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					                De La Salle University – Manila
              Department of Industrial Engineering

           Networked Readiness: Individual Usage
A term project submitted in partial fulfillment for the requirements in ORGADEC

                                Submitted by

                            Dy, Jerrick Christopher
                            Patricio, Daphne Anne

                                Submitted to

                            Dr. Jose Edgar Mutuc

                               November 2009
                                                                                                            Dy & Patricio
                     Global Information and Technology Report
                                 INDIVIDUAL USAGE

Chapter 1: System Description

1.1 Introduction
During the late twentieth century, information and communications technology (ICT) has been
proliferated and it had seen widespread incorporation into many tiers of business, political
processes and life in general (Walsham, 2001). This therefore proves that ICT in recent decades has
become a key enabler of socioeconomic progress and development as it enhances the productivity
of the people. This has resulted to the enhancement of the economic growth, the reduction of
poverty, and the improvement of living standards in many ways (Dutta & Mia, 2009).

There are organizations that monitor the status of the countries in terms of how developed their
ICTs are. One such organization is the World Economic Forum, a Geneva-based non-profit
foundation, through its Networked Readiness Index, or the NRI.

The Networked Readiness Assessment of the World Economic Forum includes three main principles,
namely the environment, the multi-stakeholder effort and the ICT usage. For any country to be
ready for ICT the environment should be ICT-conducive, that is, it should be suitable to achieve the
desired result to properly leverage ICT for enhanced growth. Once there is a proper environment,
stakeholders – the government, business sector and the civil society should make effort and have
farsighted goals could help leapfrog development that would lead to a structural transformation of
the economy, and to increased growth aspects. Once the environment is good and the market is
ready, there should be usage of the provided infrastructure by these stakeholders, with a particular
focus on its impact in terms of efficiency and productivity gains. This will show how prepared the      1
stakeholders are, given that proper ICT infrastructures are already provided by the government and
the private sectors. The preparedness and the interest shown by the stakeholders are very
important in the effective use of information technology since the technology provided is rather
useless unless it is used. The three sub-indices would be averaged together to the total Network
Readiness Score given that each of the three are given the same weight.

Under the sub index Usage, there are three important pillars to be considered. These three includes
individual, business and government usage. What this study is focused on however is the 1st pillar
under the subindex usage of network readiness which is the individual usage. Individual usage is
considered to be the 7th pillar of Network Readiness and is based on monitoring the individual
impact of Information Technology in terms of efficiency and productivity gains. Individual usage is
considered as the 7th pillar of NRI or Network Readiness Index and is one of the three considerations
in the measurement of the usage of the countries.

There are five variables being measured in the individual usage as part of the global IT
competitiveness. These five variables and the Philippine’s corresponding score are shown below:

       Mobile telephone subscribers, 2007*...............................85
       Personal computers, 2006* ..............................................68
       Broadband Internet subscribers, 2007* ............................80

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       Internet users, 2007* ......................................................103
       Internet bandwidth, 2007* ................................................76

Among the nine countries in Southeast Asia included in the NRI study, the Philippines, with a score
of 3.22, is only leading from Indonesia, Cambodia and Timor-Leste with scores of 2.98, 2.63 and 2.27,
respectively. There is quite a large gap in the Southeast Asian nations as Singapore, a country
belonging to the region, enjoys being the third among the world with a score of 5.67, and is the first
in Asia. East Asian countries, which include Korea, Japan and China also enjoy good rankings.

In the individual usage category, there is still some consistence in their rankings, with the Philippines
with a score of 1.61, still leads from Indonesia, Cambodia and Timor-Leste with scores of 1.34, 1.12
and 1.05, respectively.

Interestingly, in the Philippine scenario, individual usage is the one that pulls down the country,
where business usage is high with a score of 4.53 and government usage scored 3.51.

1.2 Objective of the Study
This study aims to know in particular the reason behind the behavior of the Philippine Individual
usage score over time. With this the study aims to know as to which variable/s can the government
start improving on in order to increase the Philippine ranking and be more competitive and more
attractive to other countries.

In other words this study is done in order to understand the interaction of the different variables in
order to make the government aware of the different areas that need improvement which will pave
way for them to provide solution in order to increase the score of the country.


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Chapter 2: System Variables
Basing from ho the usage re scored the major components or variables identified that are related to
the individual usage are the:

       Mobile telephone subscribers,
       Personal computers,
       Broadband internet subscribers,
       Internet users, and
       Internet bandwidth.

