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Speech By Acting Minister For Information, Communications And the Arts, At The Committee Of Supply Debate, On Driving Innovation, Productivity And Competition For A Vibrant Economy

15 March 2010 - Speech By Mr Lui Tuck Yew, Acting Minister For Information, Communications And the Arts, At The Committee Of Supply Debate, On Driving Innovation, Productivity And Competition For A Vibrant Economy.

Speech By Mr Lui Tuck Yew, Acting Minister For Information, Communications And the Arts, At The Committee Of Supply Debate, On Driving Innovation, Productivity And Competition For A Vibrant Economy, on Friday, 12 March 2010, Parliament

1. Chairman, let me first thank the GPC Chairman, Mr Zaqy Mohamed, and the honourable Members who have spoken on a wide range of issues. I will group my response to cover three major segments - promoting growth of our local companies, the state of development and competition in the media sector, and progress of our ICT infrastructural projects.

2. MICA's focus over the past year was to help the infocomm, media and design industries ride out the economic storm, and to prepare for the upturn. Moving forward, MICA will intensify our efforts to boost the skills, innovation, and productivity of our workforce, to contribute towards the growth of globally competitive local enterprises, and to make Singapore a vibrant global city and endearing home.


3. Several members - Mr Zaqy Mohamad, Mr Teo Ser Luck, and Mr Baey Yam Keng - have enquired on our plans to help local SMEs. Let me first start with our efforts in the infocomm sector.

A Platform for the Youth Generation

4. To help our local infocomm companies scale up and expand globally, the Infocomm Development Authority (IDA) plays a key role in establishing strategic G2G and G2B partnerships with key overseas markets. To date, we have about 50 Singapore infocomm companies engaged in overseas markets.

5. The launch of IDA International and the Global Business Development Centre of Excellence in 2009 have provided a further boost to local companies looking to export their solutions. More than 10 infocomm-related MOUs have been signed and consulting service engagements secured in countries like Trinidad & Tobago and Oman. Working with the local industry, IDA International secured new contracts of $11 million in 2009 within its first full year of operations and expects to do significantly better in 2010. There is much growth potential for our local infocomm companies and we will want to pursue this pipeline of opportunities in partnership with IE Singapore and the Singapore Infocomm Technology Federation (SiTF). Whilst many of our local infocomm companies have succeeded in gaining access to overseas markets, SiTF and IDA International will need to actively encourage a consortium approach by our companies to exploit larger overseas opportunities.

6. IDA also actively promotes Singapore-made infocomm solutions through many channels. For example, the National Infocomm Awards, or NIA for short, has been an excellent platform to help firms gain local and international visibility. Muvee Technologies, a winner of the first NIA in 2002, now ships millions of copies of its award-winning home-movie making software, the autoProducer.

Enhancing Development of Singapore's ICT Industry

7. In terms of raising workers' skills and productivity, IDA has put in place a range of schemes together with partners such as the Institute of Systems Science, NUS, the polytechnics, to develop the ICT manpower pipeline. In total, over 400 training courses were endorsed and more than 7,600 professionals had benefited from these schemes in 2009, almost double the number who benefited in 2008. To build our pipeline of future talent, IDA has also invested in programmes such as the National Infocomm Scholarships (NIS) and the Integrated Infocomm Scholarships (IIS). Last year, we awarded 26 National Infocomm Scholarships and 20 Integrated Infocomm Scholarships.

ICT as multiplier across other sectors

8. Beyond the infocomm industry, ICT can play a critical role as a multiplier to raise productivity and drive innovation. This is especially so for SMEs. More SMEs are recognising the benefits and investing in infocomm technology. Under the Infocomm@SME Programme, more than 3,000 companies enjoyed subsidies to establish their first company websites since the year 2008. Over 7,000 SME participants learnt how to harness infocomm technology through the SME Infocomm Resource Centres. In addition, more than 90 SMEs have transformed their business operations using infocomm technology, with over $6 million in grants from a joint collaboration between IDA and SPRING.

