Face-off

Does Singapore need a fourth telco? Yes

Prices for fixed broadband access have more than halved over the past five years, but mobile broadband prices have gone in the opposite direction.

The anomaly is due to one factor: competition, or the lack thereof.

Since September 2010, the number of major fixed broadband suppliers went from three to six. New fibre broadband entrants ViewQwest, MyRepublic and SuperInternet have come up with innovative offerings, forcing dominant players Singtel, StarHub and M1 to counterstrike - benefiting consumers in the process.

The opposite is true in the mobile sector. In the last 15 years, there has not been a worthy competitor to the three mobile operators Singtel, StarHub and M1. The high cost of mobile infrastructure setup was a huge deterrent.

 

So, when the sector regulator, the Infocomm Development Authority (IDA), said it wants to rejuvenate the local market, it went straight for its wallet. Last Tuesday, IDA disclosed plans to dangle hefty discounts - the biggest ever - on radio frequency spectrum to woo a fourth telco to set up here.

It is gathering views on its proposal to let a potential fourth telco bid for about 60MHz worth of frequency bands at a reserve price of $40 million. This is 60 per cent lower than the normal reserve price of $100 million.


A fourth telco will shake up the mobile broadband sector, just as new fixed broadband entrants' innovative offerings had forced the big players to respond, benefiting consumers in the process. ST PHOTO: KUA CHEE SIONG

If all goes well, Singapore will be looking at its fourth telco with nationwide coverage by the end of September 2018, as required by the authority.

Does Singapore need a fourth telco? Yes.

Does it need one badly enough to warrant IDA lowering its reserve price to encourage a new entrant? I would say: Yes.

First, competition will benefit consumers. The mobile market has settled into three big camps. Singtel, StarHub and M1 each serves about one-third of the market.

They behave like a cartel: When one raises its price, the rest follows.

Last August, Singtel raised monthly mobile subscription fees by $3 to $42.90. A month later in September, M1 and StarHub followed suit, raising fees by $2 and $5, respectively, to $41 and $42.90.

In September 2013, Singtel ended its promotional rate of $5.35 for every 1GB of excess mobile data used. Four months later, in January last year, StarHub and M1 followed suit, doubling their rates for those who exceed their data bundle. And from September 2012, all three telcos put an end to generous 12GB mobile data bundles.

Telcos cited rising investments in new mobile networks as a key factor driving up prices. Consumers complained about the lack of real options, and about the way the telcos appeared to be acting in concert.

Another problem with the mobile market now is that it is saturated.

Content with their one-third share, the telcos are settling down to chase profits and protect their margins. They appear no longer invested in offering consumers better deals to gain market share. The result: rather uniform pricing plans.

A new fourth telco can shake things up, the same way StarHub's entry as the third mobile telco shook up the market in 2000.

To gain market share then, StarHub unrolled aggressive pricing plans.

It offered free incoming calls, allowed unused airtime to be rolled over, and offered per second, not per minute, billing. This forced the two incumbents to offer similarly attractive plans, benefiting consumers.

Another case study of the benefits of competition is from the fixed broadband market here. New fibre broadband entrants created new norms.

With the rollout of virtual private network services, Internet users here can now stream movies easily from overseas content providers such as Netflix and Hulu Plus that they had no access to previously.

For as little as $39 a month, users surf the Web at a speed of up to 1Gbps - unheard of in 2009 when a 100Mbps plan that is 10 times slower cost at least $70 a month.

A fourth mobile telco today can fill service gaps that are already glaringly obvious today.

For example, it would benefit consumers to let them roll over their unused mobile data from month to month.

Or let them convert SMS and voice credits, which tend to be underutilised these days, into mobile data credits.

WhatsApp's new voice-call feature has now made it possible to replace traditional voice calls with Internet calls over the cellphone. Consumers are readily switching over as they no longer need to incur overseas call charges.

None of the three telcos now offer these choices. Existing telcos with vested interests would not want to cannibalise their earnings from voice and SMS services.

In any case, the authorities do not think the market is too saturated to support a fourth telco.

Communications and Information Minister Yaacob Ibrahim reiterated in Parliament in May: "We believe there is space for a fourth telco. We don't just want another telco. We want a telco that can bring innovation to the market, and therefore cause the existing telcos to also innovate."

Given the strong incumbent inertia in the telco market, IDA's intervention is crucial.

The Straits Times understands that the telcos are lobbying against IDA's regulatory intervention, citing the lack of a market failure.

But for consumers' long-term benefit, the entry of a new player will be a clear public good. IDA must thus stand resolute against the telcos' lobbying and act in the best interests of consumers.

A version of this article appeared in the print edition of The Straits Times on July 17, 2015, with the headline 'Yes Does Singapore need a fourth telco?'. Print Edition | Subscribe