Singapore’s NGNBN to act as catalyst for RSP market

By NG Choe Kee, Associate Director, KPMG Corporate Finance, Singapore Singapore’s Next Generation National Broadband Network (NGNBN) is firmly on track to be completed by 2012 and is expected to offer a strong impetus to the growth of the retail services market in Singapore.

The details of NGNBN were discussed in the panel discussion on the topic of National Broadband Networks: Next Generation Investment Opportunities at the TMT Finance & Investment Asia Conference, Singapore. The panel, facilitated by Sharad Somani, Executive Director of KPMG included the three major stakeholders in the NGNBN project in Singapore – Mr Khoong Hock Yun, Assistant CE of IDA; Ms Tan Kah Rhu, CEO of OpenNet, the passive infrastructure company of NGNBN and Mr David Storrie, CEO of Nucleus Connect, the active electronics operating company of NGNBN.

In June 2006, the Singapore Government announced a 10-year Intelligent Nation 2015 (iN2015) Masterplan aimed at harnessing the massive potential of infocomm. One of the key strategic thrust is the implementation of the wired component of a nationwide national infocomm infrastructure.

The panel described the evolution of the project based on an intensive industry dialogue exercise conducted by IDA. The key objectives to be achieved by the NGNBN project in Singapore included nationwide infrastructure coverage, competitive and affordable broadband prices, high level of adoption and a vibrant infocomm industry. A three (3) tier broadband industry value chain comprising the passive infrastructure company, the active electronics operating company and retail service providers (RSPs) crystallized.

The passive infrastructure company (NetCo) responsible for deployment of fibre connections to 95% homes and commercial buildings by 2012 was awarded to OpenNet in September 2008 whereas the active electronics operating company (OpCo) responsible for lighting up the fibre and provide bandwidth services to RSPs was awarded to Nucleus Connect in April 2009. The Singapore Government is providing an aggregate grant of up to S$1 billion (~ US$ 750 million) to the awarded NetCo and OpCo.

Core to OpenNet and Nucleus Connect’s business model is that service offerings would be offered to qualified licensees on a non-discriminatory basis (be it price or terms and conditions of service offerings) through interconnection offers. According to IDA’s Assistant CE, Mr Khoong Hock Yun, this is central to IDA’s requirements for the NGNBN tender which is structured to ensure open access. In this respect, NetCo must make its fibre network available not only the Nucleus Connect but also any other qualified licensees or OpCos that wish to compete in the market. Similarly, Nucleus Connect will make available its services to all RSPs on the same terms. This is expected to provide in particular, niche RSPs, a more level playing field when competing with vertically integrated incumbents and encourage innovation, thereby creating a vibrant infocomm space.

When asked during the panel discussion, OpenNet CEO, Ms Tan Kah Rhu commented that the fibre network deployment is on track to meet the 95% network coverage by 2012. Nucleus Connect CEO, David Storrie remarked that Nucleus Connect would commence service offering by 2010 and thus far, have had more than 40 RSPs indicating interest. Many of these RSPs are focused on the video services market segment.

One notable success arising from the NGNBN tender process was the price level at which services would be offered by both OpenNet and Nucleus Connect. In the residential space, an OpCo only needs to pay OpenNet S$15 per month per connection to each home, whereas an RSP only needs to pay Nucleus Connect S$21 per month per 100Mbps best effort bandwidth

services (which has already taken into account OpenNet’s charges). The eventual retail prices would depend on the quantum that internet service providers would load on top of Nucleus Connect’s charges. However, home users can expect fixed broadband access charges to drop significantly on this development. Current retail 100Mbps fixed broadband access services are priced between S$118 and S$124 per month (before any promotional discounts).

Mr. Khoong further highlighted the importance of structural separation for NetCo and operational separation for OpCo in ensuring a competitive and vibrant RSP market. Both IDA and Nucleus Connect are undertaking various initiatives to attract retail services providers to ride on this ultra-high speed fibre network reaching 95% of homes and commercial buildings over the next 3 years. The panel concluded that the Singapore NGNBN has a lot of key lessons for other countries although each country needs to evolve its own unique solution to address the geographical, population and industry challenges.



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