VIETNAM INTERNET CASE STUDY

March 2002

INTERNATIONAL TELECOMMUNICATION UNION

GENEVA, SWITZERLAND
Tim Kelly and Michael Minges wrote this report. Lara Srivastava and Audrey Selian
contributed to some sections. Vanessa Gray provided editorial comments and Nathalie
Delmas handled formatting and production. The report is based on field research
undertaken 14-18 May 2001 as well as reports and articles identified in the bibliography
or as footnotes. We would like to thank the Directorate General of Posts and
Telecommunications for arranging the meetings. The views expressed are those of the
authors and may not necessarily reflect the opinions of the International
Telecommunication Union (ITU), its members or the Government of the Socialist Republic
of Vietnam. This report is one of a series of Internet Case Studies. Additional information
is available on the Internet Case Studies web site <www.itu.int/ITU-D/ict/cs>.

© ITU 2002

ii
Contents

1. Country background ............................................................ 1

1.1 Overview ............................................................................ 1
1.2 Demography ........................................................................ 1
1.3 Economy ............................................................................. 1
1.4 Human development ............................................................ 2
1.5 Government ........................................................................ 3

2. Telecommunication and Mass Media .................................... 4

2.1 Telecommunications Sector ................................................... 4
2.2 Public Telecommunication Operators ....................................... 4
2.3 Regulation and policy-making ................................................ 8
2.4 Tariffs ............................................................................... 11
2.5 Network ............................................................................ 13
2.6 International traffic ............................................................ 14
2.7 Mass Media ....................................................................... 15

3. Internet ............................................................................. 18
3.1 History .............................................................................. 18
3.2 Market structure: A Quartet ................................................. 19
3.3 International connectivity and peering .................................. 20
3.4 Regulation ......................................................................... 21
3.5 Licensing ........................................................................... 21
3.6 Tariffs ............................................................................... 21
3.7 Universal access ................................................................. 22
3.8 Content ............................................................................ 22
3.9 Domain name .................................................................... 22
3.10 VoIP (See Box 2.1) ............................................................. 23
3.11 Quality of Service ............................................................... 23
3.12 Mobile Internet .................................................................. 23

4. National absorption ........................................................... 25

4.1 Government ...................................................................... 25
4.2 Education .......................................................................... 25
4.3 Health .............................................................................. 27
4.4 e-commerce ...................................................................... 28

5. Conclusions ....................................................................... 33
5.1 State of the Internet in Vietnam ........................................... 33
5.2 Recommendations .............................................................. 34

Annex 1: List of meetings ........................................................ 39

Annex 2: Acronyms and abbreviations .................................... 40
Annex 3: Useful links .............................................................. 42
Annex 4: Framework dimensions ............................................ 43

iii
Figures

1.1 Map of Vietnam .................................................................... 1

2.1 Vietnam's place in the region ................................................. 5
2.2 Ratio between fixed and mobile lines ...................................... 6
2.3 Mobilephone development in Vietnam ..................................... 8
2.4 Comparative tariffs ............................................................. 13
2.5 Tariff rebalancing (or the lack of it) in Vietnam ....................... 14
2.6 Vietnam's international traffic .............................................. 15
3.1 Vietnam on the Net ............................................................ 18
3.2 Internet market ................................................................. 19
5.1 State of Internet in Vietnam ................................................ 33

Tables

1.1 Human Development Indicators ............................................. 2

2.1 Business Co-operation Contracts (BCC)
for telecommunication networks and services in Vietnam ........ 11
2.2 Main telecommunication indicators for Vietnam, 1991-2000 .... 12
3.1 Internet connections ........................................................... 20
3.2 Internet Dial-up Tariffs, July 2001 ....................................... 21
4.1 Government on the Web in Vietnam ..................................... 26

Boxes

2.1 IP Telephony in Vietnam ........................................................ 7

2.2 Telstra investing in Vietnam ................................................. 10
2.3 Advertising in Vietnam ........................................................ 16
3.1 SPT Cybercafés .................................................................. 22
4.1 Vietnam's Software Parks .................................................... 31

iv
 1. Country background

1. Country background

1.1 Overview Figure 1.1: Map of Vietnam

The Socialist Republic of Vietnam,
occupying 331’114 square kilometres,
borders China to the north, Laos to
the west and Cambodia to the
southwest. On the east, it is bordered
by a 3’260 kilometres long coast line.

Vietnam is marked by two delta regions

at either end of the country, the Red
River in the north and the Mekong in
the south, which are separated by the
narrow region of the Central Highlands.
Three quarters of Vietnam’s territory is
composed of mountains and hills.

Administratively, the country consists

of 57 provinces and four centrally
administered cities (Hanoi, Ho Chi
Minh City, Hai Phong, Da Nang). Its
capital, Hanoi, lies on the Red River.

1.2 Demography

Vietnam’s population was estimated

at 76.3 million people in April 1999,
the second most populated nation in
South East Asia.1 The latest estimate
for 2000 is a population of 77.7 million
with annual average growth at 1.7 per
Source: The World Factbook.
cent. Around three quarters (76.5 per
cent) of the population resides in rural
areas. The largest city is Ho Chi Minh
with five million people. Hanoi is home at t h e S i x t h Part y C o n g r e s s i n
to 2.7 million. December 1986. The top priority of
the Doi Moi policy is the economy and
The largest ethnic group are the Viet the creation of a market-oriented
accounting for 87 per cent of the e nvironment. Vietnam has made
population.2 There are 53 other ethnic significant progress over the last
groups (accounting for around decade in this transition, building up
eight million people), the majority of investment and maintaining consistent
which reside in the mountainous areas. growth. Nonetheless, the role of the
Vietnam’s official language is Vietnamese. state remains influential via use of
Chinese, English and French are utilized measures such as five-year plans, price
to a lesser extent; ethnic languages are controls, production planning, and
also part of the linguistic landscape. access to credit, with the underlying
objective to achieve stable economic
1.3 Economy growth and development.

The shift from a centrally planned For the decade after the introduction
economy towards a policy of renova- of Doi Moi, the economy performed
tion (Doi Moi) was formally adopted impressively. During the period 1986-

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Vietnam Internet Case Study

1990, Gross Domestic Product (GDP) computer components, and coffee.

grew around four per cent a year and E x p o r t va l u e f o r 2 0 0 0 wa s
inflation was brought under control. US$ 14.5 billion, with major trade
The next five-year period, from 1991- partners being Japan (18 per cent),
1996 was even more impressive with China (11 per cent), Singapore (7 per
economic growth averaging an annual cent), Taiwan-China (5 per cent) and
rate of over eight per cent. More than Australia (9 per cent). The value of
US$ 20 billion of foreign direct imports was US$ 15.6 billion in 2000,
investment flowed in and the level of with major imports comprised of
GDP contribution by the non-State machinery and equipment, refined
economic sector grew to 60 per cent.3 petroleum, textiles, steel, electronic
Poverty declined from 58 per cent in components and fertilizer.
1993 to 37 per cent in 1998.4
Vietnam is committed to regional
Economic growth declined to 4.4 per global economic integration through
cent in 1998 as a result of the regional its participation in ASEAN and APEC,
financial crisis and the “lack of incisive its WTO accession negotiations and its
domestic reforms.”5 It has since risen signing in July 2000 of the US-Vietnam
to 4.8 per cent in 1999 and an Bilateral Trade Agreement.
estimated 6.8 per cent in 2000. The
s i z e o f V i e t n a m ’s e c o n o my wa s 1.4 Human development
US$ 31.3 billion in 2000 and per capita
income was US$ 390. The agricultural V i e t n a m ra n k s 1 0 1 st o u t o f
sector accounted for 24 per cent of 174 countries in the United Nations
GDP in 2000, industry for 37 per cent Development Programme’s (UNDP),
and services for 39 per cent.6 Human Development Index (HDI),
placing the country in the medium
Vietnam’s principal exports are crude human development category just
oil, garments and textiles, sea ahead of Indonesia. The HDI attempts
products, rubber, footwear, rice, to measure achievements in three key

Table 1.1: Human Development Indicators

Vietnam compared to selected Asian, 1999

Combined
Life school gross
expectancy Adult enrolment
HDI at birth literacy rate ratio GDP Per Capita
Rank Country (years) (%) (%) (PPP US$)
26 Singapore 77.4 92.1 75 20’767
56 Malaysia 72.2 87.0 66 8’209
66 Thailand 69.9 95.3 60 6’132
70 Philippines 69.0 95.1 82 3’805
101 Vietnam 67.8 93.1 67 1’860
102 Indonesia 65.8 86.3 65 2’857
118 Myanmar 56.0 84.4 55 1’027
121 Cambodia 56.4 68.2 62 1’361
131 Lao PDR 53.1 47.3 58 1’471

Note: GDP per capita is shown in Purchasing Power Parity (PPP).

Source: United Nations Development Programme < http://www.undp.org/hdr2000/english/
book/back1.pdf>.

2
 1. Country background

components of human development: Vietnam on 2 September 1945,

education, health and standard of becoming the first South East Asian
living, and ranks countries based on nation to do so. In November 1946,
a composite index of factors such as its first constitution was adopted. The
life expectancy at birth, adult literacy, country was renamed the Socialist
school enrolment, and GDP per capita. Re p u b l i c o f V i e t n a m f o l l o w i n g
The country has made impressive reunification in April 1975.
strides in human development, raising
its ranking from 122 to 101 over the The National Assembly, which consists
last few years. Furthermore Vietnam of 450 members, is the legislative
has a higher HDI ranking that its branch. Members are elected every
economic level would suggest. For five years. The National Assembly
example compared to other countries elects the President and Prime
with a similar GDP per capita, Vietnam Minister. There are various ‘People’s
scores higher in literacy. Similarly, Councils’ elected at the local level for
Vietnam’s life expectancy is similar to provinces, cities, towns, districts and
countries with much higher per capita communes.
income such as Brazil, Turkey, Russia
and Thailand. The role of the Communist Party is
highlighted in Article 4 of the
1.5 Government Constitution. Every five years, the
National Congress of the Communist
Vietnam declared independence from Party meets to discuss and design
France as the Democratic Republic of strategic direction for the nation.

1
General Statistical Office (Vietnam). Statistical Yearbook 1999. Statistical Publishing House. Hanoi. 2000.
2
See “Culture: Ethnic Groups” on the web site of the Embassy of Socialist Republic of Vietnam in the United
States of America: www.vietnamembassy-usa.org/learn/cul-ethnic.php3.
3
See “Economy” on the Ministry of Foreign Affairs (Vietnam) web site at:
www.mofa.gov.vn/English/Home.htm.
4
See Asian Development Bank. “Vietnam Economic Performance.”
At www.adb.org/Countries/Highlights/VIE.asp.
5
Asian Development Bank. Vietnam Resident Mission. “Economic Update.”
www.adbvrm.org.vn/Economic_Update.html.
6
The World Bank Group. “Vietnam Data Profile”.
devdata.worldbank.org/external/dgprofile.asp?rmdk=82695&w=0&L=E.

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Vietnam Internet Case Study

2. Telecommunication and Mass Media

2.1 Telecommunications Te l e c o m m u n i c a t i o n s e r v i c e s i n
Sector Vietnam are dominantly state-owned.
Viet Nam Posts and Telecommunica-
Vietnam is one of the major emerging tions Corporation (VNPT) <www.vnpt.
markets of the ASEAN region. It has com.vn> operates the telecommu-
shown some of the fastest rates of n i c a t i o n n e t w o r k s a n d p r ov i d e s
growth in economic development and services. The Department General of
consumer demand. One of the Posts and Telecommunications (DGPT)
underpinnings of this growth has been < w w w. v n p t . c o m . v n / D G P T / d g p t _
the expansion in telecommunication general.html>regulates them. Until
networks. Vietnam passed the critical recent years, this situation was quite
threshold point of one fixed-line per common worldwide, but now Vietnam
100 inhabitants (teledensity) during is in a small minority of ITU Member
1994, some two years after Indonesia. States that have neither privatized the
But by the end of 2000, by which time incumbent operator nor yet fully
it had reached a teledensity of 3.2 it separated the functions of operator
had already overtaken Indonesia. and regulator. For instance, even
Over the past five years, Vietnam has though the two were formally
sustained an average network growth separated in 1993, both DGPT and
of 26.8 per cent, slightly ahead of VNPT share the same building in
China and one of the highest in the H a n o i . A l s o, D G P T d e c r e e s a n d
r e g i o n , w i t h p a r t i c u l a r l y ra p i d ordinances are published via the VNPT
expansion in the middle part of the web site.
last decade (See Figure 2.1). If
c u r r e n t g r o w t h ra t e s c o n t i n u e , 2.2 Public Telecommunication
Vietnam is on target for reaching ten Operators
million lines installed in 2006 and a
teledensity of 30 within a decade. 2.2.1 Fixed telephone operators

While Vietnam’s domestic fixed-line The VNPT is the monopoly

network has been leaping ahead, telecommunications operator for fixed-
other parts of the telecommunication line services in Vietnam. It was created
economy have been doing relatively in 1990 when regulation and operation
less well. Although mobile communi- were nominally separated. A 1995
cations was introduced back in 1992, government decree (No. 51) outlines
and even though it is one of the first VNPT’s functions. Although fully state-
parts of the sector where competition owned, VNPT functions as a business
and private sector participation has entity. It has created numerous
been allowed, it has been relatively subsidiaries to carry out virtually every
slow to take off. Vietnam has one of aspect of telecommunications. In
the lowest ratios of mobile to fixed- addition it has established several
line subscribers of all the countries in Business Cooperation Contracts (BCC)
the region (see Figure 2.2). At the end with foreign telecommunication
of 2000, there were some 789 companies to jointly provide services
thousand mobile subscribers (see Table 2.1). The main subsidiaries
compared with more than 2.5 million of relevance here are:
fixed-line subscribers. However,
during 2000 the number of mobile • National HQ in Hanoi (Hanoi
subscribers more than doubled, PTT), a secondary centre in Ho
suggesting that the country is now Chi Minh City (HCMC PTT) and
catching up with trends elsewhere in other offices in each of Vietnam’s
the world. 61 Provinces;

4
 2. Telecommunication and Mass Media

Figure 2.1: Vietnam's place in the region

Vietnam's teledensity, 2000 and fixed-line growth rate, 1995-2000,

in comparison with selected countries in the region

90%
Cambodia 0.3 Te le d e n s ity (fixe d lin e s
80% V ie t Nam Fixe d -lin e g r o w th
pe r 100 in h abitan ts ), 2000 Cambodia r ate , in %, 1995- 2000
Lao P.D.R. 0.8 70%
60%
Indones ia 3.1
50%
V iet Nam 3.2 40%
China
30%
India 3.2
20% India
Thailand 8.7 10%
Thailand
0%
China 10.0
1995 1996 1997 1998 1999 2000

Source: ITU World Telecommunication Indicators Database.

