Unleashing the Potential of the Internet for ASEAN Economies Unleashing the Potential of the Internet for ASEAN Economies Copyright© The Internet Society (ISOC) and TRPC Pte Ltd 2015 This work is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License. To view a copy of this licence, visit http://creativecommons.org/licenses/by-nc-sa/4.0/ Table of Contents Preface .............................................................................................................................. 1 Introduction ...................................................................................................................... 2 Demographic Overview ........................................................................................................ 2 The Internet and ASEAN ....................................................................................................... 4 Conceptual Framework: the Internet Interconnectivity Model ........................................... 5 Outline of the Report ........................................................................................................... 8 ASEAN Internet Connectivity ........................................................................................... 10 Internet Access and Usage in ASEAN .................................................................................. 10 International Internet Bandwidth ...................................................................................... 17 IP Transit Pricing and the Economics of IXPs ...................................................................... 23 National Connectivity of the Internet ................................................................................. 29 Affordability and Quality of Service .................................................................................... 35 Conclusion .......................................................................................................................... 38 Internet Connectivity and Digital Economy ...................................................................... 40 From Connectivity to Interconnectivity: Introduction ........................................................ 40 Internet Interconnectivity in Action ................................................................................... 43 Creating a Digitally Integrated Society ............................................................................... 50 Conclusion ....................................................................................................................... 66 Recommendations .......................................................................................................... 69 Appendix ......................................................................................................................... 72 Unleashing the Potential of the Internet for the ASEAN Economies Preface This report is the second in the regional research series by the Internet Society (ISOC) to identify and propose ways to lift barriers to Internet development. The first report focused on 20 countries in Africa and was published in May 2013. Building on the methodology and learnings from the first report, the ISOC Asia-Pacific Regional Bureau commissioned this first of a new series of reports that looks into unleashing the full potential of the Internet for building a digital economy. This report takes a closer look at the regional Internet ecosystem of the 10 Association of Southeast Asian Nations (ASEAN) member economies and the impact of Internet connectivity on the emerging digital economy. This report takes stock of the progress ASEAN member economies have made in terms of Internet access and regional connectivity, the prospects of Internet interconnections enabling inclusive, integrated and sustainable development, and the potential opportunities and constraints on the emergence of an ASEAN digital economy. The motivations for the ASEAN focus are two-fold: first, the importance of ASEAN as an emerging online market and the subsequent innovation created is increasing strongly. The ASEAN regional bloc encompasses economies now recognized to be some of the most prolific users of smartphones and social media in the world, and the Internet is increasingly viewed as a critical driver of economic growth and social development. Second, ASEAN is rapidly approaching an iconic milestone – establishment of the ASEAN Economic Community (AEC) in 2015. Connectivity, encompassing the physical, human and digital arenas, is one of the most critical requirements the ASEAN economies need to achieve in order to reduce development gaps, enhance competitiveness and ultimately move closer to achieving the ambitious goals of the AEC. Taking these issues into account, this report examines the current status of the Internet ecosystem across the 10 ASEAN countries and identifies where bottlenecks exist from supply, usage and regulatory perspectives. However, access and connectivity is only the first step; to fully unleash and capture the benefits of the Internet, the focus needs to shift towards promoting interoperability and interconnectivity of networks, particularly in areas where the potential benefits can have an impact on social and economic development. This report, therefore, also looks at the disruptive impact that the Internet could enable through interconnectivity among traditionally siloed activities, processes and entities and how successfully these interconnections are advancing social and economic development goals such as education, health and empowerment within ASEAN. This report argues that ASEAN stands at a position to proactively drive the digitisation of public, commercial and social activities, and to realise and benefit from a digitally integrated and inclusive society. This report will serve as a guide to inform the strategy and content of the ISOC Asia-Pacific Bureau’s engagement activities in 2015 and beyond. At the same time, we also invite you to read and make use of the knowledge from this report. In particular, we hope that this report will be a useful source of information and a reference point for ASEAN governments and policymakers involved in the Internet and the digital economy. We also hope that the Internet community at large may find this report useful to further advance advocacy towards an open, free and robust Internet in the ASEAN region and beyond. 1 Unleashing the Potential of the Internet for the ASEAN Economies Introduction DemograpHic Overview The Association of South East Asian Nations (ASEAN) as a single entity would be the seventh largest economy in the world according to the World Bank, with a combined nominal GDP in excess of USD2 trillion in 2013. ASEAN is also one the fastest growing regional blocs, with the OECD projecting a real average GDP growth rate of 5.4% per annum between 2014-2018.1 Established in 1967 by Indonesia, Malaysia, the Philippines, Singapore, and Thailand, to promote regional peace and stability, ASEAN has expanded to include Brunei, Cambodia, Lao PDR, Myanmar and Vietnam, and its focus today is towards the economic prosperity and growth among its members. Although the ten ASEAN member states are at vastly differing stages of development, there is tremendous growth potential both within each economy, and across ASEAN as a whole. Figure 1. ASEAN Development Indicators *IMF estimate Source: TRPC, based on World Bank Indicators (2014), http://data.worldbank.org/indicator, CIA World Factbook (2014) Age Structure, https://www.cia.gov/library/publications/the-world-factbook/fields/2010.html 1 OECD (2014), Economic Outlook for Southeast Asia, China and India 2014: Beyond the Middle-Income Trap, http://www.oecd.org/site/seao/Pocket%20Edition%20SAEO2014.pdf 2 Unleashing the Potential of the Internet for the ASEAN Economies Table 1. ASEAN Development Indicators GDP Per Capita Population Density Urban Population Population (Current USD) (People per sq km) (% of Total) Brunei 38,563 417,784 79 77 Cambodia 1,007 15,135,169 86 20 Indonesia 3,475 249,865,631 138 52 Lao PDR 1,661 6,769,727 29 36 Malaysia 10,538 29,716,965 90 74 Myanmar 868* 53,259,018 82 34 Philippines 2,765 98,393,574 330 49 Singapore 55,182 5,399,200 7,713 100 Thailand 5,779 67,010,502 131 35 Vietnam 1,911 89,708,900 289 32 *IMF estimate Source: World Bank Indicators (2014), http://data.worldbank.org/indicator Figure 1 and Table 1 illustrate the varying levels of economic development and makeup of the ten ASEAN economies. Across ASEAN there exists a wide range of GDP per capita, population size and density, and urbanization as exemplified by the differences between Singapore (with the highest GDP per capita of USD55,182), and Myanmar (lowest GDP per capita of USD868). ASEAN is also characterized by a young population as shown in Figure 2 and Table 2, with an average median age of 28.3 years. Brunei, Indonesia, Malaysia, Myanmar and Vietnam all have over 40% of their population below the age of 24, while in Cambodia, Lao PDR and the Philippines over 50% are younger than 24. Only in Singapore and Thailand do the numbers drop to around 30%. Figure 2. ASEAN Population by Age Source: CIA World Factbook (2014) Age Structure, https://www.cia.gov/library/publications/the-world- factbook/fields/2010.html 3 Unleashing the Potential of the Internet for the ASEAN Economies Table 2. Median Age in ASEAN Countries Country Median Age Country Median Age Brunei 29.3 Myanmar 27.9 Cambodia 24.1 Philippines 23.5 Indonesia