BROADBAND ACCESS IN SINGAPORE (Speed and charges)

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BROADBAND ACCESS IN SINGAPORE:

(Speed and charges): 16.

Mr Steve Chia Kiah Hong asked the Minister for Information, Communications and the Arts (a) why Singapore's broadband excess speed is up to 20 times slower and why charges are up to four times higher than those in Japan, South Korea, Taiwan, Hong Kong and China; (b) will these factors impede Singapore's development into an international and regional information hub; and (c) by allowing telcos and service providers to tie down existing customers through the use of contracts and high termination fees, will this result in inefficiencies and poor service standards in the industry.

The Senior Minister of State for Information, Communications and the Arts (Dr Balaji Sadasivan) (for the Minister for Information, Communications and the Arts): The broadband market in Singapore is making good progress. Broadband adoption is rising and the household penetration rate has increased from 27% in June 2003 to 38% in June 2004. Prices have also fallen. Since 2001, residential broadband prices for unlimited

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access plans have fallen by up to 67%. There are also low cost packages for novice users with low usage. Our broadband access speeds have gone up and consumers now have a choice of services with speeds of up to 3 Mbps for cable modem access. We estimate that about 40% of broadband subscribers in Singapore are on access speeds of at least 1.5 Mbps.

Mr Chia mentioned that there are jurisdications where access speeds are significantly higher than Singapore's and prices are lower. We must be mindful comparisons may not be "apple to apple" and there may be other charges such as separate line rental charges along with the broadband access charges. The underlying cost structure also varies from place to place and each country has a different market size, usage profile and competition from alternatives.

Compared to Taiwan, South Korea, Japan, Hong Kong and China cited by Mr Chia, Singapore operators have the smallest user base to recover costs from. Also, unlike Korea and Japan where users access local-language content hosted locally, the majority of Internet traffic in Singapore is to access content hosted outside Singapore and this comes at a higher cost. Lastly, with relatively low fixed line rates, the substitution of broadband for dial-up access is not as compelling for some users, unlike the case in the other countries.

A point to note also is that aggressive price competition taking place in other markets may not be sustainable. For example, according to a report by the Economist Intelligence Unit in April, major broadband access service providers (BASPs) in Korea were facing financial difficulty due to aggressive price cutting. Nevertheless, IDA will continue to press on in its efforts to promote sustainable broadband adoption on several fronts.

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First, to encourage greater competition, IDA is supporting technical trials in alternative broadband technologies that can lower deployment cost and increase access speeds. IDA will be making radio frequency spectrum available for the deployment of wireless broadband technologies and is working with the industry to pilot several wireless broadband services which would promise higher speed at lower cost. If successful, these new technologies can be deployed to enhance competitiveness of our broadband market.

Second, IDA has put in place measures to overcome the lack of effective competition in infrastructure such as facilitating the introduction of wholesale broadband access services. IDA's ruling to require SingTel to offer its Local Leased Circuits to Facilities Based Operators at a discount should further reduce the cost of service providers who rely heavily on LLCs to provide telecom services to end users. These cost savings may then be passed on to end users.

IDA will continue to explore other options, including both developmental and pro-competition measures, to encourage broadband development.

Mr Chia also asked if both price and speed of broadband services would impede Singapore's development into an international and regional information hub.

While broadband costs and speed are considerations, there are other important factors like international and regional connectivity, prices of other infocomm services, intellectual property protection and trade links with other countries that contribute to our hub status. Singapore fares well in all these areas. For example, we have 21 Tbps submarine cable capacity and over 13 Gbps direct connectivity to more than 20 countries.

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We were also ranked top in Asia for Intellectual Property Rights Protection.

Mr Chia also asked whether allowing telcos and service providers to tie down existing customers through the use of contracts and high termination fees would result in inefficiencies and poor service standards.

As part of commercial practice, BASPs set minimum contract periods and termination fees to ensure a reasonable return on the cost of new customer acquisitions, like cost of a "free" or subsidised modem, gifts or discounts.

There is no evidence that such practices have compromised quality of service and service standards have been good. For example, since 2003, their network availability has been generally above 99% and their service activation time from the date of receipt of an application has been generally less than five days. Nevertheless, IDA will continue to monitor the situation and where the need arises, IDA will consider additional measures to remove any anti-competitive actions.

3.00 pm

Mr Speaker: Order. End of Question time.

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