• VTN (Vietnam Te l e c o m s These are described in more

National) <www.vtn.com.vn>. detail below.
Created in 1990, it is responsible
for construction, installation and In 1999, VNPT achieved a turnover
maintenance of the long distance of US$ 841 million, which was nine
telephone network, and provides per cent higher than in 1998. It
a wide range of services; invested some US$ 300 million. In
2000, VNPT set a target of
• VTI (Vietnam Telecom Interna- 600’000 new “lines” (both fixed and
tional), is the international services mobile) to be installed, which it had
provider (see section 2.6); achieved by October of that year. For
2001, it has set a target of installing
• VDC (Vietnam Data Corpo- just under 900’000 “lines” to achieve
ration). Created in 1989, it offers a combined mobile/fixed teledensity
data communications, Internet of five per cent. In the first quarter
(both access and connectivity), (to end March) it had already added
software applications and value- 237’000 new subscribers.
added services (see chapter
three); Like China, Vietnam has followed a
policy of allowing different
• Vinasat, which is a project to government ministries to offer
launch and operate a Vietnamese telecommunication services, as a
national satellite. Originally this form of competition with the
was to have been achieved within incumbent operator. The Defence
the 1996-2000 National Ministry has entered the market
Telecommunications Plan, but this through Military Electronic Telecom-
has now been postponed to 2003 m u n i c a t i o n s C o m p a n y (Vietel) ,
at the earliest; which gained a number of licenses
to provide different telecom-
• VNPT is also a major shareholder munication services in 1998. It
in both the main mobile currently has more than
operators, Mobifone (VMS) and 300 employees in three locations in
Vinaphone (GPC) and in Saigon Hanoi, an office in HCMC and a
Posts and Telecoms (SPT). presence in ten provinces. It had

5
Vietnam Internet Case Study

Figure 2.2: Ratio between fixed and mobile lines

For selected Asian economies, 2000

90
More mobiles Taiwan, China Hongkong SAR
80
Mobile per 100 inhabitants

70 Singapore

60 Korea (Rep.)

50
Japan
40
30 Malaysia
Macau, SAR
20
Philippines
10 China More fixed-lines
Thailand
0
iet Nam,0 10 20 30 40 50 60 70 80 90
Indonesia Fixed-lines per 100 inhabitants
India

Source: ITU World Telecommunication Indicators Database.

p r e v i o u s l y b e e n o p e ra t i n g a s a Vietel, SPT has a general license that

department of the Defence Ministry, could, theoretically, permit it to offer
mainly serving government clients, for a full range of services. At present
instance in the provision of private SPT has five main operations:
networks. Vietel now has a general
posts and telecommunications license • M a n u f a c t u r i n g ( e . g ., ra d i o -
and is theoretically allowed to operate pagers, in conjunction with a
radio paging, mobile cellular and Belgian company);
postal services including parcel post
a n d m o n e y t ra n s f e r s . H o w e v e r, • Services, including telecommuni-
because of limited resources, it has cation services such as the
not yet entered all these different SaigonNet ISP. SPT has a license
markets. for other services not yet being
offered (e.g., mobile cellular). It
Vietel’s main telecommunication is also preparing to offer trunk
success to date has been in IP radio services in conjunction with
Telephony (see Box 2.1) where it has Champion, a US company, and
been running an experimental an HF radio service in conjunction
service between Hanoi and HCMC. with PineOak. SPT has a land line
license for HCMC;
A third operator is Saigon Posts
and Telecoms (SPT), which is based • Postal services (e.g., parcels and
in HCMC. Previously part of VNPT, money remittances) nationwide
SPT was established in 1995 with within Vietnam;
some eleven state-owned
shareholders, including VNPT (18 per • Import/export activities (e.g.,
c e n t ) . I t b e c a m e a j o i n t- s t o c k imports of high-tech goods,
company in 1998 when some 13 per components);
cent of its shares were sold to
individuals, companies and staff. Like • Construction.

6
 2. Telecommunication and Mass Media

Box 2.1: IP Telephony in Vietnam

In many aspects of its telecommunication policy, was expanded to 16 Mbit/s. Traffic increased by
Vietnam has followed the lead set by China. One about eight to ten per cent per month.
example of this is in IP Telephony where China has
already established itself as one of the world’s major VoIP is not seen as replacing the PSTN. Although
markets since liberalizing the service in 1998 (see the quality is good, there are other problems, such
the ITU IP Telephony Case study commissioned for as subscribers’ unwillingness to dial the extra
the 2001 World Telecommunication Policy Forum7). numbers and a delay of between 10-16 seconds in
obtaining a dial tone (because SS7 is not being
Vietel was granted a Voice over Internet Protocol used).
(VoIP) license in February 2000 and started service
in October. The equipment vendor is Lucent, which In the future, Vietel’s strategy will be to build up a
provides equipment and some training. For the packet-based network, like China’s new operators.
moment Vietel’s service is characterised as a Vietel’s ability to compete however is constrained
commercial trial system. There are two points of by VNPT’s leased line prices. Until July 2001, the
presence (PoPs), linking Hanoi and HCMC. The price was around US$ 20’000 per month for each
service uses VNPT leased lines. Vietel charges a E1 line. In addition, some 30 per cent of Vietel’s
price of 1’818 Dong (12 US cents) per minute (peak revenue goes to VNPT (or 600 Dong per minute),
and off-peak are the same) including VAT at 10%. plus a three per cent commission for billing. Vietel
The regular VNPT price for the Hanoi-HCMC route would like to launch a prepaid card (like in China).
is 4’000 Dong (28 US cents) for the first minute This would, for instance, allow public call offices to
and 3’700 Dong (25 US cents) for subsequent offer lower price calls to their users and it would
minutes. Vietel’s price is therefore less than half enable Vietel to save on the commission currently
the regular PSTN price. Vietel argues that its price being levied for billing and bad debts. At present,
is based on cost but ultimately it has to be approved mobile users can’t use VoIP and mobile is not part
b y DGPT. The lev el of price reduction is of the trial. Also, there is no advertising of the
benchmarked against the Chinese case. service at the moment. Vietel’s own plans include
introducing prepaid service, selling services to
Results have exceeded expectations and every mobile users, offering international calls via VoIP
month more than 60’000 subscribers use it, and expanding to cover more cities.
equivalent to around 40 per cent of the market.
The system is postpaid and customers select to use The situation changed on 1 July 2001 when the
IP Telephony by dialling an access code (1780) before DGPT announced it was liberalizing VoIP services,
the subscriber number. Although it is still officially a and also announced lower leased line prices at the
trial, any telephone subscriber can use it. same time. It will award two additional licenses (to
VNPT and SPT as well as Vietel) and may, before
In October 2000, capacity on the system was the end of 2001, allow the provision of international
8 Mbit/s (4xE1 circuits). Some customers could not services by VoIP. The DGPT has said that it will
use the network because of capacity limitations. continue to review the situation every six months
Traffic was 1.7 million minutes per month initially to ensure what it calls “a healthy competitive
after launch (October to March). In March, capacity environment for all enterprises”.

Internet service and import/export are nications, which is shared between

SPT’s biggest money earners, with Vinaphone (Vietnam Telephone
I n t e r n e t s e r v i c e ra i s i n g s o m e Service) and Mobifone (Vietnam
eleven billion Dong (US$ 0.75 million) Mobile Service). There is also an older
out of a total of 43 billion Dong analogue system, SMTC (Saigon
(US$ 2.9 million) in 2000. SPT has Mobile Telephone Company), running
some 300 staff, including in postal AMPS. VNPT owns all operators and
services. There are a total of ten counts their subscribers as part of its
offices throughout Vietnam including own network. Mobifone is operated
the HQ in HCMC. The majority of under a BCC revenue-sharing and
customers are in HCMC but SPT technology sharing arrangement
opened an office in Hanoi at the end between VNPT and international mobile
of 2000. operator Millicom.8 Mobifone has more
customers in the private sector and
2.2.2 Mobile cellular operators among individuals, whereas Vinaphone
serves the government customers.
Vietnam currently has a duopoly for Although the two are theoretically in
GSM-based digital mobile commu- competition, the fact that they both

7
Vietnam Internet Case Study

have VNPT as owner, and that their rates policy and regulation. Although not a
are identical, means that in practice it ministry, the DGPT is a ministerial-
is more a battle for resources within level organization (there is no Ministry
VNPT than for customers. Indeed there of Communications). DGPT’s roots
is a suggestion that Mobifone can only trace back to 1990 when regulation
grow as fast as Vinaphone as it would a n d o p e ra t i o n w e r e n o m i n a l l y
be regarded as inappropriate if the separated in the country and DGPT
company with foreign investors did was an organizational unit within the
better than the locally-owned one. sector ministry. In 1993, the Ministry
responsible for telecommunications
As of December 2000, there were some was abolished and DGPT assumed
788’559 mobile subscribers in Vietnam supervision of the industry. The
of which Vinafone had 54 per cent, Secretary-General of DGPT reports
Mobifone 45 per cent and SMTC one per directly to the Prime Minister.
cent (see Figure 2.3). In addition to the
three operators listed above, a number DGPT’s functions are outlined in a
of other players, notably Vietel and SPT, 1995 government decree (No. 12). A
claim to have mobile licenses but are n e w Te l e c o m m u n i c a t i o n s A c t i s
not yet active in the market. currently being drafted. Up to now,
g overnment decrees govern the
Just under 70 per cent of mobile telecommunications sector. In the
subscribers in Vietnam are on prepaid draft Act, policy and regulatory
schemes. Roaming services are offered a s p e c t s w o u l d b e s e p a ra t e d . A
with around 50 countries worldwide. m i n i s t r y, o r s o - c a l l e d Te l e c o m
Bureau—similiar to the Chinese
2.3 Regulation and policy- model—would be established. The
making d raft is to be submitted to the
government by end of 2001. Then, in
2.3.1 Policy development 2002, the government would submit
the draft Act to the National Assembly.
The Department General of Posts and
Te l e c o m m u n i c a t i o n s ( D G P T ) i s Besides defining the regulatory
responsible for telecommunication framework the new Act is expected to

Figure 2.3: Mobilephone development in Vietnam

Growth in number of subscribers, 1994-2000, in thousands, and mobile tariffs,

in Dong (including ten per cent sales tax)

900 Local Neighbouring Long-distance

SMTC A mps
800
Postpaid peak 1’800 3’200 4’600
700 V inaphone/GPC GSM Prepaid peak 3’500 6’000 8’000
600 Prepaid off peak 2’450 4’200 5’600
Mobif one/V MS GSM
International calls Local plus international
500
400 Maximum installation fee 900’000
300 Postpaid subscription charge 200’000
Cost of Prepaid SIM card 150’000
200
100 Price of an SMS message 500
0
Average cost of handset 3’000’000
1994 1995 1996 1997 1998 1999 2000

Note: Tariffs are set by Decision No.293/2000/QD-TCBD dated April 3, 2000 of the Secretary General of
DGPT. Effective from May 1, 2000.
Source: ITU World Telecommunication Indicators Database, VNPT.

8
 2. Telecommunication and Mass Media

introduce a measure of liberalization VNPT holding 18 per cent) but in that

and to clarify the roles of the different year some 13 per cent of the company
players already licensed. The outlines was sold to individuals, companies and
of the plan for future liberalization are staff. However, private investment is
evident from the terms of the US- the exception rather than the rule and
Vietnam bilateral trade agreement foreign ownership in telecommu-
(July 2000) and cemented by nications is not currently permitted.
President Clinton’s visit to Vietnam in
November 2000. The trade agreement Instead, the Vietnamese government
is meant to prepare the way for has tried to pioneer a different
Vietnam to enter the World Trade concept, which is termed Business Co-
Organization (WTO) and is comparable operation Contracts (BCCs). Under a
to the bilateral agreement reached BCC, a foreign company provides
with China. The main elements financing and services as well as
relevant to telecommunications and training, in partnership with VNPT. The
the Internet are: foreign partner shares revenue with
VNPT over the life of the BCC (typically
• V i e t n a m ’s agreement to 15 y e a r s ) . B C C s h ave b e e n
implement the WTO regulatory established for fixed lines,
reference paper; international gateways and mobile
cellular (see Table 2.1). The nominal
• By 2001, two year’s after US va l u e o f t h e B C C s e x c e e d s
ratification (expected in 2001), US$ 1 billion but it should be noted
existing BCC contracts involving that funds committed are generally
US companies should become much higher than funds actually
j o i n t ve n t u r e s ( J V ) ( i . e ., disbursed (see Box Figure 2.2).
permitting foreign ownership); Foreign investors such as Telstra (see
B ox 2.2) seem to have been
• By 2005, JVs should be able to discouraged by the poor financial
enter the mobile and satellite climate in the late 1990s as well as
services market; the unwillingness of the Vietnamese
governments to convert the BCCs
• By 2007, the market for basic into joint venture agreements by
v o i c e t e l e p h o ny s h o u l d b e permitting a degree of foreign
liberalized. ownership. This may change in the
future, under the terms of the US-
It should be noted however that all of Vietnam trade agreement (see
these commitments are contingent above). The most successful BCC is
upon ratification of the bilateral trade probably that of the second mobile
agreement and, until Vietnam’s operator, Mobifone (VMS), which is
accession to the WTO, they offer a BCC between VNPT and
privileges only to US firms. international mobile operator
Nevertheless, the agreement indicates Millicom/Comvik.
a commitment to progressive market
liberalization. 2.3.3 Licensing

2.3.2 Privatization The process of licensing is almost

entirely carried out by government
It would be accurate to say that decrees, in the absence of a formal
privatization is not currently on the telecommunications Act. SPT, for
policy agenda in Vietnam. Instead, the instance, has some nine separate
new draft Telecommunications Act licenses, of which five were delivered
foresees the “equitization” of VNPT. by the DGPT, and one each from the
There is some “experimentation” with HCMC Department of Planning and
private ownership. For instance, Investment, the Ministry of Trade, the
Saigon Posts and Telecom is a joint- Ministry of Culture and Information
stock company. Until 1998, it was fully and the HCMC Department of
state-owned (there are some Construction. SPT itself, which was
eleven different state owners with formerly part of VNPT, was actually

9
Vietnam Internet Case Study

Box 2.2: Telstra investing in Vietnam

The incumbent Australian operator, Telstra, has been Relations between VNPT and its foreign partners
one of the major investors in Vietnam, having been one received a set-back in 1996 when earlier plans to
of the first to take up the option of a BCC contract, as establish joint-ventures were reversed and instead
far back as 1988. The first contract committed OTC (the the BCC contracts were offered. These were not
former international operators arm, later integrated into perceived as being so beneficial to foreign investors
Telstra) to invest US$ 237 million over twelve years. and were indeed seen an highly risky, given the
The initial involvement included the provision of a satellite financial situation in the wider Asia region.
earth station in HCMC followed by an INTELSAT station Subsequently FDI declined (see Box Figure 2.2).
in Hanoi. Subsequently Telstra helped install earth Investment has picked up more recently, and Telstra
stations in other provinces and provided 45 VSATs (Very was among the first foreign investors to return with
Small Aperture Terminals). In 1990, OTC won the an Internet Service Agreement with VDC in September
contract to handle the development and management 1998. Since the thawing of US-Vietnamese relations
of Vietnam’s international services network, and later it following President Clinton’s November 2000 visit,
extended this project to cover investment also in the Telstra will now face new competitors vying for VNPT’s
domestic long-distance network. Part of the investment favour.
involved participation in the TVH (Thailand-Vietnam-
Hongkong) undersea cable.

