September 2005

Costly business broadband holds Singapore back

    

  

 
Increasingly, Singaporeans have broadband at home. That it costs in the region of $40 - $50 a month is now common knowledge.

Although people have broadband at the office too, they do not pay for the service personally, and so there is nowhere near the same degree of awareness that business broadband costs a whole lot more than home connections. When I mention the rates that Singtel charges for business broadband, most of my friends reel in shock.

 
The relatively high monthly fees of broadband in Singapore is not something new. There has been considerable grumbling over the years that Singapore is costlier for internet service than many other countries, and, as you can see from the Straits Times article on the right, this has had the effect of slowing internet penetration in Singapore. Nor is the price gap between home and business broadband a new phenomenon. It's been so since broadband began, but there has been much less awareness of this issue.

Yet Singapore wants everyone and every business to leverage the benefits of the internet. We want to be at the leading edge of techno-enterprise.

To see if our much higher fees for business broadband is typical of other countries, I did a bit of surfing. To aid comparison, I focussed on service packages for small business, and in each case, noted the   cheapest end and the most expensive end of the range of plans offered. I also focussed only on price plans based on ADSL connections. Many other countries' telcos also offered wireless broadband, but as the article on the left pointed out, Singapore is only now beginning to issue licences to service providers for this.

 
Singapore

First, let's take a look at Singtel's rates. From their website, DSL dynamic IP type service:

  Type Limiting condition S$/month
U1 Unlimited Download speed 512 kbps 378.00
U2 Unlimited Download speed 1.5 Mbps 840.00
V1 Volume-based 2 GB a month 105.00
V2 Volume-based 5 GB a month 210.00
T1 Time-based 25 hours a month 62.95
T2 Time-based 180 hours a month 126.00

Note: the notations U1 to T2 are Yawning Bread's, not Singtel's,
to aid referencing from other paragraphs of this article.

Starhub is another major internet service provider in Singapore. I surfed Starhub's website too but I couldn't find any webpage listing their packages and prices. All I could see was a request to email them for a quote. This doesn't sound good. It looks like they have something to hide!

 
Australia

Singtel has a subsidiary in Australia which they acquired a few years ago. It's called Optus. And what are its rates?

Its cheapest rate for business broadband is A$24.95 (S$32.28) a month. That's very cheap, but it is extremely limited, allowing only 200 MB download a month, which is probably not satisfactory to most users.

At the top end, Optus' plan is based on a download speed of 512 kbps, with unlimited usage. This is equivalent to Singtel's U1 (see table above). Optus charges A$94.95 (S$122.86) a month for this. Singtel charges S$378 for the same.

Optus is not the leading telecommunications provider in Australia. Telstra is. The rate for its cheapest plan for "small and home business" is $29.95 (S$38.75). However, this only gives you 200 MB usage a month, like Optus' cheapest offer, with download speed of only 256 kbps. 

Telstra's unlimited-usage plan for small and home business with top download speed of 1.5 Mbps costs A$99.95 (S$129.33) a month. For the same technical specs, Singtel charges $840 a month.

 
Britain

British Telecom has the friendliest website. Finding its plans and rates was a breeze compared to most other telecom websites which tend to confuse the reader and hide their rates.

For a small and home business with a single internet user, BT's cheapest plan is technically more generous than Telstra's or Optus'. It gives the user "up to" 2 Mbps download speed, and a usage of 2 GB a month. It costs £21.99 (S$67.84). This is equivalent to Singtel's V1, which costs S$105 per month.

If the single-user business is prepared to pay a bit more, at £29.99 (S$92.52), he will get unlimited usage at a speed of "up to" 2 Mbps. This is better than Singtel's U2, which costs $840 a month.

For a small British business with multiple users, the rates are higher, but still compare favourably with Singtel's.

Unlimited usage by 2-4 users, with download speed "up to 2 Mbps" costs £45.00 (S$138.83). Unlimited usage by 5-20 users, with similar download speed specifications costs £65.00 (S$200.53). Both these arrangements are still far cheaper than Singtel's U2 which costs $840.00 a month. Singtel's website did not specify how many users are allowed.

 
Hong Kong

Singapore is often compared to Hong Kong. Unfortunately, I couldn't find any advertised plans and rates on PCCW's website. PCCW, which bought over HK Telecom a few years ago is the territory's leading telecommunications provider. Like Singapore's Starhub, PCCW simply asks people to email them for a quote.

 
Korea

Korea has been amazing in its adoption of broadband by home users, with many observers attributing it to the competitive rates offered.

What are the rates like for small business?

