly set. The rates were different (unequal) in the Thai currency and the US dollar (see Table 5.12.). For instance, while the 64Kbps line costs 74,400 baht per month, the dollar amount set for the

153 same line was US$800, which at the going exchange rate in late 2000 (45 baht = 1

USD) should have been equal to 36,000 baht.

Table 5.12 compares CAT’s 2000 rates for international half-circuits with CAT’s median pricing for leased lines in 1997. Based on monthly charges in the Thai baht, the rates for international half-circuits connecting to CAT’s International Internet Gateway

(IIG) in 2000 were between 17 to 82 percent lower than the 1997 median pricing for the same connection. It should also be noted that CAT seems to have adopted its idiosyncratic pricing scheme as a way to dissuade ISPs from buying higher speed connections. In 1997, the cost for doubling the 256Kbps connection speed to 512Kbps meant a 180 percent increase in connection charges (from 225,000 baht to 630,000 baht per month), and a 200 percent increase for any higher speed up to 2Mbps (from 630,000 baht to 1,890,000 baht per month). The costs for doubling international half-circuit speeds were less prohibitive in 2000, at approximately 40 percent to 80 percent, from

256Kbps to next speed up.

154 Table 5.12

Comparison of CAT’s Median Pricing for Leased Lines in 1997 and CAT’s Rates for

International Half Circuits in 2000

1997 CAT’s Median Pricing 2000 CAT’s Ratesa for Difference for Leased Lines International Half-circuits based on Speed US$ baht rates (bps) b (@25 baht Baht US$ Baht (%) = $1) 64K 3,600 90,000 800 74,400 -17 128K 6,300 157,500 1,250 99,400 -37 192K n/a n/a 1,660 138,800 n/a 256K 9,000 225,000 2,070 162,300 -29 384K n/a n/a 2,760 209,800 n/a 512K 25,200 630,000 3,480 247,700 -60 768K 75,600 1,890,000 4,860 343,200 -82 1,024K 75,600 1,890,000 5,890 405,200 -79 1,544K 75,600 1,890,000 7,480 513,600 -73 2,048K 75,600 1,890,000 9,600 554,000 -71 4 Mbps n/a n/a 17,280 997,200 n/a 8 Mbps n/a n/a 30,800 1,574,700 n/a

Note. an = Economy rate based on 1-year contract (premium rates are 25% more); 10%

discount for 3-year contract and 20% for 5-year contract; rates current as of April 2001.

bn = The US$ rates are as published by CAT and are not equivalent to the baht rates at

current exchange rates (of 40-45 baht = 1 USD). From Communication Authority of

Thailand. Retrieved March 31, 2001 from the World Wide Web: http://www.cat.net.th/iig.html.

As shown in Figure 5.3, the cost for doubling international connection speed with

CAT is highest (80%) with from the E-1 (2Mbps to 4Mbps) connection and the second highest (58%) for 4Mbps to 8Mbps. Hence, it can be discerned that CAT was trying to

155 dissuade ISPs from jamming traffic and/or seeking greater profits at the higher speed

connections.

4,000-8,000

2,000-4,000

1,000-2,000

512-1,000

256-512

Costs for doubling speed (Kbps)

0% 20% 40% 60% 80% 100%

Figure 5.3. Costs for Doubling International Half-Circuit Speed in 2000. Increase in percentages over the previous speed.

CAT vs. TOT dispute over IP network leasing authority

In addition to the 32-percent free equity holding condition imposed on all ISPs

(except for Internet Thailand, in which CAT invested 34 percent real capital), CAT’s

Internet licensing authority had had another negative impact on the development of Thai

Internet. CAT used its licensing monopoly to suppress attempts to provide low-cost or free Internet access. A licensing conflict erupted between CAT and the Telephone

Organization of Thailand (TOT) in mid-2000, when Freei.net—a new ISP not licensed by

156 CAT but which received a “leasing agreement” to use TOT’s Internet Protocol (IP) network—planned to launch free Internet service.

In 2000, TOT planned to lease its new IP networks to eleven ISPs16, some of which were ISPs holding licenses from CAT. Although it was amply clear that any international connection, voice or data, was solely CAT’s domain, the TOT expected to exploit a loophole in that it had the right to connect to neighboring countries such as

Malaysia, Laos and Myanmar. In the case of Freei.net, it was conceived that Freei.net could lease the TOT’s international network to Malaysia and then use the Malaysian network to connect to the global Internet, bypassing CAT’s international link (Suphaphan

& Charoen, July 20, 2000). CAT was opposed to TOT’s plan from the start, claiming its exclusive rights in international communication. It also threatened to file suits against applicants who did not carry its ISP licenses. TOT’s IP network would have allowed the

ISPs to provide remote Internet access for a 3-baht per dial-up flat rate across the country

(Usanee, November 4, 2000).

After several months of conflict and litigation threats, the Ministry of Transport and Communications (MOTC) finally ruled that TOT violated Section 80 of the Radio and Frequency Allocation Act, B.E. 2543, and prohibited the agency to lease its IP

16 Applicants for TOT’s IP networks included new ISPs without licenses from CAT: 1) Kolacor

System (Thailand), 2) TPP International (a TOT equipment supplier), 3) Active Communication, 4)

Freeinet, 5) Advanced Information Technology, 6) Synergy Net Holding, 7) Saffer Telecommunication

(Thailand), and existing ISPs licensed by CAT, 8) Roynet Internet, 9) Samart Infonet, 10) INet (Thailand), and 11) CS Internet. From “Telecom licenses put on hold: Ruling to stymie TOT Plans,” by Usanee

Monkolporn, 2000, November 4, The Nation, p. B1.

157 network for international links. Kitti Yoopho, deputy minister of the MOTC at the time, explained that a MOTC policy (B.E. 2522) clearly divided rights to provide services between CAT and TOT. The MOTC deputy minister also cited a directive by the new

Telecommunication Master Plan that TOT could only provide international long distance calls two to three years after the CAT had started the service provision. This was because over 80 percent of CAT’s revenue came from its international communication services

(“Kamanakom,” December 19, 2000). By January 2001, the TOT plan was announced

“dead,” and the TOT was told by the MOTC to stay clear of Internet business and cancel its international circuit leasing contracts with Malaysia’s Time Telekom and Hong

Kong’s Whampoa. However, the MOTC allowed the four CAT-licensed ISPs, Internet

Thailand, CS Internet, Samart Cybernet, and Roynet to use the TOT IP network (“TOT’s

Internet plan dead,” January 6, 2001). Interestingly enough, despite the MOTC’s ruling, the TOT went ahead with its plan and announced its decision to sign up three private companies to use its IP network in May 2001 (Wanaporn, May 10, 2001).

TOT insisted that its Internet project did not mean that it was going to be an ISP, but rather enable non-licensed private firms to enter the Internet business and provide content on the TOT website. Freei.net was one of three companies signing the contract with TOT. It planned to provide free Internet services as soon as it was authorized to use

TOT’s IP network. The other two signors, ANT (Thailand) and Success Information

Systems, would be both access and content providers providing Internet content was part of TOT’s plan to provide public Internet services to local 1,000 tambons (sub-districts) in conjunction with the Local Administration Department, Ministry of Interior (“Tor Sor

158 Tor,” May 5, 2001). CAT insisted that TOT had no right to resell Internet service to

private operators (Wanaporn, May 10, 2001).

Delayed domestic liberalization and regulatory vacuum

As the Thai commercial Internet industry began to grow, domestic Internet

companies could no longer rely on subscription fee revenues. Also, as a result of the

economic downturn and lack of funds, local ISPs were under increasing pressure to sell

their assets to large telecom firms with infrastructure or to seek foreign partners in order

to survive in a more competitive market. Yet, the CAT 32-percent free equity holding

condition obstructed the ISPs’ ability to expand their business because the condition

made the investment unappealing to foreign investors. By late 1999, local

telecommunications businesses slowly emerged from the economic slump that hit the

entire economy following the 1997 crash. Domestic telecommunications businesses had

suffered major losses during the downturn of 1997 and 1998,17 largely attributable to

foreign losses from steep depreciation of the baht (from around 25 baht to the US dollar

before the crash to the hit-bottom level 56 baht when the crisis hit in late 1997, and back

up to around 38-45 baht to a dollar in 1999 and 2000). Local ISPs, along with many of

their debt-ridden parent telecom firms, were cash-strapped and pressured to seek foreign

partners for funds to expand businesses or merely to stay afloat. Although some local

17 Ten major telecommunications companies listed on the Stock Exchange of Thailand reported

third-quarter combined losses of 17.48 billion baht in 1999 against earnings of 5.47 billion baht in 1998.

From “Recovery is back on line,” by Vivat Prateepchaikul, 2000, October 30, Bangkok Post 1999

Economic Review Year-End Edition. Retrieved October 30, 2000 from the World Wide Web:: http://www.bangkokpost.com/99year-end/11telecoms.htm.

159 ISPs and telecom companies were able to find foreign partners by 2000, others found

it difficult to attract foreign partners due to the lack of foreign confidence in the

regulatory aspects of the Industry: no clear regulatory body existed and the CAT’s 32%

free equity-holding condition continued to be unresolved (Chareon, 27 December 2000).

As the telecommunications industry worked toward industry liberalization for

domestic competition by October 2000 and international competition by 2006 as required

by the WTO agreements, the government worked to form a new regulatory body that

would regulate the entire industry in place of the MOTC, TOT, and CAT. As the

industry awaited the National Telecommunication Commisson (NTC), TOT and CAT

were ordered by the MOTC to cease their licensing and regulatory roles pending the NTC

formation (Charoen, June 27, 2000). However, the formation process, which was

expected to conclude by June 2000 to meet the October 2000 deadline, dragged on and

continued to be interrupted by irregularities, lack of transparency, and scandals. The

domestic liberalization deadline was moved a year later to October 2001.18 In this

regulatory vacuum, the industry was almost at a standstill in terms of business expansion.

The regulatory vacuum caused uncertainties, anxieties and frustration. Industry

executives lamented that there were no rules for competition and no guidelines for how

large companies should compete fairly with small ones (Sasiwimon, January 17, 2001).

Moreover, emerging broadband services providers and wireless Internet services

18 Liberalization of Thai telecom market faced major obstacles, two of which included the delay in the establishment of the new regulatory body, the NTC, and the unresolved conversion process of existing build-transfer-operate concessions due to disagreement between the state agencies and the concessionaires over the terms of compensation payment for revenue shares owed to the state.

160 providers were unable to proceed with their plans because there was no agency to

grant licenses. Meanwhile, existing operators were unable to expand due to limited

infrastructure; merely 5.3 million fixed-line telephones were available nationwide. In

mid-2000, industry leaders called for a separate treatment for the Internet to resolve the

regulatory deadlock. Yet, the government and politicians appeared more concerned

about the coming general election in January 2001 than about the future of the Internet

industry. The establishment of the NTC had dragged on from the Chuan government to

the Thaksin government that came into power in January 2001. The complexities and

politicization of the NTC panel selection process are discussed at length in Chapter 7.

It is clear from the discussion thus far that CAT’s regulatory control over the Thai

Internet industry through its licensing authority and monopoly in international communication limited the potential for growth and maturity of Thailand’s Internet industry and potential benefits for the society in major ways: (1) business (ISPs having been deprived of additional revenues from providing more varied services and choices to consumers); (2) access (customers having been deprived of opportunities to gain access to more affordable services); and (3) technology (the industry having lost an opportunity to experience and develop new technologies). But once the industry became deregulated and was opened for wider competition, who would have an edge? The next section provides a picture of key industry players in the telecommunications and the Internet industry.

161 Key Industry Players: Who’s Got the Networks?

The question of who are likely to dominate the Thai Internet industry depends largely on the answer to the question of who controls the communication networks. In

Thailand’s case, there are clearly dominant players. A report by McKinsey & Co. (April

1998) revealed key players in different segments of the Thai telecommunications industry: two state players, TOT and CAT; and five private operators, namely Jasmine

International, Charoen Pokepand (CP), Shin Corporation, United Communications

Industry (UCOM), and Samart Corporation.

Telecommunications infrastructure in Thailand has been monopolized by the two state enterprises, TOT and CAT. However, as part of the attempt to liberalize the telecom industry, many BTO concessions to operate value-added services have been given to local companies since the late 1980s. Because private capital was sorely needed to expand infrastructure, participation from the private sector increased significantly during the 1990s through concessions with TOT, CAT and the MOTC. Several dominant players began entering basic telecom services, including fixed-line telephone, domestic fiber optic networks, and satellite.

As seen in Table 5.13, the two state operators, TOT and CAT, dominated domestic and international networks respectively, while major local conglomerates had clear dominance in different market segments. Jasmine and CP (through subsidiaries

Thai Telephone and Telecommunication or TT&T and TelecomAsia or TA respectivley) shared the domestic network market with TOT. In the mobile telephone segment, Shin

Corp. and UCOM, the two most powerful local telecom operators, were dominant

162 players, with Shin having a larger market share. In the value-added service market there were several players (TOT, CAT, Shin and CP) with CP being the most dominant.

Among all major private operators, Shin Corp., a telecom conglomerate founded by

Chuan’s successor, Thaksin Shinawatra, dominated several markets: satellite communication, mobile telephone, cable and multimedia, and value-added services. By mid-2000, Shin Corporation had total assets of 33.7 billion baht with 21 companies under its umbrella (Kettiya, October 25, 2000). Samart Corporation, a player in the Internet,

VSAT, paging, and mobile telephone markets, sold its Digital Phone Co (DPC), which ran the personal communication network (PCN) 1800, for five billion baht to Shin in

February 2000 (Vivat, 2000b).

163 Table 5.13

Key Players in Thai Telecommunications Industry

Industry TOT CAT Jasmine CP Shin UCOM Samart Segment Domestic Networks ***** * ***** ***** International Networks ***** Mobile Telephone * * * * ***** ***** ** Satellite ** ***** * ** Cable & Multimedia ***** * Value-added Services *** *** ***** *** *

Note. Scale = (minor player) *______***** (major player)

Adapted from “Responding to the Economic Crisis in South-East Asia: Risks and

Opportunities for Multinational Corporations,” by McKinsey & Company, 1998, April.

Commercial Internet Service Providers (ISPs)

As seen in Table 5.14, most major telecom players had a stake in the local

Internet business: Jasmine in Internet KSC, TelecomAsia in Asia Infonet, Samart in

Samart Online, and Shin in CS Communications. Of major ISPs (typed in bold in Table),

Internet Thailand was the largest corporate services provider, and Internet KSC and

Loxinfo were the two largest dial-up providers.

In late 2000, six major ISPs accounted for over 80 percent of the traffic, namely

Internet Thailand, Loxinfo, Internet KSC, CS Internet, A-Net Internet, and Asia Infonet.

(Karnjana, 2000). Also, several major local ISPs acquired foreign partners mostly from

164 within the region, particularly Singapore. While Thai electronic commerce (e- commerce) was still in its infancy in 2000, some major telecom companies teamed up with foreign partners to stake out the e-commerce market.

Table 5.14

Internet Service Providers (ISPs) in Thailand in 2000

Company Website Parent Companies Foreign Investors 1. Internet Thailand www.inet.co.th NECTEC, CAT, TOT 2. Internet Knowledge www.ksc.net.th Jasmine International, MIH Group Service Center (KSC) MKSC, Loxley (Netherlands) 3. Loxley Information www.loxinfo.co.th PointAsia Group Singapore Telecom Services (Loxley, Wattachak Group, Advanced Research Group) 4. A-Net Internet www.anet.net.th Anew Corp. Keppel Group (Singapore) 5. Samart Internet www.samart.co.th Samart Corp. Telecom Malaysia (in Samart) 6. Asia Infonet (Asia Net) www.asianet.co.th Telecom Asia (CP) 7. Asia Access Internet www.asiaaccess.net.th Service 8. Idea Net (IDN) www.idn.co.th 9. Data Line Thai www.linethai.net.th Datamat Plc. 10. World Net & Services www.wnet.net.th Pacific Internet (Pacific) (Singapore) 11. Far East Internet member.fareast.net.th 12. Siam Global Access www.sga.net.th 13. C.S. Communications www.cscoms.com Shin Corp. 14. Chomanan Wolrdnet www.cwn.net.th (CWN) 15. Jasmine Internet www.ji-net.com Jasmine International 16. EZ-Net www.princess1.com 17. Roynet www.roynet.co.th 18. Cable & Wireless www.cwasia.net.th Cable & Wireless Cable & Wireless Servies (Thailand) (Reach) (Hong Kong)

Note. Compiled from several sources: IIRC, 2001; Bank of Thailand, 2001; Bangkok

Post 2000 Year-end Economic Review, 2000.

165 Table 5.15 shows large e-commerce investors in Thailand in late 2000

(Charoen, 2000c). PointAsia, parent company of LoxInfo, which was a holding of

Loxley, Singapore Telecom, and Zesiger Capital, was the largest e-commerce company in Thailand with 1.2 billion baht capital.

Table 5.15

Large E-Commerce Investors in Thailand in 2000

Company Investor Capital Business (mil baht) PointAsia.com • Lox bit 1,200 Internet access, application • Singapore Telecom solutions, e-market place • Zesiger Capital Group

FoodMarket • Biz Dimension Frozen 300 Food e-market place Exchange.com Food (of Thai Union Frozen Products)

Thailand • Oracle Systems n/a Horizontal digital market Horizontal (Thailand) place Exchange

Thailand.com • The Nation Group 300 Export web portal

Mweb • MIH n/a Internet access, web portal, community online AD Venture • Shin Corporation 200 Web portal, online auction, magazine online

Note. From Thailand Development Research Institute, as cited in Charoen, 2001, January

28.

166 Domestic networks

Fixed-line telephone

As of 2000, TOT had the largest share of domestic networks, operating 3.5

million fixed telephone lines. TelecomAsia of CP received a TOT concession to provide

2.6 million lines in the Bangkok metropolitan area, while TT&T of Jasmine was granted

a TOT concession to operate 1.5 million lines upcountry. Of the total 7.6 million lines,

about 5.3 million lines were in use in early 2000. Market share percentage of TOT,

TelecomAsia (TA) and TT&T in the fixed-line telephone market are as follows: TOT

(46%), TA (34%) and TT&T (20%).

Both TA and TT&T were granted 25-year concessions with TOT ending in 2018.

According to their revenue sharing contracts with TOT, TA shared 16 percent revenue for

2 million lines and 21 percent for 0.6 million lines, whereas TT&T paid to TOT substantially higher revenue-sharing rates at 43.1 percent for 1 million lines and 44.5 percent for 0.5 million lines (Rewadee & Apiradee, 2001).

Fiber optic networks

In the early 1990s, TOT granted concessions to Jasmine Submarine

Telecommunications to install a fiber optical line in the eastern seaboard Mabtapud

industrial zones. As a result, Jasmine Submarine became the provider of a 1,300-

kilometer long fiber optic connection to Malaysia. ComLink, a subsidiary of

TelecomAsia of CP, in conjunction with the state-owned Thai Railways, received a TOT

concession to run the fiber optic line across country along the railways, from Chiang Mai

in the North to Su-ngai Golok in the South.

167 IP network

TOT began to aggressively develop the Internet Protocol (IP) network in 1998.

The IP network is a high-speed network able to transmit data, voice, video, and streaming media through digital signals (IP packets). TOT has installed the systems and equipment for its IP network throughout the country. The IP network is compatible with several high-speed (2 Mbps to 2.5 Gbps) telecommunications systems, such as high-speed optical fiber network, Synchronous Digital Hierarchy (SDH), Asynchronous Transfer Mode

(ATM) digital switch network, Optical Internet Protocol, and Third-Generation (3G)

Digital Mobile Communications Systems (“IT Network Project,” 2001).

Mobile and wireless

Mobile telephone

By 2000, Thailand’s mobile telephone market was a clear duopoly consisting of

Shin and UCOM. As demonstrated in Table 5.16, mobile phone providers under the two giant local conglomerates took almost all of the 3 million-customer market share (97%), leaving only three percent to TOT and CAT. Shin’s Advance Information Services (AIS) and Digital Phone Company (DPC) combined had over 1.6 million customers in early

2000 or over half of the total market share, while UCOM’s Total Access Communication

(TAC) had 1.3 million customers at 43 percent of the total market share.

168 Table 5.16

Market Shares of Mobile Telephone in Thailand (January 2000)

UCOM SHIN CORP TOT CAT TAC TAC PCN AIS NMT AIS GSM DPC Total AMPS 1800 900 900 PCN 800 1800

20,000 50,000 493,000 815,900 554,396 943,604 150,000 3,026,900

0.66% 1.65% 16.29% 26.96% 18.32% 31.17% 4.95% 100.00%

Note. From “Rai ngan sathanapap lae tidtang anakod wa duay wittayasat lae technology

pua karn pattana sakha karn sue-sarn lae torakamanakom [Report on Status and Future

Direction of Science and Technology for Telecommunication Development],” by Pichai

Wassanasong & Darunee Hiranrak, no date.

AIS and TAC19 began providing prepaid mobile phone services in 1999. From mid-1999 to mid-2000, 312,400 prepaid mobile phone numbers were used. Of this,

100,000 numbers were provided by TAC under the Prompt system, and 212,400 by AIS under the 1-2-CALL system (Pichai & Darunee, no date).

Personal communication telephone (PCT)

In addition to the regular mobile phone systems, in late 1999 a new market

developed in Thailand for a handy cordless telephone called PCT. PCT allows

consumers to use their home phone numbers away from home, instead of having to buy

more expensive cellular telephones. PCT was first launched by Asia Wireless

Communications (AWC), a subsidiary of TelecomAsia. The PCT service was well

19 Total Access Communication (TAC) became known as DTAC.

169 received by the Thai consumers largely due to its low costs. A PCT handset cost about 4,800 baht (US$100) when it was first introduced in 1999. Some 100,000 subscribers signed up in the first few weeks of the launch in November 1999. By June

2000, the number of subscribers reached 250,000. DPC also began to offer PCT services in late 2000 (Vivat, 2000b).

Wireless application protocol (WAP)

To deliver Internet connection via PCT, TelecomAsia began to expand its network capacity from the current 16.6 Kbps to 32 Kbps in late 2000. WAP, which allows mobile users to access the Internet, was still in a testing stage in Thailand in

2000(Vivat, 2000b). By and large, consumer demand did not yet exist and prices remained high. This was made worse by the fact that TOT and CAT were unwilling to reduce revenue sharing percentages for operators with BTO mobile phone concessions in order to allow the operators to reduce the price, making it hard for private operators to promote the services. Meanwhile, the state enterprises were taking advantage of the policy vacuum to expand their own networks. CAT was granted an approval from the cabinet to proceed with its third-generation digital CDMA (Code Division Multiplex

Access) network expansion project to provide cellular phone to provinces. CAT reported that it will use its own funds of 1.2 billion baht to install cellular exchange in three regions, Pitsanulok in the North, Nakhon Ratchasima in the Northeast, and Surat Thani in the South. The project, scheduled to be completed by mid-2001, will cover 45 provinces or 40 percent of the country’s four main regions.