Box Figure 2.2: The Foreign Direct Investment Rollercoaster

FDI commitments and disbursements in Vietnam, 1991-1999, in US$ million

10'000
FDI commitments
9'000
FDI disbursements
8'000
7'000
6'000
5'000
4'000
3'000
2'000
1'000
0
1991 1993 1995 1997 1999

Source: Vietnam Ministry of Planning and Investment.

established by a Prime Minister’s license, as additional ones may be

D e c i s i o n a n d o p e ra t e s u n d e r a necessary before services can be
license from the People’s Committee offered. The licensing procedure,
of HCMC. which can take up to a year, also
introduces delays and can be off-
SPT’s case is not unusual and this putting for foreign investors.
myriad of overlapping federal,
regional and local licenses is 2.3.4 Universal service
confusing and may explain why
companies are sometimes slow to Around 85 per cent of the
exploit the full potential of their 11’000 villages in Vietnam have a

10
 2. Telecommunication and Mass Media

Table 2.1: Business Co-operation Contracts (BCC)

for telecommunication networks and services in Vietnam

Company Date # lines Value Note

(US$ million)
Japanese consortium Nov. 1997 240’000 US$ 208 plus Northern part of
(NTT, Nissho Iwai, US$14 service Hanoi
and Sumitomo) contract.

France Telecom Nov. 1997 540’000 US$ 492.5 15 year contract for
HCMC region

Cable and Wireless Nov. 1997 250’000 US$ 207

(US)

Telstra (Australia) Several contracts, n.a. US$ 237 in 1988 See Box 2.2
beginning in 1988 subsequently
increased

Comvik (Sweden) 1993 n.a. n.a. GSM mobile

Note: For manufacturing, VNPT has joint ventures with Corning (fibre-optic cable), Alcatel, NEC Fujitsu
and LG.
Source: DGPT, ITU.

telephone line. The aim is to raise this The mobilephone licenses state that
to 100 per cent by 2005. “nationwide” coverage should be
provided but there are no specific
As of year-end 1996, the last date obligations for geographic coverage.
for which data is available, Vietnam
had just under 1’000 public For Internet access, the goal is to
payphones. Though this figure has reach the world average for
u n d o u b t e d l y g o n e u p, t h e r e i s developing countries by the
considerable doubt as to whether year 2010.
these payphones are being used.
A l t h o u g h t h e y a r e g e n e ra l l y i n 2.4 Tariffs
prominent positions on street
corners in Hanoi and HCMC, it is rare The DGPT effectively regulates tariffs
to see one in use. This may be due in Vietnam and is involved not only in
to the difficulty of purchasing approving tariffs but, in many cases,
phonecards, or it may be because in proposing them. Until recently,
mobilephones are more popular. Vietnam had the characteristics of a
country that had not started to
Public call offices, or teleshops, rebalance its tariff structure. By the
which are abundant in other Asian standards of neighbouring countries,
cities, are also difficult to find in international calls are among the
Hanoi and HCMC. This may be highest in the world (see section 2.6)
because of the difficulties in gaining while monthly residential costs (at just
a license to resell telephone services, under US$ two per month) are
especially international calls, or to relatively cheap. Local call charges
offer privately owned payphone were relatively expensive until 1998
services. Mobilephone shops but have since been progressively
belonging to Vinaphone or Mobifone reduced in price and now stand at
are abundant, but it is not possible to 400 Dong (2.7 US cents) for a three
make calls from these shops, only to minute call, including tax. This creates
purchase handsets or prepaid cards. problems of sustainability of growth

11
Vietnam Internet Case Study

Table 2.2: Main telecommunication indicators for Vietnam, 1991-2000

Year Ending 31.12

Unit 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

DEMOGRAPHY, ECONOMY
Population 1) 10x3 67’770 69’410 70’980 72’510 73’790 75’181 76’548 77’562 78’705 79’832
Households 2) 10x3 13’500 14’000 14’300 14’600 14’850 15’195 15’500 15’700 15’900 16’100
Gross domestic product 3) 10x9 76’707 110’535 136’571 178’534 228’891 272’037 313’624 361’016 399’942 444’139
Average annual exchange
rate per US$ 4) 10’037 11’202 10’641 10’966 11’038 11’033 11’683 13’268 13’943 14’168
Consumer price index
(1995 = 100) 5) ... ... ... ... 100.0 105.7 109.1 117.0 121.8 119.7
TELEPHONE NETWORK
Main telephone lines
in operation 6) 10x3 137 153 260 442 775 1’186 1’333 1’744 2’106 2’543
Main telephone lines
per 100 inhabitants 0.20 0.22 0.37 0.61 1.05 1.58 1.74 2.25 2.68 3.19
Residential main lines
per 100 inhabitants ... 0.1 0.5 1.1 2.6 3.9 ... ... ... ...
% digital main lines % 20.0 39.0 78.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
% residential main lines % ... 10.0 30.0 35.0 50.0 50.0 ... ... ... ...
Public payphones ... 50 200 500 850 950 ... ... ... ...
MOBILE SERVICES
Cellular mobile telephone subscribers — 800 4’060 12’500 23’500 68’910 160’457 222’700 328’671 788’559
- Digital cellular subscribers — — — 4’000 10’000 12’500 151’511 213’700 257’568 780’673
Cellular subscribers per 100 inhabitants — — 0.01 0.02 0.03 0.09 0.21 0.29 0.42 0.99
Radio paging subscribers — 100 13’800 40’000 55’000 ... 32’300 40’765 45’935 48’145
OTHER SERVICES
Estimated facsimile machines 7) 1’200 2’100 4’060 13’200 14’900 19’800 23’500 27’900 31’000 ...
Telex subscribers ... 950 830 801 738 643 570 530 490 ...
TRAFFIC
- National trunk
telephone (mins) 8) 10x6 ... 119 234 350 500 750 1’003 1’232 1’359 ...
- Int’l outgoing
telephone (mins) 9) 10x6 ... 8 20 30 39 52 55 50 47 ...
- Int’l incoming
telephone (mins) 10) 10x6 ... 30 72 120 200 250 279 320 337 ...
- Int’l bothway
telephone (mins) 10x6 ... 38 92 150 239 302 334 370 383 ...
STAFF
Full-time telecommunication staff 11) ... 20’000 20’000 30’000 58’000 75’000 79’600 ... ... ...
TARIFFS
Telephone connection charge 12) 10x3 ... ... 3’500 3’000 2’700 2’700 1’800 1’800 1’800 1’636
Telephone monthly charge 13) ... ... 100’000 90’000 68’000 68’000 68’000 68’000 61’818 27’000
3-minute local call (peak rate) 14) ... ... 1’200 1’200 1’200 1’200 1’200 1’200 1’091 360
Cellular connection charge 15) 10x3 — 2’200 2’200 2’200 2’200 2’200 ... ... 1’363 1’090
Cellular monthly subscription 16) 10x3 — 330 330 330 330 330 ... ... 227 182
Cellular - 3-min.
local call (peak rate) 17) — 2’200 2’200 2’200 2’200 2’200 ... ... 4’908 4’908
Cellular - 3-min. local call (off-peak) — 2’200 2’200 2’200 2’200 2’200 ... ... 3’436 3’436
REVENUE AND EXPENSE
Total telecom services revenue 18)10x9 382 746 1’512 2’567 5’019 6’978 6’934 8’838 8’974 15’294
- Telephone service revenue 10x9 ... 629 1’118 ... ... ... 4’613 5’226 5’407 ...
- Mobile communication revenue 10x9 — ... ... ... ... ... 899 1’270 1’670 ...
CAPITAL EXPENDITURE
Annual telecom. investment 10x9 ... 989 ... ... ... ... 4’000 4’500 4’500 ...
BROADCASTING
Television receivers 19) 10x3 2’800 3’000 3’200 3’300 12’000 13’500 14’000 14’250 14’500 14’750
Television equipped households 20)10x3 ... ... 5’000 6’000 10’000 11’500 11’700 11’850 12’000 12’500
Home satellite antennae 10x3 ... ... ... ... 1.20 2.50 ... ... ... ...
INFORMATION TECHNOLOGY
Personal Computers 21) 10x3 ... 10 20 50 100 250 350 500 600 700
Internet hosts 22) — — — — — 5 — 34 126 179
Estimated Internet users ... ... ... ... ... 100 3’000 10’000 100’000 200’000

Source: ITU Statistical Yearbook, Vietnam Post & Telecommunications Corp. (VNPT).
(1) Source: UN. (2) ITU estimate. (3) Source: IMF. (4) Source: IMF. (5) Source: IMF. (6) 1991: Estimate. (7) Estimate. (8)
1994-1996: Estimate. (9) 1993-94: Estimates. (10) 1993-97: Estimates. (11) 1993: Estimate.
(12) Not including tax. (13) Not including tax. (14) From 2000: Rate up to the 200th minute. (15) Not including tax. (16) Not
including tax. (17) Not including tax. (18) Until 1991 including post. (19) Source: Unesco, ITU estimate. (20) TV homes (sets).
(21) Source: ITU estimates, USITA. (22) Source: Internet Software Consortium.

12
 2. Telecommunication and Mass Media

Figure 2.4: Comparative tariffs

Among selected Asian economies, in US$, 2000

M o n t h ly s u b s c r ib e r c h a r g e , C o s t o f a 3 m in u t e
L a o P.D.R. in US $, 2 0 00 Ph ilip pine s 0 .0 0 lo ca l c a ll,
V iet Na m Re s id e ntia l in US $ , 20 0 0
La o P.D.R. 0 .0 0
Th a ila n d B u s in e s s
In d o ne s ia 0 .0 1
S ri L a nka B u s i n es s c h ar g e s
Ch in a 0 .0 1
a re th e s a m e a s
In d on e s ia
r es id e n tia l c ha r g es , Malay s ia 0.02
Ch in a u n le s s s h o wn
V iet Na m 0 .03
Ma la y s ia
Ca mbo d ia 0 .0 3
Camb o d ia
S r i L a nka 0 .0 3
Ph ilipp in e s
Tha ilan d 0 .0 8
0 5 10 15

Note: In the right chart, there are no local call charges in the Philippines. In Thailand, the local charge is flate rate.
Source: ITU World Telecommunication Indicators Database.

in that most subscribers (who make VNT (domestic network), revenue-

no international calls) would not sharing is on a 61/39 per cent basis,
generate sufficient revenue to repay with mobile operators gaining 61 per
the initial investment costs incurred cent for outgoing traffic and 39 per
by VNPT. On the other hand, low per cent for incoming traffic. This is based
minute call tariffs are obviously good on a DGPT decision and has not been
for encouraging Internet use. reviewed or changed since mobile
services started. Between the mobile
2.4.1 Interconnection operators and VTI, the revenue-sharing
agreement is 2/98 per cent for the
Given that VNPT has an effective International Direct Dial (IDD) revenue
m o n o p o l y ove r m o s t f o r m s o f (the mobile operators keep the airtime
telecommunication, and owns a major charge). However, this two per cent of
stake in “competitors” like Vietel and revenue does not cover the costs of
SPT, the arrangements for intercon- billing for the service and bad debts on
nection mainly take the form of cost international calls have to be covered
a l l o c a t i o n a n d r e ve n u e - s h a r i n g by the mobile operator. Indeed, the
a r ra n g e m e n t s . T h e t w o m a i n two per cent revenue is less even than
interconnection arrangements at the five per cent commission given to
present are: card resellers. This is seen as an area
where reform is overdue.
• Between Vietel and VNPT for IP
Telephony (see Box 2.1); 2.5 Network

• B e t w e e n m o b i l e o p e ra t o r s , Vietnam’s domestic telecommunication

where a 50/50 revenue-sharing network is run by VTN, a subsidiary of
agreement is used (effectively VNPT. Previously VTN had a
sender-keeps-all); narrowband, copper and microwave
based network. Since the “open door”
• Between the mobile operators policy of the late 1990s, VTN has been
and the fixed-line network (all investing heavily in the network. The
part of VNPT). current network is composed of a
microwave (140 Mbit/s) and optical fibre
This latter arrangement takes the form (34 Mbit/s to 2.5 Gbit/s) backbone.
of a revenue-sharing agreement. Equipment suppliers include Siemens,
Between the mobile operators and Nortel, A l c a t e l a n d F u j i t s u . Fo r

13
Vietnam Internet Case Study

switching technologies, Ericsson f a x t ra f f i c a n d a l s o p r ov i d e s

technology is mainly used. The mobile international IP capacity to VDC.
operators are also obliged to use VTN’s
backbone network. The SeaMeWe 3 and TVN (Thailand-
Vietnam-Hongkong) cables provide
In the future, the plan is to move the main links to the rest of the world.
towards an IP over ATM backbone with VTI has seven satellite earth stations,
three ATM nodes to be implemented including one at its main site in Hanoi
initially and then later extended to but these no longer appear to be used
other cities. VTN will move Internet to carry substantial volumes of
traffic onto this new network. In the international traffic. VTI is carrying out
longer term, there is a plan to install a cost-benefit study to analyse
a 10-20 Gbit/s undersea fibre cable whether it might be worth using these
system along the coast using DWDM earth stations for Internet services
technology. (Intelsat is charging VTI around
US$ 9’800 per month per one Mbit/s
Until recently, only VTN was authorized link) in order to benefit from the
to provide long-distance infrastructure. greater flexibility of deployment of
Vietel and SPT recently entered the satellite links. However, VTI has
market (see Section 2.2.1), with Vietel considerable spare capacity available
in particular using an IP-based network on the undersea cables.
to carry IP telephony. The railway
ministry is also planning to offer a data For voice services, VTI has 384 Mbit/s
network but has to work with VTN. Also, o f c a p a c i ty s p l i t b e t w e e n s o m e
the electricity ministry has a fibre optic 6’000 separate circuits (compared
network but this is for internal use only with just eight international lines in
at present. the 1980s!). Voice demand continues
to grow by around 15 per cent per
2.6 International traffic year.

Vietnam Telecom International (VTI), Vietnam has some of the world’s

a subsidiary of VNPT, is responsible highest prices for international
for Vietnam’s international voice and outgoing traffic, which is priced in US

Figure 2.5: Tariff rebalancing (or the lack of it) in Vietnam

Trends in price of selected services, in US$, 1993-2000

12

10

4
300 mins, local calls

2 Monthly line rental

3 mins Int'l call to US
0
1993 1994 1995 1996 1997 1998 1999 2000

Source: ITU World Telecommunication Indicators Database.

