20 March 2009 - Speech By Mr Leong Keng Thai, Deputy Chief Executive, Director-General (Telecoms And Post), Infocomm Development Authority of Singapore At The Asia-Pacific American Chambers Of Commerce (APAC) 2009 Spring Conference (Industry And Issues Breakout Group On ICT), At Marina Oriental Hotel, Singapore
Speech By Mr Leong Keng Thai, Deputy Chief Executive, Director-General (Telecoms And Post), Infocomm Development Authority of Singapore at The Asia-Pacific American Chambers Of Commerce (APAC) 2009 Spring Conference (Industry And Issues Breakout Group On ICT), on 20 March 2009 at Marina Oriental Hotel, Singapore
1. I would first like to thank the American Chamber of Commerce for inviting me to speak at this conference. The theme for this session is indeed most relevant. There would not be a more fitting time to discuss this topic, as many Asian economies are in the midst of industry transformation in their infocomm sector, even in this challenging economic climate.
Transformation in Demand
2. We have seen significant changes in consumption patterns in the infocomm sector in recent years, both in Asia and the rest of the world. Globally, internet traffic trends have seen a shift towards real-time interactive applications like video streaming and online gaming. Peer-to-peer traffic continues to increase. Traditional media has also gone online and new media have emerged. And of course, the introduction of IP television and Voice-over-IP services are pervasive in many countries. At the enterprise level, we see new applications like Software-as-a-Service, cloud computing, and high definition video-conference being increasingly adopted by businesses worldwide. Governments too continue to explore new opportunities of using infocomm to engage citizens more than ever before.
3. The transformation in demand has been brought about by diverse applications, with new and more innovative infocomm services emerging even as I speak. However, the common trend underlying this explosion of infocomm services is a corresponding explosion of bandwidth demands. Taking Singapore as an example, bandwidth demands have seen the doubling of the household broadband penetration in the past three years. What was a 51.3% household broadband penetration in January 2006 now stands at 102.1% (in January 2009). Corresponding broadband speeds have also increased.
Transformation in Infrastructure
4. The telecommunications industry is the cornerstone of the infocomm sector, with telecoms networks and services as the fundamental building blocks on which multimedia voice, video and data content are delivered. With the increasing demand for infocomm services, there is necessarily a need for transformation of the underlying infrastructure to cope with such demand.
5. Singapore has embarked on the Intelligent Nation 2015 or iN2015 masterplan where the aim is to tap on new and emerging infocomm technologies to power the next phase of our economic and social development. The vision is an intelligent nation, global city powered by infocomm, by the year 2015. To realise such a vision, one critical foundation that Singapore is building is the Next Generation National Broadband Network (or Next Gen NBN). Let me elaborate on this.
6. While existing copper networks have served us well for the past few decades and sustained our economies through the dot.com era, several governments in Asia continue to anticipate and pre-empt the exponential bandwidth needs of the future. Indeed, Asian economies have been at the forefront of investing in and deploying next generation networks, particularly, Fibre-to-the-Home or Fibre-to-the-Building (or “F-T-T-H” and “F-T-T-B”) networks. I am sure you are aware that economies like South Korea, Hong Kong and Japan continue to rank highly for FTTH and FTTB penetration. Singapore too is well aware of the criticality of having a future-proof, high speed, nationwide broadband network in place, which is why as early as 2006, we announced plans to catalyse the deployment of the Next Gen NBN as part of IDA’s iN2015 masterplan.
7. The Next Gen NBN will be a nationwide FTTH network capable of ultra-high speed connections - and we mean fibre to every home, initially at 100 Mbps and moving on to 1 Gbps and beyond. It will be deployed to 95% of all homes and commercial buildings by the year 2012, but many consumers and businesses will be able to enjoy services provided on the network before then as the network begins its rollout from end of this year. The Singapore Government will be funding up to 1 billion Singapore dollars for the network (which equates to about 650 million US dollars), through a Request-for-Proposal for operators to operate this network.
8. I should emphasise that the Government’s investment in the Next Gen NBN is not simply a matter of transforming the telecoms network by putting in place a new set of fibre cables. More importantly, what we have sought to achieve is to transform the necessary industry and regulatory frameworks for competition to flourish in the long term. With the Next Gen NBN and a conducive environment, innovative next generation services can be developed to grow Singapore’s innovation capabilities, enhance opportunities to improve the productivity and competitiveness of the industry, and of course, the lives of all Singapore residents.
Transformation in Industry Structure
9. So what is this industry structure transformation for the Next Gen NBN about? Let me explain.
10. Unlike the traditional structure of vertically integrated operators competing in the market, IDA has set strict separation rules between different layers of the Next Gen NBN value chain. Perhaps it’s easier to refer to a diagram. The Next Gen NBN Industry structure would have four layers - the Netco, the Opco(s), the Retail Service Providers (RSPs) and the end-users. The entity (conceptually called the NetCo) will build and provide the passive infrastructure, that is, ducts and fibres. The entity or entities (conceptually called the OpCos) will buy the passive infrastructure from the NetCo and deploy active equipment to deliver bandwidth bitstreams to RSPs who then package and sell services to end-users. As the provider of an extensive last-mile fibre network which is unlikely to be replicated to the same scale and depth, the NetCo is deemed as a natural monopoly and is thus subject to strict structural separation requirements. The NetCo will have some level of ownership separation from any interest in downstream service provision so as to remove its commercial incentive to discriminate against competing downstream operators wishing to lease dark fibre from the NetCo. At the next layer, the OpCo will not be subject to structural separation from any interests in the RSP market but will have to comply with operational separation safeguards instead (which is less stringent than structural separation) to ensure that it treats buyers of its wholesale bandwidth services equally. This way, RSPs that wish to leverage the Next Gen NBN to provide next generation services will have a choice of input products offered on an equal basis.
