Economic Stability
The current economic and political turmoil in the world has not escaped the Philippines. The world financial markets are already suffering from correction and the bubble-economy of the dot.com days when the Sept. 11, 2001 bombing of the World Trade Center happened. This act of terrorism added to the decline of the world economy.

The Philippines is also suffering from political turmoil. President Gloria Macapagal-Arroyo (GMA) unseated former President Joseph Estrada in a peaceful revolution in January 2001. Although constantly bombarded by criticisms from different political sectors, GMA has succeeded in changing the way businessmen look at the government. Various business groups have shown their support for the economic policies that the current administration has implemented.

Despite the crisis, the Philippines posted a 3.3% GDP (gross domestic product) growth and expects this to grow to 4-4.5% for 2002. This shows that the Philippine economy is resilient in the midst of global economic slowdown, spurred primarily by the agriculture and services sector where there is capacity for growth.

PC penetration is still low
There is only a low percentage of PC penetration in the country, even in urban areas like Metro Manila and Cebu. Industry estimates from chip makers and computer vendors place an approximate PC penetration level of about 8% of total households. PCs are still considered a luxury, although it is increasingly becoming a necessity.


Cost of Internet access
Compared to other countries, the cost of Internet access is expensive. In the US., unlimited Internet access will cost less than US$20, and there are free Internet access available. In the Philippines, US$20 (roughly PHP 1,200) is the price for a 50 hour Internet account from a good, reliable dial-up ISP.

Although high-speed alternatives like DSL and cable Internet are now available, the actual end-user experience is not satisfactory. Complaints on speed and reliability have hounded high-speed Internet providers like PLDT's myDSL and Destiny Cable.

Prices are dropping as more ISPs fight for a share of a relatively small market. Price-based competition could eventually drive some ISPs out of business, most vulnerable to this would be those that have failed to build customer loyalty or establish a particular market niche. However, unless the cost of international leased line drops or TELCOs are forced to lower their costs to ISPs, prices are expected to remain high. ISP pricing in the Philippines remain steady, although some ISPs are charging corporate customers in US dollars in an effort to ease the effects of the devalued peso.

The biggest stumbling block in the use of the Internet is affordability. Only a few can afford to own personal computers with internet access and pay the monthly fees to take advantage of the internet. Many users still find difficult to differentiate the services being offered by ISPs. So many opt for the cheapest available rate. Plus the service required are mainly email and internet access (surfing) which all ISPs offer.

Speed of Internet access
Due to the entry of telephone companies (Telco) into the Internet market, most ISPs are limited to providing dial-up services. Telco-ISPs provide other ISPs access to their dial-up (PSTN - public switch telephone network) services, but limits access to high-speed alternatives like ISDN (Integrated Services Digital Network) and DSL (Digital Subscriber Line) - they keep these services mostly to themselves.

Security
Network Security is a big problem for ISPs. It is becoming a more serious concerns, now that more people are using the Internet for business. It is noted that some 15% of external corporate e-mail contain confidential material. Internet account hacking have been reported as early as late 1998, when account names and passwords of legitimate subscribers were circulated through chat rooms, websites and email.