14
 2. Telecommunication and Mass Media

Figure 2.6: Vietnam's international traffic

By incoming and outgoing, 1994-97, and by main partner, 1997, in million minutes

V ie t Nam 's inte rnational tr affic, in million minutes ie t Nam 's tr affic par tne r s , 1997, in million minutes
400
Other
350
300 Japan
Inc oming
250 Out
A ustralia
In
200
Taiw an-China
150
100 Outgoing UK
50
USA
0
1995 1996 1997 1998 1999 -200 -150 -100 -50 0 50

Source: ITU/TeleGeography Inc. Direction of Traffic Database.

dollars, effectively putting it out of 2.7 Mass Media

reach of ordinary people. Unlike other
countries in the world, there has been The media in Vietnam is state-owned.
no reduction in international tariffs Policy and regulatory aspects are
and virtually no rebalancing (see under the responsibility of the Ministry
Figure 2.5). A peak rate three minute of Culture and Information <www.
call to the United States costs over cinet.vnn.vn>. Despite the lack of
US$ nine and more than US$ ten to plurality, media usage is increasing as
Europe. As a consequence, Vietnam reflected by a rise in advertising
also has one of the highest ratios expenditures. Ad spending on broad-
between international outgoing traffic casting, print and outdoor (billboard),
(46 million minutes in 1999, and in only allowed since 1990, rose from
decline since 1996) and incoming US$ 20 million in 1993 to US$ 166
traffic (337 million minutes). For the million in 1999. Of particular interest
United States, which is by far is the effort the state broadcasting
Vietnam’s largest traffic partner, the authorities place on reaching the large
ratio of outgoing to incoming is as high number of overseas Vietnamese.
as 40:1 (see Figure 2.6). T h e s e i n c l u d e s h o r t wa ve ra d i o
broadcasts as well as satellite
One of the reasons for the traffic television. The leading ISP, VDC, also
imbalance is because Vietnam has a news-based web portal primarily
maintains a high net margin between aimed at overseas Vietnamese.
the retail price of a call and the
settlement rate. V i e t n a m ’s 2.7.1 Print
settlement rate with the United
States, for instance, was 0.9 SDR According to government statistics, in
(62.5 US cents) per minute, as of 1996 there were some 562 press
1 July 2001. Vietnam is not on target publications including 295 at the
to comply with either the FCC national level and 218 at the provincial
benchmarks (23 US cents by year level. Of these, there are some
end 2001 for a low income country) 150 newspapers, 58 at the national
nor the ITU indicative target rate l e ve l a n d 9 2 i n t h e p r o v i n c e s .
(35 US cents by year end 2001 for a According to UNESCO, there were
country with teledensity between ten dailies in 1996 with a combined
1 and 5). circulation of just 300’000 copies per

15
Vietnam Internet Case Study

day. This translates into a relatively and carried by Thaicom 3 (Thailand),

low figure of just four newspaper Viasat 1 (Malaysia) and Telstar 5
readers per 1’000 population, (United States).
considering Vietnam’s relatively high
literacy rate. However an increase in A c c o r d i n g t o V T V, t h e r e a r e
new publications suggests that a p p r ox i m a t e l y t e n m i l l i o n T V
circulation has risen since these households meaning that around
statistics were compiled. The major 80 per cent of Vietnamese homes
newspapers in Vietnam are Nhan Dan have a television set. The density is
(The People’s Daily) <www.nhandan. even higher in urban areas. According
org.vn>, Saigon Giai Phong (Saigon to one statistic, 96 per cent of urban
Liberation) and Lao Dong (Labour). households have TVs and watch an
English newspapers and publications average of three hours per day.
include the Saigon Times Daily Household TV penetration is estimated
<www.saigon-news.com>, Vietnam at 92 per cent in HCMC and 96 per
News <vietnamnews.vnagency.com. cent in Hanoi.
vn>, Vietnam Economic Times, and
Vietnam Investment Review. Multi-channel television is available
through satellite reception or VTV’s
The Vietnam News Agency is the MMDS wireless cable service. The use
official government press organ. It has of a satellite dish requires permission
offices in all provinces as well as from the Ministry of Culture and is
serveral overseas. It has a web site primarily intended for hotels.
< w w w.vnagency.com.vn > where Supposedly it is difficult for locals to
information is available in Vietnamese get permission. Nonetheless small
as well as English, French and satellite dishes are openly sold.
Spanish. The web site was launched According to AC Nielsen, there were
in August 1998. some 20’000 satellite dishes in the
four largest cities in 1999. VTV’s
2.7.2 Radio MMDS service, launched in 1994, has
There are three major radio stations 10’000 subscribers in Hanoi and
and one national broadcaster, Voice HCMC. In Hanoi, nine channels are
of Vietnam (VOV). VOV is the official available for US$ five/month while in
network of the Vietnamese HCMC it costs between US$ 13-30
Government. It broadcasts on AM, FM depending on how many channels are
and shortwave. National broadcasts selected. VTV censors political, sexual
are in Vietnamese as well as ethnic and violent content. According to VTV,
tongues including H’mong, Khmer,
Ede, GiaLai and Bana. Overseas
broadcasts are in twelve languages
including Vietnamese for expatriates.

VOV has 61 provincial radio stations

primarily using AM while Hanoi and
H C M C a l s o h ave F M s t a t i o n s .
According to UNESCO, there were
some 8.2 million radio sets in use in
1997 translating into a density of
107 sets per 1’000 inhabitants.

2.7.3 Television
State-owned Vietnam Television (VTV)
h a s m o n o p o l y o n o ve r- t h e - a i r
television. It has three nationwide
channels (VTV1, VTV2, VTV3) as well
as a local channel in each province.
In addition there is a satellite channel,
VTV4, aimed at overseas Vietnamese

16
 2. Telecommunication and Mass Media

there is not much demand for multi- Over 50 per cent of VTV’s revenue
channel TV because programming is comes from the government with the
not in Vietnamese. They have plans rest coming from a variety of
to launch a coaxial cable service and sources. VTV carries advertising but
a Direct-To-Home (D-T-H) satellite this is controversial since viewers
service as well as more extensive complain. By law, advertising cannot
dubbing and subtitling of foreign exceed five per cent of programming
programs. time. According to the Press Law
(1983, amended last year), private
VTV launched a web site in Septem- TV stations are not allowed.
ber 2000<www.vtv.org.vn>. The Programming is in Vietnamese with
main demand for this comes from some news programs in English and
o ve r s e a s V i e t n a m e s e . T h e s i t e French. Provincial channels also
provides program schedules, news as provide broadcasting in local
well as delayed video streaming. languages. There is no license fee
Streaming capability is limited system in Vietnam.
because of speed. VTV leases a
64 kbit/s line and plans to upgrade WebTV is being developed by VDC,
it to 128 kbit/s. Cost is an issue as with a target date for introduction of
they are paying VND 33 million per y e a r- e n d 2 0 0 1 9 but VTV is not
month (around US$ 2’250) just for involved. There is currently no data
bandwidth. broadcasting in the country.

7
See: http://www.itu.int/wtpf/casestudies/index.html.
8
Millicom, which is based in Luxembourg, has a 90 per cent shareholding in the Swedish company Comvik.
The local company is called Comvik International Vietnam (CIV).
9
See: http://db.vnpt.com.vn/news/view.asp?ID=240.

17
Vietnam Internet Case Study

3. Internet

Vietnam is a relative newcomer to the connections and high costs. In 1992,

Internet, obtaining its first permanent Hanoi’s Institute of Information
international connection in Technology (IOIT) established a dial-
December 1997. This late start is partly up telephone connection with the
explained by government hesitation. Australian National University to
The Internet is perceived
as a powerful tool for
research and economic Figure 3:1: Vietnam on the Net
development.10 It is also
perceived as a potential
threat by opening up
access to a variety of 250 Users (000s) 3.0
views and opinions that Per 1'000 inhabitants 2.62
200 2.5
are not always consis-
tent with the Vietnamese 200 2.0
government. In order to 150
guard against the latter, 1.5
the state has exerted 100 1.15
1.0
strong control over
Internet development. 50 0.49 0.5
90
Although the Internet 2
40
has grown at an impres- 0 0.03 0.0
sive rate—the number of 1997 1998 1999 2000
subscribers more than
doubling each year since
its inception—this may Note: Users estimated on the basis of two users
soon reach a plateau, per subscriber.
Source: ITU adapted from VNPT data.
with most of those that
can afford access at
commercial rates having
it. In order to promote future growth, exchange e-mail. This pioneering
create sustainability and enhance the service grew into Vietnam’s first
sophistication of Internet usage in the national computing network:
country, the government will have to
reconcile the contradiction between “This was how the online venture,
strong regulatory control and the which began with nine telephone lines,
benefits of a more free and competitive ending up at the Australian National
market. University (ANU), was growing into the
first Vietnamese internal network. The
3.1 History new network was called VARENet
(Vietnam Academic Research and
Although Vietnam only permanently Educational Network), reflecting its
connected to the Internet in intention to facilitate the exchange of
November 1997, it had been involved academic communication and
in various networking activities for research. In its early days, batches of
more than five years before. This e-mails were sent five times a day
helped to build up the expertise from ANU to Hanoi, where they were
needed to successfully launch Internet sorted by members of IOIT. At times,
services in the country. In 1991, the t h e y w e r e h a n d d e l i ve r e d ( v i a
exchange of e-mail with a German motorbike) around the city. The calls
university was explored but this were initiated in Australia and hence
p r o ve d u n f e a s i b l e d u e t o p o o r the transmission costs were only

18
 3. Internet

about one third the cost if initiated in resolutions were issued in 1997
Vietnam. Users were charged for the outlining how the Internet was to be
service, and transmission fees were used and controlled prior to its actual
refunded to the ANU.”11 implementation. Finally in November
1997, the government gave its seal
By 1996, around 300 scientific, of approval and the first ISPs began
academic and research organizations providing commercial access service.
were connected to the IOIT.
Vietnam had just over 100’000 dial-
Parallel to this, another IOIT related up Internet subscribers at the end of
organization known as NetNam was the year 2000. This translates into a
launched with assistance from penetration level of just over one
Canada’s International Development subscriber per 1’000 inhabitants.
Research Center (IDRC) through its Official statistics for the number of
Pan Asia Networking (PAN) project. users do not exist. Most estimates are
W h i l e VA R E N e t p r ov i d e d b a s i c based on multiplying the number of
connectivity to research and academic subscribers by a factor of no more
institutions, NetNam sought to than two. This seems reasonable
address the needs of the NGO considering that usage in business and
community in Vietnam. NetNam also education is relatively low—there were
used a UUCP connection to ANU in only some 200 leased Internet lines
Australia to provide Internet mail to in May 2001. Although there are a
its predominantly NGO, academic and growing number of cybercafés, these
research clients. It also had a local are in the main cities and appear to
bulletin-board service (BBS) that be primarily utilized by expatriates
contained a number of file libraries and tourists. Added to this would be
and locally-oriented material. In 1996, the 40’000 some users of the 1268
NetNam hosted a few hundred and 1269 services (see below). It is
accounts, including 60 of the estimated that, by the end of 2000,
75 foreign NGO’s operating in the there were around 200’000 users. This
country, or more than 800 users. figure is equivalent to a penetration
rate of around 0.25 per cent or one
While Vietnam was probably ready to Internet user per 389 Vietnamese.
h ave a f u l l t i m e i n t e r n a t i o n a l
connection to the Internet in 1996, 3.2 Market structure: A
this was delayed by the government Quartet
due to a lack of suitable rules and
regulations. A flurry of decrees and Vietnam had four operational ISPs in
May 2001. The four all have long time
data communication experience and
their ISP operations essentially were
Figure 3.2: Internet market
an outgrowth of that.

The largest ISP is Vietnam Data-

NETNAM communications Company (VDC)
SPT 6% < w w w. v d c . c o m . v n> w i t h s o m e
Internet subscribers
9% 66’500 subscribers in February 2001,
in Vietnam
Distribution by ISP accounting for almost 60 per cent of
Feb. 2001 the market. VDC was established by
Total = 116'046 VNPT in 1989 to provide data
communication services. VDC serves
VDC as the sole Internet Access Provider
FPT 57% (IAP) as owner of the only interna-
8%
tional Internet gateway. VDC also
hosts web sites (i.e., it is an ICP:
Internet Content Provider).

The second largest ISP is the

Source: VNPT. Corporation for Financing and
Promoting Technology (FPT)

19
Vietnam Internet Case Study

<www.fpt.com.vn>. It was founded in 24 Mbps in December 2000). Despite

HCMC in 1988 to carry out software the fact that most Internet traffic is
development and computer training. incoming—indeed VDC estimates the
It later expanded into systems incoming to outgoing traffic ratio at
development and integration and 5:1—Vietnam is one of the few
became the distributor for a number countries in the world with
of international computer companies. symmetrical international bandwidth
It was awarded its ISP license in 1997. (i.e., incoming capacity equal to
outgoing). Connectivity is with five
Saigon Postel Corporation (SPT) countries, all through undersea fiber
<www.saigonpostel.com.vn> is a joint optic links (see Table 3.1).
stock company created in
1995. It provides Internet
services through its Table 3.1: Internet connections
SaigonNet subsidiary. SPT is
Vietnam's International Internet bandwidth
87 per cent state-owned (by
by route, May 2001
eleven government organi-
zations including VNPT), and
ISP / Location Mbps
13 per cent by individuals,
companies and staff. Total Hongkong Telecom 16
staff is around 300, (Hongkong SAR)
including postal services. KDD (Japan) 2
There are nine other offices
throughout Vietnam in Sprint (USA) 6
addition to the headquarters Singtel (Singapore) 8
in HCMC. The majority of
SPT’s customers are in HCMC Telstra (Australia) 2
but it opened a Point of
Presence (POP) in Hanoi in
2000 and is aiming to build Source: VTI.
up its activities there. SPT
also operates a string of over
100 cybercafés in HCMC (see Box 3.1). International access prices are
considered high but have been coming
The Institute of Information down. They amount to around 20 per
Technology created NetNam <www. cent of VDC’s overall operating costs.
netnam.vn> in 1994. With assistance Vietnam does not have to pay for both
from Canada’s IDRC, it started an e- half circuits to countries with whom it
mail and local Bulletin Board Service peers. Typical half circuit costs are
p r i m a r i l y u s e d by d e ve l o p m e n t around US$ 10’000 per month for one
agencies, expatriates and professional E1 (1.5 Mbps).
Vietnamese. It was later awarded an
ISP license. It operates in Hanoi and National peering between ISPs has not
HCMC, offering both an Intranet been necessary because there is only
(access to Vietnamese sites) as well a single IXP (i.e., VDC). Since all ISPs
as full Internet services. c o n n e c t t o V D C ’s i n t e r n a t i o n a l
gateway, their traffic is automatically
3.3 International connectivity exchanged and national traffic stays
and peering within the country.

