Battle heats up in superfast broadband

SINGAPORE — Start-ups in the local fibre broadband market have thrown down the gauntlet to the bigger, more established players in a segment that they, as well as analysts, believe is going to gain more traction in time to come.

Last month, upstart MyRepublic, one of the retail service providers for the ultra-high-speed next-generation broadband network, upped the ante by offering a promotional price of S$50 per month for its 1 Gbps plan for the first 10,000 customers, a drastically-reduced rate compared with other players.

Even at its usual price of S$89, the plan still costs a fraction of those offered by telcos StarHub and M1, which respectively charge S$395.90 and S$399 for their packages.

Another provider, ViewQwest, offers its 1 Gbps package at S$149.95 a month.

The radical difference in price arises from a mixture of operational factors, a lack of maturity in a relatively niche part of the market and key product differences, industry participants told TODAY.

In an interview, MyRepublic said it was able to offer superfast speeds at a knock-down rate because it operates in a non-traditional way, compared with more established providers. For instance, it moved its entire IT system to the cloud two years ago. And for content, it relies on the Internet through services such as video-on-demand platform NetFlix rather than having to build infrastructure for payTV like the telcos do.

“This has enabled us to undercut the traditional operators’ IT costs. To say it is more than 10 times cheaper is an understatement,” said MyRepublic’s Vice-President for Corporate Development Greg Mittman.

Added Chief Commercial Officer KC Lai: “When we started this company, we made a firm decision not to operate like a traditional telco. You can say it is like a marriage between a telco and an Internet company.”

However, in some other areas, the start-ups and the legacy players are operating on even ground, with OpenNet charging operating companies a flat rate of S$15 per user per month for residential fibre connections. It said this rate is regulated by the Infocomm Development Authority (IDA). OpenNet is responsible for building, managing and operating a high-quality and high-speed fibre network in Singapore.

In explaining why they charge more for their superfast offerings, the telcos pointed out that they do not compete merely on price, with the strength and variety of their product offerings combining with consistent levels of service to make a comprehensive package that users put a high value on.

“We believe our hubbing offers are very attractive, with our consistent surfing experience and bundled value-added services, StarHub TV content and equipment,” said Ms Lin Shu Fen, StarHub’s Head of Entertainment and SmartLife.

The take-up rates have testified to that, she pointed out, with households subscribing to its triple services — mobile, pay TV and broadband —growing to 227,000 at the end of December, an increase of 6 per cent compared with the end of 2012.

Ms Lin added that there are no hidden charges as service activation and installation fees are waived. MyRepublic has a S$58 service installation fee.

“Nonetheless, we are closely monitoring the market to ensure that we remain relevant and competitive in our broadband offering,” she added.

Industry players also pointed out that it still remains to be seen if the newer players can maintain the same speeds levels across all services, especially when it comes to international surfing.

Analysts that TODAY spoke to noted that pricing also hinges on the bigger players’ established brand name and users’ trust in their reliability.

Senior industry analyst Serene Chan of Frost & Sullivan said: “Telcos charge on reliability and because they have redundancy plans in place. That they can charge at this rate tells us that consumers still place a high value on this.”

M1’s position supports this view. In a response to TODAY, an M1 spokesman said that M1’s 1 Gbps service is designed to meet the needs of a customer segment that require very high throughput.

“We dedicate additional network resources to manage each customer’s connection end-to-end, thus ensuring they enjoy a consistent, high-quality connection to local and international online destinations.”

Ms Chan also pointed out that the competition in Singapore in this segment is not so intense yet, but as services that require high-speed broadband gain pace in the next decade, prices will eventually come down.

“In time to come, as newer online services such as telehealth, smart home networks and smart cities gain traction, and an eco-system involving hospitals, manufacturers and homes is created, bandwidth requirements will have to increase,” she said.

Added Ms Lim May-Ann, Executive Director of the Asia Cloud Computing Association: “With the amount of capacity that is being put in place globally, it’s a matter of time before prices at the 1 Gbps band and more drop even further in the next few years.”