July 13th, 2006

VoIP in Malaysia


I havent wrote about VoIP for a while so let me try here. I suppose I could write about the Vonage, about them being sued over E911, sued for patents infrigement, sued by shareholders and the fact their share price dropped by half since IPO. The latter was kind of embarrassing for me as I just gave a glowing outlook on VoIP market sentiments to some investment bankers using Vonage as an example not so long ago. Anyway, all these bad news are already covered by others so let me write about something else, like VoIP players in Malaysia.

VoIP (long distance) players in Malaysia are dying. Actually it is kind of old news but since it is not widely known, so let me share the story here. The first sign of trouble was AIMS (a neutral data center operator) discovered they are losing customers, up to 2-3 VoIP companies per month! There was cries for help from the industry but it took a while for the regulator to figure out whats was the problem.

I dont claim to have a full picture but this is what I know: It related to the VoIP service offered by one of the incumbent.

There is nothing wrong for the incumbent to offer VoIP service. Neither was it a problem that the incumbent offers it cheaper than the other VoIP players. However, it is a problem that they engaged in predatory pricing strategy, offered the VoIP cheaper than the interconnection rate the other VoIP players have the pay them. It is also a problem to engage in price discrimination, offering the the service only and only for customers of their competitors. They literally take the “Don’ts” section of Antitrust laws and offer it as a service plan.

Anyway, the regulator already step in and stop the service. The incumbent reacted by “white labeling” the service with a third party. Things are a bit stable right now but in the long run, all but the largest VoIP players (e.g. Redtone) are in a very precarious position.

1 not too sure if that is how it is spelled…

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