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Asia Telecom 1997 Strategies Summit beyond Privatization: Regulatory Challenges - 'Competition in Telecommunications: The Regulators' Challenge'

Mr Ng Cher Keng, Director (Policy) Telecommunication Authority of Singapore (TAS) Speech - Asia Telecom 1997 Strategies Summit beyond Privatization: Regulatory Challenges - 'Competition in Telecommunications: The Regulators' Challenge'

Mr Ng Cher Keng, Director (Policy)
Telecommunication Authority of Singapore (TAS)
Speech - Asia Telecom 1997 Strategies Summit beyond Privatization: Regulatory Challenges - 'Competition in Telecommunications: The Regulators' Challenge'
Singapore, 10 June 1997

1. Good morning ladies and gentlemen and a very warm welcome to Singapore. It is a pleasure to be here today to share with you how we see the challenge facing regulators in a competitive industry.

2. As we see it, the primary challenge is how the regulator intends to shape competition in the industry. I would like to therefore outline here TAS' regulatory approach towards competition and our role in a competitive multi-operator environment.

3. Our end goal is driven by the need to maintain and enhance our economic competitiveness. Given the increasing importance of telecommunications in a global economy driven by knowledge and information, in order to maintain and enhance our competitive edge, we have to keep pace with technology and offer telecommunication services which are as comprehensive, as efficient and as responsive to market needs and demand as possible.

4. The need for Singapore to liberalise and harness market forces to achieve our goal is clear. However, our liberalisation approach is not aimed at introducing competition for competition's sake. Instead, to ensure that competition benefits are sustainable for the telecommunication industry in the long run, we have adopted a managed competition approach, that is, a deliberate and phased approach, towards liberalisation of the industry. Let me explain.

5. While we recognise that a fully competitive and open market environment may be ideal and desirable in the long term, we are mindful of the possible negative effects of an overly rapid liberalisation process. We believe that unorderly and unstructured liberalisation could lead to usage of scarce resources that is not optimal; result in unintentional duplication of infrastructure; and give disincentive to invest long term.

6. By liberalising as fast as our market can bear so that competition can be effective and sustainable, we aim to harness the full benefits of competition for consumers, businesses and the economy. We see these benefits in the form of wider consumer choice, improved service quality, competitive pricing, and stimulation towards greater efficiencies in the use of scarce resources which will enhance the dynamism, innovation, vibrancy and viability of the industry in the long run.

7. Our approach also means that we install facilities-based competition first. We believe that continued upgrading and development of our telecommunication infrastructure is critical and fundamental to enhancing further our economic competitiveness. If we were to allow any player to simply enter our market, market forces will surely compel operators to focus on short term profits rather than long term gains. New entrants may merely concentrate on cream-skimming the profitable market segments. Further, non-facilities based players may not have sufficient incentive to invest in new technologies or to develop extensively their own networks if they are able to "free-ride" on the networks of others.

8. Nevertheless, we are also mindful of the need to balance this against the added cost to the economy if there is excessive duplication of infrastructure. We are particularly concerned with the need for optimal usage of scarce resources given our small physical size and limited domestic market.

9. We also believe that it is important to have credible players who are prepared to invest long term in the Singapore market and contribute to the growth of our economy by providing excellent service at internationally competitive prices. We do not want to have a market with "fly-by-night" operators. This would not be in the interest of consumers who may be left high and dry if the operator closes shop suddenly.

10. Lastly, let me outline TAS' role in a competitive multi-operator environment. Dismantling a monopoly by licensing new operators is just the beginning. In order to ensure long-term sustainable competition, setting the necessary regulatory frameworks to ensure the healthy development of a competitive multi-operator environment is crucial. Our regulatory frameworks are focused on establishing a level playing field for all operators and players in the market. To achieve this, a clear and stable regulatory framework is critical in guiding the transition of the market from a monopolistic structure to one that is driven by competition. We have set ground rules ranging from interconnection to accounting separation to price control and service standards requirements to disputes resolution. Let me touch briefly on these.

Interconnect Regime

11. An interconnect regime is essential in a multi-operator environment to ensure seamless inter-operability among operators and their networks. A new operator has to interconnect with the incumbent operator's network as the majority of the calls will, at best, originate from or terminate at the incumbent's network in the initial phases of competition. Hence, fair interconnect and equitable access arrangements between operators are essential to ensure end-to-end connectivity and transparency to end-users in a multi-operator environment. We have set broad principles that include a strict obligation on our operators to interconnect and provide access.

12. Besides fair and equitable physical interconnect and access, the principles underlying an interconnect costing regime can also significantly influence the development of the market. Interconnect charges play an important part in either encouraging or discouraging facilities/infrastructure investment by players. Low interconnect rates may act as a disincentive against investment and development of facilities by new entrants. With low charges, a new entrant may find it cheaper to interconnect and ride on the incumbent's network rather than build its own. For interconnect rates that are too high, the converse is true.

13. We have set our interconnect charging principles to reflect our objective of encouraging facilities-based competition in the liberalised environment. As I mentioned earlier, the creation of the right incentives to encourage infrastructure development will be balanced by our aim of limiting unnecessary duplication of infrastructure.

14. We have also set ground rules on accounting separation and independent external auditing of the incumbent's operations. This is to safeguard against anti-competitive practices such as undue discrimination and predatory pricing. We also set quality of service standards for network performance and customer service. Our intention is to safeguard against competition appearing mainly in the form of price at the expense of quality. We do not believe that such a trade-off between price and quality is acceptable or a necessary outcome in a competitive environment.

15. Finally, one important role which TAS will play in a multi-operator environment is that of mediator in matters that cannot be resolved by the operators. TAS has undertaken to resolve such disputes as fairly and as expeditiously as possible.

Concluding Remarks

16. As we move into the next phase of development in Singapore's telecommunication industry, let me affirm TAS' commitment to progressive deregulation and liberalisation of the industry as well as our intention to manage and facilitate the successful transition to a competitive multi-operator environment. We will continue to monitor market developments and fine-tune our regulatory frameworks and policies to protect consumer interest and to ensure that the fruits of fair, effective and sustainable competition in the long run are realised.

Thank you.