Under these major variables are several of other variables that affect each of the major ones. The
specific details of the major variables and other important minor variables under them are discussed
in this section.

2.1. Mobile telephone subscribers
The first component of the measurement of Individual usage is the mobile telephone subscribers.
This refers to mobile telephone subscribers per 100 population. The International
Telecommunication Union, World Telecommunication/ICT Indicators 2008 (September 2008 update)
define subscribers as “users of mobile telephones subscribing to an automatic public mobile
telephone service that provides access to the public switched telephone network using cellular
technology. This can include analogue and digital cellular systems but should not include noncellular
systems. Subscribers to fixed wireless, public mobile data services, or radio paging services are not
included. “

Mobile telephony in this time has been pegged as a very significant factor to networked readiness
and is widely considered as the most revolutionary ICT. It takes its recognition for its strong social   3
and economic impact, and it has been instrumental in raising prosperity and reducing poverty in
developing countries, as a matter of fact, data from the International Telecommunication Union
(ITU, 2009) shows that there is twice the number of mobile telephone subscribers in developing
countries than the advanced ones. Factors attributable to this is its relatively easy deployment of
infrastructure, a market open to new entrants, decreasing cost of mobile handsets, and
communication per minute, among others. Mobile communications penetration has boomed in
developing countries, helping them to compensate for an underdeveloped and flawed fixed
telephony infrastructure (Geiger & Mia, 2009).

In the Philippines, according to the ITU as of 2008, 68 million of the Filipino people have mobile
subscriptions, prepaid or postpaid. Figure 1 shows the amount of mobile cellular subscriptions from
1999 to 2008, which has since saw an year-on-year greater rate of increase. Figure 7 shows how
mobile subscribers have been increasing in proportion since the last five years.

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                            Number of mobile subscribers
                     1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

                         Figure 1: Number of mobile cellular subscribers in the Philippines

                       Mobile cellular subscribers per 100
           60                                                                                            4
           55                                                                                  Per 100
                     2004          2005         2006          2007          2008

                Figure 2: Number of mobile cellular subscribers per 100 population in the Philippines

A. Competition

A mobile telephone is commonly and known to the Filipinos as the cellphone or the cellular phone.
Cellular phones are once just an advantage of high income companies in order to increases their
communication, but eventually became a necessity to individuals as it becomes a multipurpose data
machine. In the Philippines mobile subscribers grew from 10,000 in 1990 to 46.2 million in 2007,
which illustrates how companies operating in low per capita income countries have become highly
profitable by customizing innovative products and services of use to lower-income groups.

Two communication giants have merged as market leaders in the cell phone industry in the
Philippines. The first one is Globe Telecoms. Globe Telecoms introduced SMS in 1994 as a free

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service to attract customers. The SMS facility, along with the introduction of prepaid methods of
subscription, led to a sharp growth in mobile subscribers. By the year 2005, all mobile phone owners
were utilizing SMS, with texting traffic exceeding voice traffic by 10 to one. The preference for SMS
use is explained by its relative cost, where an SMS costs 1 peso per text compared to eight peso per
minute for a phone call. The 2nd telecommunication giant is Smart Communications.

Smart Communications pioneered prepaid mobile and electronic micro-credit loading (topping up
prepaid phone credit in small denominations using SMS) in the Philippines, which in turn led to the
development of other innovative products. In 2000, the company introduced Smart Money, which
allows subscribers to transfer cash from a bank account to a mobile phone. They can also use the
credit to: pay for goods and services; load airtime into any Smart phone; transfer money from one
Smart Money card to another; pay utility bills; and send remittances from other parts of the world.
As of September 2007, Smart reported 5 million Smart Money and Smart Remit users. (Oxford
Anaytica, 2007) Smart Communications Inc. is the Philippines’ leading wireless services provider with
14.4 million subscribers on its network as of end-March 2004. Of the total subscriber base served,
over 11 million are under the brands Smart Gold, Smart Buddy, Addict Mobile, Smart Infinity, and
Smart ACeS. The remaining 3.2 million subscribers are serviced through a reseller agreement with
Piltel under the GSM brand Talk ’N Text.

Another key player in the industry however emerged as Sun Cellular Corporation introduced free
texting. The free text and call changed the rule of the game for the telecommunications giant and
enable still, a much cheaper cost in using cellular phones.

