Ovum on: Selection of OpenNet Consortium ¨C as Expected

By: David Kennedy, Research Director, Ovum
(Business News & Technology News, 30 Sep 2008)

Singapore took the first major step in implementing its strict NGN structural separation model when it announced last week that the OpenNet consortium of Axia NetMedia, SingTel, Singapore Power Telemedia and Singapore Press Holdings will build the passive fiber component of Singapore's national NGN network. As Ovum expected, the rival Infinity consortium led by SingTel competitors StarHub and M1 was unsuccessful! The Axia-led consortium will benefit from up to S$750 million of public funding.

Under Singapore's separation arrangements, the passive fiber operator will offer wholesale dark fiber services to all active switching operators (at layer 2 and 3) on a non-discriminatory basis. The active network operators will only offer wholesale services, while operationally-separate retail companies will market services to households and businesses.

Singapore plans quick progress
About 60 percent of premises in Singapore will be connected to fiber by 2010, and all will be connected by 2012. Fees for the first 15m of connection will be waived for all units, homes and businesses when the network is first rolled out to encourage uptake. The fibre company will carry universal service obligations from 2013.

The results of a separate tender for a national active infrastructure will be announced in early 2009. Eleven companies, including SingTel and competitor StarHub, have pre-qualified for this tender, which offers S$250 million of public funding and will involve some universal service obligations. However, other active switching providers will be also able to connect to the fiber infrastructure. A residential dark fibre connection will cost S$15 per month, and a business connection will cost S$50 per month.

Four-way separation
Singapore's separation arrangements already mandate separate fiber, switching and retail companies. Significantly, SingTel has also announced it will transfer ownership of its ducts, pits and exchanges to a separate asset company by 2011, and will sell down its interest in this company by 2014. This company will operate under a regulator-approved board and will lease duct access to fibre operator. It is not yet clear whether the company will also lease duct space to other fiber owners.

In effect, this introduces a fourth layer of separation into the industry. This implementation will be closely watched in countries where duct access is recognised as a competition issue, particularly in Europe. It is still an open question how such access should be implemented, but Singapore is becoming a laboratory for the "nuclear option" of full separation of ducts and related infrastructure.

A model for other countries?
Is this a model for other countries? It is too early to say, because the business model for a separated NGN network will only become clear once the prices of wholesale services offered by active switching operators are known.

It is also important to recall that Singapore is a small nation packed into a small area. It more closely resembles a metropolitan environment than a truly national one, which normally includes a mix of metropolitan and urban environments. This means that the lessons learned from Singapore may be applicable at the local rather than the national level in larger countries.

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