Not only is it very competitive too, it is also simple to understand. Korea Telecom offers only 2 plans: MegaPass Lite and MegaPass Premium.

Under MegaPass Lite, the business customer gets unlimited usage at a super speed of 4 Mbps. Based on a 2-year contract (other durations are possible), the cost is KRW27,000  (S$44.12) a month, cheaper than many home broadband plans in Singapore!  Technically, MegaPass Lite is superior to Singtel's top plan which costs $840 a month.

Then it gets even better. MegaPass Premium, which offers unlimited usage at a speed of 13 Mbps costs KRW36,000 (S$58.82) a month. 

 
One argument that I have come across before as to why internet connection rates are relatively high in Singapore is that most content is hosted in far away places, mainly the US. As a result, our internet traffic tends to use long undersea cables, which are naturally costly. This may be a valid point if we compared our rates with US or Canadian rates, but what if we compared ours with Malaysia, our next-door neighbour, and New Zealand, a country with a similar population and similarly far away from the US and Europe?

 
Malaysia

Telekom Malaysia's cheapest plan for small business is based on a 512kbps download speed, with a usage limit of 60 hours a month. It costs RM44 (S$19.59) monthly. Singtel's smallest package, at an even stingier 25 hours' usage a month, costs more than 3 times more, at S$62.95.

Telekom Malaysia has 2 unlimited-usage ADSL plans for SOHO (small office, home office). If the customer wants a download speed of 1Mbps, the cost is RM418 (S$186.08) a month. If the customer wants a download speed of 2 Mbps, the cost is RM1118 (S$497.69). The latter is equivalent to Singtel's U2, which costs S$840.

 
New Zealand

Telecom New Zealand's cheapest plan for small business is based on 1 GB usage per month, at a download speed of 256 kbps. It costs NZ$59.95 (S$70.94). Singtel's nearest equivalent is its V1 plan, which allows twice as much download, 2 GB a month, for S$105.

Telecom New Zealand's top plan gives 15 GB usage at a download speed of 2 Mbps. This costs NZ$299.95 (S$355.62) a month. Singtel doesn't have anything with similar specs, but Singtel's top plan costs S$840.

* * * * *

One thing is clear from the above survey. Although technical specs vary somewhat, generally speaking, none of the other countries surveyed were as costly as Singtel's rates. Why this is so, I can't really answer as this industry is not my area of expertise.

While traffic patterns (long undersea cables to the US, etc, not much domestic hosting of internet content) may explain the big differences between our rates that those of Australia, Korea and UK with their larger domestic markets, they do not fully explain why Malaysia and New Zealand are still cheaper than Singapore.

Immediately, we turn our minds to the competitive landscape locally. It has been suggested that Singtel's near monopoly of the copper cables that reach into almost every home and office means no competitor can truly undercut them, since all others except Starhub must lease bandwidth from Singtel.

Starhub has a good reach to many homes from the days when they tried to connect as many as possible to their cable TV network, but their coverage remains incomplete. Certainly, it does not reach all downtown office buildings. Hence, Starhub is not well-positioned to give Singtel a good fight. 

And why should they? A duopoly is quite comfortable.

What has our regulator, the Infocomm Development Authority (IDA), been doing? Generally, they seem to be very conservative. Even now, we still do not have a simple number-portability arrangement for mobile phones. Each time we switch from one mobile telephony provider to another, we suffer the inconvenience of having to change our phone numbers unless we pay without end for a re-directing service. The difficulty in switching telephony provider means that competition is imperfect.

Likewise in internet broadband, IDA could perhaps have been more aggressive about promoting competition too, but if they did that, the profitability of Singtel would be at risk. Singtel is majority government-owned, and is headed by the younger brother of the Prime Minister. What role these factors play in motivating or demotivating the IDA is anyone's guess.

In a way, this is a common thread through many issues in Singapore, where the concern seems more to protect the profitability of the existing players in the market, be they Singapore Press Holdings, with nearly 100% market share of daily newspapers, or Comfort Delgro, the bus and taxi company with over 75% market share in both areas, than to open up to real competition.

You could also remark that very often the privileged companies are government-linked companies that provide cushy sinecures for former PAP politicians.

This may be too extreme a reading. There may be no intention to over-protect these companies or the ministers' friends and relatives  who run them, but the civil servants who staff the regulatory watchdogs may simply be doing what civil servants the world over tend to do: watch their backs and be deferential to anyone connected to their political masters' inner circle.

Whatever the reasons for the much higher business broadband rates in Singapore, the sorry results cannot be denied. For a compact city that is digital-savvy, and that is generally conversant in English, the language of most content on the internet, we're not particularly heavy users of this medium for business and we're certainly not particularly creative about it. You hardly see Singapore merchants putting up an online storefront, for example. 

