Singapore F1, SingTel and the Need for Speed

October 2, 2009

The SingTel Singapore Grand Prix is one of the most exciting sporting events in Asia, and this year’s was arguably the most interesting race on the F1 circuit. So what does Formula 1 have to do with telecom?  There are similarities – particularly in the Singaporean context:

1. Success is determined in large part by speed (cars vs. bandwidth);
2. Competition is based on rules that all players must comply with (the “formula” in Formula 1 vs. the wholesale pricing scheme of Singapore’s National Broadband Network (NBN)); and
3. Points 1 and 2 being equal, competitive advantage can be had through differentiation (drivers vs. strategy).

Take StarHub, Singapore’s number two integrated carrier. Its HFC infrastructure  has long been a competitive advantage, being faster than incumbent SingTel’s older copper (100Mbps vs. 15Mbps).  As the dominant pay-TV provider (and the content strength this implies), StarHub has also leveraged bundling, helping it enjoy broadband access ARPS 12% higher than SingTel’s and capture 46% of subscribers by end-2009 (see Pyramid Research’s hot-off-the-press Q3 2009 Fixed Communications Forecasts and Fixed Operator Market Share Forecasts).  Clearly, speed matters.

Sadly for StarHub, its competitive advantage will disappear over the next few months as the government-funded national FTTH network, NBN, levels the technological playing field.  At year-end, all market players will be offered identical government-mandated wholesale prices for NBN fiber connections of 100Mbps to 1Gbps.  This will bring several changes:

1. SingTel’s IPTV will soon have a network fit for quality content; it has less to lose and more to spend than StarHub.
2. A bidding war for content the likes of which we’ve yet to witness this side of the globe. First comes English Premier League (EPL) rights.
3. A renewed role for the IDA, Singapore’s regulator. It may order StarHub and SingTel to bid jointly for EPL.  But a SingTel win would give it a monopoly on football, probably decimating StarHub’s pay-TV market share within 12-18 months.
4. Quick and nasty price declines for both residential and business broadband as new retail service providers intensify competition.  We are already starting to see aggressive discounting.
5. Leveraging the NBN would instantly make MobileOne, which has negligible market share, into an integrated operator.

Singapore watchers  would be wise to observe how this month’s EPL content bidding plays out, along with the subsequent impact on both media and mobile dynamics.  The city state is a perfect study in the dynamics between broadband, content, commodification and, ultimately, profitability.

Separately, come join us at the inaugural Telco TV Asia event October 13-14 in Shanghai, where I will talk about Singapore and everything else IPTV.

— Charles Moon, Manager, AP

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