It is predicted as well that due to the further spread of mobile telephone from person to person, and
the improved service and decrease in costs, Philippine mobile user will grow to 73 million users by
2010. Currently 55 million or 60% of the population are subscribed to mobile phone services.
(Research on Asia, Group, Inc, 2008)                                                                    5

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                   Figure 3: Philippine mobile user growth forecast (2007-2010, in thousands)

Figure 3 shows the expected increase in umber of mobile phone subscribers. Since Smart
Communications own Pilipino Telephone Corporation (piltel) it is therefore considered to be the
market leader among the three telecommunication companies.

B. Cost
The government has done a good decision when they decided to leave the mobile
telecommunication industry to the private sector. This had made the competition more favourable
to the stakeholders since the prices were ever decreasing while the service is increasing. This
competitive pricing was proved to be successful in penetrating even the farthest islands and villages
in the Philippine with mobile phone technology through SMS and call services. SMS price started
from 1 peso per day and has now reached to 15 pesos for an unlimited texting for the whole day
which is practical cents per message depending on the how the user consumes it. The price of the
SIM cards for pre-paid subscribers, which started at Php 1,000 and are now selling for Php 50 to Php
150. One factor for this change is the introduction of unlimited texting by Sun Cellular which was
eventually followed by Globe and Smart. Other services, however, besides SMS and call services
which includes MMS and 3G communication remain to be expensive and therefore almost
untouched by an average Filipino. (MBC Research Reports, 2007)

Another Determinant of cost is the Cost of the Mobile Phones. It is apparent that there has been an
increase in different models of Cell phones that the turnover ratio or the obsolescence of one model
to other increases over time nowadays one can buy a cellphone as cheap as 1500 pesos.

C. Increase in Services

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One key factor for the increase in mobile telephone subscribers is the excellent customer service and
accessibility of the services of the provider. In an archipelagic country such as the Philippines, it is a
challenge for the telecommunication companies to provide services such as Load Retail and Text
registering to users from the farthest parts of the country.

With the emergence of Electronic Loading or E-Load for Smart and Autoload for Globe, the
accessibility of the load purchase which is very essential for Mobile telecommunications was
increased. The ease of being a vendor of Lad increased in the introduction of the Load Wallet which
enables a SIM card to Transfer Load to other cell phone numbers with a discount.

This kind of increase in service allows the increase of attractability of owning a mobile phone and
using the technology for communication.

In summary, other variables that affect the increasing behavior of the mobile telephone industry is
the competition between the private companies, the increased in services, the reduction of costs
and finally the increase awareness of the population due to increased subscription.

2.2. Personal computers
The second component is the Personal Computers. The World Bank defines computers as self-
contained computers designed to be used by a single individual.

The increasing number of personal computers in the world is influenced by the strong growth in
number from developing regions which is expected to push the push that total number of PCs to two
billion by 2014, according to technology analyst Gartner Inc. It is said that the increase in number is
due to the availability of internet or broadband communications in developing nations such as china
and India. Pressing problem however is dispensability of the PC. It is said that 180 million PCs are
also replaced annually. (Intel, n.d.)
In the Philippines, the increase in personal computers may be attributable to different factors such
as the decrease in cost of the personal computers, the increased need of personal computers in
business and in schools, and finally the increase in popularity and availability of internet which in a
way influence the already tech-savvy user to upgrade their Personal computers to be in tuned with
the latest innovations.

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                                    No. of Personal Computer
        Figure 4: Number of Personal Computer in the Philippines (World Development Indicators Database)

Figure 4 shows the behavior of number of personal computer over time. Data for 2005 to 2007
however cannot be obtained but data for 2008 shows that there seems to have a decrease in
growth. The decrease in growth however may be attributable to the Global and Financial Crisis
which decreases the spending power of the consumers. The growth is predicted to once again
increase by the year 2010 as the economy rebounds. Economist would say that there are no way but
up after an economic downturn.

Even though the behavior of hardware spending of the Filipino exhibits growth through the years,
the growth is still unable to match other countries. Given the hard data for the personal computers
in 2005, the Philippines is ranked only 68 among 128 countries (World Economic Forum, 2009)

The IDC or the International Data Corp provided data that shows the PC penetration rate of the
Philippines to be roughly 1.5%. Of this, 65% are found in the private business throughout the country
while only 13% belong to households. Government offices and educational institutions accounted
for only 10% and 6%, respectively. The Non-PC users therefore accounts to majority of the Filipino
People. This is such a huge market for the PC companies, most especially for the Low-end ones.
(Business World, 2001)

However, despite the decreased in growth or the unmatched growth of other countries, the
Philippines remain to have a strong potential for growth among other countries which signifies a
stronger potential for business.