VDC is the sole Internet Exchange 3.3.1 Broadband

Access Provider (IXP) and thus has a
monopoly on delivering international Broadband options are currently
Internet connections. The actual limited to leased high-speed circuits
g a t e w ay i s m a n a g e d b y V N P T ’s ranging in speed from 64 kbps to
subsidiary for international traffic, 2.048 Mbps. Prices are high, which
Vietnam Telecom International (VTI). explains why there are only around
O verseas Internet bandwidth in 200 leased line subscribers. A 64 kbps
May 2001 was 34 Mbps (up from leased line costs VND 21’480’000

20
 3. Internet

(US$ 1’442) per month while a 2 Mbps 3.6 Tariffs

line costs VND 257’760’000
(US$ 17’304) per month. VDC has an Internet tariffs are established by the
ADSL pilot. It is expected that there D G P T. 14 Dial-up Internet access
will be 100 users by the end of 2001 consists of an ISP charge and local
and perhaps 1000 by the end of telephone charges (see Table 3.2).
2002. There is no cable television in VDC, VNPT’s Internet subsidiary,
Vietnam so cable modem access is offers nationwide dial-up access from
not a short-term option. According most of Vietnam’s 61 provinces for the
to VDC’s five-year development plan, price of a local call using three four
it is targeting 100’000 broadband digit numbers: 1260, 1268 and 1269.
users by 2005.12 The first requires prior registration,
payment of a monthly subscription
3.4 Regulation charge and provides full access to the
Internet. The latter two do not require
Numerous decrees and ordinances prior registration but can only be used
guide use of the Internet in Vietnam. from the user’s own telephone line.
They regulate practically everything In addition, the latter two do not have
ranging from who qualifies for an ISP subscription charges but are tariffed
license to tariffs. One of the most according to the amount of time spent
important is Decree 55 of 2001, which online. The 1268 access code only
regulates the use of the Internet in provides access to Vietnamese sites.
the country.
ISPs can establish different pricing
3.5 Licensing packages but they must equal the prices
established by the DGPT. The one
An inter-ministerial circular issued in exception is for the second off-peak
May 1997 outlines the procedure for tariff (midnight, 7am Mon.-Fri. and 7pm
the granting of Internet provision Sat.-Sun). This can be reduced by up
licenses.13 There are three
types of Internet licenses:
Internet Service Provider Table 3.2: Internet Dial-up Tariffs,
(ISP), Internet Exchange July 2001
Provider (IXP) (provision of
international Internet VND US$
g a t e way ) a n d I n t e r n e t
Content Provider (hosting of Connection Set by ISP
content). The first two Monthly subscription 27’273 $1.83
licenses are granted by the
DGPT whereas the Ministry Per minute:
of Culture and Information
7am-7pm 210 $0.014
licenses the latter. As of (Mon.-Fri.)
May 2001, there were five
licensed ISPs: VDC, FPT, 7pm-12pm (daily) 150 $0.010
NetNam, SPT and Vietel of 7am-7pm
which the first four were (Sat.-Sun.)
o p e ra t i o n a l . Current Midnite-7am (daily) 130 $0.009
regulations stipulate that 7pm-7am
IXPs must be state-owned. (Sat.-Sun.)
I S P s p ay a o n e - t i m e
Telephone usage charge (per minute):
licensing fee of VND 15 mil-
lion (around US$ 1’000) for Up to 200 minutes 120 $0.008
a five-year license. Three—
201-1000 minutes 80 $0.005
VDC, SPT and Viatel—are
theoretically allowed to After 1001 minutes 40 $0.003
p r ov i d e their own
infrastructure. However the Note: Not including ten per cent tax. Converted
situation is unclear and to to US$ at rate of 30 June 2001.
date, only VDC has an IXP Source: VNPT.
license.

21
Vietnam Internet Case Study

to VND 30 (US 0.2 cents). In order to offices and cultural establishments.

distinguish service, ISPs can offer other Around 20 communes currently
incentives to customers. receive free Internet access, via dial-
up, but this is still a pilot.15
3.7 Universal access
3.8 Content
Vietnam has an Internet penetration
level of just 0.25 Internet users per An Internet Content Provider (ICP)
100 inhabitants (end 2000). Usage is license is required in order to host a
heavily skewed to urban areas, web site in Vietnam. The ICP license
particularly Hanoi and HCMC. For is granted by the Ministry of Culture
example these two cities accounted for and Information. Web hosting tariffs
86 per cent of all subscribers and all of are established by the DGPT. Company
the leased line accounts even though web sites do not need a license, but
they only make up ten per cent of the they must be hosted by an ICP. There
Vietnamese population. Current were around 15 ICPs at May 2001
Internet pricing is unaffordable for most including all the ISPs as well as several
Vietnamese; 30 hours of monthly use media organizations such as
would be roughly equivalent to the newspapers (e.g., <www.laodong.
country’s per capita GDP. com.vn>).

Despite these grim statistics, there are Access to foreign content is controlled
few government policies to encourage via a firewall. Sites that are considered
public Internet access. There is o f f e n s i ve o r c o n t ra r y t o t h e
currently no provision for providing government’s perspective are blocked.
discounts to public facilities such as The Ministry of Interior decides which
educational institutions, let alone sites are to be blocked and VDC
Internet cafés. On the other hand a implements the filtering on the
fifty per cent Internet access discount gateway. Sometimes users complain
is available for software development about lack of access to particular sites,
centres in order to promote that but more often they complain about
industry. Government plans call for the slower speeds caused by the
Internet density in Vietnam to be the filtering software.
same as the world average by 2010
but without more concrete projects for 3.9 Domain name
supporting public access, it is unclear
how this target can be met. The Ministry of Science, Technology
a n d t h e E nv i r o n m e n t a n d I O I T
There is a government plan to provide registered the .vn domain name in
free access to villages through post April 1994. Today the .vn domain

Box 3.1: SPT Cybercafés

Saigon Postel (SPT) is one of the ke e p i n g o ve r h e a d d o w n . M o s t

leaders driving public Internet SaigonNet cafés would have an
access. It has over 100 Internet average of ten PCs although some
agencies in HCMC. They are have more than 20. Usage is mainly
branded as “SaigonNet” cafés. They e-mail and chat. Offline games are
can set their own prices (around also popular. In the past, mainly
VND 300-400 per minute). foreigners used them. But now more
SaigonNet cafés tend to use dial- Vietnamese are visiting cybercafés.
up rather than leased lines because Students use them for their research.
leased line prices as so high. They SPT is trying to promote fidelity by
can also connect to more than one offering a “multilink service” whereby
ISP if there is a failure. A typical a SaigonNet café takes a number of
cybernet has one or two technicians lines connected permanently to their
plus students so salaries are low PBX.

22
 3. Internet

name is administered by the DGPT and rumored that the DGPT will offer
managed by the Vietnam Internet additional VoIP licenses.
Network Information Center (VNNIC).
More than 2’000 domain names have International VoIP is easy to control
been registered. Second level domain in Vietnam since there is only one
names corresponding to those widely Internet gateway controlled by the
used in other countries are generally incumbent telephone operator, VNPT.
u s e d ( e . g ., a c ( a c a d e m i c ) , e d u It blocks access to Internet Telephony
(educational), gov (government), org sites such as Dialpad and Net2Phone.
(other organizations) or com T h e r e h a ve b e e n a n u m b e r o f
(commercial)). The registration fee is applications for international VoIP
VND 450’000 (US$ 31.76) and the licenses. In June 2001, the DGPT
annual fee is VND 480’000 published tariffs for international VoIP
(US$ 33.88). All web sites located in as a preparation for the eventual
Vietnam must use the .vn domain. Use granting of licenses for the service.
of generic Top Level Domains (gTLD) T h e ra t e i s s e t a t a u n i f o r m
(e.g., www.site.com or www.site.edu) US$ 1.30/minute to any destination.
is not allowed but may be permitted Though still steep for an Internet
in the future. At present, only web Telephony call, the tariff is significantly
sites hosted outside Vietnam can use cheaper than existing international
gTLDs. charges over the PSTN. For example
a one-minute IDD call to the USA
3.10 VoIP (See Box 2.1) during peak hours cost US$ 2.51. It
is expected that international VoIP
The provision of Voice Over Internet licenses will be awarded soon.
Protocol (VoIP) requires a license from
DGPT. In May 2001, VIETEL had the 3.11 Quality of Service
only VoIP license (granted in February
2000) and has been running a trial ISPs must register for a quality
since October 2000 for domestic long certificate from the DGPT. They must
distance between Hanoi and Ho Chi abide by certain quality of service
Minh City. The price, decided by the parameters and provide quarterly
DGPT, is VND 1’818 (US 13 cents) per reports.
minute (exclusive of VAT) compared
to the PSTN price of VND 4’000 3.12 Mobile Internet
(US 12 cents) per minute. Around
60’000 users were using the service Mobile Internet has considerable
in May 2001, quite an accomplishment potential as there are more than one
considering that there is no prepaid million mobile users and an estimated
service and marketing is limited. Users 20’000 Wireless Application Protocol
dial a special prefix—1780—to get (WAP) handsets on the market. WAP
access to the service. Ironically, even was launched by both GSM operators
though it is a competitor, VIETEL in May 2001. Subscribers have to pay
leases equipment from VNPT for the a connection fee (VND 15’000;
service. VNPT also does the billing. US$ 1.06). The usage charge is
VIETEL pays 33 per cent of revenues VND 900 (US 6 cents) per minute
to VNPT for interconnection and (including VAT). Of this, VND 100 goes
billing. While the quality is acceptable, to VDC (including VAT). Applications
users have to dial a longer number include basic information, news, sport,
and put up with delays in getting a w e a t h e r, a n d e xc h a n g e ra t e s .
dial tone. VIETEL estimates that it has Subscribers can also use it for e-mail.
captured around 40 per cent of the Currently there are three Vietnamese
market based on minutes. It is WAP sites (VDC, VMS and Vinaphone).

23
Vietnam Internet Case Study

10
“If this is correct, then the direction of Vietnam’s recent dramatic reform in the direction and learning
purposes of the primary school curriculum coupled with widespread, low cost access to ICT (including the
internet) is exactly what is required. Not only should it represent the fastest and surest combination of
factors to Vietnam becoming quite early in this century a knowledge-based economy, it should also serve to
stimulate the rapid economic growth that the country seeks.” MPI, UNIDO, UNDP. Report on a Science,
Technology and Industry Strategy for Vietnam. May 2000.
11
Dang Hoang-Giang. “Internet in Vietnam: From a Laborious Birth into an Uncertain Future.”
www.interasia.org/vietnam/dang-hoang-giang.html
12
“VNPT five-year plan upbeat on Internet growth potential.” VNS, Feb. 20, 2001.
http://db.vnpt.com.vn/News/view.asp?ID=212
13
See “Inter-Ministerial Circular No.08-TTLT of May 24,1997 guiding the granting of permits for hooking up,
providing and using the Internet in Vietnam.” Available at:
<www.vnpt.com.vn/Vnpt/Legals/Bulletins/VBInternet/Thongtu/Circular08-1997TTLT.htm>
14
See Decision No.519/2001/QD-TCBD dated June 28, 2001 of the Secretary General of DGPT. Available at
www.vnpt.com.vn/Vnpt/Services/TelecomServices/Internet_PSTN.htm
15
“Free Internet access for nine more village post office and cultural places.” VNPT Web site. April 17, 2001.
http://db.vnpt.com.vn/News/view.asp?ID=278.

24
 4. National absorption

4. National absorption

4.1 Government enterprises (<www.smelink.com.vn>)

or the Japanese-funded National
Although the government sector plays Transport Development Strategy
an important role in economic life in (<www. vitranss.org>). Table 4.1 gived
Vietnam, it has generally been slower an overview of the main government
to adopt the Internet than businesses web sites.
or individuals. Although most of the
major ministries have web sites, the Within government, computer use is
majority are slow to load and contain limited but growing. For instance,
a limited amount of information. although the DGPT does not yet have
a functioning web site, most staff
The Ministry of Science, Technology members have access to a PC and
a n d t h e E nv i r o n m e n t ( <w w w. there is an internal LAN with dial-up
moste.gov.vn>) was one of the first links to regional offices. Similarly, the
government entities to go online, even Ministry of Health has around
before the formal liberalization of the 100 LANs linking some
Internet in 1997, through a dial-up 5’000 computers in total, but this is
connection to Australia. However, as considerably fewer than the number
so often happens with pioneers, its of professional staff working in the
site has failed to keep u p with health sector.
developments.
Within government, there is no single
One of the more useful government ministry with responsibility for IT, and
sites is the one maintained by the therefore no real coordination of e-
V i e t n a m To u r i s t O f f i c e ( <w w w. government initiatives. An IT project
v i e t n a m t o u r i s m . c o m> ) , which office was established in 1993 and a
p r ov i d e s l i n k s t o h o t e l s , t o u r national IT project was defined in 1995
operators, and some limited online but in 2000 this was cancelled and the
booking facilities. It has language responsibilities were split between the
support in English and French, but Prime Minister’s office and the Ministry
most of the content comprises links o f S c i e n c e , Te c h n o l o g y a n d t h e
to other sites. Environment.