9. IDA has been working closely with IRAS and SPRING to enhance the Infocomm@SME Programme. Starting from March this year, SMEs can look forward to a wider scope of assistance with the new iSPRINT scheme. A total of $25 million has been set aside for this scheme, comprising $5 million from IRAS under the Accounting Software Assistance Scheme, and $20 million from SPRING. This is expected to benefit more than 4,500 SMEs.

10. We hope more SMEs will follow the example of Nanofilm Technologies. They successfully implemented a SAP solution last year to manage its business operations and improve data reporting. Now, its management has better oversight over its sales, production and inventory and data from transactions are entered directly into databases. The estimated savings of over $200,000 per year would allow Nanofilm to recoup its initial investment in about a year.


Growing Local Design Companies

11. In the design sector, the DesignSingapore Council has in place several programmes to grow the capabilities of our local designers and design companies.

12. The Design Capability Development Programme grooms local designers by supporting their professional development and overseas exposure. 22 grants worth more than $250,000 were awarded last year. The Overseas Promotion Partnership Programme, whichco-funds local designers and firms' participation in prestigious international platforms, awarded close to half a million worth of grants last year. Through these efforts, Singapore design and designers have been gaining greater recognition internationally, with 126 awards garnered last year compared to 51 awards a decade ago.

13. My ministry is currently studying the ESC recommendations, which have highlighted design as a key business capability to raise productivity. We are fine-tuning a number of design-related initiatives and programmes that will sharpen our competitive edge. We will share more details on a separate occasion due to time constraints.


14. Let me now touch on the media sector.

Update on Singapore Media Fusion Plan

15. Mr Baey asked about the progress of the Singapore Media Fusion Plan (or SMFP in short), to strengthen the media ecosystem and create globally competitive companies. We've made good progress on the SMFP with more than 1,400 jobs created or supported, and over 2,400 media professionals trained. International calls for proposals have generated projects with partners from countries including Australia, UK, South Korea, and China.

16. One of the key priorities of the SMFP is to secure media financing, crucial in enabling our media enterprises to expand globally. Despite the economic downturn, MDA attracted another $200 million of private media funds in 2009, bringing the total media funds anchored in Singapore to $1.3 billion.

17. To support the local film industry, the International Film Fund was launched under SMFP in the middle of 2009. This provides seed funding of up to $5 million per movie. Among the projects selected is BAIT, a Singapore-Australia feature film co-production which will involve two Singapore companies with expertise in 3-D stereoscopic production and post-production services. Such cross-collaborations provide useful opportunities for our local players to work with foreign production teams and build up their expertise. There are also schemes such as the New Feature Film Fund, Short Film Grant and Script Development Grant, to support local projects that may be less commercially attractive, but have strong social and cultural relevance to Singapore. Films which had benefited from these schemes include the acclaimed film Ah Ma by Anthony Chen, which won the Special Mention Award at the Cannes Film Festival. MDA will study Mr Baey Yam Keng's other suggestions on how to further enhance support for our local film industry closely.

18. As a result of MDA's promotional efforts, media content made in, by, and with Singapore is now seen in 70 countries around the world. One such example isDinosaur Train, one of the best-received series on the PBS Kids channel in the United States. It is a co-production between our very own The Jim Henson Company and Sparky Animation, using R&D developed in Singapore by Sparky that allowed them to deliver the project with 30% more efficiency than its closest competitor.

19. In addition, our locally designed and built Interactive Digital Media (IDM) applications and services are reaching the world. Last year, this House heard about Garena, an online gaming service provider. Over the past year, it has more than doubled its user base to 32 million users in more than 200 countries.

20. Some may have heard of or used buUuk, a smartphone application which uses location-based technology to help users find food and drink spots and make reservations in various cities worldwide. Launched in end 2008, buUuk was one of the first applications to implement augmented reality on the iPhone. To date, has over 100,000 users and was voted by CNN as one of the top applications to have while travelling. This is the brainchild of a local IDM company by the same name.