A. Cost
The first variable is the decrease in cost. The decrease in cost of Computers are due to the increase
in competition of global brands such as Dell and HP that pushes researches of cheaper PC materials
or spare parts that led to a decrease selling prices. Such is the case of the cost of microprocessors
which is a very important component of a personal computer. Microprocessors started to drop in
2007 as the result of the competition between processor giants AMD and Intel. The first drop in
prices in 2007 is the highest in history which reached up to 9%.The decrease continued in three
years and is predicted to cease in the last quarter of 2009 with the last drop at 8%. With the
decrease in cost of microprocessors, the emergence of other local brands including Acer, Lenovo
Toshiba and MSI, added up to the competition which further intensified the market. (Carbone, 2009)

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           Figure 5: Cost of Personal Computers from 1998 to 2010 in $ (Bureau of Labor Statistics, 2009)

Figure 5 shows how significantly the decrease in Personal computer price has been from 1998 to
2010. The decrease shows a limiting decline which is very significant. The huge drop happened from
the years 1998 to 2002 wherein possible huge Technological Advancement happened.

Cost Sensitive Designs are growing in significance. One of the factors for the decreases in cost is the
learning curve. Simply put, computer manufacturers are becoming expert on their field that their
manufacturing time decreases. One significant illustration of this is the manufacture of the DRAM or
the Dynamic Random Access Memory which parts remained constant over time. The significant
increase in quality and ability is partnered with the increase performance in labor force which
generally and significantly decreased the cost of manufacture. Another driver of cost is the volume.
Volume increases the efficiency in manufacture. Some manufacturers associated 10% of cost
decrease for each doubling of volume. (Hennessy, 2003)                                                      9

The Philippine government has been doing something in order to make the computers more
attractive to buyers. Recently it partnered with Intel to head the project Nettop ng Bayan Wherein
Intel provided a Computer set worth only Php 10,800 with the hope that it will attract buyers who
are sensitive to price. The primary target of this project is the Education sector in order to ensure
that the infrastructure provided can be used by a prepared stakeholder. This project will increase
first time buyers which will then pave way for them to be attracted to a more expensive but
definitely more powerful Second Personal Computers. (Business Monitor International, 2009)

B. Increasing Need
As more and more people can already afford to own a personal computer, many of the business and
education transactions require the use of it. What computer giant Apple is currently doing is using
the idea that a second computer is needed by a household due to the growing competition for
computer time in single-computer households with students who need the computers for school
projects and research. (Galante, 1997)

Another important industry in need of the computers is the business process outsourcing, or the
BPO’s or more colloquially known as the Call Center Representatives. Jobs in the IT industry,
particularly the BPO sector, are projected to grow by 20-25% this year, thus driving demand for
hardware. (Business Monitor International, 2009).

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Call centres are, unsurprisingly, projected to be the biggest single source of earnings for IT service
providers, accounting for around 25% of revenues. Estimates show BPO services generating 12.2bn
in annual revenues and employing 920,000 workers by 2010. This expansion will also enable the
increase in sales of personal computers.

The government is also showing an interest in automating the different government sectors such as
the teachers and other government officials starting with the automation of the elections. This
would increase the number of personal computers in the following years. (Business Monitor
International, 2009)

C. Popularity and Internet
One important variable in increasing popularity of personal computers is Channel penetration in
which it is considered as the key driver for the continued increase in demand from the commercial
segment, especially for other regions outside the National Capital Region (NCR). The market visibility
of vendors through exposure in retail stores remains the force with which to reach consumers.