170 International networks

International Internet connections

As the country awaited full liberalization to take place in 2006, CAT remained in control of Thailand’s international connections and all 18 commercial ISPs were still required to connect to the global Internet networks through CAT’s International Internet

Gateway (IIG). Although CAT must give up its monopoly, CAT is well placed for potential market dominance, even after it privatized, as a result of its extensive international networks.

Figure 5.4 shows international connectivities from CAT’s domestic and international Internet exhanges, NIX and IIG. Major international telecom carriers connecting Thailand with the world through CAT in early 2001 included Teleglobe,

Global One, Concert, AT&T, and SingTel. The same carriers also provided international high-speed connections to NECTEC’s domestic exchange, IIR, as can be seen in Figure

5.2 above, with the addition of Thailand’s own ThaiCom Satellite of Shin Corp.

171

Figure 5.4. International Connectivity Map by CAT (April 2001)

Note. From Communication Authority of Thailand. Retrieved April 15, 2001 from the

World Wide Web: http://www.cat.net.th/iig.html.

172 Asian Internet Network (AIN)

AIN is an alliance between CAT and six Asia-Pacific telecom carriers, Chunghwa of Taiwan, Indonesia Satellite Corp., Japan’s KDD Co., Korea Telecom, Philippines

Long Distance Telephone, Telekom Malaysia, and Singapore Telecom. AIN is a leased- line system linking Internet gateways in each of the participating countries with 512 Kbps initial bandwidth that is expected to expand as the traffic grows. It allows users to internally access Internet-based content from neighboring countries’ web sites, and enables expansion of value-added services among participating countries.

The AIN network is expected to help reduce Internet traffic via the U.S. because it allows Asian Internet to bypass connecting to other Internet networks via the U.S. (as customarily done by many countries, including Thailand). Connections via AIN is claimed to potentially save about 10 percent of international connection costs for each country (“Cat stands to gain most,” June 16, 2000).

Asian ATM telecommunications services

CAT is a partner in another six-country joint venture, ACASIA Communication

Co., Ltd. ACASIA is a joint venture of Brunei, Indonesia, the Philippines, Malaysia and

Thailand, the first Asian ATM (Asynchronous Transfer Mode) network providing high- speed (2 Mbps) connections among participating countries. CAT has also been expanding its international network to increase direct links to other counties. During the late 1990s, CAT installed the 10 Gbps optical fiber submarine cable system SEA-ME-

WE 3 (Southeast Asia-Middle East-Western Europe 3) to replace the old coaxial submarine cables. Other submarine cable systems being operated by CAT included:

173 1. Philippines-Singapore ASEAN Coaxial Submarine System (ASEAN P-S)

2. Indonesia-Singapore ASEAN Coaxial Submarine Cable Syems (ASEAN I-S)

3. Malaysia-Singapore-Thailand ASEAN Coaxial Submarine Cable System

(ASEAN M-S-T)

4. Malaysia-Thai Optical Fiber Submarine Cable System (ASEAN M-T)

5. Thailand-Vietnam-Hong Kong Optical Fiber Submarine Cable System (T-V-

6. Asia Pacific Cable Network (APCN)

7. Fiber Optic Link Around the World (FLAG). (CAT, 2001a).

Satellite networks

International satellite services

CAT has already been the sole rights holder in the country to link to INTELSAT and INMARSAT. This condition will not change even after the full liberalization in

2006 and after Intelsat privatization in April 2001, for it is a special agreement Thailand requested with the WTO. Thailand is within the footprint of INTELSAT satellites above the Indian Ocean Region (IOR) and Pacific Ocean Region (POR) via Si Racha

Communications East Station in Chonburi. INMARSAT satellites provide connections for mobile and fixed terminal on vehicles with existing Public Switched Telephone

Networks (PSTNs) via Nonthaburi INMARSAT Land Earth Station. CAT also began connecting to other emerging satellite services to provide mobile phone services, including global satellite services INMARSAT-P (ICO), Iridium (now defunct) and

Globalstar, and Asian satellite services AceS and AMPT (CAT, 2001a).

174 Domestic satellite services

A 30-year concession (1991-2021) granted to Shin Satellite by the

MOTC guaranteed a satellite services monopoly to Shin Satellite until the end of 1999.

During 1991 to 1997, Shin Satellite launched three ThaiCom satellites that altogether provided 66 circuits, 46 in C-Band and 20 in Ku-Band. ThaiCom satellites had over 20 satellite earth stations across Thailand by 2000. Over 80 percent of ThaiCom 1 and

ThaiCom 2 customers were domestic users. Sixty percent of Shin’s domestic customers provide VSAT (Very Small Aparture Terminal) services, and 40 percent provided mobile phone services, radio, television and cable television services, and government communication services. ThaiCom 3 served both domestic and regional markets in an equal 50-50 percent proportion (Rewadee & Apiradee, 2001, January 17).

Foreign Partners in Thai Telecommunications

In the late 1990s, foreign telcos began entering Thai telecommunications market.

Until complete liberalization in 2006, foreign ownership in telecommunications is limited to 20 percent, with the exception of paging where up to 49 percent foreign ownership is allowed. The Telecommunications Services Operation Act under review by the Senate in late 2001, would allow up to 40 percent foreign ownership in local ISPs. However, in

October 2001, the Thaksin government changed the foreign ownership condition in the

Telecommunications Act; it reduced the old foreign ownership cap from 49 percent (as approved by the previous Chuan government) to only 25 percent. This new change was immediately criticized as anti-competitive and serving the interest of Shin Corp, Prime

Minister Thaksin Shinawatra’s family business, in the mobile phone market, primarily

175 because unlike its competitors Shin’s Advanced Info Service (AIS) has under 25

percent of foreign ownership (“New law will hamper foreign investment,” October 11,

2001). (See Table 5.17.)

The 1997 economic crisis put both state and private Thai telecom operators under

financial pressure to seek foreign partners. Table 5.17 shows foreign partnership in

major Thai telecom operators. (See Appendix D for business structure and holdings of

major telecommunications companies in Thailand.)

Table 5.17

Foreign Partnership in Thai Telecommunications in 2001

Parent Company Subsidiary Foreign Partner Shin Corp Singapore Telecom (5.18%) Advanced Info Service (AIS) Singapore Telecom (18.63%) AD Venture NTT (Thailand) (47.5%) Shin Satellite Various (40% shareholding limit)

UCOM Telenor (Norway) (24.9%) Total Access Communication (TAC) Telenor (Norway) (29.94%)

Samart Telekom Malaysia (20%)

CP TelecomAsia (TA) Nynex (USA) (18.19%) CP Orange Orange (UK) (49%)

Jasmine Thai Telephone & Telecommunications (TT&T) NTT (Japan) (20%)

Note. Source: Stock Exchange of Thailand in Kanchana & Mongkol, 2001.

In summary, this chapter has discussed the regulatory implications of state monopoly for the Thai Internet industry. It was suggested that state regulatory control through the state-owned Communications Authority of Thailand has been a major

176 impediment to the expansion of the Internet access and commercial development.

The state-owned enterprises, CAT and the Telephone Organization of Thailand (TOT), still control the nation’s telecommunications infrastructure, despite wide participation from the private sector. The next chapter discusses the concept of universal service and the role of state as policymaker and service provider of the Internet.

177 CHAPTER 6

UNIVERSAL SERVICE AND ROLE OF THE THAI STATE

The issue of universal service is explored in this chapter. Particular attention is given to state agencies’ involvement in the provision of Internet access. The first section discusses the Thai concept of universal service, followed by discussions of the Universal

Access Act, the Thai public Internet access model, the Thai Internet user profile, and the state’s role in Internet access provision.

The arrival of the Internet has propelled many governments around the world to come up with policy measures and programs to reap the most benefits from this new technology. While the open network structure has many governments concerned about reduced ability to control the freely transmitted contents over the Internet, expanding access to the Internet for educational and economic benefits has been among key government policies in the 1990s. Some countries that saw great potential for socio- economic advancement in the Internet network technology like Thailand’s neighbors

Malaysia and Singapore have adopted aggressive measures to expand Internet access among their citizens through clear and committed policy directives, corresponding funding and measures to lower initial access fees through subsidies, etc.

In 1995, Thailand responded to the arrival of the Internet with an official white paper, the IT 2000 Plan, which outlines the potential benefits of the Internet and states explicitly that universal access is a means to reap these benefits. This chapter explores how the Thai government has performed as a policymaker and a provider in access expansion of the Internet and network technology.

178 In late 1998, six information technology (IT) law subcommittees were established under the National Information Technology Committee (NITC) to study and draft five IT-related laws and the universal access law. The IT laws were seen as critical legal infrastructure to lay the groundwork for and facilitate emerging electronic commerce. Prior to the IT law legislation, Thailand was facing some fundamental problems concerning the development of its IT industry and economy in general as a result of: (1) lack of legal infrastructure necessary for conducting business in information economy; (2) lack of confidence, especially among foreign investors, in legal protection of their rights and their proprietary information; (3) underdeveloped technology transfer mechanisms, (4) lack of fair competition and low level of competitiveness; and (5) the gap between the haves and the have-nots (NSTDA, 1999).

It is evident that the Thai policymakers were responsive to the economic aspect of the ramifications of the Internet technology, i.e., legal measures were developed to address potential complications on economic activities as a result of the adoption of the

Internet technology. The development of five e-commerce-related laws were expected to improve investors’ confidence and enhance Thailand’s competitiveness, including Data

Protection Law (to protect rights of privacy); Electronic Data Interchange (EDI) Law (to set the effective legal framework to support successful electronic contracts); Digital

Signature Law (to provide the security of electronic commerce transactions by using asymmetric-key cryptography); Electronic Funds Transfer (EFT) Law (to promote consumer protection and allocate the liability incurred from the technological risks); and

Computer-related Crime Law (to criminalize the new type of offences in the borderless

179 online world) (Thaweesak, 1999). The Universal Access Law was drafted as a bylaw

of Article 78 of the 1997 Constitution to promote equitable access to National

Information Infrastructure (NII). The National Electronics and Computer Technology

Center (NECTEC) was charged with coordinating and managing the drafting process.

Each subcommittee was chaired by a prominent legal expert and comprised

representatives from related agencies.20

Thai Universal Service: “Telephone in Every Village”21

Universal service was an underlying principle of the 1995 national IT 2000 Plan developed by the National Information Technology Committee (NITC). The IT 2000

Plan provided the following strategic policy directions for building an equitable national information infrastructure (NII):

1. Wire up rural Thailand necessary to support the government’s major policies to create employment and distribute wealth to rural regions of the country, to open up new opportunity and equality for education and personal development, and to create a more open and equal access to basic public services.

2. Reform the Telecommunications Acts to make them more relevant to modern technological and global business environments. (NITC, 1995a, p. 12).

Five NII initiatives were accordingly set as follows:

20 The Electronic Transactions Bill and the Electronic Signature Bill were approved by the cabinet

in March 2000 and became Acts in September 2000 (Thaweesak, May 23, 2000). The Universal Access

Act was completed on 7 September 2000. Yet, none of the six laws were in effect at the change of

administration from Chuan to Thaksin in January 2001.

21 A term used in “An Assessment of Thailand’s New Telecommunications Plan,” by Robert D.

Cairns and Deunden Nikomborirak (1998), Telecommunication Policy, 22, 2, pp. 145-155.

180 1. Provide all villages throughout the country with basic telephone services within 5 years.

2. Improve the quality of communications networks, both metropolitan and rural, up to no less than internationally practiced norms and standards.

3. Make available access to data transmission service to all parts of the country, and to all parties, be they large or small business and organizations, as and when required.

4. Rationalize, through legislative amendments, all communications rates (local, long distance, and international) for a more equitable access in order to meet all basic and some value added service needs of the wider segments of society.

5. Undertake a comprehensive review of all related legislation with an aim to correct and introduce new legislation and regulations that will promote the development and the widest possible use of IT. (NITC, 1995a, pp. 12-13).

According to its strategic directions and NII initiatives, the IT 2000 Plan emphasized equitable communication access to all, particularly in the rural sector. The issues of equitability, availability and affordability of access were clearly part of the fundamental basis of the NII provision. Specific goals indicated under the “five-year rural Thailand communications expansion and modernization program” in the IT 2000

Plan included:

1. To install telephone lines to no less than 12,000 remote tambons [sub-districts] and villages with a budget of over 6,000 million baht for five years so as to provide nationwide universal service by the year 2000.

2. To provide all villages with 20 households or more with at least one public telephone booth, and also ensure the overall public telephone penetration rate in the provincial areas to be over two telephones per 1000 population (2:1000).

3. To meet the data transmission needs of large and small businesses and organizations located in rural provincial areas throughout the country with transmission service capacity of up to at least 64 Kbps. (NITC, 1995a, p. 13).

181 From these strategic policy directions, initiatives, and goals laid out in the IT

2000 Plan, it is clear that the telephone was a building block of Thailand’s NII. The smallest unit of access to telephone services was clearly set at the village level in the IT

2000 Plan (see initiative no. 1 and goals nos. 1 and 2 above). As a result, it appears that the basic definition of universal service indicated in the IT 2000 Plan can be summarized as “a telephone in every village.” To follow up the IT 2000 telephone-in-every-village universal service initiatives, national access expansion programs were devised by two major state agencies. The Telephone Organization of Thailand (TOT), responsible for domestic telecommunications services, developed telephone network expansion programs in 1996. The National Electronics and Computer Technology Center (NECTEC), the secretariat to the NITC, began in 1995 developing several national IT projects, including the Internet access expansion programs, SchoolNet and Government Information

Network (GINet).

From 1996, TOT began several projects which together amounted to expansion and improvement of domestic telephone networks: (1) adding 800,000 fixed-lines

(600,000 in upcountry locations and 200,000 in Bangkok), (2) converting analog to digital systems, (3) installing public long-distance telephones in rural 45,000 villages, (4) developing Internet Protocol networks, and (5) improving quality of service (service habilitation). The budgets for these projects amounted to about 55 billion baht (US$1.2 billion) during the period 1996 to 1998.22 The expansion program was interrupted and

22 The TOT budgets for projects during 1996 to 1998 totaled 55,240 million baht. The project budget breakdowns are as follows (units in million baht): 20,800 for adding 800,000 fixed-lines, 16,500 for

182 delayed by the 1997 economic crisis. However, all projects were completed by early

2001, with the exceptions of the IP network project (28% completion) and the rural

village public telephone project (68% completion). As of February 2001, 30,390 out of

the targeted 45,000 rural public telephone locations were in service.

In 1995, only 1.5 million telephone lines had been installed in the rural sector by

Thai Telephone and Telecommunication (TT&T), a TOT concessionaire. The IT 2000

Plan envisioned one telephone for every 10 persons by 1996, and one for every 5 persons

by 2001 (NITC, 1995a, p. 3). As of the end of 1999, there were only 5.2 million fixed-

line telephones and 2.3 million mobile telephone numbers being used by 60.6 million

Thais (8.57 and 3.84 per capita respectively). These telephone and mobile telephone

penetration rates were very low in comparison with Singapore (60.78% and 48.18%) and

Malaysia (15.48% and 21.07%) (see Table 6.1). (Although the Singapore and Malaysia

figures are 2000 figures and the Thailand figures are from 1999, the differences in

penetration rates are still obvious.)

the village public telephone project, 10,400 for IP network expansion, 5,940 for analog-to-digital conversion, and 1,600 for service habilitation. The 55 billion baht total budget did not include 2,620

million baht for the rural public telephone project. From “TOT Report to the Ministry of Transport and

Communication,” by Telephone Organization of Thailand. Retrieved April 22, 2001 from the World Wide

Web: http://www.tot.or.th/infdatacenter/ps7.htm.

183 Table 6.1

Telecommunications Indicators in Selected Southeast Asian Countries (2000)

Total GDP per Main telephone lines Cellular subscribers pop capita Country Total As % of Total As % of As % of % (mil) (US$) (1000) pop (1000) pop total digital phone Indonesia 212.09 675 6,662.6 3.14 3,669.3 1.73 35.5 95.6*

Malaysia 23.26 3,607 4,900.0 21.07 3,600.0 15.48 42.4 84.9*

Philippines 75.33 1,030 2,892.4* 3.88* 2,850.0* 3.83* 49.6* 46.0*

Singapore 4.02 21,881 1,935.9 48.18 2,442.1 60.78 55.8 100*

Thailand 60.62 2,038 5,215.6* 8.57* 2,339.4* 3.84* 31.0* 44.1*

Note. *1999 figures. From “Telecommunications Industry at a Glance,” by International

Telecommunication Union, 2000 & 2001. Retrieved April 15, 2001 from the World Wide

Web: http://www.itu.int/ti/industryoverview/index.htm.

Also, when compared to the Phillipines figures, which were the figures from the same year (1999), Thailand and the Philippines had the same mobile telephone penetration rates (3.8 %). This is despite the fact that Thailand’s gross domestic product per capita was twice as large as that of the Philippines, at $2,038 as opposed to $1,030.

Of the 5.3 million fixed-line telephones, as reported by the Thai Agricultural

Research Center and TOT in January 2000, more than half of telephone lines in use (2.9 million lines) were concentrated in just one quarter of the population of the Bangkok metropolitan and adjacent areas. In January 2000, about 30.5 percent of those living in

Bangkok and adjacent cities (Patumtani, Nontaburi and Samuth Prakarn) had access to telephone, as opposed to only 4.6 percent in all 72 provinces. This, however, does not

184 seem to be simply an issue of lack of infrastructure because the 5.3 million operational lines being were less than the available capacity of 7.6 million lines (see

Table 6.2).

Of the total capacity of 7.6 million telephone lines, only 65.5 percent or 2.9 million lines had been connected and were in use the Bangkok metro and adjacent areas, and 75.8 percent or 2.4 million lines had been connected and used in the provinces, leaving 2.3 million lines idle. This under-utilization of telephone capacity suggests either low demand for fixed-line telephone or slow telephone installation, or both. TOT reported a huge drop in revenue, and 80% net profit plunge from 16.5 billion baht in the first nine months of 1998 to 2.08 billion baht for the same period in 1999. The revenue losses were largely attributed to foreign exchange losses, and a decline in demand for fixed-line telephone services.

While TOT reported major losses, the provincial fixed-line carrier, TT&T reported overall improvement in operating performance with total revenues increasing from 1.42 billion baht in the third quarter of 1998 to 1.52 billion baht in same period of

1999. The revenue increase was attributed to fixed-line service earnings (despite a total

1.86 billion baht loss mostly resulting from foreign exchange losses) (Vivat, 1999b).

This indicates that demands for fixed-line telephone in the provincial areas did not decline. However, on can speculate that the decline in the fixed-line demand in 1999 was probably felt more in the Bangkok metro areas, where the popularity of cheaper mobile telephone services was rising in the late 1990s and where personal communication telephone (PCT) began to emerge.

185

Table 6.2

Fixed-Line Telephone Numbers Available and In Use in the Bangkok and Adjacent

Areas and in Provinces (January 2000)

Telephone Numbers Per 100 (%) Capacity % In Use % Capacity In Use In Use/Capacity Bangkok & 4,419,247 57.8 2,893,021 54.2 46.5 30.5 65.5 Adjacent

Provinces 3,232,263 42.2 2,448,481 45.8 6.0 4.6 75.8

Total 7,651,510 100.0 5,341,502a 100.0 12.34 8.62 69.8

Note. an = The 5.3 million is higher than the ITU 1999 reported figure of 5.2 million in

Table 6.1. From Thai Agricultural Research Center Co., and Telephone Organization of

Thailand.

Despite unfilled capacity, Thailand was intent on increasing domestic telephone network capacity in preparation for the new era of high-speed communication. The

Eighth National Economic and Social Development Plan (1996-2001) stipulated an expansion of six million telephone lines during the plan. In 1996, TOT proposed the eight-billion-baht SDH (Synchronous Digital Hierarchy) Project, a digital optical fiber network able to connect to new high-speed telecommunications technologies, such as

ATM (Asynchronous Transfer Mode), Optical Internet Protocol and Third Generation

(3G) digital mobile communications systems, carrying multimedia data at 2 Mbps – 2.5

Gbps. Like most major telecommunications infrastructure projects before it, the SDH

186 Project encountered a lot of political interference, rumors of irregularities, and scandals about collusion in the bidding process. The project bidding process was scrapped soon after it opened in 1996 and postponed until 1999. To ensure transparency, the 1999 SDH bidding process was overseen by the World Bank and NECTEC (Vivat,

1999b).

Despite the “telephone in every village” universal service policy directive expressed in the IT 2000 Plan, the 1997 Telecommunications Master Plan had no clear policy guidelines concerning universal service, except for general goals to (1) provide adequate telecommunications access and (2) to ensure that service charges are reasonable for both providers and consumers (see Table 4.1 in Chapter 4 for a list of goals and policies). However, the universal service principle could be hidden in the zoning policy proposed in the plan (Cairns & Nikomborirak, 1998).

The zoning policy proposed that the country be divided into six zones, one of which would be metropolitan Bangkok. Under the zoning policy, BTO concessions would be renegotiated and two operators would be allowed in each zone, one of which would be the TOT. One can only speculate that the TOT being licensed to operate in all zones would ensure that TOT would be the carrier of last resort (Cairns & Nikomborirak,

1998). In any case, this zone-division scheme was scrapped as a result of collusion in the first round of the SDH bidding (Vivat, 1999b) and it is unclear whether it will be resurrected. Meanwhile, TOT already had begun its Internet Protocol network project— the evolution of the old SDH project. The project was 28 percent completed by early

2001.

187 The Telecommunications Services Act, B.E. 2543 (2000) approved by the

Chuan cabinet in March 2000 includes universal access provisions in Articles 18 and

17(2). Article 18 requires telecommunications licensees to be responsible for providing access to residents in remote areas. The requirement is worded in a broad, non-specific manner as follows: “… Licensees must provide … telecommunications services in a given area that has no or insufficient access to services within the area.” Sumet

Wongpanichlert of TDRI considered this broad wording unhelpful in that it does not specifically address the four main principles recommended by the WTO or provide guidelines with regards to universal service provision. The four WTO-recommended principles include (1) transparency, (2) non-discrimination principle, (3) competitive neutrality, and (4) non-burdensome application. Moreover, the clause may also present a conflict with Article 54(3) in the same Act that stipulates no price discrimination (Sumet,

2000). Article 17(2) of the Telecommunications Services Act mentions the provision of telecommunications services to specific groups including the disabled, children, the elderly, the disadvantaged, as well as educational institutions, hospitals and other organizations providing social services. Again, no specific definitions of the beneficiaries of special services (such as children or the elderly) are provided. Clear guidelines are neither given concerning realistic measures for operators to implement to ensure universal service and the conditions under which services can be requested (ibid).

