In Part 3 of our continuing series chronicling the events leading up to the first Philippine Internet connection, we follow our hero, Dr. Rudy Villarica, as he continued to make the rounds gathering resources for the connection. From getting the funding, to procuring the Cisco routers and the know-how to get them running, to signing the contract with PLDT for the leased line to connect to the Net. At a speed of 64K, this was positively glacial by today’s standards, but it was to be the country’s only direct connection to the Internet for some time.
This article was originally written and published in March 2001.
Telcos and Ciscos
With Dr. Villarica back in Manila by the first week of December 1993, work moved fast on the shopping list prepared by the Philnet technical committee. The first order of business was to get the leased lines from the telcos. Philnet would be needing an international private line or IPL to connect from Philnet’s router to the Internet provider selected in the US, Sprint Communications. They would also need leased lines for all the universities involved to connect to Philnet.
By this time, the Philnet project had expanded outside Metro Manila schools to include UP Los Baños in Laguna, St. Louis University in Baguio, Univerity of San Carlos in Cebu and Xavier University in Cagayan de Oro. New points in Metro Manila included DOST-Advanced Science and Technology Institute in UP Diliman and the University of Santo Tomas.
Villarica lined up meetings with five of the top leased line providers.
Invariably they would be asked: “By the way, do you have the money for this?” He always managed to quickly answer: “No, but the project has been approved by the DOST, so the money is on it’s way, don’t worry.”
Eventually the Philippine Long Distance Telephone Co. (PLDT) was selected since it gave the best price. A 64-Kbps IPL for USD$10,000 per month and local leased lines for all the nodes for P130,000 per month.
Villarica recalls that Philnet tried to get special terms from PLDT in light of the academic nature of the project and the DOST backing. But PLDT was in no mood to give Philnet any special discounts, even after meeting with then company president Antonio “Tony Boy” Cojuangco.
Cojuangco also had some inkling about what effect the Internet was going to have on his business.
“This is going to affect the telephone companies,” he told Philnet. But in the end, business was business, and PLDT became the carrier for Philnet.
Also on the shopping list were routers, which would connect the university networks to the leased lines. The technical committee had been recommending Cisco routers for their robustness and Villarica had some meetings with Willy Gan. Gan’s company ComNet was an authorized reseller of Cisco. After a discussion on router models, Philnet settled on the top-of-the-line Cisco 7000 as the main router used to connect to the
IPL, and a Cisco 2501 for each university node. This equipment didn’t come cheap, as the 7000 series was running at $70,000 and each Cisco 2501 went for $30,000.
Selling the project
With all the costs involved in setting up and operating Philnet, Villarica could see the original grant wouldn’t last long. So Philnet had to have a viable business plan, and operate on a cost-recovery model.
Since Philnet was an academic network, the primary clients were universities who were referred to as members. But each educational member involved was going to have pay to participate. There was no such thing as a free lunch. Each Internet connection was going to cost them P30,000 per month.
“That was a hard sell,” Villarica recalls. “They complained: ‘Where are we going to get that kind of money?’ But we told them: ‘If you want to be the first, you’ll have to ante up.’”
Eventually, Philnet gave the schools a grace period of three to four months of free access. After having tasted what the Internet was like, they were off and running.
Educational partners weren’t going to pay all the bills however, and Philnet had to consider providing bandwidth to other groups as well. The first ones considered were international organizations based in the Philippines like the Asian Development Bank (ADB), the International Rice Research Institute (IRRI), and later on, the Asian Institute of Management (AIM). These groups were called “preferred members” and were offered an Internet connection at the rate of $3,000 a month.
Mike Hawkins, a data communications specialist at ADB, was an especially tough sell. Villarica recalls at one of the first meetings that he was worried about Philnet being merely “a network run by amateurs,” referring to the youth and relative inexperience of the Philnet technical committee. It wasn’t until Philnet had finally gone online that Mike changed his tune.
“Mike started to call me up,” he remembers. “Before that it was: ‘Don’t call us, we’ll call you.’ Now it was ‘Count us in.’”
Another significant client was ComNet, the vendor supplying the Cisco routers. Gan, ComNet’s president, himself saw the commercial potential of Internet access and signed up as a preferred member. This would lead to the formation of Mosaic Communications or MosCom, the first full-access commercial Internet service provider in the country.
Villarica never fails to emphasize the importance of the commercial clients.
“Without the preferred members, we could not have lasted even one year. The money would have dried up. But because of that we were able to keep Philnet rolling.”