21. These are some examples of how our young companies are starting to make their mark on the world stage. Our efforts aim to develop a pipeline of such promising enterprises and to help the most successful reach the major milestone of 100 million users or $100 million in revenue. With the support of the National Research Foundation (NRF), MDA will continue to invest judiciously in the IDM sector, to spur cutting-edge innovation and produce world-class enterprises.

Digital Switch Over

22. An upcoming development in the media sector is the switch over from analogue to digital broadcasting. This is a world-wide phenomenon and a number of countries have completed or are in the process of making this switchover. ASEAN has committed to do so between 2015 and 2020. We plan for Singapore to transit fully to digital broadcasting in line with ASEAN's switchover. This switch will free up broadcast spectrum that will allow industry players to develop novel digital content and services. For consumers, switchover means that they can look forward to clearer and sharper wide-screen images and more innovative and interactive content.

23. The Government is reviewing how best to achieve a seamless transition from analogue to digital broadcasting and will provide further details in due course when we have firmed up our plans.

Competition in the local media market

24. Let me now address the queries raised by several members of the House - Mr Zaqy Mohamad, Mr Zainudin Nordin, Mr Arthur Fong and Mr Calvin Cheng - on the state of competition in the local media market. Arising from the recent contest over the Barclay Premier League (BPL) broadcast rights, members asked how competition in the pay TV market had impacted consumers.

25. In general, competition in the pay TV market has benefitted consumers through the introduction of more content, better quality programming and service innovation. Today, consumers have access to 179 channels compared to 99 channels prior to SingTel's entry in 2007, with a range of subscription options and over new platforms like IP and mobile. High-definition content is increasingly available, and consumers can catch some Hollywood programmes as early as 24 hours after their US broadcast.

26. The pay TV market is still evolving, we have not reached a stable equilibrium in terms of subscription to the two pay TV retailers and MDA believes that the overall development of the sector is best left to market forces.

27. Nonetheless, I wish to assure the House that MDA will study competition issues carefully and not hesitate to step in where necessary. We share members' concerns with the proliferation of exclusive carriage agreements (or ECAs in short), a commercial practice in the pay TV market that allows pay TV retailers to lock-in premium content. In order to lock out potential competitors and to differentiate their content offerings, retailers are prepared to pay a substantial premium for exclusive rights to content. This translates to higher content acquisition costs.

28. Since SingTel's entry into the pay TV market in July 2007, competition between SingTel and StarHub Cable Vision (SCV) has resulted in the doubling of ECAs from 64 in December 2005 to 131 today. This widespread use of ECAs between channel providers and pay TV retailers as seen in Singapore, is rare in international markets. In view of this, MDA had commissioned a study on competition issues in the pay TV market in Singapore whichconcluded last year. Its review of international practices showed that some countries such as UK and France were actively exploring measures to address the issue of competition for ECAs. UK in particular has been studying the issue since 2007 and has to date not issued its final decision due to the complexities involved. Singapore, too, had to carefully consider the implications on commercial considerations and our international obligations.

29. The study also showed that the ECA-centric competition in Singapore since 2007 has resulted in both industry and consumers being negatively impacted. Firstly, content costs now constitute a significant percentage of pay TV retailers' revenue, compared to international benchmarks. For example, SCV's content costs to revenue ratio has risen from 40 per cent prior to 2007 to 70 per cent today. This is much higher than the average 40 per cent for pay TV operators in most other countries including US, UK and Hong Kong.

30. Secondly, Singapore suffers from a high degree of content fragmentation compared to other countries. Out of 179 channels today, only 7 channels are common to both SCV and SingTel. An international benchmarking exercise using a group of 16 popular channels showed that Singapore was the only country with exclusive arrangements for all 16 channels.

31. MDA's review has concluded that this situation is unlikely to self-correct in the near future, and steps need to be taken to address this market failure. Arising from its review, MDA will now require pay TV retailers to cross carry each other's content which has been acquired exclusively. Let me explain how this will work when implemented. For example, if SingTel acquires a new channel exclusively, it will have to make this channel available to Starhub's subscribers on Starhub's set-top box. And vice-versa. This measure will allow consumers to watch an exclusive channel through their preferred pay TV retailer, regardless of which retailer acquired the rights to that channel, and access available content from a single set-top box. Consumers would no longer require multiple set top boxes or switch retailers each time the rights of exclusive content changes hands. This will facilitate greater consumer access to pay-TV content, and re-focus competition to other aspects such as service differentiation and competitive packaging.