Article 78 in the 1997 constitution provides an overall principle for policymakers in matters concerning public services. Article 78 defines state’s responsibility in developing “local economics, public utilities and facilities systems and information

188 infrastructure” in all localities on an equal and equitable basis (see full quotation and discussion of the article in Chapter 4). The next section discusses details of the Act concerning on the role of the state in providing universal service.

Universal Access Act, B.E. 2543 (2000)

The Universal Access Act, B.E. 2543 (2000) was created as a bylaw to the 1997

Constitution Section 78, which mandates equitable and equal access to NII. The proposed draft was approved by the cabinet and became the Univeral Access Act in

September 2000. The Universal Access Act determines that the state is to “promote and support development and use of equitable and equal information infrastructure in all communities nationwide, in particular for the disabled, children, the elderly, and the disadvantaged, and for the optimal interests of the economy, society, politics, education, culture and environment” (Universal Access Act, B.E. 2543, Article 5). The Act spells out state responsibilities in the matter of universal service (as supporter and promoter, not necessarily as provider), no definition or specific types of universal service are provided in the Act.

Article 3 provides definitions of “information infrastructure,” “information technology,” and “information” as follows:

“Information Infrastructure” means telecommunications network [sic], information technology, information, human resources and other factors that can bring benefits of information distribution to people in all localities equally and equitably.

“Information technology” means knowledge in products or any process involving use of software technology, hardware, communication, data collection and timely application in order to produce efficiency in production, services, management, and operation, as well as in education and learning, which result in competitive

189 advantage in economy, commerce, improvement in quality of life and quality of people in the society.

“Information” means data, information and knowledge in any forms [sic] letters, numbers, sounds and pictures, or any other form that can communicate. (Universal Access Act, B.E. 2543, Article 3).

Article 40 of the Universal Access Act stipulates that an Information

Infrastructure Development Fund be established. The Fund is to be used to support equitable access to the public information infrastructure and human resources IT development. The sources of funds are to come from (1) seed money from government,

(2) annual government budget allocation, (3) money or assets from public contribution

(whether contributions from the private sector is acceptable is to be determined), (4) interest or revenue from fund, and (5) donations.

Article 7 of the Act determines that the current National Information Technology

Committee (NITC, with NECTEC as its secretariat) be the body in charge of planning and policy of the national information infrastructure, including use of frequencies according to Articles 25 and 26 in the Agency for Radio and Television Frequencies

Allocation and Telecommunications Services Act, B.E. 2543 (2000).23 Among other

23 This stipulation is somewhat confusing because radio and television frequencies were already stipulated to be managed by the National Telecommunications Commission (NTC) and the National

Broadcasting Commission (NBC) by the 1997 Telecommunication Master Plan and the 2000

Telecommunications Services Act. It is conceivable, however, that the NITC would make recommendations regarding appropriate use of the radio and television frequencies, as in the case of the

Third-Generation wireless applications for the Internet.

190 responsibilities, the NITC is also in charge of the management of the Information

Infrastructure Development Fund.

The NITC, in existence since 1992, is chaired by the prime minister and composed of representatives from ministries, related government offices and associations concerning information technology and the broadcasting industry. The membership of the NITC must also include at least six experts, two of whom must be representatives of nongovernmental organizations concerned with information infrastructure development and four of whom should be experts in the fields of engineering, computer science, economics, and jurisprudence. As of April 2001, the NITC had 20 subcommittees on development of national information technology development, including six subcommittees on drafting IT laws, and a subcommittee on national information infrastructure, on IT policy planning, on IT for the disabled and disadvantaged, and

Thailand’s Internet policy task force. (A complete Thai-language copy of the Universal

Access Act, B.E. 2543 is attached as Appendix E, and the English-language list of NITC subcommittee is included as Appendix C.)

A large part of the Universal Access Act covers the authority and responsibilities of the Universal Access Committee (NITC), and details on the formation and spending of the Universal Access Fund. Given its authority and responsibilities, it seems that the

NITC expects to play an increasingly important role in Thailand’s NII development in the future, in particular in giving policy guidelines concerning access to new communication and information technologies. The following sections explore the performance of the

NITC’s operation unit, NECTEC, in providing Internet access to the Thai public.

191 However, before discussing major public Internet projects by NECTEC, the section immediately following provides some outsiders’ perspectives on how early Internet access was distributed among academic and research communities.

Thai Public Internet Model: Restricted and Controlled Access

The issue of publicly controlled access was raised by three long-time expatriates, not by Thais. The three American expatriates, Alan Dawson and Jamie Zellerbach, early

BBS providers, and Doug Cooper, a computer linguistics researcher, were involved in different aspects of Thailand’s early Internet development. From their perspective, access was viewed as a privilege, not a right because Internet access in Thailand in the early 1990s was very limited. Chulalongkorn University was the first institution in the country to acquire the 9.6 Kbps leased line to UUNET in early 1993. Even at

Chulalongkorn, Internet accounts were given on a restricted basis, i.e., one had to be in a position deemed “deserving” of an account (Dawson, personal communication, August

17, 1998).

Before the Internet was commercialized in 1995, with Internet Thailand being the first official ISP, the small number of online communities were connected via BBS services run by Thais like Woody Koman and Paisal, and foreign expatriates like Dawson and Zellerbach. Owning communication equipment and providing communication services without permission from CAT was and is still illegal at the time of writing (May

2001). However, these BBS services were able to operate without legal complications, perhaps because the number of users was still small. Dawson’s Wildcat BBS, for example, had about 2,000-3,000 members and the number never went beyond 5,000 even

192 during the May 1992 uprising when more people logged on for information when television news was censored by the military. In addition, Dawson reasoned, some BBS users had powerful political connections.

Because the early BBS activities were deemed no threat by CAT, or because CAT did not realize their significance, some BBS providers like Dawson and Zellerbach acquired Internet domains and provided Internet accounts to anyone who wanted one, at little or no cost. Technically this was illegal. A small number of Internet account holders outside large institutions were the 200-or-so volunteers in the NECTEC Email Working

Group (nwg.nectec.or.th) (Zellerbach, personal communication, September 8, 1998).

Access outside Bangkok was more restricted, largely due to costs of connection into Bangkok. For example, as late as 1998, an NGO’s Internet access was affected when

Chiang Mai ThaiSarn considered reducing its 256Kbps connection to NECTEC to

64Kbps because the charge for the 256Kbps line went up from 16,000 baht to 60,000 baht per month (Sanguan, personal communication, September 1, 1998).

To understand the current state of Thai Internet, it is important to look at the fundamental conception of Internet access in Thailand, as compared to that in the early stage of development in the U.S., where the Internet was essentially funded by the federal government and focused around universities (Cooper, personal communication, July 10,

1998). Speaking from his experience at the University of California–Berkeley and Smith

College, Mass., Cooper elaborated:

[In the U.S.] the notion of independent, equal computer networks which nobody was really in charge of is dominant until today. When the Internet first developed, it was part of the system. You have very limited access at first, but machines on the Internet are still UUCP machines. So somebody on UUCP could in effect get

193 access to the Internet by calling it up. . . . It was the most natural way in the world to operate. As the Internet grew and funding increased, basically anybody with any plausible reason could get themselves hooked up. . . . [While teaching at Smith College] I wrote a proposal [on the behalf of five colleges] for NSF funding to get all of us hooked up through [the University of Massachusetts] and this was eventually granted. Basically I didn’t have much arguing to do. . . .

Now, in Thailand, the development is very, very different. It began with a dedicated system, which was being given to a limited number of universities. . . . Every connection, every account had to be justified. In some places it still continues to this day. It’s very, very difficult for people to get accounts even on their own campuses. It’s seen as being a privilege really, rather than a necessity in being a part of an academic community. (Cooper, personal communication, July 10, 1998).

According to Cooper, the development of Internet access to the educational system in Thailand began with the model of controlled access, resulting in limited success of the project. Despite the fact that SchoolNet has often been used a “showcase” national IT project, more than a few industry leaders and experts interviewed by the researcher deemed the project unsuccessful. This is not only because the project achieved limited access in expanding to schools, but due to the lack of technical support and absence of technical skills on the user-end to sustain the project (Vivatvong, personal communication, July 7, 1998).

In 1995, only 1.2 million or only two out of 100 Thais had commercial access to the Internet. This was attributed by those interviewed to state monopoly in international connections and many regulatory restrictions, which limited competition, distorted prices, and as a result hampered expansion of access. The next section provides a profile of Thai

Internet users.

194 Thai Internet User Profile

The first two annual surveys conducted by the NITC in 1999 and 2000 revealed

that Internet users in Thailand were largely young, urban, educated, English-literate, and

relatively well-to-do. In the two years, a survey was distributed at two general interest

popular websites: a large Thai-language portal, www.sanook.com, and a Thai-language newspaper with the largest print-circulation in Thailand, www.thairath.co.th. The survey returned 2,404 responses in 1999 and 2507 responses in 2000.

Before discussing the results, it must be noted that the results of this survey

should be read with caution for two reasons having to do with methodology of the

surveys: (1) the scope of each survey was limited to only users of the World Wide Web

who accessed the two sites; and (2) the data collection based on self-reporting surveys

distributed on these two websites could skew the results towards respondents with easy

access to the computer and the World Wide Web, and those with more time on their

hands. In other words, the number of respondents with easy access to the computer and

the World Wide Web, those with experience in using the Internet, and those with more

leisure time, could have affected the outcome. For instance, the 46 percent of student

respondents in 1999 may not necessarily accurately represent the real percentage of

Internet users in Thailand who were students. Another thing to keep in mind is that

because filling out a survey online takes time, only potential respondents with a good

Internet connection, who could afford the cost as well as time required, were likely to fill

out the survey, whereas potential respondents with poor connections and with little

money or time would be less likely to do so.

195 Significant results of the Internet user profile survey are as follows:

1. Age – For both 1999 and 2000, over half of respondents were between 20-29 years old (57% and 50% in 1999 and 2000 respectively). The proportion of young

Internet users (aged 10-19 years) increased from 11 percent in 1999 to 16 percent in

2000. About roughly 30 percent of respondents from both years were from the 30-49 age group.

2. Urban vs. Rural – About two-thirds of respondents resided in the Bangkok

metropolitan area and its periphery (in Patumtani, Nontaburi and Smuth Prakarn

provinces). Table 6.3 shows Internet diffusion by region in Thailand based on the 1999

and 2000 surveys.

Table 6.3

Diffusion of Internet in Thailand by Region (1999-2000)

Bangkok Bangkok North North- Over- Adjacent Central South Total (%) (%) Metro East seas

Region Region Areas

1999 54.4 13.3 9.3 10.5 7.0 5.0 1.5 100 2000 55.2 14.4 10.9 8.0 5.7 4.7 1.1 100

Note. From Internet User Profile of Thailand by NECTEC, 1999 and 2000, Bangkok:

NECTEC.

Roughly over 90 percent of respondents from both 1999 and 2000 lived in urban

centers (about 70 percent in Bangkok and periphery with about 20 percent in provincial

urban areas). Only 9-10 percent of respondents lived in areas outside urban districts or

the rural areas, with just one percent respondents resided overseas.

196 3. Income – Slightly over 60 percent of respondents reported income between

10,000 to 50,000 baht per month ($250-$1250 at 40 baht = US$1). Only about one-tenth

(13% in 1999 and 8% in 2000) reported income under 10,000 baht. The average annual income per capita for Thais for 1999 was $2,038.

4. Education and English and Internet literacy – An overwhelming majority (over

80 percent) were pursuing or held at least bachelor degree, with a significant percentage considered themselves having fair to excellent English skills (66% in 1999 and 88% in

2000). A significant number of them were also experienced Internet users, with about half having had at least two years and over one-fourth at least three years of Internet usage.

5. Employment sector and industry – Of respondents who worked, about half worked in the private sector (48% in 1999 and 64% in 2000) and at least about one-thirds worked in the public sector (43% in 1999 and 30% in 2000). Workers in the non- governmental organizations made up a minority (9% in 1999 and 6% in 2000). For those who were students, the majority studies sciences and engineering (51% in 1999 and 38% in 2000), e.g., general and computer sciences; and computers, electronics, and telecommunications, and a significant minority studied business (11% in 1999 and 19% in 2000).

6. Point of access – Most respondents—over 80 percent—accessed the Internet either at work or at home. There were more reporting having access at home in 2000, increasing from 36 percent in 1999 to 50% in 2000. It seems that fewer reported having accessing from school in 2000: 20 percent connected to the Internet from school in 1999

197 but only 8 percent did in 2000. However, more reported accessing the Internet from public access, primarily at Internet cafes (3% in 1999 and 7% in 2000).

With the cautions mentioned earlier, the Internet user profile depicted a rough picture of Internet access distribution in Thailand, e.g., largely limited citizens of higher socio-economic background living in the urban areas. This is not surprising when considering the low basic telephone penetration, and concentration of basic telephone services in the Bangkok metro and other urban areas. In this respect, Thailand presented a typical case of a “digital divide,” i.e., drastic disparities in distribution of information access and resources among social groups, typically suggesting the acutely unequal and inequitable distribution between the rich and the poor and the urban citizens and the rural citizens.

The low number of Internet users (especially in proportion to total population and the availability of basic telephone lines) corresponds to the relatively low number of computers in Thailand. Table 6.4 below shows numbers of different types of computers in Thailand from 1995 to 1999. The number of large and medium servers was small in

Thailand, only 2,045 in the entire country in 1999. Small servers and workstations remained at about 6,000 each, while the number of personal computers grew during 1995 to 1997, and began to slow down after 1997. By the end of 1999, there were about 1.74 million personal computers in Thailand, or 2.9 per capita.

198 Table 6.4

Number of Computers in Thailand (1995-1999)

(Quantity in Units)

Computer As % >1995 1995 1996 1997 1998 1999 Total Type of pop

Large 185 <0.01 125 17 20 14 5 4 servers Medium 1,000 200 230 240 100 90 1,860 <0.01 servers

Small 500 600 750 1,900 1,100 1,200 6,050 <0.01 servers

Workstations 1,000 1,500 1,800 1,000 400 350 6,050 <0.01

Personal 500,000 271,300 312,540 289,000 174,000 195,200 1,742,040 2.87 computers

Total 502,625 273,617 315,340 292,154 175,605 196,844 1,756,185 2.90

Accumulated 502,625 776,242 1,091,582 1,383,736 1,559,341 1,756,185 - -

Note. Large servers = General purpose and high-speed scientific computers with a price of over US$ 1 million; Medium servers = Traditional supermini-class and some midrange computers with a price range of US$ 100,000 - 1 million; Small servers = Servers for control, communications, peripherals, database, and networks with a price range of US$

2,000 - 100,000; Workstations = Technical computers with powerful graphics (such as

SUN, HP Apollo, Silicon Graphics), usually UNIX based; Personal computers = All types of personal computers including notebook computers. From National Information

Technology Committee. Retrieve April 20, 2001 from the World Wide Web: http://www.nitc.go.th/document/satistic/n-com.html.

199 It must be noted that this figure is different from the estimated 1.47 personal computers (2.4% penetration) reported by the ITU for the year 2000 in Table 5.1 in

Chapter 5. From observation, statistics from local sources tend to be higher than those from international sources. The drop in numbers of all types of computers after 1997 is likely to be correlated to the economic recession after the 1997 crisis.

State Role in Internet Access Provision

As discussed in Chapter 5, Internet access in Thailand expanded very slowly even after five years since it was first commercialized. The NITC Internet User Profile surveys summarized in the previous section further indicate that Internet usage in

Thailand remained limited to the more privileged urban users. The small number of

Internet users and the limited expansion of the Internet seemed to be in contradiction to the well-crafted national IT development plan (IT 2000 Plan), the many well-publicized national IT development projects such as GINet, SchoolNet, and Software Park, and the drafting and amending of IT- and e-commerce-related laws. The discrepancy poses a question as to why access expansion was slow and limited despite relatively clear universal service directives indicated in the IT 2000 Plan and the implementation of several major IT programs. Although the sluggishness in commercial Internet growth could be adequately explained by state monopoly, by market restrictions imposed by

CAT and by the economic recession, a question regarding the effectiveness of the access expansion programs by several state agencies remains unanswered.

In the following section, selected government projects targeting Internet access are discussed, namely GINet and SchoolNet by NECTEC. In addition, a pilot project

200 funded by the Office of Agricultural Economics, called RuralNet, aiming to connect farmers upcountry, is also examined. Public Internet services offered by TOT and CAT are also briefly covered largely because there are few details available on these two recent services.

NECTEC-operated national IT development projects

Government Information Network (GINet)

The government approved a proposal from NITC to establish the Government

Information Technology Services (GITS) in May 1997. GITS was set up to provide common information services to all government sectors. The GITS program was budgeted in October 1998, at 2,012 million baht for the start-up and implementation up to five years. Afterwards, the project was expected to be self-financed through service fees collected from government ministries and offices. However, as a result of the economic crisis and the devaluation of the baht in 1997 as well as a budget fiasco involving misallocation of funds for three major IT projects (Software Park, GINet, and

SchoolNet), there was a serious delay in budget delivery for the fiscal year of 1998. In addition, the final budget delivered was extremely limited, resulting in further delays in implementation (NSTDA, 1999; Thaweesak, 1999). According to the original goals of the project, the GINet was expected to cover Bangkok and ten major provincial centers of administration in 1998, all 76 provinces in 1999, and all districts in 2001 (NSTDA,

1999). GINet was designed as a high-capacity, high-speed information network for government services, connecting all 76 provinces with an optical fiber backbone running at speeds between 155Mbps and 622Mbps. Once fully deployed, several 2Mbps

201 downstream links would connect with all 800 districts in the country (GITS, 2001).

Economic conditions forced the government to adjust the scope and goals of the program

as described in Table 6.5.

Table 6.5

GINet Goals Before and After 1997 Economic Crisis

Original Goals New Goals

1. Connect all 76 provinces within 2 years (1999). 1. Connect all 76 provinces within 5 years (2002).

2. Connect to all 800 districts within 4 years (2001). 2. Begin connecting major districts in year 6 (2003).

3. Provide high-speed network services through 3. Provide network services through dial-up and leased circuits. continually upgrade to leased circuits.

4. Operate under the two billion baht budget (or 4. Operate under the two billion baht budget (or US$ 77 million at US$ 1= 26 baht). US$ 53 million at US$ 1 = 38 baht).

Note. From Government Information Technology Services (GITS). Retrieved April 14,

2001 from the World Wide Web: http://www.gits.net.th/about/ginet_newplan.html.

The budgetary limitation allowed NECTEC to carry out only the necessary preparation of the network design and planning. By April 2000, GINet was available to

21 provinces. The initial bandwidth of the network backbone to all provincial points of presence (POP) was set at 128Kbps to be upgraded to (E1) 2Mbps, STM-1 (155Mbps), and STM-4 (622Mbps) eventually (GITS, 2001; Thaweesak, May 23, 2000).

The GITS program aimed to increase the efficiency of government and public services through information technology. Its final goal was to transform the Thai government into an e-government with common information exchange standards and a

202 secured messaging system. As part of the GITS program, a Government CIO

Program was created, whereby each ministry and department selected a chief information officer (CIO) to be in charge of the IT action plan for each respective ministry and department. NECTEC and the Office of the Civil Servant Commission jointly (OCSC) managed the 30-hour compulsory training program for the 15 ministerial and 180 departmental CIOs (Thaweesak, 1999).

As stipulated in the GITS initiative, the GITS services were to be operated by

NECTEC during the first five years (1998-2002). NECTEC claimed that GITS was operated on the basis of competition, i.e., NECTEC did not require government offices to connect through GITS. Government offices that connected to GINet, did so via either leased lines or modems. Those in the Bangkok metro and adjacent areas could connect through high-speed fiber optical lines to the central GINet center, while government clients upcountry could connect to GINet via leased lines at 64Kbps or higher. In 2001, three years after GITS was launched, government offices were already paying service fees to NECTEC according to the three types of connection, despite the fact that the project was not expected originally to be funded by the collection of service fees until after the fifth year of operation. The service charges are shown in Table 6.6.

203 Table 6.6

GINet Service Charges (May 2001)

1. Dial-Up Service Nationwide Membership set-up fee No charge *Special promotion Access fee 10 baht/hour *minimum 20 hour/month

• No minimum number of users required • Free web hosting for the first 50MB • 10 baht for each additional hour • 2000 baht for each additional 50 MB • Free E-mail service • Domestic roaming

2. Leased-Line Node Connection in Bangkok Membership set-up fee No charge Monthly access fee (according to speed) • Under 2 Mbps • 9000 baht • Over 2 Mbps • 27,000 baht

3. Leased-Line Node Connection Upcountry Membership set-up fee (per circuit) • Speed 64-256 kbps • 6,000 baht • Speed 512-2048 kbps • 14,000 baht

Monthly access charge (per circuit) according to speed and distance Point of Presence 64 128 126 512 1024 2048 (POP) kbps kbps kbps kbps kbps kbps Nakorn Pathom, Ayudhya, 6,100 9,200 14,600 23,000 36,000 53,300 Saraburi Chonburi, Petchburi, 8,500 13,300 20,100 32,400 49,000 71,300 Pacheenburi, Chantaburi Nakorn Ratchasima, Nakorn 11,200 16,700 25,200 40,300 61,200 89,300 Sawan, Pitsanulok Khon Kaen, Udornthani, Lampang, Ubonratchathani, 17,300 26,900 40,500 64,800 97,900 143,300 Chiang Mai, Suratthani, Nakorn Srithammarat Phuket, Songkla, Narathiwat 22,100 33,700 50,700 80,600 122,400 179,300

Note. From Government Information Technology Services (GITS). Retrieved May 5,

20001 from the World Wide Web: http://www.gits.net.th/services/ginet_pricing.html.

The fact that NECTEC leased infrastructure from TOT and CAT and resold the connection to government clients in the GINet network attracted criticisms from some

204 industry observers. The fact that NECTEC was acting like a middleman was

suspicious, critics said (Suvit, personal communication, August 6, 1998; Somkiat,

personal communication, August 24, 1998). NECTEC should have pressed the

government to order TOT and CAT to provide their infrastructure at discount rates.