Lenovo, the company which acquired IBM, predicted that Small and Medium Vendors will become
the battle ground for selling the Computers. This is one of the reasons why one of their services is
offering aid or help to Small and Medium entrepreneurs in term of E-business. Lenovo or IBM sees
the potential of the 90% SME registered Businesses in the country as the sector by which IT will be
much of a use. (Business Monitor International, 2009)

Communication systems and instant messaging may lead to people sitting longer in front of
computers for amusement, which has something to do with territoriality (Lee and Varey N.D). The
Pop culture which induces the use of social networking and gaming increase the popularity of
computers and with it increase the attractiveness to own one. With the growth of internet
compared to the previous years, the notion of cheaper and free communication for an OFW ran
country has led to the wild use of social networks such as Facebook, Friendster and Multiply.              10

2.3. Broadband internet subscribers
The third component is the Broadband internet subscriber. International Telecommunication Union
defined this as any dedicated connection to the Internet of 256 kilobits per second (kb/s) or faster, in
both directions. Broadband subscribers refers to the sum of DSL, cable modem, and other
broadband (for example, fiber optic, fixed wireless, apartment LANs, satellite connections)

Of the 200 economies included in the study, 180 economies, mostly developing economies, doubled
their number of Internet users during this period, growing by as much as 44,400 percent (as in the
case of Somalia). The most obvious benefit it brings from an economic standpoint is arguably the
efficiencies it promises to bring through the reduction of many transaction costs. Moreover, these
transaction costs can be very varied; this includes reduction of paperwork, faster procurement
between firms, convenience of shopping online for consumers etc. The combination of the Internet
and information technology can cut down greatly on the time and resources needed to carry out
transactions. The Internet minimizes the obstacle of physical distance. Indeed, a World Bank study
has aptly described it as “globalization on steroids.”. (Lee, n.d.) as of March 2008 there is a total of
967,600 broadband subscribers.

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Of the estimated 7% of the population who are Internet users in the Philippines, a growing number
(around 20%) use a broadband connection to go online. Broadband household penetration,
however, remains at around 2% which is somewhat insignificant. Factors that affects the future
growth includes provisions of reliable infrastructure, especially in support of broadband Internet.
(Paul Budde Comminication, 2007)

The reason for the lagging of the Philippines among its Southeast Asian competitors is the number of
problems encountered by the subscribers which affects its trust to the company. Such problems
includes slow connection, no connection at all, poor service and high costs.

Broadband is very essential to the economy of any country. Every 10-percent broadband penetration
translates to a one-percent boost in a country’s gross domestic product (GDP). The growth of
broadband also translates to growth in information communications technology sector and other
industries as well. This is because the growth in broadband also means there were growth in
Personal Computers, internet usage and a reputable bandwidth.

A. Accessibility

80% of the internet users still access the internet through dial up connections. However,the number
of Broadband subscribers has been growing sharply together with the drop of internet costs.
Philippine Long Distance Telephone Co (PLDT), a telecommunications giant, reported that the
number of its broadband Internet subscribers had soared by 54% in September 2005, to 76,000 from
49,500 a year earlier. Smart Communications, a PLDT subsidiary, and its rival Globe Telecom had
about 20,000 wireless broadband subscribers between them in September 2005. There were 357
Internet service providers (ISPs) in February 2006, according to the NTC. Among the largest are those
operated by PLDT and Globe Telecom and also ISP Pacific Internet, based in Singapore. (Economist
Intelligence Unit, 2006)                                                                                11

PLDT, being the largest internet provider, has an existing digital microwave radio system and digital
fibre optics running nationwide, from the northern island of Luzon to Mindanao in the south. PLDT
also operates a satellite system through Mabuhay Satellite and a data network that runs at 622
megabits per second. These infrastructure provides most of the broadband internet in the country.

However, areas that are not equipped with these infrastructures would rely on Third Generation
Mobile telecommunications or 3G for internet services. This is becoming the trend today with the
release of the 3G internet kit of the three telecommunication giants namely; Smart Communications’
Smart Bro, Globe Telecoms’ Globe Tatoo and Sun Cellular’s Sun Cellular Wireless Broadband. In
December 2005 the NTC awarded licences for third-generation (3G) mobile-telecommunications
services to four local providers: Smart Communications, Globe Telecom, Digitel Mobile Philippines
and Connectivity Unlimited Resources Enterprises. Smart and Globe started tests on their 3G
services in February 2006. (Economist Intelligence Unit, 2006)

The success of mobile telecommunications over fixed telecommunication can prove that mobile
internet or mobile broadband can be of a huge success as well. What the problem with this however
is the cost of setting up all the 3G network in order to accommodate the huge market in all of the

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archipelago. However, investing in mobile broadband matched with Personal Computer ownership
would surely have its fruits afterwards. (Nokia Siemens Networks, 2009)

The association of the word Personal Computer has also evolved over time. Personal computers my
now refer to either a desktop computer and a laptop. Because people are gaining mobility more and
more, the popularity of Laptop increase while its cost as compared to the desktop also decreased.
Because of this, a mobile internet should match the mobility of the laptop. This provides a very huge
potential for a wireless broadband companies. This increases dependency of the internet users to
mobile broadband since it provides them the internet whenever and wherever they want them.


