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Face-off

Does Singapore need a fourth telco? No

I have not changed my cellphone provider since I became a subscriber nearly 20 years ago. The three mobile phone operators, M1, StarHub and Singtel, had almost the same products. There was no incentive to switch.

Recently, the Infocomm Development Authority (IDA) unveiled a framework for a new mobile phone operator to enter the market. Which brings me to the question: Will I ditch my current operator and switch to the new entrant?

No, I do not think so.

Does Singapore need a fourth telco?

I think not.

 

The incumbents are already moving out of their comfort zone to develop new products and services.

But first, let's look at prices. I do look forward to competition, for it will certainly lead to lower prices. But in the long term I am not so sure that adding a fourth telco will make things better for the consumer.

Let me explain. The first priority of a new entrant is to grab market share. New offerings at lower prices for more capacity would certainly be attractive. As customers, we would get more bang for the buck. I could pay less for making phone calls and for streaming iTunes movies to my iPad.

But I am uncertain that low prices are sustainable. A price slugfest needs deep pockets. The incumbents, especially Singtel, which has a large war chest, would retaliate.

The new entrant, already out of pocket by a few hundred million dollars because it has to roll out a mobile network infrastructure, might need to subsidise prices.

Could it last out the fight?

A fight would also have a negative impact on the incumbents, which are listed companies. Less revenue means lower profits, which means lower dividend payouts. Shareholders - I do not own any local telco shares - would feel the pinch.

If prices fall first, then rise again, I could end up having to swop from my current operator to a new one, and back again, when the new entrant has to reprice higher to cut losses.

What would be the point of that, except to add inconvenience to my life?

In other words, adding a fourth telco, in itself, does not guarantee a more competitive or efficient telco market. Nor does it guarantee that I will benefit as a consumer.

It is not the entry of a fourth telco per se that could shake up the market. It is the entry of new product innovations. And that is what would get me to switch operators - if one offers a better plan that meets my needs.

The incumbents have not been sitting still.

Recently, StarHub rolled out a new family product service called HomeHub Go, which gives loyal clients who sign up for bundles of pay-TV, fibre broadband and home phone services a better deal for mobile services.

These customers will get more mobile data when they sign up for a phone subscription - a generous 7GB of data on the go with a $60-a-month mobile line.

M1's new offering is even better. It addresses the data roaming challenge faced by many people.

To avoid high roaming fees, M1 users can sign up for its Data Passport add-on service for only $10 more a month. Singapore-based executives and holidaymakers travelling to Indonesia, Japan, Malaysia, Saudi Arabia, Sri Lanka or the United States can log on to the assigned local networks and use their phones as if they are in Singapore.

Did the threat of a new market entrant lead the incumbents to unveil such products? Maybe.

But such services create a "stickier" relationship between customer and provider. It makes moving to a new player more difficult.

Whether or not a fourth telco does come in, I am optimistic that, over the next two years, the incumbents will unveil more and better services.

Even without a fourth telco, there has been sufficient competition for them to keep up with network improvements.

Singtel, the dominant mobile operator here, will be rolling out Wi-Fi-based plans to offload some of the congestion on its mobile network.

StarHub announced plans a couple of months ago to upgrade its network to better manage exploding levels of data growth. Over the next two years, it will upgrade its core and access networks with software-defined networking (SDN) technology.

This technology can transform the way the incumbent operators do business. Marketers, for example, will have greater flexibility to make pricing changes on the fly in response to market movements.

Previously, such adjustments had to be made days in advance by network engineers.

As a consumer, what matters most to me are being able to change my phone frequently and being able to manage my data usage.

I change my phone every year. Each time, I incur a penalty charge for not completing the two-year contract. I would like to see a service where there is no penalty and where the phone is not part of the voice-data plan. Today, prices are still very high if I decouple the phone from the voice-data plan.

I would also like a self-service app where I can pay as I go after my data plan is fully used up. All the content I consume today is digital - be it magazines, books, newspapers, movies or music. I worry that I could bust my data limit, incurring hefty extra charges. A self-service app would let me add more data capacity on the fly.

But these are product and business innovations that any of the existing three telcos could offer.

You don't need to wait for a fourth telco to enter the market to offer innovations.

A version of this article appeared in the print edition of The Straits Times on July 17, 2015, with the headline 'No'. Print Edition | Subscribe