Broadband in the Tropics

his tropical country is emerging as a test case of whether developing nations can be at the forefront in implementing new ways to make the Internet more mobile. Malaysia is one of the few countries that has rolled out a next-generation high-speed broadband network that covers most of its population. That means someone with an iPhone sitting on a monorail train in the jungle-covered hills of Kuala Lumpur easily can make video calls with Apple Inc.'s FaceTime application, using a tiny pocket router to access a WiMAX wireless-broadband network set up by local conglomerate YTL Corp. Bhd. Enlarge Image With around 70% of YTL's revenue coming from selling water and power in places such as Australia, England and Singapore, the WiMAX network represents a high-stakes return to Malaysia for the company. YTL started out as a small construction firm in Malaysia before branching out into utilities, property development, tourism and other industries. Managing director Francis Yeoh says the WiMAX network, started late last year at a cost of $800 million and named Yes, gives YTL a chance to leapfrog existing mobile-phone operators in the country by offering faster Internet speeds. Industry analysts and the country's political leaders say better high-speed Internet infrastructure could give Malaysia a competitive edge over regional rivals such as China, Thailand or Singapore as Malaysia tries to up-shift into faster economic growth. "We can't rely on what little oil we have left or commodities like palm oil," says Mr. Yeoh, 57 years old. "We need new ideas to lift ourselves up, and taking a lead in technology is one of the ways forward." YTL has 300,000 WiMAX subscribers and expects that to expand to 400,000 people by year-end. Mr. Yeoh says Yes needs a million or so subscribers from Malaysia's 28 million people to start turning a profit. The WiMAX system has been touted as a quick, easy way to roll out wireless broadband services, but alternatives such as the long-term-evolution protocol are picking up momentum in the U.S. and elsewhere. Wing K. Lee, the chief executive of Yes, says the network could switch to LTE quickly, if that standard becomes most widely adopted. Either way, YTL's initial success suggests that as high-tech equipment becomes less expensive and more accessible, advances in mobile Internet aren't limited to the U.S. and other big markets. Networking company Cisco Systems Inc. predicts that mobile Internet data traffic across the world will increase 26-fold between 2010 and 2015. In a paper released earlier this year, Cisco noted that traffic tripled in 2010, 2009 and 2008—and that was before smartphones and tablet computers really began to take off in places such as China, India and Southeast Asia. The popularity of such devices has sparked demand for wireless systems such as WiMAX and LTE that are geared more heavily toward providing Internet rather than voice services. In some ways, Malaysia is an unlikely place to test-drive technologies that haven't been fully rolled out in more-developed markets. The government is tightly controlled by the same political party that has run the country since gaining independence from Britain in 1957. Antigovernment criticism is closely monitored. As recently as last month, censors pulled out their black markers to blot out some unflattering passages from the Economist magazine. Malaysia's opposition leader, meanwhile, is on trial for the second time for allegedly violating the country's strict sodomy laws. Anwar Ibrahim's first conviction was overturned in 2004, and he says this latest trial is another government attempt to destroy his political career. In the mid-1990s, however, Malaysia's leaders pledged not to censor the Internet, a promise the government largely has kept. The vow was a crucial turning point, luring such big names as Microsoft Corp. and Google Inc. that already were impressed by the country's relatively inexpensive labor and good infrastructure. It also provided Mr. Yeoh with an opportunity to steer YTL back into Malaysia and try to outflank the existing telecommunications companies who use cellular telephone networks. Without the government's commitment to an uncensored, open Internet, he says, it would have been much more difficult for YTL to invest so much in the new venture, which is run by YTL Communications Sdn. Bhd., 60% of which is owned by YTL. "It might not have happened," Mr. Yeoh says at YTL's headquarters in downtown Kuala Lumpur. "Most Asian governments are terrified of the Internet. Look at Burma, look at North Korea." Analysts are watching closely to see how quickly the new service catches on. YTL's Yes network is more expensive than Malaysia's existing GSM networks because it works on a pay as you go basis, much like an electricity provider, rather than the usual system of package contracts and monthly fees. Many "people aren't really using mobile Internet extensively just yet," says Jeffrey Tan at Kuala Lumpur's OSK Research Sdn. Bhd. Indeed, Malaysians still mostly use their smartphones as phones and tend to use the Internet when at home or in the office, he says. Telecom operators elsewhere in the region suggest there still is room to increase data speeds on existing cellular networks. Philippines-based Globe Telecom Inc., for instance, operates a WiMAX-based wireless broadband service in the sparsely populated south of the country, but Chairman Jaime Augusto Zobel de Ayala said earlier this year that the company still is focusing most of its attention on developing its cellular network. Yet with Apple preparing to roll out new, less-expensive versions of its iPhone and competitors such as Samsung Electronics Co. introducing more affordable smartphones, analysts are predicting an explosion in demand for mobile Internet services, potentially placing YTL in a more competitive position. The company is focusing on expanding its signal to the thick jungles of Borneo island and is thinking about entering nearby markets such as Indonesia and the Philippines. Yes's Mr. Lee, an American who was born in Hong Kong and used to work with Sprint Nextel Corp., says the wireless-broadband model helps connect rural subscribers almost instantaneously without the time-consuming wiring that conventional networks require. Says Mr. Yeoh, "I won't be satisfied until we've got 14 million subscribers."