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Monopoly Practices Taint Singapore's NBN

Singapore's regulator, the Infocomm Development Authority of Singapore (IDA) , has chastised OpenNet Pte Ltd. , which runs the island state's core Next Generation National Broadband Network (NGNBN), for its high prices, slow service and excess charges, criticisms usually leveled at state-owned monopoly telcos.

That the IDA has had to step in will be a painful disappointment for Singapore's authorities: The country believed it had the right model to efficiently deliver ubiquitous high-speed broadband services to the whole country within a matter of years as part of its aim to be a regional digital hub. (See Singapore Unveils Digital Hub Vision.)

So what went wrong?

In September 2008, OpenNet, in which incumbent operator Singapore Telecommunications Ltd. (SingTel) (OTC: SGTJY) holds a 30 percent stake, won the tender to become the sole "NetCo" that would run Singapore's new passive infrastructure to support island-wide fiber access broadband and benefited from a S$750 million (US$597 million) government grant. (See OpenNet Scores Singapore Deal.)

But progress has not been as smooth as envisaged and following a three-month review, the IDA has told OpenNet it must cancel some of its fees and raise its service quota.

Essentially, OpenNet's performance has failed to live up to expectations, with the company attracting a storm of complaints from retail service providers and consumers since it began connecting customers 18 months ago.

It has been criticized for “significant provisioning delays” and extracting fees from customers for patching connections and missed appointments, the IDA reported.

Not a monopoly issue?
The regulator says OpenNet's problems are purely "operational," and are nothing to do with its monopoly control of the network infrastructure.

However, OpenNet does not have a direct competitor. Under the regime established in 2009, Singapore set up a unique three-tiered structure, with a NetCo running the underlying passive network, a single OpCo running a wholesale services business -- currently StarHub -owned Nucleus Connect Pte Ltd. -- and retail service providers selling to consumers and enterprises. (See Nucleus Connect Launches.)

Critics at the time said the structure was created as a means of guaranteeing roles for the two main telcos, both of which are ultimately controlled by the government through its investment arm, Temasek Holdings Pte. Ltd.

In an email to Light Reading, IDA said the tiered structure would "ensure a vibrant, competitive" environment, citing the 40 fiber broadband plans offered by a dozen ISPs as proof of that (at least in the retail service tier).

But the industry is wary. "I'm not sure about this structure, or how it seems to be actually working in practice," said Simon George Smith of the Asia Pacific Carriers' Coalition (APCC). He believes it could work "if you had a completely independent passive layer, like OpenNet should be, in competition."

Jeannie Ong, head of investor relations and corporate communications at StarHub, said the firm had "some reservations" about SingTel's role as OpenNet's key sub-contractor and in providing key facilities like trenches and ducts to OpenNet.

Missed targets
The biggest issue, though, appears to be the level of service for business customers.

Enterprise customers have faced "long delays in service activations and difficulties in getting specific dates from OpenNet," stated the IDA. In the first 10 months of 2011, OpenNet failed to meet 70 percent of its service activation targets for non-residential customers.

Smith, whose organization represents international wholesalers and managed services providers, said OpenNet's mandate was consumer-centric. The new carrier was "very much focused on the consumer market [and] the whole issue about 1 Gbit/s to every home."

He said the new fiber network is primarily of interest to enterprise-focused carriers for backhaul, but service provision for that type of customer is even slower than for consumers.

StarHub's Ong pointed out that even SingTel does not use OpenNet to serve its customers for the non-residential segment, "where many operational issues remain largely unresolved."

She added: "Perhaps the 'key sub-contractor' is not able to pay sufficient attention to resolve these issues. ... It might be helpful if OpenNet could appoint other sub-contractors to ease the situation."

SingTel declined to comment on OpenNet or the IDA review.

OpenNet acknowledged it was undergoing "growing pains," but said it was connecting around 10,000 new customers a month.

Daniel Ho, OpenNet's director, business development and communications, said the operator was still examining the results of the IDA review.

For more on Singapore's NBN:

— Robert Clark, freelance editor, special to Light Reading

digits 12/5/2012 | 5:39:29 PM
re: Monopoly Practices Taint Singapore's NBN

I have long had high hopes for Singapore's model but OpenNet's shenanigans are making me question the validity.


Maybe the introduction of a second NetCo (and, for that matter, a second OpCo) might help avoid such issues (though duopolies hardly have positive reviews...)  

fgoldstein 12/5/2012 | 5:39:27 PM
re: Monopoly Practices Taint Singapore's NBN

Ray,


It has to be treated as a utility.  It's a monopoly, and it should be given a fair rate on return, but it also needs to be disciplined by regulators.  So if it fails to meet objectives, for instance, it should not be guaranteed its full rate of return.  Some states hae imposed Performance Assurance Plans on ILECs, for instance, to give them an incentive to meet installation and repair deadlines.


Part of the LoopCo model is to concentrate regulation at this bottom layer so that higher layers need less regulation.  It all falls apart if the facilities provider doesn't live up to standards and the regulator doesn't hold their feet to the fire.

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