Broadband heaven and hell

Double the speed, double the download limit, and more. It seems the Maltese high-speed internet broadband subscribers never had it so good, with their access speeds getting to 20 or 30 megabits/second almost overnight at no extra cost.

The two major fixed-line broadband providers, Go and Melita Cable, have announced this on the eve of the international trade fair at Ta' Qali. Concurrently Vodafone Malta, the only broadband wireless operator till now, tried to keep up with its own cost-related offers.

Last September more than 75,300 broadband connections were deployed, accounting for 79 per cent of all internet connections. This means almost half the households and non-residential units in the country have a high-speed internet connection.

The two major broadband providers said that better broadband access is the result of continuous investment in their infrastructure to meet the demand for more international bandwidth.

"The convergence of media is the driving force behind the evolution of the internet. It is difficult nowadays to identify where one medium stops and the other ends," remarked a spokesman from Melita Cable. "The usage patterns of broadband internet reflect this and users spend more time accessing video content, audio content, streaming services as well as interactivity services."

The Go spokesman confirmed the change in usage patterns in broadband over ADSL.

"More people are using the internet, for longer periods and doing different things than they were doing some years ago. However, there is still a pattern of peak usage during certain hours, and few people are extremely heavy users, while the bulk have normal usage patterns. Economies of scale work to your advantage here as volume allows you to better maximise on your network and bandwidth resources."

To meet the ever-increasing demands of its customers, Melita Cable has decided to install its own submarine data cable between Malta and Sicily. The company is completing the necessary planning processes and is moving into the contractual and implementation phases of this project.

Go, who already owns a submarine cable, will have a second one by the end of the year. "This allows us to ensure that we do not need to do any traffic management as we never have congestion on the international links," the company's spokesman claimed. "That is why we speak about "the broadband experience" - talking about high local speeds but then traffic managing international bandwidth does not necessarily give you that, since as we know 99 per cent of all traffic goes outside of Malta."

Maltese broadband users have to keep in the mind that the speeds advertised by the providers have some restrictions attached. For example all speeds advertised in the Onvol-branded products by Melita Cable are on a shared best effort basis, meaning there is a possibility you would have to share the speed with your neighbours, though the company insists it has plenty of spare capacity on its network.

In the case of ADSL, the closer you are to the network the higher the speed, and over the coming months more and more households will be coming within range of their maximum speed, the Go spokesman explained. However, the speed is not shared with other households.

It's not the first time that Melita and Go do comparative advertising to promote their broadband packages, mostly based on the limitations of the competitor's infrastructure.

Both Go and Melita Cable are investing into other forms of internet access besides fixed-line broadband. Go said it will "soon" roll-out its WiMax wireless broadband internet network while Melita Cable has been investing in its mobile network to become the third 3G mobile operator in Malta. However, the Melita spokesman declined to give any hints on the launch date.

While Go has 52 per cent of broadband market share with ADSL, Melita Cable has garnered the remaining 48 per cent of this market with its cable internet service. Vodafone Malta is a new entrant but making slow headway with its WiMax service. Go and Cellcom are expected to join Vodafone Malta soon in providing WiMax access.

While personal users may have something to smile about, these sudden increases in broadband capacity are putting a strain on the smaller independent internet service providers (ISP). A few weeks ago the Malta Communications Authority (MCA) issued a review of competition in the wholesale broadband market, i.e. services sold and purchased by electronic communications providers rather than by end users.

According to the report, it seems that the rising number of broadband connections registered between Go and Melita has been achieved at the expense of these independent ISPs, which are being squeezed out of the market by their competitors through wholesale pricing and not fair competition at retail level.

While independent ISPs such as Waldonet and Nextweb have also increased their product offerings in line with Go's offerings (Waldonet and Nextweb sell ADSL accounts acquired from Go), all independent ISPs can only offer retail broadband products to end users with download and upload speeds as offered by Go.

"The range of retail products offered by independent ISPs clearly demonstrates that while these ISPs can only emulate Go's packages, Go and OnVol are able to dictate pricing and speeds. The MCA believes that this situation greatly hinders the competitive edge of independent ISPs, which could potentially stimulate more competition in the market."

The authority is also critical of the wholesale broadband pricing strategy towards the independent ISPs.

"In conclusion, the MCA believes that Go and Melita Cable are earning high profits (either at retail or wholesale level), which is not a good indication of a fully competitive market. On the other hand, independent ISPs, despite merging to become more efficient and attain a larger subscriber base, are still experiencing a rapid and continuing decline in market share and revenues. Although diseconomies of scale have a great impact on the profitability of small ISPs, it is also pertinent to note that ISPs have been facing great difficulties to obtain decent wholesale inputs from network operators to be able to compete effectively."

The MCA concluded that the entry of Vodafone Malta in the broadband market has brought more competition. Furthermore, the launch of Cellcom's wireless broadband service to end users in the near future would alleviate the problem of wholesale access for ISPs, since Cellcom is a consortium of small ISPs.

In its market review the MCA, however, also suggests further reductions in the price of lower-end packages so as to increase the affordability of broadband for everyone. This should also be coupled with continuous upgrades in higher-end packages, which would ensure that Maltese consumers have adequate broadband packages, comparable to those available in other EU countries.