                     Figure 6: Subscribers of Mobile or portable devises as against fixed ones

Figure 4 shows the predicted increase in handheld devises as well as portable laptops which must be
matched with an internet connection for an efficient use. This however is a loop wherein an increase
of one will cause an increase of the other. In other word, as handheld devise increases, so is the
demand for a mobile broadband, and when mobile broadband increase, the attractiveness of hand
held devices will also increase.

B. Prices
Globe Telecom offers prepaid Globe Tatoo kits at Php1,895. The kit comes with a modem, a choice
of two types of HSDPA USB modems, and a sim card. The sim card is pre-loaded with Php30 of
credit, good for up to 1.5 hours of internet access. You can purchase additional credits from Globe
authorized dealers in various denominations. The sim given with the prepaid Globe Visibility kits is
call and text activated so it can be placed in a cellular phone and be used for voice calls and sending

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Smart Communications also offers prepaid wireless internet kits under the name Smart Bro. The kit
cost Php1,995 and comes with a HSPDA capable USB modem and a sim card. The sim card is pre-
loaded with Php100of credit, good for up to 5 hours of internet access. You can purchase additional
credits from Smart authorized dealers in denominations ranging from Php30 to Php500. Unlike the
Globe Visibility sim, the Smart sim is only activated for data, and cannot be used to make voice calls
or send SMS.

Philippine Long Distance Telephone Company. PLDT offers mobile broaband services under the
WeRoam brand. It offers unlimited access kits at the following rates:

       Php5,800: 1 month unlimited subscription.
       Php 8,360 : 3 months unlimited subscription.
       Php 12,130 : 6 months unlimited subscription.
       Php 19,360 : 12 months unlimited subscription.

PLDT is the sister company of Smart Communications and provides 3G internet services through
Smart base stations. The kit also comes with unlimited free WiFi access via Airbone Access hotspots.

Despite the fresh new growth brought about by newly released wireless services such as Smart Bro
and Globe Tattoo, overall broadband penetration remains low; there were only 11 broadband
services for every 1,000 people in the country early in 2008.

2.4. Internet users
The internet is defined as a global computer network – a network that links computers the world
over by satellite and telephone, connecting users with service networks such as the e-mail and the
World Wide Web (Microsoft, 2008). Today, it serves not only as a gateway for business transactions,
but a gateway to the entire world. It has evolved into a global marketplace where people come to          13
talk, share information and play.

Internet access has many things to offer: information, interactivity, economic opportunities, access
to education, healthcare and government services (Pepper, Rueda-Sabater, Boeggeman, & Garrity,
2009), and there are five stages to it: the proto-internet, the early days, familiarization, extensive
use, intensive use and internet ubiquity. One of the factors that affect the use of the internet is how
people can find services online. According to Pepper, et al. (2009), a survey done indicated that
citizens continuously wanted to avail online services regardless of their experiences in using the
internet. In addition, the government should also spearhead efforts to make access to the internet
easier and to further promote the use of the internet as one of the identified barriers to greater use
of the internet is the skills, aside from accessibility and cost; government services should also be
available online. The survey also found that having a PC at home is a key factor in increasing the
frequency and use of the internet and that access through mobile phones do not satisfy the
connectivity needs. Pepper, et al. (2009) proposed six keystones for a net strategy that should be
maintained to be robust in order to achieve the intensive use stage. The six keystones are as follows:

    1. Market/Competition
    2. Policies and regulations
    3. Applications and content

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    4. Government budgets
    5. Skills for IT
    6. Infrastructure investment

Aside from maintaining the robustness of the keystones, there are also some practices that can be
taken by governments to address bottlenecks and promote progress in connectivity. These lessons

    -   Focus on market failures – Government actions should be designed to address market
        failures and bridge temporary gaps in demand or supply to accelerate adoption.
    -   Coordinate infrastructure design and implementation – Installation costs can be minimized
        when the cables can be simply laid on the road rather than going to dig a hole and lay them.
        Coordination with infrastructure designers would mean that at the very least, there would
        be anticipation after some time that wires would be put so that before constructing, spaces
        would have been allocated for cost effectiveness.
    -   Sequencing – Improving cost effectiveness by considering the importance of effect
        sequence, for example, many lower-stage countries would do well to focus on improving the
        PC-to-citizen ratio as they develop

According to 2008 data, the Philippines ranked 85th among 134 countries with 6.72 users per 100
population. The following is a plot of the amount of internet users within the past 10 years.