Critics also thought NECTEC should have maintained its responsibility as a policy think

tank, providing policy guidelines instead of getting involved in service provision (Suvit,

personal communication, August 6, 1998).

SchoolNet

The SchoolNet Project was launched in March 1995 after the Thai Social/Science,

Academic and Research Network (ThaiSarn) reached its maturity. SchoolNet was the first public Internet program involving secondary schools. The project initially connected schools to the Internet via dial-up modems and later via Internet nodes. Although the

SchoolNet project was conceived of and operated as a pilot project by NECTEC, it became a collaboration of three ministries: (1) NECTEC under the Ministry of Science,

Technology and Environment (MOSTE), providing all network equipment and managing network systems; (2) TOT and CAT, under the Ministry of Transport and

Communication (MOTC), providing domestic and international connections; and (3) the

Ministry of Education (MOE), being responsible for promotion of content development and human resources development.

SchoolNet expanded slowly. Out of the total of 38,817 primary and secondary schools in the Thai educational system, the number of schools connected to the network began with 10 in 1995 and increased to 50 in 1996 and 1,261 by the end of 2000. Five

205 years later the number of schools joining SchoolNet was only 2,312 (see Table 6.7).

The 1999 SchoolNet expansion program aimed to provide free Internet access to 5,000

secondary schools (grades 6-12) nationwide, including more than 1,000 schools at the

primary and kindergarten levels (Thaweesak, May 23, 2000). This goal was not met in

1999 and the deadline was moved to 2002 (NITC Press Releases, November 9, 2000).

As of April 15, 2001, among the 2,312 schools in Bangkok and all provincial areas

connected to SchoolNet, 717 were producing content on their own websites (SchoolNet

Thailand, 2001).

Table 6.7

Thai Schools in SchoolNet (1995-April 2001)

Year 1995 1996 1997 1998 1999 2000 4/15/2001

No. of 10 50 189 446 1,208 1,261 2,312 Schools

Note. From “SchoolNet,” by Pairash Thajchayapong, 2000, January. Retrieved April 15,

2001 from the World Wide Web: http://www.nitc.go.th/document/presentation/schlnet-

jan43.pdf; “School Directory,” by SchoolNet. Retrieved April 15, 2001 from the World

Wide Web: http://school.net.th/thaischool/.

The slow expansion of SchoolNet validates the criticisms by some interviewees of the project’s lack of success. The number of 2,312 schools in the SchoolNet is minute when put in perspective with the total number of 38,817 schools in the Ministry of

Education system—barely six percent of all schools nationwide. Because more schools

206 in SchoolNet are secondary schools (Grades 7 to 12), the number of primary schools

(Grades 1-6) in the network is even smaller in proportion (2.63%). Table 6.8 below

shows the numbers and percentages of all schools, and primary schools separately

connected to SchoolNet by region as of April 15, 2001. As seen in the table, more

schools near the capital center (Bangkok, central and eastern regions) were connected

than those further away (eastern, northern and northeastern regions)—at nine percent or

higher and at six percent or lower respectively.

Table 6.8

SchoolNet Penetration (April 2001)

Number of Primary and Secondary Schools Number of Primary Schools in Min of Region in Min of Education System Education System Total In SchoolNet (%) Total In SchoolNet (%) North 8,327 524 6.29 6,855 223 3.25 Northeast 15,041 486 3.23 12,429 126 1.01 Central 5,808 569 9.80 4,475 222 4.96 Bangkok 1,657 194 11.71 38 8 21.05 East 2,454 231 9.41 1,932 111 5.75 South 5,530 308 5.57 4,231 97 2.29 All 38,817 2,312 5.96 29,960 787 2.63

Note. From “Summary: Number of Schools by Jurisdiction and by District,” by Ministry

of Education. Retrieve April 15, 2001 from the World Wide Web:

http://www.moe.go.th/main2/stat-thai/school_AMP43.xls; “School Directory,” by

SchoolNet. Retrieve April 15, 2001 from the World Wide Web: http://school.net.th/thaischool/.

SchoolNet provided four levels of connections.

1. Level 1 – dial-up, one-computer, one-modem connection

207 2. Level 2 – dial-up, one-three computer, one modem connection

3. Level 3 – dial-up, LAN-to-server, one modem

4. Level 4 – leased-line, LAN-to-server or router

Responsible for the procurement of its own equipment, each school in Level 1 and

was given one Internet account and could dial-up free of charge24 to connect to the academic and research ThaiSarn network run by NECTEC. Schools connecting at Levels

3 and 4 paid for their own leased-line connection and ThaiSarn membership fees if they wished to become a node. In addition, schools were also responsible for other telecommunications charges, such as telephone calls. Schools with free dial-up accounts paid for local telephone charges of three baht per dial.25 Schools with leased line

connections paid rates shown in Table 6.9.

Somkiat Tangkijvanich (personal communication, August 24, 1998), a senior

researcher at TDRI, thought that SchoolNet initially had been conceived as a way to

expand leased line connections to schools at reduced costs. Initially, NECTEC set a

leased-line connection policy requiring SchoolNet to buy leased lines from Internet

Thailand, the first official ISP in which NECTEC had a 34 percent stake.

24 Private schools were given a file transfer protocol (FTP) account for one year to transfer the

school Web page to the K12 server at ThaiSarn but the school must already have an Internet account with a

commercial service provider. For private schools that wished to have leased line connections, they could

buy leased-line connections from commercial ISPs at discounted rates. For example, Internet Thailand

gave a 10% discount from the list price.

25 Schools outside Bangkok were able to dial into SchoolNet nodes (regional universities, colleges,

or other schools) in the same province or within the same area code.

208

Table 6.9

SchoolNet Leased-Line Connection Charges Per Month (April 2001)

Connection Charges Per Month in Bangkok Simultaneous Connection Speed and Peripheriesa Access Baht US$b 9.6 Kbps 3 3,000 75 19.2 Kbps 5 3,000-6,000 75-150 28.8Kbps 6 8,400 210 33.6 Kbps 7 8,900 222.5 64 Kbps 20 9,000-11,500 225-288 128 Kbps 40 8,800-12,600 220-315 256 Kbps 80 12,450-19,900 311-498 512 Kbps 160 18,200-31,400 455-785 2 Mbps 640 37,500-75,000 938-1,875

Note. an = Leased-line charges in the provincial areas depend on speed and distance. bn = Calculated at exchange rate 40 baht = 1 USD. From “About Us,” SchoolNet.

Retrieved April 15, 2001 from the World Wide Web: http://www.school.net.th/about/speednode4.php3.

Therefore, this policy had curious implications. In Somkiat’s view, there was no need for NECTEC to sell leased lines26. If subsidy were considered for schools or students, the subsidy should go directly to the schools. In his opinion, there was no need for a central agency to facilitate the subsidy. The food coupon model, whereby coupons

26 If this condition was set initially, it changed by 1997, when other state and commercial providers were also selling leased lines to SchoolNet at reduced rates, including TOT, CAT, Shinawatra

DataCom, TelecomAsia, UCOM, Worldsat Network, and Samart.

209 are directly distributed to recipients who can purchase from any vendor, could be applied to telecommunications services (personal communication, August 24, 1998).

The problem of network connectivity for SchoolNet is central to its success, or lack thereof, in terms of access expansion. The centralized connectivity model, whereby schools had to dial long-distance to the k12 server in Bangkok, incurred high telephone charges for schools. This was a problem until the project merged with the Golden Jubilee network in 1998 and schools were able to dial up at a three-baht per call rate through a local flat-rate system set up for the Golden Jubilee network. Chadamas (personal communication, August 5, 1998), NITC Director, formerly in charge of SchoolNet, explained that telecommunications costs were one of the most serious barriers to expansion of SchoolNet, besides limited budget, lack of skills, and lack of local content.

Moreover, although the project was conceived as a pilot project by NECTEC to be turned over to the Ministry of Education (MOE), the MOE was not eager to be involved in the first two to three years of the project. This was because the MOE had its own plan to expand Internet access to schools and to build a separate school network infrastructure with a node in each of the 75 provinces outside of Bangkok.

In 1996, the Office of National Primary Education Commission (ONPEC) under the MOE set a 2.85 billion baht (US$ 114 million at the 25 baht = 1 USD exchange rate at the time) for the 1997 fiscal year to buy computers for 14,000 schools nationwide.

This project was set as a part of the MOE’s education reform plan under Sukavich

Rangsitpol, then the education minister. The reform plan involved heavy spending on procurement of computer equipment for schools, development of educational media, and

210 teacher training and development. However, the MOE was forced to abandon this plan as a result of serious budgetary shrinkage following the economic crisis in late 1997, combined with corruption allegations involving the education minister Sukavich and senior officials at the ONPEC in the multi-million-baht computer and computer software procurement (corruption allegations discussed further in Chapter 7).

The MOE changed course towards more collaboration with NECTEC’s

SchoolNet after 1998, as SchoolNet was entering Phase II when it merged with the

Golden Jubilee network27 and became SchoolNet 1509 (Chadamas, personal communication, August 7, 1998). The MOE increased its participation by becoming responsible for selecting schools to join the SchoolNet 1509 program. In December

1998, the MOE agreed to become the principal school ISP.

According to Chadamas, the budget for SchoolNet was very limited, operating at about 1 million baht per month in 1997, and by 1998 the budget was largely used up.

Moreover, in 1998 the SchoolNet faced a budget fiasco, when the 391 million baht budget bundled for three major national IT projects (GINet, Software Park and

SchoolNet) was misallocated to the Office of Prime Minister, when it was supposed to be sent to the Minister of Science, Technology and Environment (MOTSE), the parent ministry of NECTEC. This fiasco, coupled with political interference in the Software

27 The Golden Jubilee Network was established through the initiative of Her Royal Highness

Princess Maha Chakri Sirindhorn to commemorate King Bhumipol’s 50th anniversary of His Majesty’s accession to the throne in 1998. The 4-digit number, 1509, was chosen to signify the 50th year of accession (1509) and King Bhumipol’s 9th reign in the Chakri Dynasty (1509). The first digit (1509) was a technical necessity.

211 Park project (as discussed in Chapter 7), resulted in significant loss of SchoolNet and

GINet funds when the budget was finally delivered.

Besides the lack of adequate budget, the SchoolNet project also suffered from a

lack of cooperation with other state agencies. NECTEC had originally envisioned that

the MOE would take over the SchoolNet project after its pilot period ended at the end of

1998. However, the MOE appeared more interested in pursuing its own plans. An

insider, who wished to be anonymous for this comment said high level MOE officials

were more interested in pursuing the ministry’s own infrastructure expansion programs

and viewed NECTEC’s SchoolNet as a competitor. As a result, it was not surprising that

SchoolNet did not receive enthusiastic cooperation from the MOE. In fact, the MOE

staff was ordered to ignore requests for cooperation from NECTEC in the early stages of

the SchoolNet project development. Cooperation from the MOE was not forthcoming

until it was forced to abandon its plan to establish an Internet node in every province and

to equip all schools with computers.

The CAT and TOT were also not particularly helpful in supporting the SchoolNet

project, at least in the beginning. It took a policy direction from the MOTC to assure the

involvement of CAT and TOT in 1998. The MOTC ordered both TOT and CAT to

provide telecommunications connections to SchoolNet at education-discount rates. In the process of doing so, the MOTC submitted a proposal to that effect to Her Royal Highness

Princess Maha Chakri Sirindhorn, the initiator of the Golden Jubilee network project.

Subsequently, HRH Sirindhorn sent a royal decree to TOT and CAT that they must subsidize long distance fees for schools with dial-up connections. As a result, dial-up

212 schools were given five Internet accounts, with an access quota of 80 hours per account per month, whereas schools with leased-line connection were given discounted rates, for instance 3,000-6,000 baht per month for a 64Kbps connection from TOT

(SchoolNet Thailand, December 1998).

The collaboration from CAT, TOT and MOE, resulted in an increase in the number of schools in the network from 189 by the end of 1997 to 1,261 by the end of

2000, with 3328 school nodes. The total number of schools connected was still below the

1998 goal of bringing 1,500 schools into SchoolNet. TOT and CAT contributed limited resources, 128Kbps links to each province, 512 Kbps international link, and 480 total phone lines in 1999. NECTEC explained the underachievement in connecting schools by pointing to the lack of teachers’ capability and the lack of relevant Thai content

(Karnjana, May 12, 1999).

In September 2000, further budgetary problems caused the MOE and NECTEC to postpone a new deadline to connect 5,000 schools to SchoolNet to the 2002 year-end.

However, the plan to expand network capacity forged ahead: increasing to 2Mbps for each of 20 provincial hubs; increasing international circuits capacity to 5.6Mbps; and adding 60 dial-up numbers for each of the 20 provincial hubs. The dial-up numbers for

Bangkok increased from 120 to 450 (NITC, October 11, 2000).

It is clear that expansion of Internet access to the general public suffered a number of obstacles, from budgetary problems and high telecommunications costs to the lack of public service attitude in the state agencies, and lack of necessary skills and support

28 End-of-2000 figures.

213 systems for the public to acquire technology literacy. As a result, the Thai public outside the city centers and outside the reach of commercial Internet services, remain largely unconnected. This is not helped by lack of synergy among responsible government agencies to carry out and push for public interest goals.

The economic environment in Thailand, especially after the 1997 crash, was not one that encouraged projects with social goals. The idea of government subsidies was unpopular. To outsiders, it seems that there was a limited will and few initiatives on the part of the government to build public access, and there was no champion for public access in the government (Zellerbach, personal communication, September 8, 1998).

Some charged that governmental agencies were more concerned with their own survival and organizational interests than to seriously pursue efforts that did not directly benefit the organization (Somkiat, personal communication, August 24, 1998). Strong political will and clearly-defined agenda for public service programs were lacking. Even the

SchoolNet project, which was thus far the largest public access project for Thailand, had been unambitious and very small in scope (Cooper, personal communication, July 10,

1998).

Agricultural Economics Office’s Rural Internet for Farmers Project

RuralNet

RuralNet was initiated and funded by the Office of Agricultural Economics,

Ministry of Agriculture and Cooperatives, and conducted by the Institute of Rural

Development Institute, Chulalongkorn University. RuralNet was conceived as a project to expand information technology access to rural farmers in order to bridge the

214 technological gap and make available information for farming communities

concerning technological advancement and information essential to their economic and

social livelihood. Part of the rationale of the project was that the rural segment of the

population did not receive adequate attention and continuous support from the

government. Clearly defined policy on rural development at the national level was

lacking, while at the same time local organizations, especially agricultural cooperatives

and brand-new organizations like Tambon (sub-district) Administration Organizations

(TAOs), or sub-district offices, were not yet strong enough to be on the forefront of

bringing new technology into the communities (Suvit, personal communication, August

6, 1998).

Phase I – The first phase of the project (1995-1998) involved a feasibility study,

project design, selection of participants, and network building.

The feasibility study revealed that the most realistic and viable unit of

participation was at the organizational level, rather than the individual level, considering

costs (high if targeting individuals but lower if costs could be shared within community

of users) and potential benefit from sharing of information within and among user groups.

Hence, the defined unit of participation was a tambon administration organization, a

newly created local administration unit typically headed by a young graduate in political

science, deemed more receptive to the introduction of new technology. Another

important consideration was the fact that the TAO has an office with a small staff and is

typically equipped with a telephone line. A TAO is also a democratically elected body

and is responsible for developing and implementing tambon development plans and

215 policies, including infrastructure development. Other organizations, particularly agricultural cooperatives and other agricultural groups were considered possible participants.

Participants were chosen through local political networks of Gothom Areeya,

Thailand’s leading pro-democracy activist and grassroots mobilizing force behind democratization of local administration in Thailand, or through connections with local higher education institutions in the local areas, such as universities or Rajbhat institutes

(Teacher’s colleges). By 1998, the project involved 21 districts in six provinces in the central region (Nakorn Pathom, Rachburi, Singburi, Lopburi, Ayudhya, and Supanburi)

(Suvit, 1998).

RuralNet was originally designed as a closed-bulletin board system (BBS) with a server at Chulalongkorn University in Bangkok. Due to telecommunications costs for connecting long-distance to the server in Bangkok, the system was first set up to be an off-line BBS, i.e., users only connected to upload and download messages. Selected

TAOs and a few other agricultural cooperative offices were given free-of-charge a set of necessary equipment, including computer, modem, and Free Agent software (a BBS interface software developed by the training team). It was expected that news concerning agricultural development and prices would be delivered through the BBS and farmers would have opportunities to post questions concerning their crops or any other concerns on the bulletin boards, where “experts” could post their answers.

Chulalongkorn University’s Institute for Rural Development organized the technical set-up, project introduction, and training of participants with the collaboration

216 of higher education institutions in the local areas. For instance, Kasetsart University-

Kampaeng Saen campus in Nakorn Pathom, coordinated, assisted in or provided training, as well as provided technical or other support to participating organizations in the area.

Phase I Evaluation – The first phase of RuralNet (1995-1998) was evaluated as

having limited success. The top-down model used by the project was problematic in

several areas:

1. The project was initiated from the Ministry of Agriculture and Chulalongkorn

University, not from the farmers in the villages who were the real beneficiaries. The top-

down, handout model did not provide any opportunity for the potential users to provide

input as to what they needed.

2. Although the project was top-down, there was no official endorsement of the

project through the command chains. As a result, local officials at the provincial, district,

and tambon or sub-district levels did not view the project as part of their duty, hence did

not take the project seriously. Some local officials considered the project “extra work” or

“volunteer work” at best.

3. The project was unable to reach individual farmers through participating local

organizations because the first phase largely involved introduction of the project, and

building understanding and gaining familiarity with the technology (use of computer and

the BBS network). The participating organizations themselves were still struggling with

the concept of the project. Therefore, the true objective of the project could not be

reached, e.g., to develop communication with and to encourage more participation from

217 the farmers in efforts to build an information database for the local agricultural communities.

4. The centralized BBS system with a server at Chulalongkorn University proved problematic for access, in terms of technical difficulties and telecommunications costs.

That is, the system was not always reliable and the server was often down, making it difficult and discouraging for participants to log on. In addition, telephone charges were at the long-distance rates from the participants’ location to Bangkok. Local hosts were set up in two provinces, Lopburi and Rachburi, in 1998. Participants in these provinces could then dial up to the local hosts for only three baht per connection.

5. Unfamiliarity with technology intimidated and discouraged participants tfrom participating. Technical support was also inadequate and far from site. Often, participants stopped using the system simply because of minute computer problems, which could have been easily fixed by someone familiar with computers. Yet, for many participants these problems loomed large and had to be solved by technicians (often members of faculty or staff at local institutions) who were not always available onsite. In cases where the access point was at the local agricultural cooperative office, the computer was often not even used or connected to the modem because the office staff needed to use the phone line(s) for facsimile. Also, the staff sometimes considered connecting to the

RuralNet BBS an interruption to their routine (Sripen, personal communication, August

13, 1998; Suvit, personal communication, August 6, 1998; Kalya, personal communication, August 6, 1998; Srisak, personal communication, August 19, 1998).

218 Based on these problems, the RuralNet BBS system had very low traffic.

Apart from the technical issues, participants were also discouraged at times by a lack of timely responses to their questions. In other words, sources of information were lacking as well. There was a small number of outside participants and volunteers available to exchange ideas and information with participants. By early 1998, the number of BBS users was at the level of 30-50 per month, and the messages averaging about 12-18 messages per day. Table 6.10 below shows the statistics of RuralNet BBS messages and participants during June 1997 to February 1998.

Table 6.10

Statistics of RuralNet BBS Messages (June 1997-February 1998)

Messages 6/97 7/97 8/97 9/97 10/97 11/97 12/97 1/98 2/98 Total/mo 77 56 35 132 193 167 330 502 336 Avg/day 3.9 2.5 1.9 4.6 7.2 6.7 11.8 17.9 14.6 # of days 10 7 113 1 4 4 2 3 2 w/o msg # of users 18 13 14 28 37 27 41 55 51

Note. From Summary Report: Project to Hire Contract Experts in the Implementation of information Distribution Program, by Sripen Durongdej, Institute of Rural Development,

Chulalongkorn University, 1998, A Report to the Office of Agricultural Economics,

Ministry of Agriculture and Cooperatives, Table 1.

Phase II – The negative evaluation of the Phase I RuralNet resulted in a reevaluation of the approach to the project. Because of the inability of the project to provide adequate support and follow-up in so many locations, Phase II was scaled down to focus only on two tambon administration offices in Tambon Tung Noi and Tambon

219 Kampaeng Saen in Nakorn Pathom Province. The approach was then adapted to be more participatory, involving more communication with the local participants through regular meetings, brainstorming, and visits. Training and support were more systematically provided and participants had more involvement in deciding the type of information they needed and the way in which they could incorporate the use of this technology in local community development, through making it part of the tambon development plan.

The second phase of the project was set towards the end of the project’s fiscal year and therefore received funding for only three months (August-October, 1998). After

October 1998, the budget was expected to come from the tambon’s development allocation fund. In this phase, efforts were made to encourage more active participation from outside the communities, e.g., agricultural experts, civil servants and other interested individuals. A recommendation was made, and accepted, to create local newsletters using information on the BBS and input from local communities. During the initial three months, funds were allocated for publication and distribution of newsletters.

Local institutions, in this case the Agriculture Department of Kasetsart University, were more involved in the development process by providing more support and functioning as an information resource for the users.

After Phase II was implemented in late 1998, there was no further information on the development of the project. Staff at Chulalongkorn University’s Institute of Rural

Development who had worked on the project reported that the Institute was no longer involved in the project by 2000. An informant who was involved in the project said the

220 project was brought under the supervision of the MOAC with the implementation of

Phase II. However, the RuralNet project was not reported among a long list of projects operated by either the Office of Agricultural Economics or the MOAC by late 2000.

Some project insiders observed in 1998, at the beginning of Phase II implementation, that local communities would have little incentives to continue the project in the absence of additional funding. Also, because the project was not viewed by the participants in the tambon organizations as a priority project, it was unlikely that the local communities would use their own funding to continue the project.

Public Internet projects by TOT and CAT

The TOT and CAT came rather late in providing public Internet services. TOT began providing public Internet access in Chiang Mai in 2000. Although TOT had planned to install 600 public Internet booths by early 2001, as of May 2001, it had installed 300 in local TOT offices and public locations. Users required a prepaid TOT card to access TOT’s public Internet. The cards were sold at various prices, 50, 100, 200, and 500 baht. The TOT public Internet charges were three baht per connection and 0.20 baht per each minute of use (equivalent to 15 baht per hour).

