The Liberalisation and Privatisation of Telecommunications in Singapore

Mr Lim Chuan Poh, Director-General Telecommunication Authority of Singapore (TAS) Speech - The Liberalisation and Privatisation of Telecommunications in Singapore

Mr Lim Chuan Poh, Director-General
Telecommunication Authority of Singapore (TAS)
Speech - The Liberalisation and Privatisation of Telecommunications in Singapore
Singapore, 5 December 1994

This morning, it is my pleasure to share with you some thoughts on the subject "The Liberalisation and Privatisation of Telecommunications in Singapore". The telecommunications industry has entered a phase driven by fast-changing technology, which in turn, is stimulated by the demands of increasingly sophisticated end-users. To meet these demands, there has been a worldwide trend towards privatisation, liberalisation and deregulation in the telecommunications industry. This trend has created many opportunities, as well as challenges for both telecommunications regulators and operators.

Singapore's telecommunications policies have been, and will continue to be geared towards developing a "world-class" telecommunication network capable of providing high quality telecommunication services at competitive prices. We believe that having a good telecommunications infrastructure is one of the critical factors that will drive Singapore's economic development into the next century and beyond.

Before I touch on Singapore's regulatory and policy framework, I would like to briefly outline the recent history of telecommunications in Singapore.

Brief History of Singapore's Telecommunications Industry

Prior to 1 April 1992, TAS was the all encompassing government authority responsible for telecommunications regulations, network operation and services - like many MPTs and PTTs overseas. On 1 April 1992 however, the commercial functions of TAS were hived off to form Singapore Telecom and Singapore Post. TAS was reconstituted under the TAS Act 1992 as the national regulator, policy-maker, developer and promoter of the telecommunications and postal industry.

Regulatory and Policy Framework for the Telecommunications Industry in Singapore

Important Role of Liberalisation, Deregulation and Competition

TAS recognises that market forces, if allowed to function properly, would be the most efficient means in achieving its goals. The decision to introduce competition in telecommunications is influenced by two main factors. Firstly, we note that real network and infrastructure costs have been falling due to rapid technological advancement. As such, the natural monopoly argument is no longer absolutely true for the telecommunications industry.

Secondly, although the "homogenous" telecommunications services provided by the monopoly operator has been adequate in meeting the needs of most end-users in the past, it will not be sufficient in fulfilling the increasingly diversified and sophisticated demand for telecommunications, especially in the rapidly changing global business environment.

Liberalisation, deregulation and competition thus offer a viable approach to ensuring the provision of better quality of services at highly competitive prices. They also stimulate more innovative services aimed at satisfying the needs of different market segments with custom-made solutions. In Singapore, our liberalisation policy is aimed at increasing consumer choice and stimulating greater efficiencies in the use of scarce resources. Our journey along the road to liberalisation has only just begun.

While we recognise that a fully competitive and open market model in telecommunications may be ideal and desirable in the long run, there is a risk that the long term benefits of liberalisation to Singapore may not be fully realisable if competition is introduced too rapidly. Hence, in introducing competition, TAS will aim for a deliberate and phased approach. We will weigh better consumer choice against the added cost from duplication of services and facilities. We will also take into account the small size of the Singapore domestic market and the need to optimize the use of valuable resources, such as land and frequency spectrum.

In Singapore, competition is being actively promoted for telecommunications services which are not part of the exclusive right of Singapore Telecom's licence. Competition will also be introduced as soon as Singapore Telecom's exclusive licence for the service expires. For instance, we are now in the midst of a tender exercise to select one more public mobile telephone operator and three more public radio paging operators to operate competitive services from 1 April 1997.

TAS is now working on measures to introduce competition at the retail level for services under Singapore Telecom's exclusivity. This will have to be done through a policy of reselling Singapore Telecom's services so as not to infringe on Singapore Telecom's licence. We believe that a policy enabling retailers to buy services from Singapore Telecom for resale will lead to more innovative packaging and a wider variety of telecommunications services to be available to the general public. It will also introduce a form of competition ahead of the expiry of Singapore Telecom's exclusive licence.

Of course we will have to guard against resellers unwittingly or deliberately inflating the cost of telecommunications service in Singapore. TAS will set guidelines for resellers to ensure that they stay within a certain pricing principle. For a start, we intend to grant resale licences only to hotels and service apartments. These are existing resellers of telecommunications services through commercial arrangements with Singapore Telecom. From 1 Jan next year, reselling of telecommunications services by hotels and service apartments will have to be licensed by TAS.