                      Internet users per 100 population
          3                                                                    Internet users

              1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

                                 Figure 7: Internet users per 100 population

As can be seen in Figure 7, the number of internet users is only increasing in a linear manner, rather
than the global average.

The Internet World Stats website showed that as of March 2009, there are 20.6 million Internet
users in the Philippines with a penetration rate of 21.5 per cent of the population. One sould notice
that the internet usage is even higher than personal computers. The emergence of internet café and
the availability of computers and internet at work are the reasons for this.

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Because of the low PC penetration rate, Internet usage in the country is also one of the poorest in
the region and in the world. According to the IDC, Internet penetration rate stood at 3.7% last year,
a figure that is greatly surpassed by neighbors Malaysia, Taiwan, Hong Kong, and Singapore, among

Internet users are people with access to the worldwide network. According to 2008 data, the
Philippines ranked 85th among 134 countries with 6.72 users per 100 population. The following is a
plot of the amount of internet users within the past 10 years.

A. Profile of Users

Findings by Fang and Yen (2008) indicate that factors affecting internet users include the gender,
where they say that men are more likely to be internet users than women. In addition, age is also
significant, their study and related literature show that internet users in general are getting younger,
and is also at par with other developed and/or developing countries.

According to Nithya and Julius (2007), some human behavioral patterns play a significant role on
internet usage. They have studied on extroversion, neuroticism and self-concept, and the first two
did not have significant differences, while self-concept yielded significant differences among heavier
internet users as against lighter users. From this, it can be concluded that anyone can surf the
internet with little problems from these three behavioural patterns.

According to the research group BSBC Hook UAI, there were 1,925,649 Internet users in 2004 in
Metro Manila belonging to the A, B and C classes, ages ranging from 13 to 30 years old, as compared
to 1,885,465 in 2002, indicating a 21.3-percent increase. (Asia Telecommunications Report, 2009)

Factors driving up Internet use include a highly educated middle-class population and a well-
developed consumer culture. The ever-increasing number of Overseas Filipino Workers (OFW) has
also driven Internet growth since residents of the Philippines see the Internet as an affordable way
to keep in touch with them. (Economist Intelligence Unit, 2006).

The potential for internet users also increases because of high literacy rate of the Filipinos and their
ability to read and understand English.

B. Security

People, however, may be put off from accessing the internet because of security-related reasons
such as viruses and worms as studied by Furnell, Tsaganidi and Phippen (2008). Greater threats are
also present such as phishing, where sensitive data is at risk especially for novice users as phishing
sites attempt to extract this information from people by disguising themselves as seemingly
trustworthy sites. Information includes usernames, passwords and credit card numbers, among
others. This is somehow also driven by the increasing attacks on PCs recently, especially on Windows
platforms. Internet users are being frustrated into various beliefs regarding viruses – the damage
that it can do and the subsequent loss of data and/or identity thefts. This frustration is then pushed
on many other things such as websites, expertise and software. These kinds of experiences have
significant implications, but more importantly, it was found out that users were not keen on
protecting themselves, which is highly related to expertise or awareness of products and features.

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For example, people tend to view firewalls as negative in the outside world because virus attacks
from these, when in fact they are good features operating systems should have.

C. Availability of Personal Computers and Internet Providers

Majority of Internet and PC use is limited to major cities. Rural areas however doesn’t have the
privilege to have access to a personal computer, much more be connected to the internet.

The availability of generic or assembled PCs also played a crucial role as these enabled consumers,
both home users and entrepreneurs, to purchase cheaper wares. Further, the emergence of Internet
cafes and computer centers also aided PC and Internet penetration in areas outside Metro Manila.
(Business World, 2001)

The Internet café has been the growth driver of online gaming with a 38-percent share from January
to June 2004, with Metro Manila registering the highest share with 41 percent, followed by Central
Luzon with 17 percent. This is very obvious considering that many of the students if not all, are
engaged in playing online games in the internet café with their friends in exchange for physical
games. Because the Philippines has a low personal computer (PC) penetration rate estimated at less
than 10 percent of the total population, the Internet café has provided access to online gaming and
the Web to many Filipinos. (Asia Telecommunications Report, 2009)

Although the use of internet remains to be as attractive as ever considering a lot of transactions,
researches, and information can be extracted from it, its use sis highly correlated with the
availability of computers and the literacy of the users.

