With the advent of mobile telecommunication advancements and the projected surge in mobile data demand and consumption,¹ Singapore’s telecommunications regulatory body, the Info-Communications Development Authority of Singapore (‘‘IDA’’) has acknowledged the need to review the allocation of spectrum in Singapore in order to ensure the optimal use of scarce spectrum resources.

Therefore, the IDA recently released a public consultation paper² to seek feedback from industry players and members of the public on proposals to optimize the use of radio spectrum and more importantly, to introduce further competition in the mobile market.

In line with the IDA’s vision to establish Singapore as a ‘‘Smart Nation’’ supported by high-speed fixed and wireless network infrastructure, IDA’s longer term vision is the creation of a Heterogenous Network (‘‘Het- Net’’) to enable seamless connectivity for end users. To facilitate this, the consultation paper more specifically seeks feedback on the suitability, timeframes, and technical issues concerning the re-allocation of various spectrum bands,³ including substantial frequency spectrum that will be made available in the next few years.

In addition, the consultation paper seeks feedback on enhancing mobile competition and service innovation in Singapore. At present, SingTel, M1, and Starhub are the only three operators in a highly saturated oligopolistic mobile network operator (MNO) market. Each MNO possesses a sizeable share of the market, with SingTel the market leader with about 45% market share.

As for mobile virtual network operators (MVNOs), who do not own any spectrum infrastructure and instead buy airtime in bulk from incumbent MNOs to sell repackaged services, there are presently about 13 small MVNOs that each serve niche markets, adding up to a very small proportion of less than 1% of the mobile market.

Despite the saturation of the mobile market however, public sentiment is that mobile competition has been decreasing in recent years. For example, when market leader SingTel announced it would be reducing data bundles from 12GB to as low as 2GB in 2012 — M1 and Starhub swiftly followed suit. The same recently occurred again with all three telcos announcing they would begin charging for 4G services.

Consumers may question why prices have not substantially decreased, even though telecommunications technology has advanced exponentially in recent years. Admittedly, this is a complicated question. However, from the consumers’ perspective, the answer becomes simple — Telcos see potential competition from a converging industry and internet-based services like voice over internet protocol (VOIP) and over-the-top (OTT) services. Telcos need to look for new revenue streams.

With mobile communications applications such as Skype, Viber, Whatsapp and Snapchat ever increasing in popularity, the truth is that the use of traditional telephone and messaging services are decreasing, and MNOs risk being disintermediated.

In response, there have been calls by telecom operators for regulators to allow them to detect and charge OTT players such as Whatsapp for using their networks.⁴

Although this would help operators overcome a huge challenge by monetizing the increasing demand for data services, it remains to be seen whether this would be allowed by regulators in Singapore.

The Info-Communications Development Authority of Singapore believes that facilitating greater competition in the saturated mobile market would result in benefits for consumers. Nonetheless, IDA believes that facilitating greater competition in the saturated mobile market would result in benefits for consumers, and is interested in facilitating more MNOs and MVNOs to set-up up shop in Singapore.

In relation to MNOs, IDA is seeking views on the interest and viability for a new MNO to enter the market, and whether the market environment or technology developments have changed favourably since the 2013 4G spectrum auction. In that spectrum auction, IDA set aside 2 x 20MHz of spectrum in the 2.5GHz band at the reserve price for any new entrant that wished to deploy a 4G network in Singapore. However, no new entrant stepped forward to express interest, furthering the view that the mobile market is currently saturated with significant barriers to deny entrance for new MNOs. This is largely because the existing players enjoy the significant advantage of incumbency, especially with the way consumer mobile contracts are structured in Singapore, with lock-in contractual periods of up to ten years or more.

As of the date of writing, it is believed that the MNO market is unlikely to have changed. Barriers to entry remain high for any new entrants, with market penetration already at more than 150%, and the existing challenges faced as discussed. In any event, the addition of any MNO will not change the oligopolistic nature of the MNO market. What consumers additionally need is increased competition in and amongst the MNOs themselves, and not the addition of another single MNO, especially if such an MNO is unlikely to offer anything different from the existing players.

As for MVNOS, IDA is seeking views on business and financial models preferred by mobile operators, potential levels of interest of MVNOs to enter the mobile market and the target market segments of such MVNOs. It also seeks views on the depth of MVNO deployment envisaged (in particular the viability of a ‘‘Heavy/Full’’ MVNO model versus other models), and possible mechanisms to implement an MVNO-hosting framework, such as a regulatory, incentivisation and/or voluntary commitment approach for MVNO-hosting which has worked successfully in other jurisdictions such as Hong Kong and the Netherlands.

Whilst there is every reason to welcome additional MVNOs to the mobile market in Singapore, the MVNO model generally operates successfully in serving small niche markets. For example, Philippine Long Distance Telephone Company (‘‘PLDT’’), an MVNO in Singapore, offers pre-paid mobile services targeted at Filipinos.

Whilst there are examples of MVNOs that have enjoyed success abroad, it is doubtful if an MVNO would be able to enjoy widespread success in Singapore’s saturated mobile market. Such was the case when the Virgin Group launched Virgin Mobile in Singapore in 2001, but had to shut down barely a year into operations due to poor subscriptions — and this was in a less saturated mobile market over 10 years ago.

Lastly, IDA is seeking views on key technical and service aspects related to HetNet deployment, in line with the its vision to establish a HetNet to allow for seamless user experience across all mobile networks island-wide. From the consumer’s perspective, the real value of high-speed data connection lies in the ability to use and access the multitude of VOIP and OTT mobile applications and services available freely in the market today. To this end, HetNet is the way to go.

Moving forward, the reality of the future is that consumers will have an increasing demand for data connection and usage, both in terms of quantity and quality. As such, mobile networks in the HetNet landscape of the future will require greater capacities and interoperability to create a better user experience in order to truly realize the IDA’s vision of Singapore as a ‘‘Smart Nation’’.

End Notes:

1. The IDA has various studies that forecast mobile data traffic to experience compounded annual growth rates of between 40-70% over the next few years.

2. Consultation paper issued by the Info-Communications Developament Authority of Singapore – Proposed Spectrum for International Mobile Telecommunications (‘‘IMT’’) and IMT-Advanced Services and Options to Enhance Mobile Competition, April 22, 2014.

3. For instance, Sub 1GHz bands such as the 700MHz, 800MHz and 900MHz bands, and Above 1GHz bands such as the 1.4GHz, 1.9GHz , 2.1GHz (‘‘3G bands’’); 2.3GHz and 2.5GHz TDD bands (‘‘TDD bands’’); and the 3.5GHz band. These bands were identified in line with international trends and spectrum harmonisation efforts regionally.

4. SingTel CEO Chua Sock Koong, when speaking at the Mobile World Congress Event in Barcelona in Feb 2014.

For further information, please contact:

Chia Ling Koh, Partner, Bird & Bird

[email protected]

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