In our effort to maintain Singapore's position as a competitive business hub and an attractive tourist destination, TAS is conscious that telecommunications cost in general is a significant factor. Telecommunications cost in hotels and service apartments are no exception. TAS has, in consultation with the Singapore Hotel Association, revised downwards various surcharges on telecommunications services which are currently levied by hotel and service apartment guests.

For example, the current 20% surcharge cap on IDD calls made from hotel rooms would be reduced to 10%. Also local calls which are now charged at 50 cents per call will be revised to 10 cents per three minutes, in line with public payphones. The revised pricing scheme will take effect from 1 Apr 95.

Besides the scheme for hotels and service apartments, TAS is in the process of finalising a more comprehensive resale scheme covering a variety of telecommunication services. Details will be released at a later stage.

Management of Future Liberalisation Deregulation and Competition

As we move from a telecommunication industry with a traditionally monopolistic market structure to a more competitive market structure, with competition at both the network and service provision levels, it is crucial that we develop a clear and stable regulatory framework. TAS envisages that such a regulatory framework would comprise three categories of policies covering competition safeguard policies; consumer welfare safeguard policies; and long term infrastructure and network development policies.

TAS recognises that the present monopolistic structure of the industry here has created enormous market power for the incumbent operator with its control of the network, full access to customers, comprehensive subscriber database, enormous financial, human and capital resources and widely-accepted perception as the "natural" and "national" provider of telecommunication services. The significant market power of the incumbent operator means that TAS would have to play a "refereeing" role to ensure that new entrants will not be unfairly treated.

Given the potential for misuse of market power, TAS is fully cognizant of the need to develop guidelines which set the rules of a level playing field and to monitor strict compliance. In this respect, TAS has formulated policy guidelines for the establishment of fair interconnection charging principles, transparent arbitration procedures and regular financial reporting mechanisms by operators to prevent any anti-competitive practices.

TAS will also ensure that consumers' welfare is not neglected or compromised during the progress towards the development of an efficient and effective competitive telecommunication environment. TAS will not accept any trade-off between quality of service and prices as a result of liberalisation, deregulation or competition. We will monitor closely the quality of services provided as well as establish a pro-competition price control regime.

The International Dimension

The developments taking place in Singapore which I have just outlined for you reflect similar trends which are now taking place globally, albeit under different conditions and at different speeds, depending upon the domestic circumstances of each country.

There is no doubt that these concepts of liberalisation and deregulation will come to dominate the telecommunications landscape worldwide in the next decade. It is therefore imperative that regulators, operators and other players come together to discuss and compare notes on these trends and on their changing roles within this new scenario.

For this reason, Singapore was particularly happy to support the creation of a World Telecommunication Policy Forum at the recent ITU Plenipotentiary Conference in Kyoto this September. This new Policy Forum will bring together governments, consumers and the private sector alike for a frank exchange on global trends, technological developments and policy issues. Recognising that there is much we can learn from the experience and hindsight of other countries, Singapore applauds its creation and we hope to take an active part in its deliberations.

Regulators in particular, must come together more often to exchange views and to further develop their contacts with one another, as they each learn to effectively manage and regulate the rapidly-changing telecommunications industry. Too few opportunities exist for the regulatory authorities of the Asia-Pacific to compare notes and to discuss their approach to regulatory issues.

It was for this reason that the Directors-General of the regulatory authorities from the six ASEAN countries came together recently to form a committee within which we will discuss and develop common positions and views on regulatory issues affecting our sub-region, especially issues on spectrum management, the emerging global satellite communication systems, technical standards and equipment certification procedures.

Concluding Remarks

Regulators the world over have to come to terms with the many challenges which the phenomena of privatisation, deregulation and liberalisation have placed before them. In Singapore we recognise that market forces might compel operators to focus more on short-term profit margins rather than on long-term gains or national needs. Furthermore, there might not be sufficient incentive for new market entrants to invest or develop their telecommunication infrastructure if they could instead free-ride on the network infrastructure developed by their competitors.

As constant upgrading of the telecommunication infrastructure is vital to the growth of the industry and the maintenance of our international competitive edge, TAS will formulate a coherent policy for the long-term development of the telecommunication infrastructure which can support a strong and vibrant Singapore economy. TAS will also work towards providing guidance, direction and the "right environment" to facilitate market activities as well as help create and maintain a "level playing field", at least at the stage when competition is nascent.

Our priorities are clear and the task at hand is a momentous one. TAS hopes that the years ahead will see a strengthening of our role domestically as well as a deepening of our links with other regulators in the region and beyond. This will certainly be a critical period of transition for us and with your help and guidance, we look forward to the challenges ahead.

Thank you.