D. Cost

The cost of using the internet compared to the mobile phones is definitely cheaper. Figure 6 shows
the comparison between using the mobile phone and using the internet for communications.              16
However, it is definitely cheaper to own a mobile phone than to own a personal computer.

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                                                                                                             Dy & Patricio
                             Figure 8 Comparison of mobile phones to internet

Internet café rates also decreased through time. Internet café started by charging 40 to 50 pesos per
30 minutes. Today however, internet café charge for a minimum of 15 pesos per minute.

Comparing the internet prices here and other countries, Japan leads the way in broadband prices
with $0.22 (or roughly Php 9.90 at Php45:$1) per megabit per second. The list is followed by —          17
Sweden $10.79 (Php485.55), Denmark $11.11 (Php499.95), Switzerland $12.53 (Php563.85), US
$15.93 (Php716.85), France $16.36 (Php736.2), Netherlands $16.85 (Php758.25), New Zealand
$16.86 (Php758.7), Italy $17.63 (Php793.35), Ireland $18.18 (Php818.1) and Finland $19.49
(Php877.05)., The most expensive broadband connection cost is in Turkey with $81.13 (Php3,650.85)
per megabit per second. For the Philippines Globelines Broadband is Php1495.00 for 1Mbps; PLDT
myDSL costs Php1,995 for 1.2Mbps, Eastern’s evo DSL at Php1,600 and Bayan DSL costs Php1,699
for 1Mbps. That brings the average broadband price at Php1,616 ($35.91).

The Philippines currently has almost 100 internet Service providers but most of them have
connections through backbones connected in the United States. Because of this, the Internet fee is
higher of about 80% of the charge in the United States. (Asia Telecommunications Report, 2009)

2.5. Internet Bandwidth
This measure shows the total capacity of international Internet bandwidth in megabits per second.
The Philippines has ranked in at 76 in terms of internet bandwidth with 1.1 mB/s per 10,000
population as of 2007.

Internet bandwidth has become a significant aspect of economic development (Hwang, Kim and
Weiss, 2002) as Quality of Service (QoS) applications emerge in the market. However, despite its
importance, bandwidth is something that is not utilized at the fullest extent at one point due to

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operating system limitations, wherein a user tried utilizing through tweaks in a Microsoft Windows
XP environment (Microsoft Philippines, 2006).

A country that has good bandwidth capabilities is more likely to experience less congestion for users
to be able to achieve the allocated bandwidth speeds. There would also be reduced latency for
business customers as businesses in general have been patronizing voice over IP for quite some time
and a good bandwidth would mean that connectivity failures that would be caused by natural
disasters would be reduced (Yugatech, 2008).

The reason for this lack of breakthrough in internet speeds is that because despite of developments,
prices remain relatively high as compared by Yugatech (2008), where a 100Mbps connection in
Japan costs the same as a 2Mbps connection in the Philippines. To lower costs, Savage and Waldman
suggest that there should be ability to use the internet, first and foremost, and this is driven further
by customer demand. As customers become more efficient at using the internet because of ability,
the effective prices go down. In addition, implementation costs also go down as time passes by and
as better technology is developed. Demand will also come from indicators of technical ability such as
family background, motivation and propensity for early IT adoption as well as tastes for bandwidth
that are not measured in conventional indicators such as experience and education. Their study also
shows that urban consumers are willing to pay more for an improvement in bandwidth, therefore
indicating a larger demand for technological advancements in terms of bandwidth, which is also a
driver for lowering costs.

A bandwidth is the number of bits processed in a single instruction. Short for binary digit, a bit is the
smallest unit of information in a machine. Eight consecutive bits then made up a byte.

The overall number of local internet users has grown steadily over the last five years. Falling prices of
PCs and internet subscription rates, partly as a result of greater market competition, have driven this
growth. However, low PC and internet penetration rates, along with low telephone density and                18
security concerns, still hold back the development of e-commerce. (Business Monitor International,

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Cambridge.                                                                                             20

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