Regulate mobile wholesale pricing, say potential telcos

SINGAPORE - Potential telcos are urging the local regulator to lay down for the mobile sector the same wholesale pricing rules that are used for the fibre broadband market.

Only then will the Infocomm Development Authority (IDA) succeed in injecting more competition in the mobile space.

The IDA announced this intention on Tuesday when it launched a consultation exercise to seek views on how more mobile virtual network operators (MVNOs) can be enticed to set up shop here.

MVNOs buy airtime in bulk from the existing dominant telcos - SingTel, StarHub and M1 - instead of building their physical mobile networks. At present, there are 13 MVNOs, but they are very small, servicing less than 1 per cent of the 8.4 million mobile lines here.

One obstacle is the unregulated market, with wholesale agreements signed privately between MVNOs and the big three.

Mr Vignesa Moorthy, chief executive of local Internet service provider (ISP) ViewQwest, said this has to be overhauled.

Having benefited from the regulated pricing regime of the national fibre broadband infrastructure, he said: "Wholesale prices need to be transparent and fair to level the playing field." ViewQwest is keen on bundling mobile data and voice services with its fibre broadband plans.

The Government-backed national fibre broadband network has introduced more competition in the fixed broadband market, resulting in prices falling by more than half since its launch in 2010.

LGA Telecom, a niche MVNO here offering post-paid mobile services as an add-on to its business broadband customers, has similar views. "Regulated pricing will bring down the barriers to entry," said its chief operating officer Yew Hock Meng.

ISP SuperInternet also plans to enter the mobile market, first as an MVNO targeted at business users. Once the business takes off, it plans to take up the fourth mobile operator licence, acquiring airwaves and rolling out its own mobile network.

"It is critical that the IDA works in rules to let MVNOs expand in such a manner," said managing director Benjamin Tan.

Market observers said the lesson from Virgin Mobile's failed venture here is that it "cut a bad deal". The joint venture between British entrepreneur Richard Branson's Virgin Group and SingTel was the first MVNO operator here but closed down in 2002, barely a year into operations.

But the MVNO model has worked overseas. In Britain, supermarket chain Tesco uses its distribution might to sell pay-as- you-go mobile data and voice services to shoppers.

Managing partner Rob Bratby of technology law firm Olswang Asia said that for MVNOs to succeed here, they must "have a distinct value proposition and target an under-served market segment".

Some analysts said the IDA is turning to the MVNO route to boost the local mobile scene after past efforts to issue a fourth mobile operator licence were unsuccessful. When 4G airwaves went on sale last year, no fourth mobile player showed up - as was the case 10 years ago during the auction of 3G airwaves.

Mr Clement Teo, Singapore telco analyst for United States- based market research firm Forrester, said the cost of airwaves "could be a huge barrier" for any potential newcomer under the traditional licensing model.

Mr Ajay Sunder of market research firm Frost & Sullivan said it would take more than 10 years for a newcomer to break even in a mature market like Singapore under the traditional licensing model. In developing markets like India, it would take seven or eight. "It is not viable," he added.

This article was published on April 24 in The Straits Times.

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