Perhaps the most impressive site is the The longer-term goal is to create a
one for the National Assembly single go vernment network, for
(<www.na.gov.vn>). This basic but instance to facilitate e-mail
skillfully presented site has information communication. One of the peculia-
about the history of the National rities of the current situation in
Assembly and of Vietnam, as well as Vietnam is that many government
the full text of the national constitution. officials and business people have
It has information and brief biographies multiple e-mail accounts that are used
of each of the Deputies but unfortuna- for different purposes. Because it is
tely no e-mail addresses or other links not feasible to check so many
that would allow for interactive accounts on a regular basis, this
communication or feedback. means that e-mail is less useful than
it could be.
Among other government sites, the better
organized and more informative ones tend 4.2 Education
to be those with links to overseas
development assistance programmes, Although the Internet is considered very
such as the German-funded assistance important for teaching and learning in
programme for small and medium-sized Vietnam, the actual level of Internet use

25
Vietnam Internet Case Study

Table 4.1: Government on the Web in Vietnam

Ministry Website URL

Ministry of Culture and Information www.cinet.vnn.vn

National Assembly (English and Vietnamese) www.na.gov.vn

Ministry of Agriculture and rural development www.mard.gov.vn

(some English)

Ministry of Education and Training www.moet.edu.vn

Ministry of Health www.moh.gov.vn

Ministry of Foreign Affairs (English and www.mofa.gov.vn

Vietnamese)

Ministry of Planning and Investment (English Sites hosted by Netnam at:

and Vietnamese) www.netnam.vn/mpi_ferd and by UNIDO
at: www.smelink.com.vn

Ministry of Science, Technology and the www.moste.gov.vn

Environment

Ministry of Transport, National transport www.vitranss.org

development strategy study, funded by Japan
(English)

Ministry of Trade www.mot.gov.vn

Ministry of Trade, Vietnam Trade network www.vitranet.com.vn

(English and Vietnamese)

Vietnam National Tourist Agency (English, www.vietnamtourism.com

French and Vietnamese)

Source: ITU, UNDP (http://www.undp.org.vn/undp/partner/links/vnmin.htm).

in the education sector is limited. In that price has come down to US$ 800
primary and high schools, usage is low per month, but still remains a luxury.
but all universities have an Internet In principle, the education sector
connection and their own web site. should benefit from a discount on
Many professors have private Internet connectivity prices. In practice, this
accounts and use e-mail. Perhaps is not the case. Quality of service is
3-4 per cent out of the total number of low and costs are high. A few hours
120’000 Internet accounts in Vietnam use would cost several hundred
are used by the academic sector. That thousand Dong, which is beyond the
would amount to around 5’000 accounts reach of most students.
out of a total potential user base of
22 million students. Many of the first users of the Internet
came from the education sector. For
Because connections are slow— instance, the Ministry of Science and
typically just a 64 kbit/s dial-up line, Technology was one of the first users,
though a few universities have leased with a dial-up account to Australia
line connections—using the Internet before the use of the Internet became
is often frustrating. One of the reasons “official” in late 1997. The Ministry of
for the slow connections is cost. Until Education and Training has a web site
July 2001, a 64 kbit/s dial-up account at www.moet.edu.vn. There is a plan
cost US$ 2’500 per month. Since July, to link the Ministry with Edunet, the

26
 4. National absorption

international not-for-profit educational One problem is the lack of Vietnamese

network (see for instance www.edunet. l a n g u a g e s o f t wa r e f o r u s e i n
ca), and a grant from the Japanese educational applications. This
Overseas Development Agency has effectively restricts the likely user
been requested for this purpose. The population for the Internet to the
idea is to connect all universities to the ten per cent or so of Vietnamese who
Ministry and to Edunet but this project speak some English. There has been
is still at the planning stage. some development of distance
learning, for instance at the Hanoi
In Vietnam there are 22’200 primary University of Technology (www.hut.
schools, 1’760 secondary schools and edu.vn), but again cost is a limiting
123 institutes of higher learning. factor.
Primary school is mandatory but not
secondary school. Adult literacy rates 4.3 Health
stand at just over 90 per cent. This
represents a major improvement since In 1995, the Prime Minister’s Office
the 1950s when as few as one in five of formulated a five-year Master Plan
the adult population could read or write. geared towards increasing the use of
information technology (IT) in the
Most secondary schools would have health sector. In the same year, the
at least one PC. Relatively few primary Ministry of Health set up a nationwide
schools have PCs but some private Steering Committee for IT
schools in big cities have better D e ve l o p m e n t . H o w e v e r, this
facilities. One example is the Hanoi programme was discontinued owing
Amsterdam High School, one of the to a shortage of funds.
best schools in Hanoi. Out of a sample
“Maths-gifted class” that graduated in Four of Vietnam’s universities contain
1991, some 16 out of the 26 students medical schools. In addition, there
are known to have e-mail addresses. are 30 accredited research institutes,
Many are working in the IT sector, or and 15 provincial medical schools.
in government institutions of one form Collectively, these institutions have
or another, including universities.16 access to 5’000 PCs, more than
Another example is the ChuVanAn 100 local area networks (LANs) and
secondary school, which has an active eight wide area networks (WANs). As
alumni section.17 As ever, things are many as 300 professionals work in the
further ahead in HCMC than elsewhere field of IT. Some are specialized in the
and the local government there has subject and other doctors and
recently announced a project to pharmacists hold supplementary
introduce computers at all levels in qualifications. Some 100 Internet
schools. accounts, all dial-up, exist in the
health sector, four belonging to the
At the university level, the situation Ministry’s headquarters in Hanoi. In
i s m u c h b r i g h t e r. T h e r e a r e a n 1997, the Ministry set up a web site
estimated one million university containing official health information,
s t u d e n t s , a l l o f w h o m r e c e i ve such as health legislation, access to
compulsory courses in basic IT use. services and health policy. At the
There are some 50’000 IT specialists same time, the Ministry set up a
in universities and training colleges medical Intranet connecting
and around 5’000 computer graduates 30 hospitals and institutes. The initial
e a c h ye a r. H o w e ve r, t h i s f a l l s target date in the Master Plan for
substantially short of the requirement connecting all district hospitals was
for computer literate employees in the 2000. Once again owing to financial
workforce. The situation is constraints, the unofficial target is now
exacerbated by the brain drain. Of the 2005.
26 students in the 1991 Hanoi-
Amsterdam maths class, at least five In 1999, Vietnam had 11’ 229 medical
currently work outside Vietnam and a service units around the country.
further five work in foreign-owned WANs are used by hospitals to send
companies in Vietnam. their periodical reports to the Ministry

27
Vietnam Internet Case Study

o f H e a l t h < w w w. m o h . g o v. v n> 4.4 e-commerce

electronically. Some hospitals use
LANs to facilitate the management and The Prime Minister has assigned
processing of patient records. responsibility for e-commerce to the
However, the prevalence of non- Ministry of Tra d e (MoT)
standard systems and applications < w w w. m o t . g ov. v n> a n d D G P T,
across hospitals prevents a consistent although the former has taken a
exchange of information. coordinating role. This mandate,
which is vague, was given three years
Telemedicine projects have suffered ago. The MoT has invited experts and
from shortages of staff and specialists from different ministries
e q u i p m e n t . Re s u l t s h av e b e e n and organizations to provide input into
unsatisfactory so far as the first pilot t h e n a t i o n ’s e - c o m m e r c e p o l i c y
transmission suffered from poor development.
quality of service. In 2000, the
Ministry of Health applied to the In 1998, the MoT launched an
European Commission for the funding a wa r e n e s s c a m p a i g n a b o u t e -
of a Telemedicine project, the outcome commerce and organized seminars for
of which is still uncertain. government officials to discuss the
topic. It held a three-week training
National health insurance, which is course in Hanoi for officials from all
mandatory in Vietnam, covers more over the country as part of a Canadian
than ten million people. Claims are International Development Agency IT
processed electronically. Some of the project. An e-commerce guide has
obstacles to the wider use of the been prepared and is available on
Internet in the health sector include VDC’s web site.
the slow speed, the high cost, and the
limited IT training. But the main Since 1999, there has been a
obstacle according to the Ministry of government-funded project to develop
Health is the lack of a legal framework a policy paper on e-commerce. The
for electronic signatures. topic has been divided into twelve
subjects (infrastructure, legal, impact
While the first priority of the Ministry o n c u l t u r e , s e c u r i ty, c o n s u m e r
of Health is the treatment of patients, protection, e-payment, etc.) and the
the IT Committee is also considering relevant ministries were assigned to
the following issues: look into each subject. The report,
covering 2001-2005, was submitted
• funding options for the high-cost to the government in July 2001.18
leased line access
• the official status of electronic A major obstacle to e-commerce is the
documents lack of information and official guidance
• standardization of hospital from government on what is allowed
software and not allowed. There is also a
shortage of funds and expertise to look
Even though some 1’000 PCs are in into e-commerce. The government is
use in the pharmaceutical industry, not stopping anyone from entering the
individual pharmacies typically do not market but they are concerned about
have their own web sites or Internet how to protect Small and Medium
access. Moreover, as in many other Enterprises (SMEs). There is also a lack
countries, pharmaceutical companies of e-payment mechanisms. A major
need to comply with regulations on barrier for Business to Consumer (B2C)
sales and advertising through lengthy e-commerce in Vietnam is the limited
and complex procedures. In an effort availability of credit cards. The use of
to address this, the Vietnamese credit cards has just recently started,
government is currently working with in co-operation with foreign banks.
the Canadian International Though credit cards are available, few
Development Agency (CIDA) on a people have them. Additionally they are
project to devise an IT-based approval primarily used domestically as there are
procedure for pharmaceuticals. restrictions on overseas use.

28
 4. National absorption

The government is working on a legal site, although some are only available
framework for e-commerce, including over the government’s intranet.
electronic signatures and certification
authorities but this is unlikely to Despite the barriers, the MoT is taking
become a law in the near future. These a number of steps to promote e-
issues are more likely to be dealt with c o m m e r c e . Fo r e x a m p l e i t i s
through a decree or ordinance. developing web sites to promote
V i e t n a m m ay s i g n t h e B e r n e trade. There is also a project to put
Convention on copyright protection in customs online. The MoT is also
the near future. This is one of the interested in following legal
requirements of the US/Vietnam trade f ra m e w o r k s for e-commerce,
agreement. particularly the United Nations
Commission on International Trade
Security concerns, relating to hacking Law (UNICTRAL) model.20
and computer crime, have increased.
For instance, a Ministry of Trade official The majority of Vietnam’s some
recently lost some one million Dong 30’000 private firms are SMEs. For
because his Internet account was the most part, they are not very
hacked and his password stolen. In computer literate. The country is
the short term there will be an working with regional organizations
ordinance on encryption which will such as APEC and ASEAN to
help security. strengthen its SMEs. These regional
agreements tend to create some
State-owned banks have been slow to pressure to build up e-commerce
develop consumer electronic services c a p a b i l i t i e s . 21 The Vietnamese
such as ATMs or online banking. Chamber of Industry and Commerce
Instead this is being driven by foreign <www.vcci.com.vn > has also been
banks that have been allowed to active in building up IT capability in
operate in Vietnam for a number of SMEs and sponsored a workshop in
years. Australia’s ANZ was one of the M a y 2 0 0 1 o n I n t e r n e t- b a s e d
first to set up offices in Vietnam and information.22
has two branches in Hanoi and Ho Chi
Minh City. ANZ offers credit cards and It is expected that state-run
ATMs but thus far no online banking. companies should take the lead in the
Another foreign bank, HSBC, has plans introduction of e-commerce. 23 The
to introduce on-line banking. MoT is particularly optimistic about
sectors such as tourism, agriculture
There is scarce market research on a n d t h e g a r m e n t i n d u s t r y. Fo r
e-commerce or business adoption of instance, the Vien Tien company, which
Information and Communication sells paper products and clothes, is
Technology in Vietnam. For example, using its web site to advertise its
there have been no government products and to take orders but not yet
studies on computer use in com- to do financial transactions. There are
p a n i e s . 19 One reason is a lack of also high hopes that Vietnam’s large
funding. There are no known expatriate community will use their
estimates regarding the size of the e- expertise to build up e-commerce
commerce market. applications. The fact that they tend to
be well-off and have Internet
A major bottleneck for facilitating connections suggests that expatriates
electronic trade is the number of provide an ideal market for Business-
documents and licenses required to to-Consumer transactions.
do business. Though this may not be
remedied in the short-run, more S o m e i n i t i a t i ve s o r potential
transparency can be introduced by applications include:
putting required forms and procedures
o n l i n e . V i e t n a m i s e n c o u ra g i n g • NutTrade.com, a US company, is
government departments to go online helping Vietnamese companies
and make forms such as customs to sell cashew nuts. There is a
p a p e r s ava i l a b l e e l e c t r o n i c a l l y. verbal agreement to develop the
Supposedly every ministry has a web scheme nationwide;

29
Vietnam Internet Case Study

• The rice industry is another portal is VITRANET <www.vinakey.com.

potential e-commerce user as vn>, partially supported by the ITU’s
t h i s m a r ke t i s n o w f u l l y Electronic Commerce for Developing
opened;24 Countries project. It provides trade
news, legal documents and other
• Flower sales are another business-related news on its web site.
possibility, for instance for
expatriate Vietnamese sending O verall, the Ministry of Trade is
flowers to relatives living in confident that e-commerce will take
Vietnam. Flower production is off in Vietnam but it is difficult to
famous in the mountainous Dalat see the way ahead. For example the
region in the south, near HCM City. Ministry has plans to have e-
It is doing well in attracting foreign procurement and trade management
investment. go online by 2005. Unfortunately this
timetable is too conservative and in
Portal sites are not particularly well the meantime the country is missing
developed, though ISP home pages and o u t o n m a ny b e n e f i t s o f e -
newspapers attract a lot of attention. commerce. Vietnam has a long way
One successful company is VASC to go to improve its e-commerce
(value-added services company) physical and legal infrastructure and
<www.vasc.com.vn> which is a kind of improve its low e-readiness
Vietnamese version of Yahoo. Another ranking. 25

30
 4. National absorption

Box 4.1: Vietnam's Software Parks

Software development has been identified as one of typically do one portion of software coding in Vietnam;
the four key areas in Vietnam’s Information this is usually part of a larger project. Accounting,
Technology (IT) Master Plan management, and education
(along with infrastructure, applications are among those
hardware development and being developed for the local
human resources). 26 The market. Softwares that have
logic is compelling. Computer been developed include a job
programming is basically market application and an
brainpower and thus requires electronic catalogue for a
relatively little investment. business.
Funds that are needed could
come from local private One strategy for funding
companies as well as foreign software parks is to attract
ones. A software overseas funding as well as
development industry would development assistance. For
also build up Vietnamese example the US Trade and
expertise in computing, Development Agency
helping to make Information recently approved a
and Communication Technology sustainable and US$ 400’000 grant to fund a feasibility study for
driving the country into a knowledge-based economy. Quang Trung Software Park. The Japanese
The government feels Vietnam has a number of government is also planning to provide assistance
advantages: for a US$ 100 million software park in Hanoi.