32. This mandatory cross carriage measure will only apply to exclusive agreements entered into on or after 12 March 2010, including renewals of existing exclusive agreements. It is not reasonable to apply such a measure retrospectively and therefore, it will not apply to existing agreements such as the 2010 - 2013 BPL broadcast rights.

33. MDA has launched an industry consultation on the implementation details. This period of consultation will give pay TV retailers sufficient time to make the necessary adjustments and we expect mandatory cross carriage to be operationalised by the third quarter of this year.

World Cup

34. Mr Zaqy Mohamed, Mr Arthur Fong and Mr Zainudin Nordin also asked whether the Government plans to intervene in the broadcast of the forthcoming World Cup. We understand that SingTel and StarHub have recently made a new offer and negotiations with FIFA are still on-going. This is a commercial matter that is best left to the two pay-TV retailers and FIFA to settle. While time is running short, we remain hopeful that the negotiations will reach a sensible outcome.

Broadcast and Magazines

35. Let me now address Mr Calvin Cheng's query on competition in the broadcast and magazine publishing sector. Let me state upfront that to date, we have no evidence that MediaCorp has engaged in anti-competitive behaviour that warrants functional separation of its business units. MDA would not hesitate to take action under the Media Market Conduct Code should MediaCorp be found to engage in anti-competitive behaviour.

36. The House may also recall that we liberalised the free-to-air TV market a few years ago with the introduction of MediaWorks. Market realities showed that the local free-to-air TV market could not sustain both MediaCorp and MediaWorks and this led to their mutual agreement to consolidate.

37. MDA is mindful that a vibrant media industry should not depend on Mediacorp alone and we need to build up the capacity and capabilities of the independent production companies. Our annual PSB funding to MediaCorp stipulates that a minimum number of hours of public service broadcasting (PSB) be outsourced to these independent companies. This has increased from about 500 hours (or 27% of local PSB hours) in 2005, to more than 700 hours (or 35% of local PSB hours) in 2009. Since 2007, MDA has also started to commission public service programmes directly, where production companies and MediaCorp's in-house production units can compete to pitch programme ideas to MDA for funding support. To date, some 350 hours of public service programmes have been commissioned, most of which were awarded to independent production houses.

38. In addition, many TV and radio artistes are not directly employed by Mediacorp. Many popular artistes that appear on MediaCorp programmes are actually managed by artiste management companies and they are also available to independent production companies. MediaCorp also outsources many complementary activities such as dancers or back-up singers. Overall, there is both business opportunities and competition at various levels of the media production value chain.

39. Likewise, Singapore has a thriving magazine publishing industry. Besides SPH Magazines and MediaCorp Publishing, there are close to 100 other publishers in the market. We have no restrictions against publishing or distributing a magazine in Singapore, as long as it is in line with MDA's content guidelines for publications. There are currently about 2,600 local and 5,500 imported publications in circulation in Singapore. SPH and MediaCorp together account for only about 1 per cent of these publications.

Postal Service Standards

40. Chairman Sir, Mr Low Thia Kiang has asked about the proliferation of postal services and how this has impacted the service quality. SingPost has taken the feedback on board and has now implemented a separate queue for postal services.

41. A 5-day postal service is not unusual. IDA had approved SingPost's application after conducting a comprehensive review, studying the data on mail volume and consulting with various stakeholders. The volume of mail on Saturdays, which is traditionally low, has dropped by 20% over the past 5 years.

42. Today, SingPost is already subject to and meets stringent Quality of Service requirements, whereby 99% of mail collected has to be delivered by the next working day to areas within the CBD and 98% for areas outside the CBD. These requirements are comparable to those in other countries such as Hong Kong and UK. The same service levels will be maintained under the 5-day postal service.

