Based on statistics made available by the Minister of Energy, Water and Communication as at 2006, broadband penetration rates for Malaysia is less than 3%, compared to more than 60% for South Koreans.

The BN Government’s National Broadband Plan target of 25% household penetration by 2006 and 50% by 2008, has clearly failed miserably.

In the larger national interest of achieving the above targets, and its importance towards building a generation of enterprising and innovative Malaysians, DAP proposes that the broadband market be liberalised to allow for foreign competition.

To promote the building of high quality and reliable broadband network, DAP proposes favourable tax treatment for telecommunication firms undertaking broadband investments:

* New broadband operators are allowed to deduct financing costs from their taxable income.

* Investors are exempted from paying taxes on interest income from bonds specifically ear-marked to finance these investments.

* Exemption from import duties for specific state of the art telecommunications equipment required for broadband infrastructures.

In addition, there should be direct grants to fund, valid for new connections signed up before 31st December 2008:

*The cost of installation of the broadband connection between the business premises and the appropriate exchange for the amount not exceeding RM100 per connection.

*First-time installation charges for connection to broadband services faced by all new residential subscribers for the amount not exceeding RM50 per connection per household.

*First-time installation charges not exceeding RM100 per connection and monthly charges not exceeding RM50 per month, for broadband services faced by registered charitable organizations and community centres.

The lack of competition in the broadband industry creates disincentives for businesses and consumers to adopt ICT. A monopoly telecommunication service provider would be induced to charge a higher price at all levels of service quality than in an otherwise competitive environment, thus slowing broadband adoption in the economy.

Hence, fiscal transfer schemes via favorable tax treatment on telecommunication companies and grants cannot serve as catalysts for ICT development by themselves. The National Broadband Policy needs to promote both facilities-based and intra-platform competition.

Facilities-based competition, or inter-platform competition, would bring about competition between providers of the same or similar services, but where the services are delivered via different or proprietary means or networks. For instance, a new cable TV network may compete with a BPL (broadband over power lines) to provide broadband services.

Intra-platform competition requires the incumbent telecommunication monopoly to share their physical network with other broadband ISPs, who may wish to access the facilities of the incumbent telecommunications provider. This will prevent duplication of network infrastructure as well as eliminate the natural barrier to competition in the industry.

While the current limited local loop unbundling (LLU) policy in place already permit such sharing of facilities, it is understood based on the feedback from the industry that the incumbent monopoly still possesses undue influence over LLU and hence retarding the liberalisation of the broadband sector.

Therefore, the industry regulator, Malaysian Communications and Multimedia Commission (MCMC) shall be given more enforcement powers to prevent anti-competitive and negative collusion behaviour by incumbent telecommunication companies. Heavier penalties shall be imposed, particularly for price and non-price anti-competitive behaviours such as delays in processing of applications, unreasonable terms and conditions as well as other forms of anti-competitive manipulations.

Stimulus for Local MSC Companies

To promote the growth of ICT industry in Malaysia, as well as the success of the Multimedia Super Corridor (MSC) which was initiated in 1996, all MSC status companies shall be immediately qualified to bid and tender for all Government-related ICT projects. In the past, only companies registered and approved by the Ministry of Finance are qualified to tender for these projects.

By allowing additional competition in the provision of services to the Government, the Government can expect additional savings in terms of cost of implementing ICT projects as well as an increase in quality of services provided. At the same time, it will serve as a timely boost to MSC-status companies, particularly local ones with the expanded market as the Government represents one of the largest consumers of ICT products and services in the country. The stronger domestic presence of the MSC-status companies shall result in improved ability and credibility for these companies to compete in overseas markets.

In addition, as the entire concept of ICT is based on its ability to transcend physical boundaries, particularly with the advent of broadband and mobile technologies, the geographical requirements for MSC-Status companies to be located at specific sites shall be phased out accordingly.

This requirement has been most heavily criticised by those employed in the industry, and the DAP is receptive to the voice of those affected by the current policies. Without geographical limitations, we expect Malaysian MSC-Status companies to continue to grow exponentially in terms of numbers and profitability, as their ability to service customers, attract global top talents as well as reduce operating cost will be enhanced substantially.

Increasing computer ownership

1. Household computer ownership in Malaysia continues to remain low at 21.9%. In order expedite the increase computer literacy as well as ownership, particularly among the lower income group who currently don’t pay any taxes, all Malaysians above the age of 21 shall be entitled to computer purchase vouchers based on their income levels. Those with income RM1,200 and below per month shall be entitled to RM200, while those with income above RM1,200 and below RM2,500 will be entitled to RM100. Assuming a 10% take-up rate by those who are eligible, this exercise will cost the Government approximately, RM300 million.

2. To encourage the use of internet technology in Malaysia, DAP proposes an allocation of RM250 million for a nationwide WiFi plan to create ease of connectivity to promote learning and innovation. The project will pilot in Klang Valley, Penang and Johor Bahru for 2008 and for all other secondary cities in Malaysia by 2010.

3. At the same time, the current RM3,000 tax relief policy for computers purchased every 3 years should l be abolished as it benefits wealthier Malaysians disproportionately, and does not benefit lower income groups who do not have to pay taxes.

(Speech 11 on 2008 Budget in Parliament on Monday, September 10, 2007)