In December 1999, CAT opened public Internet outlets to commemorate His

Majesty the King’s sixth cycle birthday. CAT’s public Internet had similar features to those employed by TOT. Users required a CATNET card. As of May 2001, CAT had installed 400 of its planned 800 terminals in its local offices nationwide. CAT planned to extend the service to 1,2000 districts over three years. CAT charged higher rates than

221 TOT service, at the three baht per connection but 0.50 baht per each minute (or 32.50 baht per hour).

Neither TOT nor CAT public Internet services was successful. They were unable to compete with the commercial Internet cafes that were more widely available, cheaper

(charges per hour can be as low as 10 baht in some areas, especially near campuses where competition was keen), and operating at better hours. The TOT and CAT public Internet locations proved inconvenient for potential customers who either worked or went to school because TOT and especially CAT public Internet terminals were located in the respective local offices which operate only during business hours.

In addition to these public Internet projects, five small-scale projects aimed at providing information technology access to rural schools, the disadvantaged and the disabled were implemented according to the initiatives of HRH Princess Maha Chakri

Sirindhorn, as follows:

1. IT for Rural School Education, involving over 70 schools,;

2. IT for Disabled Persons, concerning the use of IT applications to develop independent living and learning skills and to enhance education and job opportunities

(e.g., Speech Viewer, easy balls (large mouse for physically handicapped), handicapped access, etc.)

3. IT for Sick Children in the Hospital, involving four hospitals,

4. IT for Cultural Dissemination Program to develop local cultural content and database, and

222 5. Computer Training for Female Inmates, having successfully trained over

100 female inmates. (Chadamas & Thaweesak, 2000).

Thailand’s Internet Policy Task Force (IPTF)

In October 1999, the cabinet approved the establishment of an Internet Policy

Task Force (IPTF). The IPTF is charged with:

1. Collecting and/or preparing basic data and indicators of the Internet such as the number and type of users, usage, domains, hosts and traffic.

2. Conducting studies and research, as well as monitoring Internet activities and their impact, in order to recommend appropriate policy and action to be taken by the government.

3. Seeking methods and measures for effective expansion of the Internet in the country. (NITC Order No. 15/2542).

The Internet Policy Task Force is chaired by the director of NECTEC, and composed of over 20 members, who are representatives of related governmental agencies

(e.g., NECTEC, TOT, CAT, National Security Council, National Police Force, Ministry of Transport and Communications, Ministry of Education, Ministry of Foreign Affairs,

Ministry of Defense), representatives from the industry (e.g., ISP Club, Internet User

Club, Webmaster Club), and a few non-governmental representatives, including

Professor Yuen Poosuwan, a computer science expert from Kasetsart University, Somkiat

Onwimol, a respected media professional and a senator, Gothom Areeya, a respected democracy activist, and Professor Karnchana Karnchanasut, Head of Thailand’s Internet

223 domain names administration office, thnic. A copy of the official IPTF order with a full list of the task force members is included as Appendix F.

In summary, efforts to expand public access to the Internet in Thailand were done on a limited scale using a largely top-down approach, as demonstrated by the GINet,

SchoolNet and RuralNet projects. Budget was a major driving force in creation and implementation of these projects, as much as it was an obstacle to its continuation and success. Budgetary problems were acute especially when the original funding dried up, leaving projects that could not yet be fully managed by the participants. Programs with good initiatives to promote access among the information poor such as the RuralNet

Project and the IT programs for the disadvantaged and the disabled tended to be piecemeal, small in scope and did not enjoy sustained support from the state to follow up or expand the programs further. Real grassroots, bottom-up initiatives were lacking and not encouraged by the government or by authorities with ability to fund projects. Also, the center-to-periphery model of expansion was hindered by the cumbersome bureaucratic mechanism often negatively impacted by bureaucratic politics.

It is evident that state agencies in different arms of government did not cooperate well with one another, as demonstrated in the implementation of these public Internet programs. As a result the projects suffered. The next chapter discusses the politics of

Thai telecommunications, in which several forces in the policymaking process of Thai

Internet and telecommunications are discussed.

224 CHAPTER 7

POLICY POLITICS OF THAI TELECOMMUNICATIONS

This chapter discusses telecommunications politics with an emphasis on the latter

half of the 1990s. The discussion focuses on the interactions among different interest

groups in the Thai telecommunications political landscape—how they entered the scene,

how they influenced telecommunications development and other groups in the process.

The first part of the chapter is a discussion of the role of NECTEC and NITC in Internet

policy politics, followed by a discussion of the link between telecommunications

liberalization and corruption with examples drawn from two major infrastructure

projects. The latter part of the chapter discusses the rise of corporate influence in the

political process and telecommunications business interference in the formation of the

new regulatory body, the National Telecommunications Commission, and a new element

of democratic interests in Thai telecommunications politics.

NECTEC and NITC: New Think-Tanks in Policy Politics

Perceptions of NECTEC and NITC as new think-tanks

The mixing of regulating and operating functions has been an integral part of Thai

telecommunications history, and a problem. The National Electronics and Computer

Technology Center (NECTEC) was a young state body designated to guide the

development of the emerging information technology (IT) sector. Established in 1987,

NECTEC came into the national telecommunications arena as an independent state

authority staffed with highly educated, often western educated, personnel. It was to be a new think tank for the country conducting research and development in electronics,

225 computer and information technology. With this progressive image, NECTEC was

expected to be a representative of a new generation of state agencies that would be less

prone to Thailand’s usual political manipulation and bureaucratic politics.

In the highly politicized environment of the 1990s in which scandals about

corruption and irregularities involving several national infrastructure projects, NECTEC received mixed reviews about its performance as a new state policy think-tank. National

IT projects like SchoolNet and GINet, operated by the NECTEC under the policy guidance of the National Information Technology Committee (NITC), were considered by many to be unsuccessful (discussed in Chapter 6). Some industry leaders interviewed by the researcher felt that NECTEC was under-appreciated and did not receive due recognition for its leadership in national IT development (Trin, personal communication,

August 27, 1998), whereas others viewed the agency as weak, bureaucratic, and unfocused. In addition, as a policy body NITC was also considered inadequately independent and unwilling to stand up to political powers, hence unable to make a real difference (Mechai, personal communication, September 9, 1998; Cooper, personal communication, July 10, 1998). Yet, the two agencies were considered the best alternative available in Thailand’s historically politically-charged policy environment, and were given somewhat qualified approval.

Former NITC director Pichet Durongkaveroj described the ideal role of NITC as a

policy think-tank and an inter-ministry and private sector coordinator. However, in

practice NITC had also been responsible for administering several jump-start

operations—a responsibility that was not desired by the agency itself (Pichet, personal

226 communication, July 30, 1998). Critics pointed to the close relationship between

NITC and NECTEC as problematic, NITC was expected to be a body solely responsible

for setting national IT policy guidelines. It was a body that grew out of NECTEC, from

which its personnel were drawn.

With this history of agency formation and intertwined functions with NECTEC,

NITC was seen as being in a poorly defined and an unattainable position as a policy body

free of organizational interests and interferences from special interests (Zellerbach,

personal communication, August 8, 1998,). The essential problem in the organizational

location of the NITC (within NECTEC) was that there was no division between policy

setting and operational implementation, which was a basic tenet of management. Under

this condition, the agency was unable to achieve long term goals while having operational responsibilities because of conflicts between the two responsibilities. The situation was made worse by the fact that NITC and NECTEC also acted as regulatory bodies in setting industry standards, and as a commercial providers in selling software and by setting up the commercial ISP, Internet Thailand (Cooper, personal communication, July 10, 1998).

In this respect, the incestuous relationship between NECTEC and NITC and the dual function of the twin agencies made them akin to the Telecommunications Organization of

Thailand (TOT) and Communication Authority of Thailand (CAT)—the two state agencies often accused of having vested interests.

Furthermore, NECTEC’s many functions caused some to question its ability and

effectiveness in handling them all, from conducting research and development, to

developing policies (through NITC) and operating many large and small projects. Some

227 critics thought that several of NITC/NECTEC-initiated projects were not truly effectual but were operated more like “showcases.” However, the real issue seems to be the ability of the two agencies to effectively manage all the projects that they had created.

Some critics saw NECTEC and NITC as over-extending themselves. NECTEC and

NITC executives responded by citing lack of manpower and insufficient budget

(Thaweesak, personal communication, August 24, 1998; Pichet, personal communication,

July 30, 1998). NECTEC director Thaweeksak Koanantakool explained that the official staffing for NECTEC originally was set at 99 permanent positions. However, due to workload and, thanks to its budgetary independence, the agency was able to create extra positions to meet work demands. The size of NECTEC staff in late 1998 was 400, four times the original quota. In addition, the NECTEC director explained that the agency had to respond to policy agendas that were imposed from many directions, particularly from government ministries, and often in haphazard fashion and without prior consultation with the agencies, making it difficult for the agency to respond in the most effective manner (Thaweesak, personal communication, August 24, 1998).

Independence of NECTEC and NITC was a critical point. Considering their status as independent state agencies with relative freedom to spend their budgets,

NECTEC and NITC were seen as susceptible to potential exploitation (e.g., use of budgets for organizational or special interests). On the other hand, the two agencies had relative freedom to build technologically efficient and cost-effective public networks that would have stimulated access expansion in the early stage of Internet development.

Instead, they put efforts in developing sophisticated technologies (multi-media, Software

228 Park, etc.) that tend to benefit commercial interests rather than the public at large

(Cooper, personal communication, July 10, 1998; Suvit, personal communication, August

6, 1998).

Observers in favor of either free public access to the information network or free and fair competition pointed to the involvement of NECTEC in commercializing the Thai

Internet as an overextension of responsibility. To observers from these two camps, commercialization of the Thai Internet was either done too soon or done in an unhealthy way. NECTEC and NITC supporters considered NECTEC’s commercial initiative warranted, given that no other agencies were willing to undertake the effort (Dawson, personal communication, August 17, 1998). Others, however, viewed the move as a serious conflict of interest (Suvit, personal communication, August 6, 1998; Cooper, personal communication, July 10, 1998). Many agreed that even if NECTEC had a good reason to initiate a commercial ISP in 1995, the time for it to withdraw its 34 % stake in

Internet Thailand was due when the commercial Internet sector was sufficiently established by 1998. The majority of interviewees also agreed that NECTEC’s appropriate role was to take a more active role in creating a more competitive environment for the IT industry as a policymaking agency, not as an operator.

Other criticisms of NECTEC concerned its tendency to be self-contained and in control of initiatives and projects, which in turn made the agency rather closed to input and collaboration from independent entities or individuals. For instance, some reported that their offers to collaborate on projects that were noncommercial but beneficial for the public at large were not very well received. A problem seemed to be the tendency of

229 NECTEC (like many other state institutions in Thailand) to require complete ownership of intellectual property rights over any work resulting from collaborative efforts. This demand for complete intellectual property ownership and unwillingness to share it, were said by some industry insiders, to have limited possibilities for NECTEC itself and Thailand in general to build a body of work in the public domain that could be shared with the society at large and not just have limited use and limited potential for further development within an organization.

Although NECTEC and NITC were well regarded as more progressive than other state agencies, they were not immune to criticisms often reserved for state agencies with vested interests. Some critics even went further to say the agencies were more concerned about their own survival and internal organizational interests, than with creating an effective, transparent and workable national IT policy. These criticisms were strong; yet, they were understandable if the Thai public mood was taken into account. After the 1992 pro-democracy protests and the 1997 economic crash, the Thai public became very politicized in terms of demanding social justice, democracy, state transparency, and state obligations to the public. There was widespread public resentment against the state for having failed to prevent and protect the country from rampant corruption that cost the country dearly in the 1997 financial collapse and national economic downfall. Roused by political rejuvenation and newly found public obsession with political and social reforms in the post-crisis time of late 1990s, more state affairs were put under closer public scrutiny. NECTEC and NITC did not arise in a vacuum. In fact, an examination into the organizational structure of these two agencies would reveal that they were no less

230 susceptible to political interferences than any other state agencies. The difference was perhaps that NECTEC and NITC were new, and came in the time of public eagerness for serious systematic reforms. As a result, they were met with higher expectations.

NECTEC was put under the National Science and Technology Development

Agency (NSTDA), an independent agency created under the Science and Technology

Development Act (1991). As an independent unit the NSTDA had management and budgetary freedom. However, in terms of chains of command, NSTDA was put under the oversight of the Ministry of Science, Technology and Environment (MOSTE). The appointments of members of the NSTDA board of directors were made by the MOSTE minister. The first significant test of NECTEC’s independence and ability to withstand political interference came with the selection of the location for the Software Park in

1998.

Software Park and politicization of NECTEC

The Software Park Project grew out of policy research on a development strategy for the software industry in Thailand conducted by NECTEC. Supported by Thailand’s

Board of Investment (BOI), the project was approved in May 1997 and went into operation two years later. Software Park was intended to (a) offer state-of-the-art infrastructure and investor friendly environment for new and small and medium enterprises (SMEs) in the software industry, (b) provide technical support and technology transfer to Thai IT professionals through education and training, and (c) establish a marketplace for software for both national and international businesses (Thaweesak,

1999; Software Park Thailand, 2001a).

231 According to the Software Park managing director Rom Hiranpruk Software

Park was the first major project that attracted attention from politicians to the agency.

This was because Software Park was seen as a new kind of industrial project, which

involved a large real estate deal (Rom, personal communication, 1998, July 30). The

total budget allocated for the project for 1998-2001 amounted to 1.8 billion baht.29 In

fact, budgets became an issue in late 1998 when there were reports of “budget mishap”

concerning three major national IT projects operated by NECTEC: SchoolNet, GINet and

Software Park.

Budgets totaling 391 million baht allocated for the three projects for the fiscal

year 1998 were mistakenly sent to the Office of Prime Minister, instead of the to the

MOSTE, the parent ministry of NECTEC. The funds were sent back to the Budget

Bureau, causing serious delays in budget delivery for the year. In the process, the GINet

and SchoolNet were reported to have lost a substantial amount of their allocated budget,

while Software Park received 262 million baht, more than twice its 1998 original

allocation for 1998. It was unclear whether the mistake was a simple administrative error

or a result of political manipulation.

Amidst rising criticisms of NECTEC (about its involvement in many projects),

then deputy prime minister and chair of the NITC Suwit Khunkitti ordered a restructuring

29 The total budget for Software Park was 1,810 million baht, with the following annual allocation:

134.54 million baht for 1998, 848.103 million for 1999, 708.557 million baht for 2000, 84.186 million baht for 2001, and 34.614 million baht for 2002. From “Prissana tuek Software Park: lock spec TOR pon

Jasmine” [Software Park building mystery: TOR spec locked for Jasmine], 1998, May 17-20, Tansettakij,

p. 33.

232 of NECTEC and NITC in June 1998. The order required the NITC to split from

NECTEC in order to separate the NITC’s policy functions from NECTEC’s operating functions to avoid bias and insure the independence and efficiency of the two agencies.

The NITC was expected to be in charge of the national IT master plan with authority to oversee and evaluate IT projects by government agencies, including those of NECTEC.

Suwit’s order also specified that the two agencies should reevaluate their roles. In particular, NECTEC must find its own direction and focus, citing NECTEC’s multi- faceted tasks as a potential cause of its inefficiency in research and development, operations, and as a commercial provider (“Suvit prab,” June 25, 1998; Pongpen, June

30, 1998). The ramifications of the deputy prime minister’s order were significant in that the order effectively cancelled NECTEC’s previous bidding process to select the builder of the Software Park. The order in effect annulled the previous bidding result and declared Samart Corporation, a local telecommunications player, the winner.

After much debate about the separation of NITC from NECTEC, the separation did not take place. This could perhaps be interpreted that NECTEC, as an organization, was able withstand outside political interference. Yet, it could also mean that the force of interference was not strong enough to change the course of NECTEC’s original plans.

Another political attempt to interfere with NECTEC’s organizational management occurred around the same time, but was similarly unsuccessful.

When the former NECTEC director Pairash Thajchayapong was leaving the office to take the directorship of the NSTDA, Thaweesak Koanantakool, then NECTEC deputy director, was announced to be the next director. The appointment of Thaweesak was

233 abruptly halted by the MOSTE deputy minister Pornthep Thejapaipul, who was reported to be in favor of appointing an outsider to head the agency. However,

Thaweesak took the directorship of NETEC shortly after (Sompit, June 2, 1998;

“Pornthep,” June 15, 1998). These interferences in NECTEC were indicative of

NECTEC having achieved the new status of power and a status of a politicized agency.

Politicization of powerful state agencies handling lucrative deals had been

Thailand’s political reality for the greater part of its modern history (last half of the twentieth century). Corruption and irregularities plagued large infrastructure projects in the 1980s and the 1990s, involving politicians, business interests and bureaucrats with various roles in government concessions. As a new state entity in position to deliver many potentially big-budget projects, NECTEC was susceptible to interference that would inevitably compromise its ability to function as a truly independent entity.

Meanwhile, as NITC continued to be attached to NECTEC, it also continued to leave itself open to criticism and speculation about its integrity and efficiency as an independent policy body.

Telecommunications Liberalization, Private Participation and Corruption

Efforts to liberalize the telecommunications industry in the l990s in Thailand were intended to solve the chronic bureaucratic rent-seeking problems intricately linked with state monopolies. Private participation was encouraged through build-transfer- operate (BTO) schemes whereby private companies were granted concessions to build and operate telecommunications services. It was hoped that privatization of telecommunications and private capital would not only help the government expand

234 much needed telecommunications infrastructure to accommodate the country’s rapidly growing economy, but also enable more free and fair competition and transparent operation of services in the industry. However, privatization of the Thai telecommunications industry itself became a major cause of corruption (Sakkarin, 2000).

Because telecommunications infrastructure projects in the 1990s involved unprecedented amounts of capital, liberalization of telecommunications created an opportunity for lobbying that involved many interest groups, bureaucrats, politicians, and local business leaders (Pasuk & Baker, 2000). While liberalization provided new opportunities for heavy-capital business activities, the rise of democratic politics empowered political parties, which were heavily factionalized and unbound by strong political ideologies.

Together, these two forces set the stage for illegal and corrupt activities through the alliances of business and political factions that influenced the process of government telecommunications licensing and bidding of BTO contracts and other regulatory changes.

In a time when economic prosperity seemed no longer beyond reach and foreign capital flooded the local economy, growing democratic politics expanded the scope of interplay between new political players, new political groups and new policy agendas

(Pasuk & Baker, 2000). Having economic growth as a common goal, policymaking technocrats, empowered politicians and increasingly prosperous business groups formed a pro-liberalization coalition that would, as Pasuk Phongpaichit and Chris Baker (2000) argued, become a fundamental element that led to Thailand’s 1997 economic downfall.

Pasuk and Baker contended, from the perspective of the political economic environment

235 in which domestic and foreign forces interacted and interest groups competed, the

Thai economic crisis was not simply a result of policy mistakes, nor inherent failures of its economic model, but the “systematic disordering of economic policy making as a result of economic growth, neoliberal-inspired financial liberalization, and democratization” (p. 31). The pro-liberalization coalition that came together during this time included foreign players such as the World Bank and the IMF. In explaining the perspectives of each participant in this pro-liberalization coalition and how each participant was contributing to Thailand’s economic bubble before it burst in late 1997,

Pasuk and Baker wrote:

The participants in this pro-liberalization coalition were motivated by differing agendas. For the World Bank, liberalization would theoretically bring welfare benefits through more rational capital allocation, and would also increase market access for the bank’s Western patrons. For the Thai technocrats . . . empowered to handle rapid change in the economy, liberalization would sweep away old oligopolies which hampered growth and welfare. For the new business groups, liberalization was a windfall which opened up access to capital on an unimagined scale. Ultimately this was a disastrous coalition as the World Bank and technocrats could not control the political consequences of liberalization, and the new business groups did not understand the macroeconomic consequences. The new coalition did not have either the ideological or political coherence to establish a workable policy regime (Pasuk & Baker, 2000, p. 31).

Parallel with the picture that Pasuk & Baker painted of the Thai liberalization political economy, telecommunications liberalization did not come with instant attainment of liberal economic discipline (of fair market competition and transparency). In the domestic environment in which business-political alliances were growing strong, this move towards liberalized policy regime allowed for the mixing of a new tradition

(liberalization, private participation) with the old one (political and bureaucratic corruption).

236 TOT’s three-million-line telephone project

Throughout the 1990s, irregularities, graft, and corruption surrounded several

large-scale telecommunications infrastructure projects. The first and most controversial

of the projects that captured public attention was the TOT three-million-line telephone

expansion project introduced in the late 1980s, worth US$4 billion (Sakkarin, 2000). A

TOT concession to operate the three-million telephone lines was awarded during the

Chatichai government (1989-1991) to a large local agribusiness, Charoen Pokephand

(CP). The selection of the CP business group sparked public criticism of political bias

because CP was not the highest bidder in any aspect: revenue sharing, concession

duration, or investment costs. In fact, its terms were among the least desirable.30

Because rising rumors of collusion attracted public attention to the project, the extraordinarily high stakes compelled CP to use its political resources and connections for intense lobbying and wide-scale political maneuvering with all parties and many levels of government offices.

The high profile of the case put CP’s close ties with military under close public

scrutiny, stirring even more controversies, which finally forced the reshuffling of the

Chatichai cabinet. This gave an opportunity for the military which previously had

conflicts with this government to claim corruption as the reason for its coup in February

30 For detailed analysis of the bidding process of this project, see Sakkarin Niyomsilpa, The

Political Economy of Telecommunications Reforms in Thailand, 2000, London & New York: Pinter, pp.

182-194.

237 1991. As a result, the Chatichai government was brought down, and the military returned to dominate politics temporarily.

During the rule of the military junta from February 1991 to March 1992, the three-million-line battle went on among the military, the technocrats (brought in by the care-taking prime minister Anand Panyarachun and endorsed by the World Bank), the politicians and the business groups. Conflicts between the military and the technocrats escalated when the military took over the TOT by sending a top general, General

Issarapong Noonpakdee, to chair the TOT board and the care-taking prime minister

Anand ordered an investigation of the project. Several urgent studies were conducted, including one from the World Bank, and all recommended substantial revision of the contract. Following the studies, intense negotiations between the government headed by

Anand and CP began. The negotiations were highly charged and highly political, as the military pressured Anand to decide in favor of CP.

In an unusual case in which Anand was highly independent and extremely popular among the public, the military was put somewhat at bay when Anand threatened to resign. Unable to afford Anand’s resignation, a compromise was reach and CP’s contract was changed for CP to operate two-million lines in Bangkok under the terms laid down by the negotiation committee. The remaining one-million-line portion of the original project was subsequently offered to new bidders. The bidding process coincided with the political rejuvenation of the Thai public following the popular overthrow of General

Suchinda Kraprayoon from the premiership in May 1992. The large-scale democracy protests effectively eliminated the military as an important factor in Thai politics. The

238 bidding process of the one-million-line project was said to be among the most transparent of major infrastructure projects in the Thai history. The winner selected to operate one million fixed lines upcountry was a consortium of Jasmine, Loxley and

Italian Thai, known as Thai Telephone and Telecommunications (TT&T) (Sakkarin,

2000).

