VietNamNet Bridge – The five percent electricity price increase has pushed the input costs of Internet Service Providers (ISPs) up by 5-10 percent. However, they have to try every possible means to cut down expenses, or accept lower revenue instead of trying to raise the Internet charges.

The average power price has raised to 1369 dong per kwh since July 1, an increase of 65 dong per kwh (5 percent) over the previous level. This has dealt another strong blow on ISPs, who keep complaining that the current Internet charges in Vietnam are too low, which cannot bring the profits high enough for re-investment.

Nguyen Van Khoa, General Director of FPT Telecom, said the electricity price has worsened the business operation of the company. Since the power price accounts for 3 percent of the total production costs of FPT Telecom, with the new power price, the input costs would increase by 5-10 percent.

With the electricity price increase, ISPs would not only have to pay higher for the electricity bill, but also for other input materials and services. Khoa has estimated that the total production cost of FPT Telecom would be 40-60 billion dong higher than that of the last year.

While everything has been getting more and more expensive, the Internet charges remain unchanged over the last 18 months.

“The Internet charges in Vietnam are the lowest in the world, which has benefited users, but put big difficulties for ISPs, because we do not have money to develop, make re-investment, upgrade the networks and infrastructure items,” Khoa said.

Vu The Binh, Director of NetNam, also said that 4-5 percent of the total expenses are spent on the electricity bill. When the power price increases by five percent, the production cost would increase by five percent as well.

Binh has foreseen that the electricity price increase would not cause loss, but would lead to lower profits and lower shareholders’ dividends.

An executive of CMC TI has agreed with Khoa and Binh, saying that with the power price amounting to 50 percent of the production cost, the revenue from leasing racks at the online database center would decrease by 3 percent.

He said the revenue decrease would not cause a loss, but this would have bad impacts on the business of the company, if the input costs keep increasing but the sale prices remain unchanged.

ISPs would rather accept lower profits than lose clients

Higher production costs and lower income are the foreseeable impacts of the power price increases. ISPs now have to cudgel their brain thinking about the measures to optimize the use of infrastructure items, practice thriftiness and minimize the power consumed. The only choice for ISPs is to cut down expenses to offset the power price increases, because they cannot raise the Internet service fees.

Binh said that in order to optimize the electricity use, Green Energy services should be utilized. In other countries, modern technologies have been used to optimize the power use for Internet operation. For example, equipments can turn off automatically in non-rush hours and turn on in rush hours.

FPT Telecom once raised the service fee in March 2011 amid the input cost increases. However, analysts believe that the scenario would not be repeated at this moment.

ISPs have all confirmed that they do not intend to raise the service fees in the immediate time, while they would accept to see revenue decreases in short term. Some sources have said an ISP is thinking of cutting down low cost ADSL service packages in order to avoid overly heavy loss.

Thanh Mai