43. This will allow SingPost to cap costs and reap savings. Savings will be shared in the form of discounted stamp booklets for consumers from 15 May 2010, and rebates for franked mail customers for a period of 1 year from 1 June 2010. To mitigate the impact of the revision on businesses and consumers, SingPost has extended its mail collection times by one hour on Fridays, to 6 pm for areas outside the CBD and 8 pm for areas within the CBD. Post offices will also continue to operate and open on Saturdays.

ICT Infrastructural Investments

44. Several members - Mr Zaqy Mohamad, Mr Zainudin Nordin, and Mr Teo Ser Luck - have also requested for an update on MICA's ICT infrastructural projects and the benefits they bring to Singapore.

Next Gen NBN

45. One key infrastructure project is the Next Generation Nationwide Broadband Network (or Next Gen NBN in short). This will provide ultra-high speed broadband access of up to 1Gbps island-wide. It will transform the way enterprises and consumers interact and access information, be it for entertainment or commercial purposes. This high speed network, together with our extensive international links through the multitude of submarine cables that land in Singapore, will position Singapore at the forefront of international high speed broadband developments.

46. The Government's investment of up to $1 billion dollars to this project is expected to catalyse some $3 billion in private investment from the Next Gen NBN operators, OpenNet and Nucleus Connect. Rollout of this network is well underway island-wide, and my Parliamentary Secretary, Mr Sam Tan, will elaborate on its progress later.

47. To Mr Zaqy Mohamad's query on competition and prices in the broadband market, IDA has structured the Next Gen NBN to ensure Effective Open Access through structural separation for the NetCo (which is OpenNet), and operational separation for the OpCo (which is Nucleus Connect). Hence, even though SingTel and StarHub are shareholders of the Next Gen NBN operators, the Next Gen NBN operators cannot discriminate against their downstream competitors in favour of their own affiliates. IDA has also conducted an industry consultation with the view to include similar separation requirements in the regulatory toolkit for other players in the telecoms market.

48. Given the open access structure, and the prices committed by the Next Gen NBN operators which are subject to IDA's price regulation framework, we expect wholesale broadband service prices to be competitive. IDA will also monitor service availability indicators closely to ensure that the Next Gen NBN operators continue to provide access to their wholesale services on an equal basis.


49. Let me share with members two initiatives that will strengthen Singapore's position as a telecoms hub. The first is the implementation of the neutral, non-profit, Singapore Internet Exchange (or SGIX in short) in 2010.

50. We expect the SGIX to facilitate highly efficient routing of Internet traffic. This should attract more telecoms carriers, Internet service providers, and content and games providersto hub in Singapore and use Singapore for the exchange of international Internet traffic and content hosting. This will further reduce broadband access costs and improve our speed of access to content and services, which particularly benefits highly interactive applications like online stock trading and interactive gaming, as well as bandwidth intensive activities like cloud computing.

51. Since incorporation in September 2009, SGIX has received strong support from the industry. StarHub believes the SGIX will attract richer and more overseas content into Singapore. 1-Net Singapore shared that SGIX will enable faster and smoother delivery of high speed broadband applications and services.


52. The second is the establishment of a National Authentication Framework (NAF). Online transactions between Government, businesses and consumers are expected to rise and we will need a highly robust and trusted security architecture. Today, consumers often have to use different tokens to access the services of different operators who have deployed their own security systems. This has led to some inconvenience for consumers, and varying standards for delivery of authentication services.

53. IDA has worked closely with key sectoral regulators to establish the National Authentication Framework (or NAF in short) which will enhance the security of online transactions through the deployment of a nationwide strong authentication platform. By aggregating demand at the national level, the NAF is envisaged to provide more cost-effective authentication services for businesses. Consumers can also look forward to the convenience of using a single authentication device to access multiple online services using the NAF.


54. Chairman, in conclusion, MICA will continue to build on our efforts to boost innovation and productivity amongst our enterprises, and help them expand beyond our shores. We will also promote a competitive and conducive regulatory environment, and invest judiciously in infrastructure. This will contribute to Singapore's global competitiveness, and create a vibrant economy for the benefit of businesses and consumers in Singapore.

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