As the economic bubble expanded and democratization of politics progressed, however, the tradition of collusions between business and politics continued, making the

1992 transparent bidding of the one-million phone lines appear as through it were an anomaly rather than a new standard setter. Later projects, such as the Synchronous

Digital Hierarchy (SDH) worth billions of baht, also encountered intense political and business maneuvering. But one thing was changed. Closed deals were no longer easy and public attention to state affairs was on the rise. As more corrupt bureaucrats and politicians would find out, they were no longer unaccountable for their corrupt actions.

With the introduction of the Internet, computers became a new opportunity for deals. The next section discusses the case of political corruption involving computer procurement and government officials and politicians. The case demonstrates the corrosive impact of democratic politicking in Thai politics.

Ministry of Education’s computer procurement scandals

As part of the 1996 education reform program by the Ministry of Education

(MOE) set by the then MOE minister Sukavich Rangsitpol, the Office of National

Primary Education Commission (ONPEC) allocated 2.85 billion baht (US$ 114 million at the 25 baht = US$1 exchange rate) to buy computers for 14,000 schools nationwide. A

239 total of 3,720 primary schools were to be given ten computers each and 10,280 were to get six each. (“B2.8 billion plan,” June 5, 1996). Contracts to supply computer equipment and software would be put out for bidding.

In late 1996, complaints emerged from a computer company of an unfair bidding process for the 1.3 billion baht contract for the 3,720 primary schools (Sirikul, October 4,

1996). Powel Computer Company claimed of being misrepresented in the bidding process. It said that the ONPEC was misled into thinking that it was not authorized by

Microsoft (Thailand) to distribute Microsoft software, which was not true. This misrepresentation caused it to qualify for only 16 percent of the bidding contests.

The project again attracted broad public attention during the 1997 economic crisis. After the value of the baht fell, ONPEC’s computer procurement scheme was put under review, which revealed that although ONPEC received a lump sum in the 1996-

1997 fiscal year, it failed to demonstrate how the money was spent. The House budget committee scrutinizing the 1998 budget bill required ONPEC to provide the 1996-1997 fiscal spending details before it would consider authorizing the 1997-1998 budget. In early August 1997 the committee set new guidelines for approving computer procurement schemes for all ministries worth over seven billion baht. (“Computer purchase scheme,” August 5, 1997).

Two weeks later, the House budget committee ordered a cut in ONPEC’s budget resulting in only 800 state primary schools, one school in each district being provided with computers. It also trimmed by 10 percent the MOE budget for providing computer training to teachers. ONPEC worked out a new plan, which required 1.6 billion baht.

240 Some 700 million baht was expected from the government and 900 from a World

Bank loan. These funds would buy computers for 4,3000 schools (Sirikul, August 23,

1997).

Such politicking would eventually influence the balance of power in Thailand’s telecommunications politics. In a censure debate against the New Aspiration Party

(NAP)-led cabinet (which presided over the crisis), the democratic opposition alleged irregularities in ONPEC’s computer procurement plans which involved a NAP member,

Sukavich, the former MOE minister and deputy prime minister. Sukavich was alleged by the opposition to have endorsed the purchase of “hi-class” (multimedia computers with

Pentium processors) from a Taiwanese firm at unusually high prices. A state-owned enterprise under the MOE, Kurusapa Business Organization (KBO), was also implicated in the allegations in the 500-million baht computer software deal. The KBO won a bid to supply ONPEC with 5,999 sets of computer software, priced at 60,000 baht each, and another bid to supply 120 sets of computer software worth 135 million baht to the

General Education Department. The KBO was alleged to have colluded with three suppliers, Comzone, Panda and Progress. The latter two were presumed to have been dummy companies (Sirikul, October 14, 1997). In the opposition’s allegations, the software specifications were tailored to coincide with those of the merchandise proposed by companies with certificates of authorization from Microsoft (Thailand) to distribute

Windows ’95 and Microsoft Office. Only four companies had direct certificates from

Microsoft, including Ton Or Grammy, Comzone, Niyom Panich, and the Ministry’s own

KBO. (Sirikul, January 22, 1998).

241 In late 1997 and most of 1998, democrats led an investigation into the project

after the Chavalit (NAP-led) government was forced to step down and the Democratic

Party led by Chuan Leekpai returned. Investigations led to revocation of software

contracts given to KBO and the case was sent to the Counter Corruption Commission, which subjected the alleged parties to criminal investigation. In late 1998, ONPEC and

GED were ordered by the Democratic-led cabinet to seek legal actions against 18 officials found to have been involved in the procurement scandal (Sirikul, August 7,

1998). In April 1999, a Education Ministry committee approved unanimously to dismiss six senior officials implicated in the computer deals. Five of the fired officials were top

executives of ONPEC under Sukavich during 1996 to 1997 (Sirikul, May 1, 1999).

The Rise of the Businessmen and Their Influence in Politics and Policy

In the formation of new alliances among segments of technocrats, politicians and

business interests, as seen in the two cases discussed above, old bureaucratic powers

(represented by the military, government officials and their political allies) were put

under increasing pressure and closer scrutiny by pro-democratic forces. And, as seen in

the case of the three-million-line telephone project, the military was effectively

eliminated from politics.

As the Thai political system became more democratized, the new acceptable

venue to assert influence was democratic participation. Because technocrats in charge of

national policymaking and the increasingly aware public were largely resentful of old

oligopolistic arrangements between the military and the bureaucratic officials, political

players and interest groups recognized that an effective way to influence policy to their

242 interests was to participate in politics through the electoral system. From the late

1980s, when the military was on the decline, more former generals entered politics and became members of parliament (such as Chavalit Yongchaiyuth, leader of NAP). And as macroeconomic policymaking was considered of extreme importance, technocrats were often appointed to key ministerial positions to take charge of policy. For instance, Tarin

Nimanhemin of the Bank of Thailand was appointed minister of finance to handle the financial crisis in the Chuan government; Tarin was central to Thailand’s financial and macroeconomic restructuring in meeting the IMF’s requirements in the late 1990s.

Generals-, bureaucrats- and technocrats-turned politicians marked the political transition.

In telecommunications politics, the same transition was evident. Sombat

Uthaisong, former director-general of the Post and Telegraph Department (PTD) and former TOT president, was appointed deputy minister of the Ministry of Transport and

Communication (MOTC) in the Banharn government (1995-1996), and became deputy minister of interior in the Thaksin cabinet in 2001. Direk Chareonphol, former TOT deputy managing director, was appointed MOTC deputy minister in the Chavalit government (1996-1997). The late 1990s were marked by a new feature: businessmen- turned-politicians.

Businessmen-turned-politicians

The case of businessmen-turned-politicians cannot be better depicted by any example than Thaksin Shinawatra, an exceedingly successful telecommunications tycoon who became Thailand’s prime minister in January 2001. Thaksin entered politics in 1994 as a member of Palang Dharma Party and subsequently became the foreign minister in

243 the Chuan government. Thaksin was appointed deputy minister in 1997 under the

Chavalit government. He established his own Thai Rak Thai Party (TRT) in 1998 and

took the Thai election by a landslide in January 2001, significantly reducing the political

power of the Democratic Party (“Thaksin,” May 2001).

Thaksin Shinawatra founded what was to become by the late 1990s Thailand’s

largest and most successful telecommunications conglomerate: Shin Corporation.

Formed in 1987 as Shinawatra Company, a computer and software distributors. A company gained prominence through a series of successful government contracts.

Shinawatra acquired a contract with the MOTC to launch Thailand’s first domestic satellites, ThaiCom, beginning in 1991. By mid-1990s Shin Corporation was a dominant player in local cellular and satellite markets, with stakes in a wide range of telecommunications businesses, except in fixed-line telephone.

Other influential telecommunications businessmen also entered politics. Poosana

Preemanoch, a UCOM executive, and Somchai Benjarongkul, among UCOM’s major

shareholders, were appointed cabinet ministers in the Chavalit government (1996-1997).

Preecha Maleenond, TV Channel 3 executive and a family member of Thailand’s

television broadcasting power house, the Maleenond family, was appointed deputy

minister of MOTC in the 2001 Thaksin cabinet.

Thaksin, Shin Corporation and Thai Rak Thai Party

Once the Thai Rak Thai Party took control and Thaksin became prime minister in

January 2001, rivals were fearful of the new government stalling liberalization, because

Shin Corporation was said to gain from its existing market dominance (Suphaphan,

244 January 8, 2001; Woranuj, Januray 17, 2001). These fears were in part boosted by evidence of editorial control by the Thai Rak Thai Party during the 2000 election campaign through Shin’s majority ownership in Thailand’s only independent television station, ITV.

Other political and business interests blocked Thaksin’s Thai Rak Thai Party from taking over the Ministry of Transport and Communications by challenging Thaksin and

Thai Rak Thai to show their neutrality and sincerity in not assuming regulatory control over telecommunications. As a result, the MOTC minister portfolio was given to Wan

Muhamed Nor Matha of the Democratic Party, while Pracha Maleenond of Thai Rak

Thai took the deputy minister portfolio. Other key ministerial positions in the Thaksin cabinet taken by telecommunications businessmen included minister of commerce,

Adisai Bodharamik, former chairman of Jasmine International, parent company of

TT&T, upcountry fixed-line operator. Another telecom businessman-turned-politician without a ministerial portfolio in Thaksin’s government was Veerachai Veeramethikul, son-in-law of Dhanin Chearavanont of CP Group, the parent company of TelecomAsia, the Bangkok metro fixed-line operator.

At the time of writing it was still too early to make a case of showing how the

Thaksin telecommunications interests dominated government affected Thailand’s telecommunications politics, although criticisms of potential conflicts of interest abounded as Thaksin took office in early 2001. Because the government would preside over the massive conversion of telecommunications concessions granted to private operators as part of the liberalization efforts dictated by the 1997 Telecommunications

245 Master Plan, telecommunications business representation in the Thaksin government was naturally expected to influence the process to their favor, especially Thaksin himself being the head of the family that owned the largest telecommunications conglomerate in the country Shin Corporation. By the time the Thaksin cabinet was formed, the largest concessions under conversion reviews included two huge TOT cellular and fixed-line concessions worth billions of baht, Shin’s AIS mobile phone and TT&T’s upcountry fixed-line phone (Chareon & Kanchana, January 9, 2001).

Thirty-six telecommunications concessions had been granted to private operators by TOT, CAT and PTD since 1989. Of these, five were already scrapped or converted by

2000. Scrapped were Radio Phone, Fonepoint and Lines Technology, while Shinawatra

Directories and Shinawatra Datacom were converted. Twenty-six concessions were for joint ventures, but fewer than 20 were on the conversion list by 2000 year-end under the framework provided by Thailand Development Research Institute (TDRI). Only five joint venture concessions were considered priorities. They were major fixed-line and mobile phone concessions granted to TelecomAsia (of CP), TT&T (of Jasmine and

Loxley), AIS and DPC (of Shin)), TAC and WCS (of UCOM) (Vivat, 2000a).

The lump sum compensation framework proposed by the Thailand Development

Research Institute (TDRI) (calculated from the date of conversion until the end of concession) was totally rejected by private operators. Private operators argued for paying for compensation until 2006, in order to be on a leveled playing field with new domestic and foreign players. TT&T proposed to pay nine billion baht compensation for its 30- year concession conversion, while TA asked for compensation from the TOT and

246 proposed to buy back its business for only 14 billion baht. Although no conversion was settled, an agreement was reached regarding compensation payment calculation that should be based on existing service operations. Once conversions were made, concessions would be converted into licenses. However, there remained disagreement on

TDRI’s recommendation that value-added services created in the future be included in the compensation calculation. The state operators felt that they should be entitled to their shares of revenue based on future potential of these value-added services (Vivat, 2000a).

As the concession conversion awaited establishment of an independent regulatory body and oversee its process, political maneuvering became increasingly intense surrounding the formation of the National Telecommunication Commission, the new regulatory body. A bribery scandal surfaced only a month after the Thaksin cabinet was formed. As soon as it won the election, Thai Rak Thai sought a partial revision of the

Frequency Allocation Act to break a year-long regulatory deadlock in the Internet industry and proposed returning licensing authority to CAT. Thai Rak Thai argued that the delay in forming the NTC further delayed the liberalization process of the telecommunications market (Charoen, Janurary 11, 2001). The Frequency Allocation

Act took away TOT’s and CAT’s licensing and regulatory authority. As a result regulatory disputes were not resolved, as seen in the Internet licensing dispute case between TOT and CAT (discussed in Chapter 6). Also, industry leaders in telecommunications and the Internet had become frustrated with regulatory uncertainties preventing them from pursuing business expansion.

247 Thai Rak Thai explained that it wanted a speedy establishment of the NTC and wanted CAT to relinquish the 32 percent free holdings in all 18 ISPs and to allow new, smaller ISPs to operate. As part of its (populist) campaign Thai Rak Thai pledged to set up a free Internet project in 7,000 tambons (sub-districts) within four years

(Charoen, January 11, 2001).

Industry insiders as well as the Thai public were paying close attention to Thai

Rak Thai policies. According to permanent secretary of Commerce Krirk-krai Jirapaet,

Thai Rak Thai’s export-promotion policies were similar to those of the Commerce

Ministry, except for trade liberalization.31 The 1997 economic crisis roused nationalistic sentiment among Thais. Several parties including Thai Rak Thai campaigned on domestic industry protection platforms. Yet, it remained to be seen how and to what extent Thai Rak Thai’s pledge to revise trade liberalization policies once in office would affect the liberalization process of Thai telecommunications. A preliminary examination into business influence in the telecommunications regulatory restructuring process revealed intense business involvement in the formation of the independent regulatory bodies, in particular the National Telecommunications Commission to be discussed below.

31 The tenets of the Thai Rak Thai export policies were: utilize Thailand’s uniqueness and originality in core products such as food and handicrafts, increase competitiveness in manufacturing and improve the quality of materials, improve research and development, support product development and value-added development among exporters, employ the Internet in product distribution, and establish ministry of trade and industry. From “Anti-liberalisation talk draws words of caution,” by Woranuj

Maneerungsee, 2001, Janaury 17, Bangkok Post.

248 Formation of Independent Regulatory Bodies and Irregularities

The formation of an independent regulatory body was a result of direct application of economic liberalization adopted by Thai policymakers. Specifically, it was required under the WTO agreement, recommended by the IMF, and encouraged by the

United States and regional agencies such as the Asia Pacific Economic Cooperation

(APEC) in which Thailand was a member. Domestically, the establishment of an independent regulatory body to oversee the telecommunications industry was adopted as part of key policy initiatives by Thailand’s 1997 Telecommunications Master Plan. It was also stipulated in Article 40 in the 1997 constitution and recommended in the national information technology (IT 2000) policy guidelines. The new regulatory body was clearly a new policy condition agreed upon and supported by many groups, especially by policymakers.

The formation of an independent regulatory body began with intense debates in the late 1990s among politicians, the media, and the academics, before a final agreement was made to establish two seven-member regulatory bodies, the National

Telecommunications Commission (NTC) and the National Broadcasting Commission

(NBC). The NTC would be the sole body responsible for regulating the entire telecommunications sector, from spectrum allocation, granting licenses for and regulating telecommunications services to setting licensing requirements, standards and technical specifications, interconnection principles and processes, tariff structures and service fees

(Vivat, 2000a), whereas the NBC would supervise the broadcasting sector, introduce a master plan on the re-allocation of radio and television frequencies, and issue laws

249 governing radio and television operators (“Army men,” 2000, April 15). The formation of the NBC attracted more interest from the public groups, particularly academics and non-governmental organizations (NGOs). An NGO network had been set up to monitor and ensure transparency in the establishment process of the NBC, under the leadership of a social activist Supinya Klangnarong (Mongkol, March 23, 2001).

Broadcasting regulatory issues were more familiar for the Thai public who had had at least 20-30 years of history in government control and ownership of national media. The formation of the NTC, on the other hand, was not a matter pushed by public interest organizations, but one under the influence of business interests. Following is a discussion of the formation of the NTC and the bribery scandals that surrounded it in early 2001, and a brief discussion of the formation of the NBC.

National Telecommunications Commission (NTC)

Under this agreement, the current regulator, the PTD (under the MOTC), would officially be transformed into the Secretariat Office of the NTC (Sasiwimon, January 26,

2000). The NTC’s immediate task was to oversee the concession conversions and the privatization of TOT and CAT. Originally the NTC was to be established by June 2000 but the deadline was missed. The Telecommunications Services Act was approved by the

Chuan government in March 2000 and went into the Senate prior to the January 2001 election. The passage of the Act was, as a result, not expected until late 2001, when the

Senate would also select seven members out of the final 14 candidates for the NTC

(Supara, October 8, 2000; Charoen, January 3, 2001; “Thailand’s Year,” January 10,

2001).

250 Under the Frequency Allocation Act, the NTC commissioners must represent a wide range of professional groups, including telecommunications, law, social and security. However, during the first year of its formation, the selection process of NTC commissioners was criticized for favoring vested interests. An informal survey conducted with telecommunications industry leaders in late 2000, as reported by the

Bangkok Post, revealed that the candidates likely to win the NTC chairmanship were those closely connected to existing regulating agencies such as the current PTD director- general Sethaporn Cusripituck, vice-president of the Telecommunications Association of

Thailand Kosol Petchsuwan, CAT’s former chairman Smith Thammasaroj, and a former

TOT executive and advisor Direk Charoenphol (Suphaphan, December 29, 2000). This prediction could change depending on the political alignments of the incoming Thaksin’s government and how telecommunications politics would be played out by stakeholders.

The selection process of NTC nominees began in August 2000. The media reported business and political maneuvering, which began to draw criticisms regarding lack of transparency in the selection process (“Some senators,” February 22, 2001). A bribery scandal broke in late February 2001, when a 200-300 million baht bribe was alleged to have been demanded by a senator’s aide in exchange for securing senate endorsement for appointment to the NTC (Surasak, March 6, 2001).

The bribery allegation prompted the Senate to set up a screening committee to scrutinize the NTC nominee selection process (“Nominees,” February 23, 2001) and to later requested a police investigation into the scandal (Supawadee, March 28, 2001).

Some senators began calling for the scrapping of the entire nominee selection process due

251 to links to telecommunications interests found among the 14 nominees from whom the Senate were to select seven to sit on the NTC panel. Mechai Viravaidya, a member of the Senate Communications Committee, called for the NTC panel selection process to go back to square one because it was “not transparent from the beginning,” (“Nominees,”

February 23, 2001). Shortly after, the Senate ordered a sweeping review of the NTC panel selection process and a 21-member screening panel was set to review qualifications of all 14 nominees (Kosol & Supawadee, March 3, 2001).

After the screening panel found that the 17-member selection committee which picked the 14 nominees for the Senate to select the final seven did not include specialists from telecommunications related fields, on May 4, 2001, the Senate voted 130:23 to reject the entire selection process, declaring the selection process non-transparent and unacceptable. The nominee list was returned to prime minister Thaksin for further consideration (Wut, April 10, 2001;”Telecom selections scrapped,” May 5, 2001;

“Thaksin,” May 5, 2001).

The Senate’s decision to scrap the selection process was not without opposition.

Some senators claimed the Senate had no authority to scrap the process, as it was authorized to only choose or not choose the candidates, and not investigate in the selection process itself. The NTC 17-member selection committee vigorously defended its process against the senate allegations of lack of transparency. (Kosol, May 10, 2001).

National Broadcasting Commission (NBC)

Article 40 in the 1997 constitution indicated that radio and television frequencies were public assets and hence must be used in the best interests of the public. Having

252 common ground in the 1992 pro-democracy uprisings, the media, academics, and public interest groups, led by NGOs, actively participated in the constitutional amendments that resulted in Article 40. The formation of the NBC had seen more public attention in the process, although there were no large-scale scandals as seen in the NTC formation.

However, as a result of NGOs’ attention in the process, the NBC formation was also found to have been influenced by special interests. Military and business connections were found by the NGO monitoring network between the 17-member selection committee and the list of 28 candidates, short-listed from the initial 75 applicants. The 17-member selection committee comprised military and media interests such as (a) Major General Sunthorn Soponsiri, Channel 5 director and board member of

Tor Tor Bor 5 radio network, (b) Chatchai Thiamthong, a financial manager of BEC

World which owns TV Channel 3, and (c) Thakonkira Veeravan, owner of Exact

Communications under the powerful music power house, Grammy Group. Meanwhile, among a long list of candidates with military and media connections were (a) Supatra

Suparb, a Tot Tor Bor 5 board member, (b) General Thongchai Keusakul, and adviser to

Major General Sunthorn, (c) Arun Ngamdee, a BEC World board member, (d) Udom

Janopart, a TV Channel 3 assistant managing director, and (e) Pana Thongmee-akhom, a

Grammy advisor (Mongkol, March 23, 2001).

In any case, the military was expected to have little say in the selection process.

The military was permitted to retain up to 50 percent of the broadcasting frequencies by the new constitution and it was deemed likely to maintain control over TV Channel 5,

253 which had traditionally been under the army control, because the army still had sufficient manpower and resources. (“Army men,” April 15, 2000). The NBC selection committee rejected a request by a selection committee member, Anand Panyarachun, former prime minister and highly regarded statesman to postpone the short-listing deadline (to select the final seven NBC commissioners) to ensure transparency (Mongkol,

April 10, 2001). The NBC selection committee proceeded to select 14 nominees for the

Senate to consider by the end of May 2001.

NGO representatives supported the Senate’s decision to scrap the NTC selection process, and called the Senate to also scrutinize the NBC selection process, which would go on according to schedule. The Selection panel was to pick 14 candidates from the 28 candidates on May 24, 2001 and then send the short list to the Senate to pick the final seven to sit on the NBC (Mongkol, May 9, 2001).

Chapter 8 concludes with theoretical implications of the Thai Internet policy process. The chapter answers the research questions and explains the major factors and forces in the Thai telecommunications and Internet policy formation, how ideas were channeled into the policy process, and how the relationships among policy actors affected policy outcomes concerning Internet development. The chapter also examines the role of the Thai state in telecommunications restructuring and the formation of the Internet and concludes with implications of existing policies for the future role of the Thai state.

