Breaking out of the walled garden created by telcos

You'd be forgiven for being confused with the state of the television and content business in Singapore - multiple set-top boxes, complaints over confusing offers bundling mobile, home broadband and TV, and a high-profile battle for sports rights.

Some observers lament that in Singapore, we get the same fare of global big-name news and entertainment channels as TV watchers in other countries, except that there is a lack of unique and compelling local content on traditional TV (outside of state broadcaster MediaCorp). Exasperated market watchers have likened it to being in a strange and curious place not unlike Alice In Wonderland.

We hope to add another perspective to the conversation.

Traditionally in the telecom sector the world over, the network access and content sectors were lumped together because the two were inextricably lashed together by operators which controlled access to the consumer - in a nice and cosy place, sometimes referred to as the "walled garden".

Content owners had a single gateway to the consumer - through the operator's set-top box, which similarly served as the consumer's sole choice for content. Operators would enter into bidding wars to win exclusive content for their set-top box, especially sports content.

In the end, consumers lost out. Either they paid more - or worse, operators cross-subsidised from their access to content businesses - meaning that Internet broadband subscription fees are re-directed to pay for loss-leading content rather than improve the quality of the Internet experience.

The result of strategies that bundle access and content, keeping it within the walled-garden, is a "crowding-out effect".

Incumbent players are reluctant to drive forward new disruptive business models for content creation and distribution which challenge traditional distribution revenue streams.

By overpaying for certain types of content, network operators make it harder for innovative new players to come in and develop standalone ways of monetising content overall.

Dumb pipes, smart move

But then along came the National Broadband Network (NBN), which was launched in Singapore to "separate" the access sector from other sectors "enabled" by access. Which are those other sectors? There are many - applications, business productivity, cloud and, yes, content.

Not only was the move to launch the NBN a smart one (the Singapore NBN is being copied in over 40 countries around the world), but it is part of a massive global industry transformation.

This evolution, which has really just started in earnest and which will play out over the next decade, is seeing the gradual disintermediation of content from content delivery. This separation is seen as a threat by traditional cable and phone companies that sell subscription TV services. They fear becoming "dumb pipes" for other people's programming when consumers (referred to as "cord cutters") plug their Internet connection to the back of the TV set, bypassing the set-top box.

What are some concrete examples of this industry transformation which is now under way?

MediaCorp recently launched Toggle so that anyone with a good Internet connection can stream what they want, when they want.

This service has only recently come off its beta and is a mere toddler in evolving into its full potential as a full-blown Netflix-type service. Watch that space.

And MediaCorp is not alone.

Pretty much every broadcaster around the world has or is planning to launch a "direct to consumer" approach by streaming their content online.

Plus, content owners are also being courted by a myriad other industry players, including Intel, Sony and Google, which are known to be developing their own pay-TV streaming services with content delivered entirely over the Web (sometimes referred to as "over the top" or OTT services).

Planning to join the fray are several Singapore start-ups which have approached us to discuss their plans to either launch original content portals or Netflix-type-services. (Disclosure: We work for MyRepublic, a fibre broadband access company with a vested interest in liberating content from the embrace of access providers within the walled garden.)

This global industry transformation is starting, albeit very modestly, to have a financial impact. Subscriptions to pay-TV services in the US are now at their lowest level in four years. Cable TV subscriptions here in Singapore have been decreasing every quarter for some time.

According to JP Morgan, network owners across the world are starting to get a smaller and smaller share of wallet spent on content, with content players themselves being able to take more and more, often by going direct to the consumer through a Toggle-type approach.

And yet while we can point to lots of activity signalling a telecoms and TV industry in flux, cord-cutting still isn't happening in large numbers. This is largely because traditional telecoms and cable companies have managed to secure exclusive rights to coveted programming - such as sports.

And while cross-carriage rules have been introduced, no one knows whether these will work.

While we can point to some breathtaking developments where coveted programming rights have been wrested away from traditional telecoms and cable behemoths, unfortunately, at least for now, these are the exception rather than the rule.

The Kiwi example

Take New Zealand for example, where BPL (Barclays Premier League) rights, for the first time, have been awarded to an OTT provider, Premier League Pass. This is akin to Toggle winning the BPL rights here in Singapore, so that anyone with a good Internet connection could subscribe and watch.

Overnight, this makes New Zealand a place to watch for the evolution of the media and content distribution sector, and puts the country in the enviable position of having the potential to be the birthplace of new and transformative business models on how content can get to consumers for better value.

With Singapore households having been estimated to be twice as likely to stream as households in Australia and New Zealand, we believe that Singapore is much better suited to be on the bleeding edge, driving new forms of content and media distribution.

We'd like to see bold moves like these in the media and content distribution sector in Singapore, with online content and distribution players independent from network operators getting access to content which traditionally has been trapped in the walled garden of operators.

To drive such an outcome, some industry watchers have argued for further tweaks to be made to the regulatory cross-carriage arsenal. Others still have recently called for a single entity to be set up to negotiate for content rights so that all acquired content is available on non-discriminatory licensing terms to all pay-TV service providers.

While there have been various attempts in Britain (through Project Kangaroo and the Copyright Hub) to harmonise online video delivery between rights owners and broadcasters, and establish a rudimentary clearing house for online content rights, no significant progress has been made. The commercial and legal complexities are enormous.

That said, these obstacles are no more substantial than those which faced those tasked with the conception and implementation of the Singapore NBN itself. The result of having taken this bold step to open up and level the playing field in network access has been to catapult Singapore into becoming the world's leading telecoms market, the place to watch, the country to copy.

So the real question for Singapore is how bold we wish to be in defining the future of TV, content licensing and distribution - and in particular whether we wish to lead or follow. Whichever approach is taken, the future of telecoms and TV in Singapore is certain; the only issue is whether we get there slowly or quickly, whether we are an early adopter or a late bloomer.

Lawrence Chan is head of product and Greg Mittman is vice-president, corporate development at MyRepublic, a company that provides access to fibre broadband services.

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