“The development of our country’s software industry Government plans call for creating a US$ 500 million
would benefit from the following fundamental software market and 50’000 IT professionals including
advantages: … Vietnamese people are capable of 25’000 computer programmers (also fluent in English)
quickly absorbing this technology; there are in the by 2005. How realistic is the Vietnamese government’s
overseas Vietnamese community many experts, who plan? The value of the market seems optimistic
are experienced in the software industry and wish to considering that the software market in Vietnam is
establish cooperation and make investment in currently estimated at only US$ ten million per year.
Vietnam.”27 Also software piracy in the country is rife with Vietnam
cited as one the worst offenders in the world.29 This
The strategy the government is adopting is to promote may deter potential investors in software
software development sites around the country rather development.
than one specific zone. The Ministry of Science,
Technology and Environment has been charged with Vietnam’s main advantage appears to be labour costs
spearheading software development. A number of with the average programmer earning about
incentives are provided to companies locating at the US$ 200/month. SSP has a training and education
sites such as tax breaks, low rent, etc.28 So far, a few centre to instruct software engineers on following
so-called “Software Parks” have been established in international standards. It is also working with the
Ho Chi Minh City and Hanoi. University of Ho Chi Minh City to train software
engineers. SSP also hosts the first Cisco Networking
One of the first was Saigon Software Park (SSP) Academy in Vietnam.30 Nonetheless Vietnam currently
<www.saigonsoft.com.vn>. The word “park” is a only churns out around 2’000 graduates in IT a year
misnomer since SSP is actually located in a new six- and it will need to accelerate this if it is to meet its
story building albeit in a relatively quiet residential target. The country is also working with overseas
district of HCMC. It opened for business in July 2000 partners to develop training programs. India appears
with 30 companies. SSP has around two dozen to be a model for the Vietnamese with several
management staff and over 600 people are working agreements made with that country for human
there. This includes established companies as well as resource development.31
new ones. Most are Vietnamese but there are also a
few foreign ones. SSP is fully occupied and has been Right now, the major selling point of software “Made
looking for another building close by. SSP has a two in Vietnam” would appear to be lower labour costs.
Mbps Internet connection for which it pays However there are a number of other countries that
VND 200 million a month. This price is discounted 50 offer equally low labour costs as well as other advantages.
per cent as part of a government policy to promote For example, one of the best known is India which has
software development. Nonetheless SSP’s main cost the added pluses of having been in the business a long
is the Internet connection. SSP Internet connection time, a core of highly trained and English speaking
goes straight to the international Internet gateway professionals and extensive worldwide connections.
so it must provide its own firewall that blocks sites Another potential problem is that government support
specified by the Ministry of Interior (Internet for software development risks creating an island of IT
Telephony sites are excluded). Companies in SSP activity insulated from the rest of the country.

31
Vietnam Internet Case Study

16
See: http://www.jaist.ac.jp/~thang/toan-ha-8891.html.
17
See: http://64.177.74.100/cgi-bin/UltraBoard/UltraBoard.cgi .
18
The improvement of telecommunication infrastructure and reduction of Internet access prices were identified
as top priorities. See “Telecommunications infrastructure first priority in e-commerce development in
Vietnam in 2001-2005.” VNPT Web site, July 12, 2001. http://db.vnpt.com.vn/News/view.asp?ID=620.
19
According to one survey of 93 private firms in May 2000, 33 per cent were connected to the Internet. None
had created a web site or considered the Internet a particularly useful tool. See ebusinessforum.
http://www.ebusinessforum.com/
index.asp?layout=rich_story&doc_id=913&country_id=&title=Vietnam%3A+Key+issues&channelid=6&categoryid=21
20
According to UNICTRAL “The Model Law, adopted in 1996, is intended to facilitate the use of modern means
of communications and storage of information, such as electronic data interchange (EDI), electronic mail and
telecopy, with or without the use of such support as the Internet. It is based on the establishment of a
functional equivalent for paper-based concepts such as “writing”, “signature” and “original”. By providing
standards by which the legal value of electronic messages can be assessed, the Model Law should play a
significant role in enhancing the use of paperless communication. In addition to general norms, the Model
Law also contains rules for electronic commerce in specific areas, such as carriage of goods. With a view to
assisting executive branches of Governments, legislative bodies and courts in enacting and interpreting the
Model Law, the Commission has produced a Guide to Enactment of the UNCITRAL Model Law on Electronic
Commerce.” See http://www.uncitral.org/english/texts/electcom/ecommerceindex.htm.
21
For example under the terms of the e-ASEAN Framework Agreement which Vietnam signed, a high-speed
Internet connection will connect ASEAN countries to provide online products and services.
22
See “Workshop on Internet-based Information and Services for SMEs: SMEs want more and better
Vietnamese web sites.” http://www.smenet.com.vn/index-e.htm.
23
There are some 5’300 State-Owned-Enterprises accounting for around 40 per cent of GDP. See US
Department of State. “FY 2001 Country Commercial Guide: Vietnam.” July 2000.
24
The Internet could help rice farmers obtain better prices. See Anya Schiffrin. “Of rice and Men.”
http://www.thestandard.com/article/0,1902,21402,00.html.
25
For example, Vietnam was ranked 58th out of 60 economies in one e-readiness survey. See
http://www.ebusinessforum.com/index.asp?layout=rich_story&doc_id=367.
26
See Prime Ministerial Decision No.81/2001/QD-TT on IT promotion for the country’s industrialisation and
modernization.
27
Resolution NO.07/2000/ND-CP of June 5, 2000 on the building and development of software industry in the
2000-2005 period. www.vnpt.com.vn/Vnpt/Legals/Bulletins/CPTTg/Nghi_Quyet/
Resolution07_June2000.htm.
28
“First northern hi-tech park prepares to open its door.” VNPT Web site. 31/7/2001.
db.vnpt.com.vn/News/view.asp?ID=703.
29
According to the US Software and Information Industry Association, Vietnam’s software piracy rate is 98 per
cent. See www.siia.net/sharedcontent/press/2000/5-24-00.html.
30
“Saigon Center of Techniques and Technology to Award Cisco Networking Academy Scholarships to Top Le
Hong Phong Students.” Press Release. 5 April 2001.
http://www.cisco.com/warp/public/146/asia_pr/april01/1.html.
31
“VN, India set up IT center.” (VNS, April 26, 2001) http://db.vnpt.com.vn/News/view.asp?ID=322. FPT and
India’s Aptech have a one year program leading to certification of software programmers. Students can
enroll at one of three centers (Hanoi, HCMC and Danang). The programme costs between US$ 700-850 per
year. The centers enroll around 800 students. See “Aptech, FPT to introduce new training program.” The
Saigon Times Daily. 17 May 2001.

32
 5. Conclusions

5. Conclusions

5.1 State of the Internet in • connectivity infrastructure: a

Vietnam measure based on international
and intra-national backbone
The Mosaic Group <www.agsd.com/ bandwidth, exchange points, and
gdi97/gdi97.html>, has developed a last-mile access methods.
framework for characterizing the state
of the Internet in a nation. They • organizational infrastructure:
consider six dimensions, each of which a measure based on the state of
has five ordinal values ranging from the ISP industry and market
zero (non-existent) to four (highly conditions.
developed). The dimensions are as
follow: • s o p h i s t i c a t i o n o f u s e: a
measure characterizing usage
• pervasiveness: a measure from conventional to highly
based on users per capita and the sophisticated and driving
degree to which non-technicians innovation.
are using the Internet.
V i e t n a m e s e va l u e s f o r t h e s e
• g e o g r a p h i c d i s p e r s i o n: a dimensions are shown below.
measure of the concentration of
the Internet within a nation, from Pervasiveness is rated at level 2,
none or a single city to Established. At December 2000, there
nationwide availability. were just over 100’000 subscribers
tr a n s l a t i n g i n t o a n e s t i m a t e d
• sectoral absorption: a 200’000 Internet users in the country
measure of the degree of or 0.25 per cent of the population.
utilization of the Internet in the
education, commercial, health Geographic Dispersion is rated at
care and public sectors. level 2, Moderately dispersed. Internet

Figure 5.1: State of Internet in Vietnam

Dimension Value
Pervasiveness
4
Pervasiveness 2 3
Geographic Dispersion 2 Sophistication 2 Dispersion

Sectoral Absorption 1.5 1

0
Connectivity Infrastructure 1.5
Organizational Infrastructure 2
Organizational Absorption
Sophistication of Use 1.5

Connectivity
TOTAL 10.5

Note: The higher the value, the better. 0 = lowest, 4 = highest.

Source: ITU.

33
Vietnam Internet Case Study

access is theoretically available from with a national system based on state

all provincial capitals for the price of control. Despite a late start, (the
a local call. However there are very I n t e r n e t wa s f i r s t p e r m i t t e d i n
few fixed telephone lines outside of Vietnam on November 19,1997), the
the capital. dramatic growth that has marked the
Internet in other countries is apparent
Sectoral Absorption is rated at level now also in Vietnam. During 2000, the
1.5, between Rare and Moderate. This number of dial-up Internet subscribers
ranking is a function of the type of grew f rom j us t 4 2 ’0 0 0 to ov e r
c o n n e c t i v i ty i n e d u c a t i o n , g o v- 100’000, a growth rate of almost
ernment, health care and business. 150 per cent. In the first four months
One major factor affecting this of the y e a r, a p p r ox i m a t e l y
dimension is the high cost of leased 10’000 subscribers have been added
lines. Few primary or secondary each month.
schools have Internet connections
though all universities do. Some The big question is what happens
government ministries are on the web next? A series of market reforms are
although there is no central portal. In proposed, which would see a degree
addition, other ministries are on the of liberalization and an extension of
government intranet and therefore not the current system whereby different
accessible to the general public. Few ministries and provincial governments
provincial governments have web are effectively in competition with
sites. The Ministry of Health has its each other. Already, in some areas
own web site. Usage in the business that are seen as critical to national
sector is minimal. development and trade promotion,
such as building a software industry,
The Connectivity Infrastructure is there has been a degree of relaxation
at level 1.5, between T h i n a n d of government control. A trial of Voice
Expanded. International connectivity is over Internet Protocol (VoIP) is being
34 Mbps bothways. There are POPs in conducted between the two largest
the large cities as well as a nationwide cities and could be extended to
Internet backbone. There is a domestic international traffic, where Vietnam
Internet exchange by default since has some of the highest prices in the
there is only one international gateway world.
provider to which all ISPs connect. Few
leased lines are in place and there is no It seems clear that the Vietnamese
ADSL or cable modem for broadband government is at a turning point.
local access. Should it persist with a model of state
control or should it move in the
The Organizational Infrastructure direction of a free market model? The
is at level 2, Controlled. There are four Internet, a potent symbol of civil
operational ISPs of which only one is liberties, lies at the heart of this
allowed to provide an international dilemma. Can a socialist model of
gateway. Entry into the ISP market is government be reconciled with a user-
not possible at this time although it driven Internet? Equally, can the
appears that may be changed soon. Internet continue to grow without a
new measure of economic
Sophistication of Use is at level 1.5, l i b e ra l i z a t i o n ? The following
between Minimal and Conventional. recommendations to help promote the
The most popular applications among diffusion of the Internet are offered
most users appear to be e-mail, chat for discussion, on the basis of lessons
and information retrieval. However learned in other countries.
there are a growing number of local
language web sites. 1. Licensing and adjustments
to market structure
5.2 Recommendations 1.1 Internet access provider
There appears to be a conflict of
In Vietnam, the government has interest in the situation of VDC, which
attempted to reconcile the essentially is the monopoly national and
free-market character of the Internet international backbone Internet

34
 5. Conclusions

Access Provider (IAP), using lines parties, including users and private
leased from VTI, as well as the sector representatives, in a formal
country’s largest Internet Services consultation process. The inputs to
Provider (ISP). This puts VDC in a these consultation processes and the
strong position relative to other ISPs resulting policy changes should, as far
since it is both their competitor and as possible, be made available over a
their main supplier. There does not DGPT web site, which is independent
appear to be any structural separation from that of VNPT.
between the two sides of the business
(e.g., accounting separation). When 2. Private sector participation
considering opening up the market to The government should encourage
more ISPs, the Internet bandwidth private sector participation, foreign
market should also be opened to investment and employee ownership
alternative suppliers, for instance by in Internet companies, especially
allowing direct connections between among Internet Service and Content
VTI and other ISPs. If VDC is to Providers. The experience of partial
continue as both an IAP and the private ownership in Saigon Posts &
leading ISP, then there should be full Te l e c o m m u n i c a t i o n s h a s b e e n
managerial and accounting separation successful and this should be
b e t w e e n t h e t w o h a l ve s o f t h e extended. It may be worthwhile to
operation. consider reducing or removing caps
on the percentage of equity that can
1.2 Internet service providers be owned by any single organization
The current number of licensed ISPs or individual. These steps would help
(five, of which only four have launched attract investment into the Internet
services) is inadequate now that the sector.
market in Vietnam is maturing. As a
first step, additional ISPs should be 3. Cybercafés
licensed. At a later stage, the ISP The growth and development of
market should be liberalized and the cybercafés has had a very positive
licensing requirement for ISPs should effect in spreading awareness of, and
be simplified. access to, the Internet in Vietnam.
Policies that specifically support the
1.3 Cybercafés development of cybercafés could
The licensing procedure for cybercafés include:
should be liberalized.
3.1 O f f i c i a l endorsement of
1.4 Internet Content Providers cybercafés and clarification of
The government should consider their legal status.
phasing out the current system of
Internet Content Provider licenses to 3.2 Recognition by government of
encourage more production of local particularly successful or
content. Instead, a system a self- i n n ova t i ve c y b e r c a f é s , f o r
regulation of content, perhaps backed instance through some sort of
up by a set of agreed guidelines and awards scheme which honours
an industry watchdog, should be excellence and best practice.
introduced.
3.3 Official support for franchising
1.5 Separation of regulatory, schemes that will enable
policy-making and operational entrepreneurs to establish
functions cybercafés. Such support could
The degree of separation between the include, for instance, training,
regulator and policy-maker (DGPT) loans, starter kits and rental
and the national operator (VNPT) subsidies during early phases of
should be clarified. development.