11. The separation requirements will result in a major transformation of the industry structure that operators have been used to. But in IDA’s view, it was a necessary step to ensure equal, non-discriminatory access to the network by all service providers, or Effective Open Access. By diluting the ability and incentives of the NetCo and OpCo to discriminate against downstream operators, the playing field for next generation service providers will be transformed. Coupled with other regulatory requirements on the operators, like regulated pricing and universal service obligations, competing operators will be able to access the Next Gen NBN easily, on an equivalent basis, and at reasonable prices, allowing them to invest and innovate in services and applications. We have awarded the project to deploy the passive network infrastructure to the OpenNet consortium in September last year, and we are looking to make the award for the operator providing wholesale bandwidth services soon.
Opportunities From Transformations
12. The NBN project, and its associated regulatory framework, will put in place the fundamental communications highway for Singapore for the future. The network avails tremendous opportunities for service providers wishing to grow their operations in Singapore, or enter the Singapore market quickly to provide next generation services. In this regard, existing telecom operators are expected to benefit from the open access services offered by the Next Gen NBN, which will lower the barrier to entry to the telecom market substantially. These would include more than half of our 44 Facilities-Based Operations licensees which are foreign owned.
13. The Next Gen NBN also presents opportunities to deploy services beyond traditional telecoms connectivity - this is really the key beyond this entire exercise. To this end, IDA is supporting the development and deployment of next generation services such as tele-health, high definition video conferencing and immersive learning applications. This is where we encourage companies like yours to leverage the capabilities of the Next Gen NBN to develop and test bed innovative products and services that are interactive, available on demand and rich in content and experience.
Harnessing Infocomm to Transform the Public Sector
14. Allow me now to also briefly talk about the use of infocomm technology in transforming the way our Government works and in the provision of public services. In the area of e-government, Singapore has over the years matured into one of the leading e-Government which delivers convenient and accessible online services and engages citizens in policy formulation. The ubiquity of the Internet has permitted us to provide one-stop services to both citizens and businesses. For citizens, there are currently over 1,600 e-government services available online, ranging from registration and renewal of passports to filing of income tax returns. For businesses, one example I can give is the Online Business Licensing Service or OBLS, is a portal that offers an integrated single form application for multiple licences from over 30 different government agencies in Singapore. Traditionally, if you want to start up a business, you would have to approach multiple agencies. As a result of OBLS, the cost of incorporating a company in Singapore has been reduced from approximately S$31,000 to just S$270 (more than 100 times reduction). The average approval processing time has also been reduced from 21 days to only 8 days. Over 22,000 businesses have used OBLS since its launch in 2004. This is one example of the many integrated government services being developed to serve businesses and citizens in Singapore.
15. The ability to leverage infocomm technology is increasingly being recognised internationally as a key factor for a nation’s growth and development. In this regard, Singapore has consistently been ranked among the top nations in the world for using infocomm to innovate and help citizens engage the Government.
U.S-Singapore Cooperation International Presence and Programmes to Support the Infocomm Industry
16. The U.S is one of Singapore’s most important trading and investment partners, and both countries enjoy a long-standing free trade agreement with benefits to major sectors such as manufacturing, banking, services, e-commerce and telecommunications.
17. Singapore is an ideal location for infocomm innovation and business. Our climate for foreign investment in the telecom sector is entirely open. When we liberalised the telecom market in 2000, IDA lifted all direct and indirect foreign ownership on its operating licensees. As I mentioned earlier, more than half of our 44 or so Facilities-Based Operations licensees are foreign owned. These include prominent U.S companies such as AT&T and Verizon. IDA’s commitment to principles of transparent decision-making, proportionate regulation, provide certainty for investors, both local and foreign.
18. IDA also actively collaborates with major U.S infocomm companies such as Oracle, Cisco and IBM, just to name a few, to spur innovation and development within the infocomm industry. Examples of collaboration include the Oracle Partner Solution Centre, as well as Cisco’s Enabling Platform Innovation Centre or “EPIC” in short.
19. The Oracle Partner Solution Centre is a competency centre that assists partners’ adoption of Oracle technologies. It offers technical assistance, access to state-of-the-art hardware and training. Cisco’s EPIC, the first of its kind in the world, is dedicated to the creation of Next Generation Services and will serve as a bridge between the research and commercial environments, to help industry players quicken the time-to-market for their services. Such collaboration bring about active knowledge transfer and benefits not just for the U.S companies, but also help strengthen the competencies of our Singapore infocomm companies.
20. Ladies and gentlemen, I hope I have offered you a glimpse of the transformations in Singapore’s infocomm industry, with the exciting advent of the Next Gen NBN and the services that will be deployed on it. In closing, I would like to take this opportunity to invite you to participate in the activities and events lined up in Singapore in June, in conjunction with the annual Infocomm Media Business Exchange. This would include the iGov Global Exchange Forum and the Next Generation Broadband Forum, which will continue discussions on what I have spoken about today.
21. Thank you.