254 CHAPTER 8

CONCLUSIONS

Economic boom and bust, political crisis, democratic rejuvenation and a new constitution: these were major events that took place over the decade in which Thailand entered the twenty-first century. Increasing pluralism of Thai politics through political transformation from a semi-democratic to a democratic regime in the post-1992 political crisis period, coupled with internationalization of the Thai economy opened doors for a multitude of interests to enter the telecommunications policy formation process.

The findings of this study confirm basic assumptions about telecommunications policymaking based on Kingdon’s political model of policy process and Singh’s conceptual framework of factors determining telecommunications restructuring and state types in decision-making process.

First, ideas play an important role in the policy process. While the main impetus for Thailand to reform its telecommunications industry is in no small part a result of its own aspiration to become the regional economic center, neo-liberal economic ideas like liberalization and progressive global economic integration have had a direct impact in

Thai telecommunications policy formation. The US$17 billion rescue package by the

International Monetary Fund required Thailand to adopt a major financial and economic restructuring program after the 1997 economic collapse, and agreements with the World

Trade Organization subjected the country to a commitment to open its telecommunications sector to foreign competition by 2006. Multilateral agreements and

255 ideology enforced by powerful international institutions like the WTO and the IMF are likely to set the future trend for greater internationalization of policy.

Second, the case study of Thailand has shown that multiple policy forces influence the process of policymaking and these factors are environmental, institutional and human, residing in both internal and external milieus. It also confirms an assumption that there exist relationships among policy actors who may or may not share the same interests. As the policy coalitions unite in preparation to defend collective interests against the looming competition from powerful multinational corporations to come in the fully liberalized economy, domestic interests merge and clash in the exercise of protecting and defending their respective interests. Interactions among major domestic actors in the policy process—technocrats, bureaucrats, politicians, business, and public interest groups—range from cooperative efforts in regulatory reforms to conflicts of interests leading to political corruption in the process of telecommunications privatization and liberalization.

Third, with respect to the role of state, the weak performance of the Thai state supports the assumption that state’s effectiveness in policymaking is impacted by its maneuverability and responsibility, or its ability to impose its own agenda and shape the social choices in national development. The plurality of interests in the Thai telecommunications policy process affects the ability of Thai government agencies to direct policy outcomes. Moreover, in the Thai political system, where policymaking is often driven by vested interests and political infighting, policymakers find it hard to sustain a commitment to any given policy initiative, and the policymaking function of the

256 state is seriously undermined. In the face of internationalization of the economy and diversification of internal politics, the Thai state is no longer a monolithic entity that can effectively impose its agendas in the policy process but is an agglomeration of divergent interests that can expect variable results from its actions. In the juxtaposition of the rise of a more mature democratic regime and the intensification of money politics, business interests become increasingly influential in telecommunications policymaking through more direct political maneuvering at the top policymaking levels. However, burgeoning public interest activism among NGOs, academics, media representatives, and elected politicians, particularly in the Senate, are still confined in the periphery of the policy arena. This is because telecommunications presents a rather unfamiliar and complicated set of issues, difficult for the larger public to understand, and because telecommunications, as well as Internet, policymaking remains in the domain of the political and business elites. The historical pattern of ownership and control of state apparatus over national resources has had a negative impact on the development of the

Internet in Thailand. Bureaucratic control and monopoly and the lack of public interest spirit among state agencies has seriously hampered the expansion of access to the Internet and slowed the development of commercial services of new network technology. State telecommunications incumbents like the Telephone Organization of Thailand and the

Communication Authority of Thailand and powerful corporate powers with privileged monopoly concessions like Shin Corp have little incentive to support liberalization policy.

257 In the following sections, the five research questions are discussed. A brief answer is first given to each question and then elaborated.

Environmental and Institutional Policy Factors

Research Question No. 1: What environmental and institutional factors were present in Thai Internet and telecommunications policy formation?

Numerous factors were involved in the process of Thai Internet and telecommunications policy formation. Economic integration and proliferation of technologies were certainly the environmental “push-factors” in telecommunications reforms and the formation of Internet and NII policy. Key institutional and environmental actors can be divided into two groups: external and internal. External factors combined with domestic factors (political liberalization, economic crisis in 1997, and Thailand’s own ambition to become a key player in the region) propelled Thai policymaking towards a more liberal and pro-competition direction. The external factors consisted of major financial and trade institutions, including the IMF, the WTO, the

World Bank, the United States, and APEC. The domestic policy actors were composed of technocrats, bureaucrats, politicians, business interests, and public interest groups.

Traditionally powerful groups such as the military and the labor unions became virtually non-factors in telecommunications and Internet policy formation, while the public interest groups emerged as a new factor, and the business groups became increasingly influential in the policy process through political connections and direct participation in electoral politics.

258 External forces

Major international financial and trade organizations such as the World Bank, the

IMF and the WTO play crucial roles in transforming global as well as national economic systems to a more unified, free-flow system of trade and services. Borderless technologies push for borderless economies. Most governments have accepted and agree that this is a new, and welcome, reality. Being part of this new borderless system, countries like Thailand aspiring to obtain an important place in the world stage see no choice but embrace this new borderless ideology and jump on the bandwagon of free trade.

Thailand’s export-oriented and fast growth-oriented policies since the 1990s have been in no small part influenced by free market ideology, heavily propagated by powerful international trade and financial institutions. Need for foreign capital and technology transfer further compels the country to accept the reality of economic liberalization.

Central to today’s economic liberalization policy trend is a more open telecommunications and information sector.

The World Bank had an early role in Thai telecommunications restructuring. It was an important source of consultation for Thailand’s initial attempts to privatize the two state enterprises, the Telephone Organization of Thailand (TOT) and the

Communication Authority of Thailand (CAT) beginning in late 1980s. The World Bank strategy paper released in 1992 outlines three aspects of the Bank’s major thrust in telecommunications: 1) developing competition, 2) increasing private sector participation, and 3) developing regulations that enhance the two objectives (Singh, 1999,

259 p. 30). Considering its historical role in the country’s economic restructuring in several periods, the Bank continues to be looked upon as a source of advice as well as a source of financial assistance. Most recently, Thailand sought a US$25-million grant from the Bank to install Internet links in rural areas nationwide (Chareon, 26 June 2000).

As a result of the 1997 economic crisis, the International Monetary Fund has played a far-reaching role in Thailand’s economic policy. In exchange for the US$17 billion loan, the IMF imposed several policy measures including financial sector restructuring, privatization of the state-owned enterprises, reduction of state monopoly and increase in private investment. Thailand’s top policy body, the National Economic and Social Development Board (NESDB), accordingly adjusted its macroeconomic policy framework and revised the eighth national development plan for the remaining three-year term (1999-2001). Legal measures Thailand has taken included drafting a

Privatization Master Plan and a Corporatization Law.

Yet, the most salient external influence in the reform process of Thai telecommunications comes from the WTO. The WTO Basic Telecommunications

Agreement (BTA) is arguably the strongest impetus in policy and regulatory change in many countries including Thailand. Initiated in 1994 to extend the original General

Agreement on Trade in Services (GATS), the BTA requires several agreements to liberalize regulatory policies. The BTA’s Regulatory Reference Paper contains six major liberalization measures, including anti-competitive safeguards, interconnection provision, licensing criteria, allocation and use of scarce resources, establishment of independent regulatory structure, and universal service obligations. Thailand has so far agreed to only

260 part of the Reference Paper. Of these policy guidelines, the Telecommunications

Master Plan developed by the Ministry of Transport and Communication includes the

establishment of an independent regulatory body. As of May 2001, the National

Telecommunications Commission (NTC) is in the process of being established.

However, Thailand will be under increasing pressure to accept it entirely along with most

other WTO members. Once the Thai telecommunications market is open to international

competition by 2006, other guidelines will inevitably be incorporated into the national

telecommunications regulatory structure.

The Thai telecommunications reforms process is the result of several streams of

policy influences. The wave of liberalization comes through many venues. Beside the

powerful international organizations discussed above and more extensively in Chapter 4,

the United States is a foreign source of policy ideas. In late 2000 the US Federal

Communications Commission (FCC) entered into a one-year policy consultation

arrangement with Thailand’s Post and Telegraph Department (PTD). In the arrangement,

the FCC assisted the PTD in the establishment of the new regulatory body, the NTC. The

FCC consulted on six policy areas that closely mirrored the WTO Reference Paper

guidelines, including (1) regulatory procedures and management of conflict of interest,

(2) interconnection regulatory policy and its relationship to competition, (3) licensing

systems, (4) perspectives on policymaking related to new technologies and convergence

of telecommunications policy and regulation, (5) standardization and certification, and

(6) universal service obligations (Chareon, September 27, 2000).

261 Being a successful pioneer in technological development and a source of many new technologies, the United States plays a catalytic role in many countries’ information infrastructure development. The Clinton-Gore’s vision of National

Information Infrastructure (NII) and Global Information Infrastructure (GII) inspired many countries, including Thailand, to develop similar NII policies and regional network infrastructure policies along the line of GII. It is no coincidence that Thailand’s 1995 IT-

2000 Plan contains policy strategies similar to those in the US 1993 National Information

Infrastructure: Agenda for Action (Chapter 4). The influence of the United States also extends to agendas in regional cooperation. In the Asia-Pacific Economy Cooperation

(APEC), the United States has been a prime force behind the Working Group on

Telecommunications (APEC-TEL), the functions of which include a telecommunications liberalization policy project group. From the beginning the project faced heavy opposition from the ASEAN delegations in the APEC, including Thailand.

Ideas matter in policy. They come from all directions, both from external and internal sources. In an open political system like Thailand, there are many venues through which ideas enter the policy process. It may be hard to quantify the degree of influence of any given idea in the policy process. However, where ideological influences from foreign sources are concerned, the relationship between foreign policy guidelines and actual policies drawn by the agencies to which the guidelines are directed are direct and explicit as seen in the case of the IMF guidelines being taken by the NESDB and those of the WTO being drawn up in the Telecommunications Master Plan.

262 Domestic forces

In the domestic policy arena, ideas are initiated and intertwined in the interaction among several interest groups. Thailand’s recent telecommunications reforms saw a transformation of roles within the triangular relationship among key pro-liberalization policy interests, the technocrats, the politicians and the business interests. In the rise of coalition politics and the increasingly liberalized economy, the triangular relationship strengthened with business moving from the position of patron to politicians’ partner in the early to mid-1990s, the politicians from supporter to player and the technocrats from rival of politicians to supporter. In the meantime, the bureaucrats in the state telecommunications enterprises found themselves yielding to the pro-liberalization coalition pressure to increase private competition (Sakkarin, 2000).

Next is the discussion of the four significant local policy forces in the telecommunications reform process: technocrats, bureaucrats, politicians, business interests, and public interest groups.

1. Technocrats - The technocrats staff the policy think-tank agencies, namely the

NESDB, the TDRI, the NITC and the NECTEC. As the top national agency in charge of national economic and social development policy and planning, the NESDB has ideologically been the staunchest proponent of telecommunications liberalization and private participation. It has also been influenced by global economic policy agendas, most recently from the IMF. The Thailand Development Research Institute (TDRI) is a research institute providing macro- and sectoral-level ideas to major policy agencies.

The TRDI adopts a similarly liberal economic policy stance but with less force. The

263 National Information Technology Committee (NITC), with the National Electronics

and Computer Technology Center (NECTEC) as its secretariat and operation unit, is in

charge of national information infrastructure policy and planning.

Viewpoints from TDRI’s leading experts in telecommunications such as Sumet

Wongpanitlert and Somkiat Tangkitvanich have been influential in helping define the

direction of recent telecommunications reforms and national information infrastructure

development. The IT-2000 Plan was drafted with substantial input from the TDRI

research specialists, including Sumet, before it was approved by the NITC. However,

despite regular collaboration in many policymaking activities such as feasibility studies

and policy idea formulation among top national think tanks, each has its own institutional

agenda and political position. As a young, highly technocratic, inter-governmental

coordinator and a facilitator of state-business partnership in national information

technology development, the NECTEC tends to be politically neutral. The TDRI, on the

other hand, seems less politically confined and in effect able to complement the role of

policy agencies like NECTEC. For instance, the TDRI is more openly critical than

NECTEC of CAT monopolistic restrictions in the Internet industry.

2. Bureaucrats – Before Thailand transformed itself from a historically bureaucratic polity into a democratic regime with political and policy participation from multiple players, the bureaucrats used to be more prominent actors. Bureaucrats at the two state enterprises, the Telephone Organization of Thailand (TOT) and the

Communication Authority of Thailand (CAT), lost their key ally when the military was effectively edged out of politics during political democratization in the late 1990s. TOT

264 and CAT bureaucratic power depends much on the political scene because politicians can—and often do—dictate the power dynamics at the boards of state owned enterprises.

Until the NTC is established as expected in late 2001, the Ministry of Transport and

Communications (MOTC) is in control of national telecommunications policymaking and politics through its authority to regulate the sector and its authority to remove and appoint members of the boards of directors of the two state telecom enterprises.

The Post and Telegraph Department (PTD) and the MOTC ministers have been pushing for greater liberalization of the telecommunications sector and the establishment of a central regulatory body, although not aggressively pursuing the elimination of state control. The TOT and the CAT were resistant to liberalization pressure from the MOTC.

The push for the establishment of the NTC has been viewed skeptically, particularly by the SOE’s labor unions, as a move to maintain the ministry’s regulatory power. However, as it became clear that liberalization was inevitable and necessary for their organizational survival as telecommunications operators, the TOT and the CAT have come to accept liberalization, and the labor unions have largely moved from the anti-reform camp to the pro-privatization camp. Despite having yielded to liberalization and privatization pressures, the CAT and TOT remain a strong force in Thailand’s telecommunications industry. CAT’s control is overwhelming in the Internet industry, but that did not stop

TOT from attempting to encroach on CAT’s domain. The looming competition intensified competitiveness between the two SOEs, as seen in the ISP licensing conflict, when the TOT attempted to lease its IP networks to several ISPs some of which were not licensed by CAT. It is evident that as both regulatory and operating entities, the state

265 apparatus is motivated by its own institutional interests and as a result often acts against the interest of the public.

3. Politicians – The roles of politicians are usually divergent and conflicting due to the factionalism of coalition politics. Elected politicians influence telecommunications policy through key ministerial positions, in particular those within the MOTC. More recently, as the NECTEC and the NITC gained importance as agencies in charge of major national infrastructure projects, the ministerial positions at the Ministry of Science,

Technology and Environment (MOSTE) became another influential and sought-after political post. Politicians can take policy positions depending on their political and business ties. This becomes increasingly true as more bureaucrats, technocrats and business executives have entered politics and sought parliamentary and key ministerial positions. As a result, politicians appointed to key ministerial positions do not necessarily act according to the dominant ministerial agendas but according to the interests of their specific alliances, which are often with specific business interests. The ability of politicians in key positions to impact the policy process is seen in the cases discussed in Chapter 7, which largely involved corrupt activities such as the case of the computer procurement program in the Ministry of Education, or exerting control over the organizational management of the policy agencies, such as the case of interference in the director appointment of NECTEC by the MOSTE minister and the proposed organizational restructuring of NECTEC and NITC by the MOTC minister.

4. Business interests – The role of the local business community grew during the

1990s through BTO concessions. Growing from small value-added service providers,

266 Thailand now has six major local telecommunications conglomerates that dominate

Thai telecommunications, namely Shin Corporation, UCOM, Samart Corporation,

TelecomAsia, Loxley, and Jasmine (see Appendix D). From being on the sideline of policymaking as supporters of politicians or bureaucrats, local businesses have become successful in influencing the policymaking process in Thailand by persuading or pressuring policymakers to direct policies to their advantage. This is possible partly because, while macroeconomic policy is generally drawn by technocrats at the top national policy institutions, long range planning and implementation activities are generally left to government ministries (Pasuk, 1992; Geray, 1999). As a result, through alliances with politicians and partnerships with the state, business interests have been able to advance their agendas by influencing planning at the ministerial and state- organizational levels.

Thai telecommunications businesses promote their agendas through connections with politicians and government officials. As local business influences grew with their increased participation through BTO concessions, their policy input entered the decision- making process through the regulators—MOTC, TOT and CAT—which further recommended policy guidelines to the top national policymaking agency, the NESDB

(Sakkarin, 2000). More recently, as discussed in Chapter 7, more and more businesspeople enter politics themselves and assert direct influence in the policy process through their positions in the government. The Thaksin cabinet has more than a few ministers with close ties to major telecommunications businesses, and the prime minister himself is a businessman of considerable success.

267 5. Public interest groups – The public interest groups are a new factor in Thai telecommunications politics. They are not yet a formidable force, but are beginning to influence the policy agendas. Part of the underlying ideological influence in public policymaking in Thailand in the late 1990’s comes from constitutional amendments that began after the 1992 popular uprisings. Several public interest groups which found common interests in removing the military from politics and in democratizing the political process were academics, non-governmental organizations (NGOs), and the media. Although this group may not directly influence the policy process of telecommunications and Internet, they are important sources of ideas for policymakers and political lobbyists. These groups also find support in some members of the Senate, who came from similar public interest advocacy background.

Role of Ideas

Research Question No. 2: How were ideas channeled into the policy process of

Thai Internet development and telecommunications reforms?

This question can be answered using Kingdon’s policy model. Local and international policy forces enter and influence the policy process at various points and through various junctures of events. The policy formation process of Thai Internet development and telecommunications reforms contains a diversity of influences from both domestic and foreign sources. It demonstrates the direct influence of global policy agendas from major international institutions in policy formation along with national policy planning agencies. Neo-liberal economic philosophy from the IMF, World Bank,

268 the WTO, and the United States (exerted through these agencies or directly) propelled

Thailand’s extensive economic liberalization programs.

However, Thailand also has its own national ideology that supports liberalization

of the economy. During the peak of the economy (late 1980s to early 1990s), the national

aspiration to become the regional economic power was running strong. The idea of

turning Thailand into the financial, transport and telecommunications hub of mainland

Southeast Asia was conceived during the Chatichai government. The idea of Thailand as

a regional economic power was an extension of the “greater Thailand” ideology

conceived in the Pibul Songkram regime during World War II. The ideology was an

emulation of Japan’s “greater Asia” ideology. The idea found support among the

military, although Chatichai shifted the focus more towards economic power. The

regional economic power idea was adopted by the top national policy body, the NESDB,

and became an underlying ideology in its national policymaking since the early 1990s,

after it was adopted in the Seventh national economic and development plan (1992-

1995). The idea became embedded in the national ideology and was adopted by

successive governments.32 In the case of Thailand’s telecommunications and Internet

policy formation, the important role of ideas is evident in the influence of global

economic agendas. Figure 8.1 summarizes an overall policy process of Thai

32 For more details on the historical origins of this regional economic hub idea, see Sakkarin

Niyomsilpa, The Political Economy of Telecommunications Reforms in Thailand, London and New York:

Pinter (2000), chap. 1, pp. 91-93.

269 telecommunications reforms and national information infrastructure policy

development. The three streams depict key factors and forces in the policymaking

process.

Low Inefficient telecom indicators state monopoly Need for capital

Problem Stream

1997 economic collapse Budget crunch

Telecom Master Plan NESDB/8th Plan MOTC TDRI NECTEC/NITC *Full liberalization Domestic * privatization of TOT & CAT Policy Stream *Independent International regulator World Bank WTO/BTA IMF USA APEC-TEL IT-2000 Plan

SEA economic power Politicized public Politician-Business alliances

Political Stream

1992 military 1997 constitution Multiple changes media control in administration in 1990s (Chatichai-Anand-Chuan-Banharn-Chavalit-Chuan)

Figure 8.1. Process of Thai Internet and Telecommunications Policy Formation

Ideas that are popular can have an important effect on policy at a given time

(Olufs, 1999). This is evident in the liberalization of Thai telecommunications. As seen in Figure 8.1, liberalization ideas that came into the Thai telecommunications policy process were largely global agendas transmitted or imposed by international institutions like the World Bank, the IMF and the WTO, as well as ideas that circulated through powerful global actors like the United States and regional trade cooperation like the

APEC.

270 The influence of popular global agendas in the policy process is particularly true in the case of the formation of national information infrastructure (NII) policy.

Following “The National Information Infrastructure: Agenda for Action” by the US

Information Infrastructure Task Force on September 15, 1993, several APEC members— particularly the fast Northeast Asian and Southeast Asian countries— began to develop their own NII plans. This was with the exception of Singapore and Malaysia which already had their own versions: IT-2000 – A Vision of an Intelligent Island and Vision

2020 respectively (Saga, 1999). Thailand finished drafting its NII plan in 1995, IT-2000

– Thailand IT Policy into the 21st Century, which became known as the IT-2000 Plan.

Since the APEC started the Asia Pacific Information Infrastructure (APII) initiative following the first APEC Ministerial Meeting on Telecommunications and Information

Industry (TELMIN1) in Seoul in May 1995, the Working Group on Telecommunications in the APEC (APEC-TEL) has become a forum through which member countries exchange information on their respective information infrastructure plans (ibid). Policy emulation in the case of the Thai IT-2000 Plan is extensive. For instance, the SchoolNet project is inspired by the US K-12 network, while the Software Park was developed after extensive studies and visits to various “parks” in many countries in the region, India,

Taiwan, Korea, etc. (Rom, personal communication, July 30, 1998).

People and players in the policy process justify their actions and desires with ideas (Olufs, 1999). For example, free competition proponents often cite growth opportunities and lower prices for consumers as policy incentives. The WTO agreements encourage a shift from revenue-sharing to a cost-oriented regime for international

271 telecommunications with an explanation that more opportunities for new services will follow when prices are lowered as a result of competition (Kelly, 1999).

The role of ideas in the policy process deserves careful examination in terms of the relationship between ideas and interests. Are aggressive ideological agendas pushed by esteemed entities such as the IMF, the World Bank and the WTO simply a manifestation of their neoclassical economic orthodoxy? Are the IMF’s harsh austerity measures imposed on many countries, including Thailand, just a result of the cold- blooded conviction of the IMF technocrats about economic responsibility and rationality, having nothing to do with American capitalist domination as some have criticized?

(Castells, 1997). In their analysis of the 1997 Thai economic crisis, Pasuk and Baker

(2000) said that the IMF was more intent on forcing neo-liberal reforms on the country than helping it achieve the fastest and least painful recovery. It is also argued that the

IMF is influenced by large powerful donor countries, in particularly the United States.

