Can Konsortium Rangkaian Serantau make it this time? (Update)

  • Telcos
  • Friday, 01 Aug 2014

KONSORTIUM Rangkaian Serantau Sdn Bhd (KRS) was set up in 2011 with an aim to buy international bandwidth for Internet traffic to lower the cost of Internet protocol (IP) transit traffic.

The net effect was to lower broadband rates which hopefully will attract more people to the broadband bandwagon.

It also had an ambitious plan to lay subsea fibre optic cables to link Malaysia with the United States.

But three years later, it has only inched forward from where it started.

The company found that the challenges were insurmountable.

There is the inability to get everyone to place orders for bulk buying of transit traffic, hence, without the volume, it is hard to demand for lower pricing.

Every player has its own preference, some already have direct contracts with the suppliers, and some are not keen to work with KRS.

The volume of traffic that KRS has bought over the past three years is less than one gigabit, which is too little to start off with. Because it is so insignificant, some members think that KRS may perhaps have closed shop.

KRS was set up under Entry Point Project 10 (EPP10) to solve the problem of costly bandwidth and greater international connectivity.

It has 24 shareholders. The big and small boys of the communications industry are its members. They include Telekom Malaysia Bhd (TM), TIME Dotcom Bhd (TDC), to Maxis Bhd, Celcom Axiata Bhd, Bhd, U Mobile Sdn Bhd, Green Packet, YTL Communications Sdn Bhd, REDTone International Bhd, OCE, Fibrerail Sdn Bhd, Jaring, Sacofa, Sarawak Information Systems, Fibrecomm Networks (M) Sdn Bhd, and V Telecoms.

Each member had to fork out RM10,000 in contribution for the paid-up capital of RM240,000 for KRS in 2011.

But along the way, KRS changed course to do its own subsea cable network. Known as the Serantau Cable, it was meant to link Malaysia with the United States via a 18,500 subsea (communications) fibre optic cable network.

This would have provided a good “backup” capability to other carriers in the region as the Serantau Cable was to take a completely different route from all other cable systems in the region.

But that idea has since been canned though a feasibility study has been done. The reason for that is that, it is far too costly to have a subsea cable link, the regional players are not keen, nor are the local players.

For a typical 7terabits cable network with four to five fiber pairs, the cost is between US$400mil and US$600mil from Malaysia to the United States, probably, via Hong Kong.

KRS claims it will cost only US$340mil, and had the regional players come in as shareholders, KRS’ cost will be down to US$210mil.

So if that did not take off, and KRS had only been able to serve a very small community, should it remain or be just disbanded? It has thus far received RM9mil from the Government for the study and other things.

But KRS is not willing to give up so fast.

In fact during its recently-concluded EGM on July 21, it came up with another plan to buy up to 20G of space for the industry, and call it its second growth phase.

However, the question is, if it could not get the big boys to work with them for the past three years, what assurance is that they will come in now with orders?

Even if they do, will the rates offered for transit traffic be lower than what they are getting directly from the suppliers such as TM, TDC and the international consortiums that have subsea cable networks?

IP transit cost makes up about 10% to 40% of total Internet cost for a player, and the rates have since dropped given the ample capacity with global players forming alliances to lay more submarine cable to provide access.

Both TM and TDC are partners in various initiatives and they have been able to provide capacity the nation needs, so do we really need Serantau Cable or KRS?

But given the volume, they can at least negotiate.

However, the industry players are not willing to let KRS buy for them and it is highly likely that they will not support KRS in the future even though KRS wants to stay alive.

Will it ever live to serve the purpose it was set up for in the first place?

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