Never mind potentially cutting-edge uses, even for the mundane tasks of communication and research, does this pricing pattern for broadband raise the cost of doing business in Singapore? Does it handicap our small businesses by burdening them with costs higher than so many countries in the world?

For a place that likes to boast how rational we are in our economic decisions, how ruthlessly efficient we are in meeting challenges springing from economic and technological change, this stark problem of business broadband costs stands as a serious indictment.

© Yawning Bread 

 

5 July 2005
Straits Times

Singapore slips in broadband stakes
by Alfred Siew

(second half of published article)

Singapore has one of the world's first nationwide broadband networks with cyber highways to almost every block of flats. Yet, almost 10 years after broadband arrived, fewer than half of all homes have taken to it. Most say it costs too much, and are sticking with dial-up services, which cost under $10 a month.

The unenthusiastic response is threatening Singapore's ambitions to be a digital exchange that will attract global companies which store and distribute computer games, movies and other digital goods to the region. Industry sources worry that, with just 46.6 per cent of homes on broadband, Singapore may end up a fringe player, losing out to South Korea, Hong Kong or China.

There is much at stake. Singapore hopes to bring in revenues of $500 million by next year and wants a slice of the Asian online games pie estimated to be worth US$1.84 billion (S$3.12 billion) by 2008. 

Singapore has already distributed digital movies such as Day After Tomorrow and hosted the El Kardian online game - important steps to staying in the competition. But it has not brought in the top games. The hottest title now, World of Warcraft, is run from computer servers in the United States, China and South Korea. 

When a game is run from servers here, investment dollars roll in, with Internet companies getting paid to provide the computer servers and data connectivity. 

More traffic means more money for a digital exchange - in the same way a busy airport or sea port rakes in revenue. 

What Singapore needs, say industry insiders, is a big game title to attract more content providers. What it lacks are online gamers, music lovers and movie buffs. Said a source familiar with government projects: 'Why set up a computer server in Singapore to distribute your game, when you can put it in China to reach the millions of gamers there?' 

Indeed, Singapore's 550,000 broadband subscribers are a drop in the ocean compared to more than 21 million in China. 

What Singapore has going for it, however, is excellent Net connectivity to countries in the region. It can also make up for its small size if better-off Singaporeans spend more online, by subscribing to more games services each month. 

Mr Manoj Menon, a partner at research firm Frost & Sullivan, said Singapore has fallen behind in terms of competitive pricing for Internet services and having more of its people on broadband. 

In South Korea, more than 70 per cent of homes are on broadband and they pay about 25,500 won (S$40.80) a month. In Hong Kong, where the penetration rate is 66 per cent, services cost about HK$148 (S$32). In Singapore, broadband services are not only slower but also cost more at $47.25 a month from SingTel, and $58.80 for StarHub. 

What happened to Singapore's early start? Industry watchers point to giant SingTel and say that by controlling most of the telecoms infrastructure, it has pegged back its rivals. Pacific Internet, for example, has to lease SingTel's network equipment to offer a broadband service. Said PacNet CEO Tan Tong Hai: 'Every dollar that we earn, we give a good chunk of it to SingTel. How do you make money like this?' 

There is an urgency to drive down prices now. The telecoms regulator, the Infocomm Development Authority of Singapore (IDA), opened the market two months ago to wireless broadband technologies billed as low-cost alternatives to SingTel's network. They let PacNet and other challengers set up their own networks, without having to dig up roads and lay cables to reach home users. This means potentially cheaper broadband offerings. 

The telecoms regulator wants more players because it fears Singapore may slide down the Internet hierarchy. With China as a low-cost manufacturer and India gobbling up outsourced software projects, the pressure is on Singapore firms to stay ahead. 

The unhappy statistic cited when experts talk about the threat to Singapore's competitiveness is the slow take-up of broadband services. A recent survey by the World Economic Forum ranked Singapore No. 1 overall for infocomm development, but only No. 11 for broadband usage. Korea was first and Hong Kong, second. 

Observers say Singapore's broadband woes are a timely wake-up call at a time when the digital gap is narrowing. Mr Derrick Lee, a director at a wireless service provider Bluengine, said: 'When I went to China three years ago, I was surprised to see a broadband service in the hotel that offered double the speed back home. We really need to keep in touch with the competition.' 

Malaysia has been catching up, he noted. It offers wireless broadband services and 'they are on par or even ahead of us'. The bottom line, he said, was this: 'If Singapore has more expensive broadband services, fewer users and older technology, why would people base their Internet operations here?'

 

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