To support their argument, Pasuk and Baker cited the US success in having pushed for the inclusion of its agenda in the IMF’s economic rehabilitation programs in order for

American firms to have greater access to international markets. They noted the Clinton government embarked on a mission to pressure the IMF to broaden its crisis programs beyond macroeconomic tinkering to include measures to “reduce trade barriers . . . [and] include the requirements to liberalize trade and eliminate directed lending and other unfair or market-distorting subsidies” (Summers, 1999b, as cited in Pasuk & Baker, 2000, p. 6). According to former Treasury deputy secretary, “the United States has made real progress in furthering some key American values” in pressuring for such changes in the

272 IMF programs (as cited in Pasuk & Baker, 2000, p. 6). Furthermore, a US trade representative, Charlene Barshevsky, also noted that the IMF programs which included commitments to restructure public enterprises and accelerate privatization of several key sectors including communications in recipient countries would “create new business opportunities for US firms” (TN, 3 April 1998, as cited in ibid).

In summary, global economic agendas proved to be the push-factor in the Thai telecommunications reform and the national information infrastructure policy development process. Meanwhile, the national ideology as the regional economic power and the collective realization among the domestic policy actors of the necessity of economic liberalization provided a fertile ground for the assimilation of the global ideas.

The role of ideas in the policy process is not merely ideological but is often intertwined with interests.

Policy Factors in Thai Internet Network Formation

Research Question No. 3: What were the relationships among the policy forces and in what way did their interactions impact the policy outcomes concerning the development of the Internet in Thailand?

The development of the Internet has been greatly hampered by the plurality of interests in the policy arena in Thailand. The state, whose influence has been diminished by the myriads of interests, is unable to impose its policy agenda in this pluralistic and highly fragmented policy environment. NECTEC and NITC (discussed in Chapter 7), as young and politically inexperienced Internet policy arms of the Thai state, were at times unable to overcome bureaucratic politics, to command cooperation from state agencies,

273 and to impose its policy agenda. As a result, several programs these twin agencies operated did not enjoy much success.

The interactions among different state arms were detrimental to the development of the Internet. For instance, CAT has been clearly protective of its monopoly in the

Internet market. On the other hand, while TOT may act as a competitive force that challenges CAT’s monopoly (in the case of ISP licensing and leasing of its IP network), it has acted out of its own interest. As a young state body, NECTEC was unable to contend with CAT directly, but rather deal with it through several indirect and politically unconfrontational ways, e.g., initiated commercialized Internet through a joint venture with CAT (and TOT), and convinced CAT to allow it to install the second domestic

Internet exchange to boost Internet usage.

As a result, their regulatory and political limitations gave NECTEC and NITC small room to succeed. Despite the national policy goals to become the regional economic hub, Thailand has done rather poorly compared to Singapore and Malaysia.

The telephone access expansion program under “telephone in every village” policy goals did not reach the 20% penetration target by 2001. As of the end of 2000, the fixed-line telephone penetration rate remains at one-in-ten level, compared to one-in-two in

Singapore and one-in-five in Malaysia. Mobile telephone diffusion also lags behind the two competitors, by far—at four percent per total population, compared to 15 percent in

Malaysia and 61 percent in Singapore.

Internet diffusion has also been extremely slow, with merely four percent of the population having commercial access in early 2001. Public Internet development

274 projects such as SchoolNet are small and piecemeal. Project implementation encountered several obstacles, including lack of strong political backup, budget problems and poor coordination and cooperation among responsible agencies. All national projects were affected by the steep devaluation of the baht. Budgets were either cut back or shrunk in value due to the currency devaluation, causing delays in project implementation or redirection of priorities.

The real challenge in the implementation of Internet access expansion policy lies, not in the budgetary limitations or in the temporary economic downturn, but rather in the results of the interaction of pluralistic policy forces and the failure of the state to impose its public interest agendas. In addition, the usually strong force of pro-liberalization coalitions among technocrats, business and politicians, was unable to thwart the remaining bureaucratic control in international communications. In this case, the coalition did not gather to impose enough pressure on CAT to relax its control over the international communications networks. On the contrary, the Thai Internet industry is characterized by the incidental cohabitation of the technocrats with the bureaucrats, with the business interests not having much to do about the peculiarly restricted regulatory condition in which it operates.

Problems and challenges in Thailand’s NII development policy, extensively covered in Chapter 6, can be summarized as follows:

• Lack of clear policy direction in national IT development

• Lack of government commitment and long-term view in national IT development

• Lack of policy coordination among responsible agencies

275 • Continued political interferences in policy

• State monopoly hampering free and fair competition

• High connection charges, especially on international leased circuits

• Poor policy management and lack of technical skills

• Centralized, top-down policy approach and limited grassroots input in the policy

process

• Inadequate network infrastructure outside Bangkok

• Redundancy in network expansion efforts among several state agencies

• International pressures for open competition from the IMF and the WTO

• Lack of sense of social responsibility among local private enterprises

Characteristics of the Thai State as Policy Actor

Research Question No. 4: What were the characteristics of the Thai state in its role in telecommunications restructuring and formation of Internet policy?

Facing myriad interests, the Thai state has been unable to impose its agenda, shape policy choices, and deliver on its responsibilities as the policymaker and the provider of services. Applying Singh’s state characteristics in the decision making process, the Thai state has been weak, and “dysfunctional.”

A globalized economy has changed the role of the state. In the area of communication and information, which has historically been central to state control, a state confronts three major interrelated challenges to its sovereignty: 1) globalization and interlocking of ownership, 2) flexibility and pervasiveness of technology, and 3) autonomy and diversity of the communication media (Castells, 1997, p. 254). Computer-

276 based technologies like the Internet have undermined state authority, despite ardent state attempts to control the medium. With multinational businesses invading domestic economic domains, which are in part supported by the powerful influences of global agendas in domestic policies, governments become increasingly powerless in controlling policy, organizing trade and economic production and fulfilling commitments to provide social benefits to the populace.

In this environment, a state is burdened with balancing between directing the course of national independence and prosperity and fulfilling its responsibility to all segments of its population. As seen everywhere, this is a tremendously difficult task. In the new politico-economic arrangements, myriads of interests drive national policy and management. The state role is significantly diminished by the twin forces of economic globalization and fragmentation of power, driven by interrelated the thrusts of new technology and political democratization. The state is no longer able to singularly impose and enforce its agendas on the system of fragmented and competing interests.

Having to defend and negotiate with external forces and manage and compete with other internal forces within and outside the state apparatus, the state is no longer recognizable as a monolithic entity with one dominant ideology. Rather, the state is a collection of interests, with different arms of the state apparatus having diverged into separate units with separate agendas—ministries, state enterprises, independent state entities, which have variable degrees of control over policy and management of state affairs. The state ability as a collective unit, hence depends largely upon the interaction of these state interests with external and non-state forces, in particular business and public interest

277 groups. Although there is a tendency among state and non-state interests, the relationship configuration can shift and change based on the merging of common interests toward alliances. This makes the state’s ability to dictate policy outcome less than predictable.

Different characteristics of the state in Singh’s analysis of state decision making suggest that when a state is unable to cope with myriad pressures and is ineffectual in imposing its agendas and meeting its responsibility, as characteristic of most developing countries, the state is “dysfunctional.” Compared to Singapore and Malaysia, Thailand is a dysfunctional state in Singh’s definition. That is, the Thai state has a low degree of maneuverability and variable degree of responsibility (Table 8.1). Meanwhile, the

Singapore and Malaysia states have a high degree of maneuverability and responsibility, i.e., they are able to impose their own agenda and social choices, and are committed to produce policy outcome with a high degree of efficiency.

Singapore took a fully centralized strategy in national IT development with strong political leadership and well-defined policy systematically executed by the state-owned

Singapore Telecom and the National Computer Board. Malaysia, while allowing private participation in services provision, espoused a long-term view in its IT development policy that enjoyed strong political backing from the government. It can be argued that

Singapore’s small city-state and authoritarian leadership and Malaysia’s strong and consistent government provide an environment conducive to more cohesive and comprehensive policymaking and policy implementation. By contrast, the Thai state has had many changes of administration, each averaging less than two years in the 1990s.

278 Therefore, it lacked political continuity that could enable policy continuation, which is an important factor in ensuring policy success.

Table 8.1

Characteristics of State in NII Policymaking Process: Comparison Among Singapore,

Malaysia and Thailand

______Country Characteristic Maneuverabilitya Responsibilityb IT Growth

Singapore Catalytic High High High

Malaysia Near-Catalytic High High Relatively High

Thailand Semi-Dysfunctional Variable Variable Low

Note. a = Maneuverability is the state’s ability to impose its own agenda and shape societal choices. b = Responsibility is commitment to development while helping the state increase its legitimacy. Adapted from Singh’s State Decision-Making Process

Model (Singh, 1999, Table 2.2).

This study shows that Internet development has been affected by the

“dysfunctional” nature of the Thai state. The fate of the Internet in Thailand has hinged upon the control of one singular state entity, the Communication Authority of Thailand, which maintains a monopoly over international connections. In the Internet sector the configuration of policy actors is different from that of the telecommunications sector, in that new players emerge and the technocrat-politician-business triangular relationship is incomplete. While the MOTC, a top regulator in the telecommunications industry, has

279 been strong and able to impose its agendas on state agencies under its umbrella

(Chapter 7), the NITC is relatively weak, small, inexperienced, and hence unable to influence the actions of other agencies. The case in point is CAT. As the main policy body in the Internet industry, NECTEC has been unable to convince CAT to take necessary steps in making the Internet more available, affordable, and accessible.

Instead, NECTEC/NITC allowed CAT to exploit its monopoly and impose onerous licensing conditions (33-percent free equity holding) that was harmful to the industry as a whole. CAT’s control over leased line connections has caused Thai Internet access to be more expensive than other countries in the regions, leading to Thailand lagging behind on the development path of information technology.

Since telecommunications is a high stakes industry, it is no surprise that it is highly politicized and full of competing interests. The diminishing authority of state, rising business influence in politics, and the competition of interests among state and non-state actors are characteristic of Thai telecommunications politics. In an increasingly globalized environment, these characteristics have implications for future development of the telecommunications and information industry.

As demonstrated in the discussion of policy politics of Thai telecommunications through several cases in Chapter 7, one thread that ran through all cases was the democratization of Thai telecommunications politics and increasing public scrutiny of major state affairs. Growing public pressure through media exposure of corruption, combined with democratic politicking has resulted in the punishment of participants in corrupt practices as seen in the case of the computer procurement scandals. This change

280 did not stop all corruption but it did send a strong message to potential parties in political collusion that blatant corruption would no longer go unnoticed.

Public-minded individuals who entered politics, in particular senators like

Jermsak Pinthong and Meechai Veeravaidhya became voices of the public in demanding transparency and accountability as in the case of the formation of the NTC. The Senate was an institution historically dominated by military men and bureaucrats who were appointed to take control of part of the national political apparatus in order to serve their respective organizations and alliances. The political characteristics of the Senate were dramatically changed as a result of the 1997 constitution amendments that required the

Senate to be elected. This in effect expanded the democratic political space and provided platforms for new players. Also emboldened by the democratized atmosphere, Thai

NGOs were active in the NBC formation. Even though of public interest advocacy was still in an early stage of development and was not yet a strong force in Thai telecommunications politics, it was to some extent able to dilute the dominant business- political coalitions in policy politics. Whether this development will have a significant impact on the policy process and change Thailand’s telecommunications political landscape remains to be seen. But it can be concluded that this new democratic element has added another dimension to the existing political arrangement concerning Thai telecommunications politics, in which business interests appeared overwhelming.

281 Implications for Future Role of the Thai State

Research Question No. 5: What implications do Thai policies concerning the

Internet and telecommunications have on the future role of the state?

The increasing diversification and fragmentation of social interests which impose divergent demands and challenges on the state result in their “aggregation under the form of (re)constructed identities” (Castells, 1997, p. 271). As the society becomes more and more pluralistic, the state’s ability to respond simultaneously to the vast array of demands induces what Jurgen Habermas called a “legitimation crisis.” In order to maintain its legitimacy, the state responds by decentralizing some of its power to the local government. As national governments are more and more burdened with managing strategic challenges of globalization of trade and communication and the accompanying pressures from de facto global policymakers like the WTO, multiple trade cooperation, and international corporate powers, the domestic issues become the domain of local government.

This trend has a salient future implication for a country like Thailand, where democratization and decentralization of power have taken place. The technology factor will further this tendency. The fragmented and empowering nature of new digital technologies will allow the revival of local governments and likely create new types of communities that are not geography-bound. The newly empowered local communities and local governments and the new virtual communities will eventually undercut the power of the national government. If the trend in advanced democratic societies such as the United States and Europe can offer any indication, this decentralization of power and

282 politics will stimulate and instigate localism and competition for legitimacy from the

re-localized groups and local governments. For a country that has been able to

successfully unify as a nation-state like Thailand, this trend is important both in terms of

understanding political reorganization as well as making appropriate policy strategy.

As demonstrated extensively in this study, the Thai state authority is weakened by

numerous policy interests. The state’s diminished ability to impose its agendas and

dictate policy outcomes has resulted in the NII development plan lacking in force, focus

and direction. This trend in diminished state influence in setting the national political and

economic agenda is unlikely to be reversed. As a result, the state will have to re-create

and re-define its legitimacy by adjusting its relationship with its populace and with its

local governments. Centralized and top-down policy agendas and management are no

longer appropriate and a more holistic user-oriented policy model is required for the new

environment. Policymakers need to be cognizant of the importance of user participation

in national and local policy initiatives and in implementation.

Within privatized and internationalized political economies, the future of a

welfare state is dim. The role of the state must accordingly be reevaluated in the extent to which it can realistically function as an agent of the public interest. The state will be hard pressed to find workable solutions for social and economic balance and as a result will have a difficult time legitimizing its power. As technologies continue to evolve, the issue of universal service provision will have to be continually redefined and the role of state revisited. And as businesses are likely to be the primary providers of most services, better and more comprehensive frameworks for state-private partnership in national

283 development must be created. The questions for policymakers to wrestle with in terms of universal service obligations will concern what services will be qualified as public service, how they should be delivered, and who will pay.

Recent competition in the Thai Internet market has shown some positive results in reduced access charges. Yet, market forces alone will not be sufficient in solving the access gap problem. The new populist Thaksin government has promised to fund national projects, for example the Ministry of Interior 68-million baht project to connect

7000 tambons (sub-districts) within 2003 (“Thousand tambons,” March 31, 2001) and the

Ministry of Education’s proposed 3.4 billion baht project to connect all schools

(“Computing a plan,” April 15, 2001). The NESDB set a relatively modest goal in its

Media, Information Technology and Telecommunications Development Plan (1999-

2008) to have computer-mediated communication with every tambon and an Internet penetration rate of 20 percent, affecting 14.1 million of 70.5 million Thai population in

2020 (Pichai & Darunee, 2000). Whether or not these goals will be met depends much on the many interests at work in the politics of telecommunications. Political interference, policy irregularities and corruption involving large and lucrative telecommunications infrastructures have become a staple of Thailand’s recent political life. How the government can devise a universal service policy that is compatible with the liberalized environment and that is less susceptible to politics and vested interests is an important and practical question.

In conclusion, the study has shown that the role of traditionally strong policy actors such as the military and the technocrats weakened in the 1990’s decade.

284 Meanwhile, whereas state monopolies struggle to maintain dominance through resistance against liberalization, business interests are becoming overwhelmingly powerful not only through business alliances with politicians but also through direct participation in politics and strategic ministerial posts in the cabinet. Emerging public interest advocacy by NGOs, media, academic, and individual senators is only beginning to exert some influence, albeit limited, in the political system dominated by money politics. State monopoly in telecommunications has yielded a negative impact on the development of the Internet despite national policy directive on universal access.

Kingdon’s political model and Singh’s telecommunications restructuring factors and state characteristics are useful in providing good analytical maps to understand the evolution of the policy process and particularly the interactions among various policy actors. However, while the Kingdon “garbage can” policy model has strength in providing a framework to identify elements that go in the policy process, it does not accommodate the historical and structural elements that pre-exist in the political and social system. In other words, the Kingdon model assumes free participation in the policy process as can be expected in more mature democracies like the United States, but in an immature democracy like Thailand many actors do not operate by democratic and participatory rules and the larger public’s access to public policymaking remains limited.

Also, in the society where politics is still dominated by a small group of power elites with diverging interests, and where the government is weak, the state cannot be expected to act as arbiter of competing interests.

285 The Singh’s state typography is relevant in explaining the behaviors of governments like that of Thailand and the constraints governments of developing countries tend to face in the policymaking process such as the existence of special interests and local power elites. The range of maneuverability and responsibility of the state provided by Singh helps in understanding the unpredictable and inconsistent state behaviors in policymaking within the context of weak political institutions against the increasingly powerful forces of business. Nevertheless, the complicated social system cannot be explained totally and neatly by one single theoretical model. Each society is unique with different elements arising from unique historical and cultural backgrounds.

In attempting to understand a phenomenon in a given social system, it is helpful to place the subject of investigation within the historical and cultural context. In Thailand’s case, the history of state behaviors, particularly the historical pattern of control and ownership—helps illuminate its current role.

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309 APPENDIX A

ABBREVIATIONS

AFTA ASEAN Free Trade Agreements

AIN Asian Internet Network

AIS Advanced Information Services

AIT Asian Institute of Technology

APEC Asia-Pacific Economic Cooperation

ASEAN Association of Southeast Asian Nations

ATM Asynchronous Transfer Mode

BBS Bulletin Board System

BOT Bank of Thailand

BTO Build-Transfer-Operate

CAT Communications Authority of Thailand

CDMA Code Division Multiplex Access

DPC Digital Phone Company

EGAT Electricity Generating Authority of Thailand

EU European Union

GATS General Agreements in Trade and Services

GINet Government Information Network

IMF International Monetary Fund

ISP Internet Service Provider

310 IP Internet Protocol

IT Information Technology

ITU International Telecommunication Union

IIG International Internet Gateway

IIRC Internet Information Research Center

JTM Jabatan Telekom Malaysia

MCOT Mass Communication Organization of Thailand

MITI Ministry of Internal Trade and Industry

MOAC Ministry of Agriculture and Cooperatives

MOE Ministry of Education

MOF Ministry of Finance

MOSTE Ministry of Science, Technology and Environment

MOTC Ministry of Transportation and Communications

NBC National Broadcasting Commission

NAFTA North American Free Trade Agreements

NECTEC National Electronics and Computer Technology Center

NESDB National Economic and Social Development Board

NII National Information Infrastructure

NITC National Information Technology Committee

NIX National Internet Exchange

NSTDA National Science and Technology Development Agency

NTC National Telecommunications Commission

311 NTL National Technology Laboratory

NWG Network Working Group

ONPEC Office of National Primary Education Committee

PCN Personal Communication Network

PCT Personal Communication Telephone

PIE Public Internet Exchange

POP Point of Presence

PRD Public Relations Department

PSTNs Public Switching Telephone Networks

PTD Post and Telegraph Department

RBOCs Regional Bell Operating Companies

SDH Synchronous Digital Hierarchy

SOE State-Owned Enterprise

STM Syarikat Telekom Malaysia

TA TelecomAsia

TAC Total Access Communication

TCP/IP Transmission Control Protocol/Internet Protocol

TDRI Thailand Development Research Institute

ThaiSarn Thai Social/Scientific Academic and Research Network

TOT Telephone Organization of Thailand

TT&T Thai Telephone and Telecommunications

UUCP Unix-to-Unix-CoPy

312 VoIP Voice over Internet Protocol

VSAT Very Small Aperture Satellite

WAP Wireless Application Protocol

WTO World Trade Organization

313 APPENDIX B

PERSONAL COMMUNICATION REFERENCES (LIST OF INTERVIEWEES)

Name Date Organization Location Note

Chadamas August, 7, 1998 NITC BKK SchoolNet Thuwasethakul Chaiwut August 20, 1998 Kasetsart Univ. Nakorn RuralNet Pronbanditpattama Pathom Cooper, Doug July 10, 1998 Southeast Asian BKK Computer Linguistics Research Ctr., Linguistics Dawson, Alan August 17, 1998 Bangkok Post BKK Early BBS provider Gothom Areeya, August 8, 1998 BKK Democracy activist Gritsana Changgom August 10, 1998 NITC BKK Lawyer

Kalya Homket August 6, 1998 Institute of Rural BKK RuralNet Development, Chula Coordinator Mechai Viravaidya August 9, 1998 TOT, Chairman BKK Senator, PDA (NGO) Montien Boontan July 14, 1998 NITC Subcommittee, BKK Academic disabled community Nopparat December 13, 2000 TOT BKK IP Network Methaweekulchai Noppasit August 28, 1998 Chiang Mai Univ. Mae Hong ThaiSarn Son Patcharee Pleebut August 20, 1998 Tambon development Nakorn RuralNet Pathom Pichet July 30, 1998 NITC, Director BKK Durongkavaroj Pituma Panthawi January 21, 2000 NITC BKK Researcher December 7, 2000 Pornthep August 28, 1998 Sob Muey School Mae Hong Rural SchoolNet Supparapron Director Son Rom Hiranpruk July 30, 1998 NECTEC/ NITC Software Park, MD Sanguan Chantalay September 1, 1998 Pangfan Nature Chiang ThaiSarn Observation Ctr. (NGO), Mai Director Somkiat August 24, 1998 TDRI BKK Research Tangkitvanich Specialist Sripen Duronkdej August 13, 1998 Kasetsart Univ. BKK RuralNet

Srisakdi August 19, 1998 Kasetsart Univ. Nakorn RuralNet Bhramsophee Pathom (continued)

314

Name Date Organization Location Note

Suvit Nakpeerayudh August 6, 1998 Chulalongkorn Univ. BKK RuralNet Thawalwongse August 29, 1998 Chiang Mai Univ. Mae Hong ThaiSarn Krairojananan Son Thaweesak August 24, 1998 NECTEC, Director BKK Koanantakul Tinakorn September 1, 1998 Basic Education Lampoon ThaiSarn Office Trin Tantsetthi – August 27, 1998 Internet Thailand, BKK ISP President Uthai Kathiyod – September 1, 1998 Basic Education Lampoon ThaiSarn Office, Director Vivatvong Vichit- July 7, 1998 Loxinfo, President BKK ISP Vadakan Zellerbach, Jamie September 8, 1998 Sala Group, Sala BKK Independent Thai BBS BBS provider, NGO

315 APPENDIX C

LIST OF NITC SUBCOMMITTEES

316

317

318 APPENDIX D

FLOW CHART MAJOR THAI TELECOMMUNICATIONS OPERATORS

319

320 APPENDIX E

UNIVERSAL ACCESS ACT, B.E. 2543 (2000)

321

322

323

324

325

326

327

328

329

330

331

332

333 APPENDIX F

NITC ORDER NO. 15/1999 APPOINTMENT OF SUBCOMMITTEE ON THAILAND’S INTERNET POLICY TASK FORCE

334

335