1.6 Transparency of process 3.4 Special recognition and support

When considering changes in policy, for entrepreneurs wishing to
the DGPT should involve all interested establish Internet access points

35
Vietnam Internet Case Study

in rural areas. This might include 4.3 P r o m o t i n g e-government

tax concessions, reduced access initiatives (i.e., putting certain
pricing such as exists for Software g ov e r n m e n t a d m i n i s t ra t i ve
Development Parks, etc. services and information on the
Web). This could include, for
3.5 Creating a professional associa- instance, selecting one or two
tion of cybercafés. high-profile applications, such as
processing of school registrations
3.6 Creation of a range of different or the system of application for
types of cybercafés, for instance licenses, and making these
in universities, gov ernment available online.
departments, libraries, health
centres and other office buildings 4.4 E x t e n d i n g a d u l t e d u c a t i o n
as well as in public places. programmes and IT “re-training”
for professionals (e.g., health
3.7 Using the network of post offices care workers and lawyers).
to extend Internet access into
smaller towns and rural areas, 5. Invest in the new generation
thereby exploiting the synergies In order to encourage Internet take-
between the postal and up among students in primary and
telecommunications operations secondary schools, a formal
in the current organizational programme should be developed to
structure. e x t e n d t h e l e ve l o f a c c e s s t o
computers and computer skills.
4. Public awareness and training Measures could include “kids’
The Internet is now reaching a phase c o m p u t e r c l u b s ” t o e n c o u ra g e
where it could begin to expand rapidly students to explore the Internet and
among the general population. In to develop research projects. At least
order to achieve this, it will be in urban areas, some element of
necessary to raise general public computer training (e.g., keyboard and
awareness of the Internet and its mouse skills) should be a compulsory
potential benefits. Measures to raise element of the secondary school
awareness and to promote access curriculum. An essential first step is
could include: to increase the number of PCs in
school classrooms. Where
4.1 Extending the offer of subsidised appropriate, the support of
Internet access prices, currently international and bi-lateral assistance
available only in the software organizations could be solicited.
development parks, to universities
and schools and other community At the university level, steps to
access locations. In the past, this encourage university use of Internet
has been offered on a case-by- could include:
case basis. Evidence suggests that
high prices, especially for leased • Provision of subsidised leased
line access, are a significant line access for universities and
obstacle to broadening the take- other higher educational
up of Internet. establishments;

4.2 Developing short (e.g., one • Creation of a high-speed national

week), standardized, govern- academic network to link all
ment-approved training pro- national universities and
grammes for Internet skills, such research institutes together and
as web site development and to establish links with foreign
awareness of the Internet. At the universities;
same time, informal training and
sharing of expertise among • The programme currently in
cybercafé entrepreneurs and place for compulsory IT training
between cybercafé users should in universities should be
also be encouraged. extended;

36
 5. Conclusions

• Further d e ve l o p m e n t of some 40 per cent of the traffic on this

computer science courses in route within a few months of operation
u n i versities to increase the and with only minimal advertising. In
number of computer-literate line with the policy on VoIP in China,
students who graduate each the experiment should now be
year; operationalised and the provision of
VoIP should be permitted also for
• Establishment of formal links and international traffic. In this context,
co-operation between academic the endorsement of IP Telephony by
institutions and IT businesses, to participants in the ITU’s recent World
help reverse the brain drain. Telecommunication Policy Forum
should be noted (see www.itu.int/
6. Pricing issues wtpf).
The rebalancing of prices, towards
regional norms, is an urgent priority. 8. Content issues
Currently Vietnam has some of the While clearly of great significance for
world’s most expensive prices for Vietnamese society, the operation of
domestic and international leased a national firewall has the effect of
lines. This is inevitably passed on in slowing Internet communication, and
terms of higher prices for local ISPs exacerbating problems of congestion.
and therefore customers’ Internet A better policy might be to direct
access prices are also among the efforts towards developing more local
highest in the region, mainly due to content, especially in the Vietnamese
the telephone charge element. Steps language. This could be achieved
to rebalance tariffs could include: through programmes such as school
competitions for content development
• Allowing ISPs, and other and e-government initiatives. In any
operators to set their own tariffs. case, the perceived need for content
In the short term, an upper limit control should be dealt with in a way
on prices could be set by DGPT. that does not exclude ISPs from
It should not be necessary to set e v e n t u a l l y h av i n g t h e i r o w n
lower limits for prices; international gateways.

• Introducing some degree of 9. 3G mobile

competition in services provision, The take-up of mobile in Vietnam,
for instance by allowing resale of which is now around the one million
services and by permitting voice user mark, suggests a high level of
o v e r I P ( Vo I P ) s e r v i c e s t o latent demand for communication
develop further (see below); services. SMS messaging is also
proving very popular. It is likely that
• Systematic benchmarking of demand for 3G mobile Internet
telecommunications and Internet services will also be high. For that
prices against regional and reason, Vietnam should consider an
national averages; early licensing policy for 3G mobile
services to allow operators the time
• In the critical area of leased line to prepare their networks. Mobile
prices, a target of reaching operators should be granted ISP
regional average prices within licenses and permitted to offer
three ye a r s should be Internet access via wireless means.
considered; Vietnam should follow closely 3G
developments in other countries, and
• Consider waiving or reducing the select an IMT-2000 standard, which
dial-up telephone charge for will allow it to compete at the
Internet access. international level.

7. VoIP 10. E-commerce

The Voice over IP trial being conducted The development of a viable local e-
between Hanoi and Ho Chi Minh City commerce capability will require close
is proving to be a success, gaining co-operation between several different

37
Vietnam Internet Case Study

arms of government, the banking worthwhile for government agencies

sector, the ISPs, merchants and and ISPs to carry out more market
others. It will also require wider use research in the Internet arena to
of credit cards and clarification of the ascertain user demand and market
status of electronic signatures. Given trends more precisely. One indicator
the high percentage of the economy that would be useful to monitor is
that is in state hands, it is logical that the percentage of dial-up minutes
the government should take a leading that go to Internet users rather than
role in making available its own voice callers. Another would be a
products and services via the Web. more scientific survey on the number
of Internet users in the country. The
11. Conduct more market research DGPT might consider working with
Given the high level of statistical t h e C e n t ra l S t a t i s t i c s O f f i c e t o
data gathering that is conducted include questions on ICT equipment
within the country, for instance for availability and use in annual
agricultural products, it would be household surveys.

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 Annexes

Annex 1: List of meetings

No. TIME Appointment with

DATE
1 14/05/01 09:00 am Department General of Post and
Telecommunications (DGPT)
(Telecom Policy Department and
Science Technology and
International Cooperation
Department)
2 14/05/01 10:30 pm Vietnam Television
3 14/05/01 02:00 pm Ministry of Health
4 14/05/01 03:00 pm Ministry of Education
5 15/05/01 11:00 am Ministry of Trade
6 15/05/01 02:00 pm Vietnam Post and
Telecommunication Corporation
(VNPT)
7 15/05/01 15:30 pm Vietnam Data Communication
Company (VDC)
8 15/05/01 08:00 am Vietnam Telecom International
Company (VTI)
9 15/05/01 09:00 am Vietnam Telecom National Company
(VTN)
10 16/05/01 09:00 am VIETEL – Ministry of Defense (ISP)
11 16/05/01 10: 30 am Ministry of Science, Technology and
Environnement (FPT)-(ISP)
12 16/05/01 13:30 pm Vietnam Mobile Services Company
(VMS)

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Vietnam Internet Case Study

Annex 2: Acronyms and abbreviations

AMPS Advanced Mobile Phone Service/System

ANU Australian National University
APEC Asia-Pacific Economic Cooperation
ASEAN Association Of South East Asian Nations
ATM Asynchronous Transfer Mode
B2C Business to Consumer
BBS Bulletin-board service
BCC Business Cooperation Contract
CIDA Canadian International Development Agency
CcTLD Country code top-level domain
DGPT Vietnam Department General of Posts and Telecommunications
DWDM Dense Wavelength Division Multiplexing
FCC Federal Communications Commission
FDI Foreign Direct Investment
FPT Corporation for Financing and Promoting Technology
GDP/GNP Gross Domestic Product/Gross National Product
GSM Global System for Mobile Communication
HCMC Ho Chi Minh City
HDI Human Development Index
HQ Headquarter
IAP Internet Access Provider
IXP Internet Exchange Provider
ICP Internet Content Provider
ICT Information and Communication Technology
IDRC Canadian International Development Research Centre
IDD International Direct Dialing
IOIT Institute of Information Technology
IP Internet Protocol
ISP Internet Service Provider
IT Information Technology
JV Joint Venture
LAN Local Area Network
LDC Least Developed Country
MoT Ministry of Trade
NGO Non-governmental organization
PAN Pan Asia Networking
POP Point of Presence

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PSTN Public Switched Telephone Network

SDR Special Drawing Right
SPT Saigon Posts and Telecommunications (Saigon Postel Corporation)
SKA Sender Keeps All
SME Small and Medium Enterprises
SMS Short Messaging Service
SMTC Saigon Mobile Telephone Company
UNDP United Nations Development Programme
UNICTRAL United Nations Commission on International Trade Law
UUCP UNIX-to-UNIX Copy Program
VARENet Vietnam Academic Research and Educational Network
VASC Value-added services company
VDC Vietnam Datacommunication Company
Vietel Military Electronic Telecommunications Company
VMS Vietnam Mobile Service (Mobifone)
VND Vietnam Dong
VNNIC Vietnam Internet Network Information Center
VNPT Vietnam Posts and Telecommunications Corporation
VOV Voice of Vietnam
VTI Vietnam Telecom International
VTN Vietnam Telecoms National
VTV Vietnam Television
VoIP Voice over Internet Protocol
WHO World Health Organization
WIPO World Intellectual Property Organization
WLL Wireless Local Loop
WTO World Trade Organization

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Vietnam Internet Case Study

Annex 3: Useful links

Organization Website
Main government-related ICT organizations/providers
Vietnam Posts and Telecommunications Corporation www.vnpt.com.vn
Vietnam Department General of Posts and www.vnpt.com.vn/DGPT/dgpt_general.html
Telecommunications
Vietnam Telecoms National www.vtn.com.vn
Vietnam Datacommunication Company www.vdc.com.vn
Mobifone (VMS) www.mobifone.com.vn
Vinaphone (GPC) www.gpc.vnn.vn
Saigon Posts and Telecommunications www.saigonpostel.com.vn
Main ICT providers
Corporation for Financing and Promoting Technology (FPT) www.fpt.com.vn
NetNam www.netnam.vn
Mass media
Ministry of Culture and Information www.cinet.vnn.vn
Vietnam News Agency www.vnagency.com.vn
Nhan Dan (The People’s Daily) www.nhandan.org.vn
Saigon Times Daily www.saigon-news.com
Vietnam News www.vietnamnews.vnagency.com.vn
Academic
Ministry of Science, Technology and the Environment www.moste.gov.vn
Ministry of Education and Training www.moet.edu.vn
Hanoi University of Technology www.hut.edu.vn
Health
Ministry of Health www.moh.gov.vn
Electronic commerce
Ministry of Trade www.mot.gov.vn
Vietnamese Chamber of Industry and Commerce www.vcci.com.vn
Vietnam Trade Network www.vitranet.com.vn
Portals
Value-added services company www.vasc.com.vn
VITRANET www.vinakey.com.nv
Other
Vietnam National Tourist Agency www.vietnamtourism.com
National Assembly www.na.gov.vn
National Transport Development Strategy www.vitranss.org
Ministry of Agriculture and rural development www.mard.gov.vn
Ministry of Foreign Affairs www.mofa.gov.vn
Value-added services company www.vasc.com.vn
Saigon Software Park www.saigonsoft.com.vn

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 Annexes

Annex 4: Framework dimensions

Table 1: Pervasiveness of the Internet

Level 0 Non-existent: The Internet does not exist in a viable form in this country. No computers with
international IP connections are located within the country. There may be some Internet users
in the country; however, they obtain a connection via an international telephone call to a
foreign ISP.

Level 1 Embryonic: The ratio of users per capita is on the order of magnitude of less than one in a
thousand (less than 0.1%).

Level 2 Established: The ratio of Internet users per capita is on the order of magnitude of at least one
in a thousand (0.1% or greater).

Level 3 Common: The ratio of Internet users per capita is on the order of magnitude of at least one in
a hundred (1% or greater).

Level 4 Pervasive: The Internet is pervasive. The ratio of Internet users per capita is on the order of
magnitude of at least one in 10 (10% or greater).

Table 2: Geographic Dispersion of the Internet

Level 0 Non-existent. The Internet does not exist in a viable form in this country. No computers with
international IP connections are located within the country. A country may be using UUCP
connections for email and USEnet.

Level 1 Single location: Internet points-of-presence are confined to one major population centre.

Level 2 Moderately dispersed: Internet points-of-presence are located in at least half of the first-tier
political subdivisions of the country.

Level 3 Highly dispersed: Internet points-of-presence are located in at least three-quarters of the first-
tier political subdivisions of the country.

Level 4 Nationwide: Internet points-of-presence are located in all first-tier political sub-divisions of the
country. Rural dial-up access is publicly and commonly available and leased line connectivity is
available.

Table 3a: Sectoral Use of the Internet

Sector Rare Moderate Common

Academic - primary >0-10% have leased-line 10-90% have leased-line >90% have leased-line
and secondary schools, Internet connectivity Internet connectivity Internet connectivity
universities

Commercial- >0-10% have Internet 10-90% have Internet >90% have Internet
businesses with > 100 servers servers servers
employees

Health-hospitals and >0-10% have leased-line 10-90% have leased-line >90% have leased-line
clinics Internet connectivity Internet connectivity Internet connectivity

Public-top and second >0-10% have Internet 10-90% have Internet >90% have Internet
tier government servers servers servers
entities

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Vietnam Internet Case Study

Table 3b: The Sectoral Absorption of the Internet

Sectoral point total Absorption dimension rating

0 Level 0 Non-existent

1-4 Level 1 Rare

5-7 Level 2 Moderate

8-9 Level 3 Common

10-12 Level 4 Widely used

Table 4: Connectivity Infrastructure of the Internet

Domestic International Internet Access Methods

backbone Links Exchanges

Level 0 Non- None None None None

existent

Level 1 Thin ≤ 2 Mbps ? 128 Kbps None Modem

Level 2 Expanded >2 >128 kbps 1 Modem

– 200 Mbps -- 45 Mbps 64 Kbps leased
lines

Level 3 Broad >200 Mbps >45 Mbps More than 1; Modem

-- 100 Gbps -- 10 Gbps Bilateral or Open > 64 Kbps leased
lines

Level 4 Immense > 100 Gbps > 10 Gbps Many; Both < 90% modem
Bilateral and Open > 64 Kbps leased
lines

Table 5: The Organizational Infrastructure of the Internet

Level 0 None: The Internet is not present in this country.

Level 1 Single: A single ISP has a monopoly in the Internet service provision market. This ISP is generally
owned or significantly controlled by the government.

Level 2 Controlled: There are only a few ISPs because the market is closely controlled through high
barriers to entry. All ISPs connect to the international Internet through a monopoly
telecommunications service provider. The provision of domestic infrastructure is also a monopoly.

Level 3 Competitive: The Internet market is competitive and there are many ISPs due to low barriers to
market entry. The provision of international links is a monopoly, but the provision of domestic
infrastructure is open to competition, or vice versa.

Level 4 Robust: There is a rich service provision infrastructure. There are many ISPs and low barriers to
market entry. International links and domestic infrastructure are open to competition. There are
collaborative organizations and arrangements such as public exchanges, industry associations, and
emergency response teams.

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Table 6: The Sophistication of Use of the Internet

Level 0 None: The Internet is not used, except by a very small fraction of the population that logs into
foreign services.

Level 1 Minimal: The small user community struggles to employ the Internet in conventional, mainstream
applications.

Level 2 Conventional: The user community changes established practices somewhat in response to or in
order to accommodate the technology, but few established processes are changed dramatically.
The Internet is used as a substitute or straight-forward enhancement for an existing process (e.g.
e-mail vs. post). This is the first level at which we can say that the Internet has "taken hold" in a
country.

Level 3 Transforming: The user community's use of the Internet results in new applications, or significant
changes in existing processes and practices, although these innovations may not necessarily
stretch the boundaries of the technology's capabilities. One strong indicator of business process
re-engineeering to take advantage of the Internet, is that a significant number (over 5%) of Web
sites, both government and business, are interactive.

Level 4 Innovating: The user community is discriminating and highly demanding. The user community is
regularly applying, or seeking to apply the Internet in innovative ways that push the capabilities of
the technology. The user community plays a significant role in driving the state-of-the-art and has
a mutually beneficial and synergistic relationship with developers.

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