By Sonia Kaloenikov-Jesso
14 June 2010
SINGAPORE — This island city-state, thanks to its small size and a big public investment, could soon be the first country blanketed with a fiber optic infrastructure so fast that it would enable the contents of a DVD to be downloaded in only a few seconds.
The new network is expected to give a strong boost to the growth of services like online video and Internet telephony. Pyramid Research, which analyzes the telecommunications business, expects the revenue of Singapore telecommunication operators to rise to $5.1 billion by 2014 from $3.8 billion in 2009.
The new network, stimulated by an investment of 1 billion Singapore dollars, or about $700 million, from the government, will help the country leap ahead in an international race to roll out faster broadband speeds, a competition in which several Asian countries are in leading positions.
While policy makers in many places are still debating their high-speed broadband strategies, considering, for example, whether development should be led by the public or private sector, broadband users in some parts of Asia already have access to the next generation of high-speed networks.
Japan and Hong Kong have been leading the way, with private companies already offering speeds as high as one gigabit per second, or 1,000 megabits per second — many times as fast as the 35 megabits per second required for streaming high-definition video. But these networks do not cover every home.
South Korea, one of the world’s most wired places, has also announced plans to complete a new broadband network offering one gigabit per second in all major cities by 2013.
For the development of its network, Singapore is relying on a mixture of public subsidies and private-sector participation and separating three main functions: the building of the infrastructure, the operation of the network and the provision of retail services.
OpenNet, the infrastructure builder is owned by a consortium formed by Axia of Canada and three Singaporean companies — SingTel, Singapore Press Holdings and SP Telecommunications — using existing parts of SingTel’s network. As part of the agreement, SingTel has transferred its 30 percent stake to a separately managed asset company and will reduce its stake within five years.
The infrastructure operator, which received a grant of 750 million Singapore dollars from the government, is required to have the new network operating in Singapore by the end of 2012. So far, it has laid fiber optic connections to about 30 percent of all the buildings; it is aiming for 60 percent coverage by the end of this year.
Khoong Hock Yun, an official in the Infocomm Development Authority of Singapore, said the government had seen an opportunity to introduce a next-generation fixed-line network, as well as to restructure its telecommunications sector.
“If you look at history across many developed countries, after years of liberalizing their telecom sector, the essential part of their fixed-line network is still owned substantially by the incumbent,” he said, referring to former monopoly providers like SingTel. “Those who have the physical infrastructure have a huge competitive advantage, and every service company remains dependent on the incumbent for their fixed line network needs.
“As a result, much of the pace of development, in terms of pricing and services offered, really depends on the investment decision of that incumbent and whether they want to partner with other people to create solutions they may not be prepared to offer at that point in time themselves.”
By separating the infrastructure building from the running of the network, the authority believes it can create a more competitive environment with more effective open access to downstream operators, Mr. Khoong said.
The Singaporean model draws its inspiration from several community broadband networks that can be found at the local level in countries like Britain, France, the Netherlands and Sweden.
“We noticed that in many of these cities that had rolled out their own network and made it open access, they had a huge growth in telecom service providers at the retail level,” Mr. Khoong said. “For small communities you have 20 to 30 retail service providers. This creates real competition.”
Nucleus Connect, which will operate the network, has announced monthly wholesale prices starting at 21 Singapore dollars for speeds of 100 megabits per second for residential connections, and Malcolm Rodrigues, general manager of commercial services at the company, said about 90 companies had expressed interest in providing a retail service. He expects about 12 companies to sign up for the services.
But analysts and market observers doubt whether new competition will really develop within the Singapore context, and whether prices of bandwidth for consumers will go down significantly for consumers as a result. Consumers now pay about 40 Singapore dollars per month for broadband access of six megabits per second, which is relatively high compared with Hong Kong, where some consumers pay about 200 Hong Kong dollars, or about 36 Singapore dollars, a month for service of one gigabit per second.
“I don’t think it’s going to introduce new competition, at least in terms of delivering the basic service,” said Bryan Wang, an analyst at Springboard Research. “It’s a very small market. It’s still going to be the same game between the main three current players — SingTel, StarHub and M1,”
He said retail service providers who were unable to offer the bundling of other services like television, mobile or fixed-line phone services, would have an uphill struggle to offer lower prices.
“There is a very limited room for new players,” Mr. Wang said. “It’s very likely the fixed broadband business will only attract those customers that need the bandwidth. A lot of consumers don’t need one Gbps, especially when you’re getting cheaper wireless broadband access.”