Jayashri Dasgupta Operational Management Report 3 October 2003 Internet and Service Providers in Singapore Summary The year 2002 saw rapid growth of broadband access in Singapore for the first time. The year also saw the merger of StarHub and Singapore Cable Vision, which changed the competitive landscape. Table of Contents Market Overview ISP Profiles ISP Strengths and Limitations Insight List Of Tables Table 1: SingNet Table 2: Pacific Internet Table 3: StarHub Internet Table 4: SingNet: Business Internet Table 5: Pacific Internet: Business Internet Table 6: StarHub Internet: Business Internet Gartner Reproduction of this publication in any form without prior written permission is forbidden. The information contained herein has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The reader assumes sole responsibility for the selection of these materials to achieve its intended results. The opinions expressed herein are subject to change without notice.
Market Overview The Singapore government liberalized the provision of public Internet access service in October 1998. To encourage foreign participation in this industry, full foreign ownership was allowed from September 1999 for Internet access service providers (IASPs) and Internet exchange service providers. Since the liberalization of the Internet service provider (ISP) market, the regulator, Infocommunications Development Authority of Singapore (IDA), has already licensed 49 public IASPs (as of June 2002) and 17 Internet exchange service providers (as of June 2002). However, liberalization of the Internet market in Singapore made the sector very competitive, and margins were squeezed as service providers fought to provide the lowest price, making it tough for the small ISPs to survive. As a result, most players pulled out of the market, and very few service providers actually managed to survive. StarHub Internet, formerly Singapore s third IASP CyberWay, had announced a free surf plan in December 1999 to offer free Internet access with no limits on surfing hours. Users only pay for the local telephone charges, but calls to the customer support desk are charged at S$0.30 per minute. This nofrills, free surfing plan brought a new paradigm to the Internet market in Singapore. SingNet swiftly responded to StarHub Internet s free Internet access by announcing a joint marketing program with its parent, Singapore Telecom (SingTel), to provide its fixed-line subscribers with free Internet access and e- mail accounts. Of late, SingNet has withdrawn its free Internet access. StarHub, however, continues to offer free Internet access to its customers. The trend in Singapore has been slow growth for revenue in dial-up access, while revenue from corporate leased lines and broadband has increased rather significantly. Another revenue-contributing area is valueadded services, which had showed significant growth. As a result, the ISPs are now broadening their focus from being just a residential ISP to a supplier of corporate Internet solutions, including leased-line access, Web hosting and other services. Singapore ISP revenue has grown steadily over the years, reaching about S$402.1 million (US$231.10 million) in 2002. Revenue from access has experienced slower growth as compared to revenue contribution from value-added services (such as Web hosting, advertising, maintenance, consulting and Internet Protocol virtual private network [IP-VPN]). However, revenue contribution from access still makes up the majority of the ISPs revenue. About 85 percent of the total revenue in 2002 came from access and the remainder from value-added services (VAS). VAS will become increasingly important as margins for access diminish. Dial-up (over the plain old telephone service [POTS]) is currently the most popular mode of Internet access in Singapore even though the market has reached plateau and has actually begun to decline. Broadband access through asymmetric digital subscriber line (ADSL) and cable modem is fast catching up since the ISPs slashed broadband prices, primarily due to the faster download speeds that broadband offers at incremental costs. Over the last couple of years, the number of paid accounts for broadband has been increasing by leaps and bounds. At the end of 2002, Singapore had 100,000 cable modems and 129,000 ADSL accounts as compared to 78,000 cable modems and 62,000 ADSL accounts at the end of 2001. Gartner expects paid accounts for broadband to overtake that for narrowband by 2004. To ensure quality broadband access, IDA has set up a quality of service (QOS) standard requiring broadband local access network providers to submit their quarterly reports. The operators must comply with the QOS standard of a minimum of 99 percent network availability, network accessibility of more than 95 percent and a service activation time that must be within five working days. At the end of 2002, there were approximately 1.23 million Internet subscribers in Singapore. Nevertheless, incumbent operator SingTel s SingNet dominates the ISP market. SingTel also receives 3 October 2003 2
incremental revenue from the usage of its established copper last mile from all dial-up subscribers in Singapore, irrespective of their service provider, as subscribers must pay a per-minute usage fee. Despite being one of the first countries in the world to have a nationwide broadband network where one can request a broadband connection through either the ADSL or cable modem, Singapore s broadband subscriber numbers did not rise as spectacularly as one would expect during the first few years. Its only now that the broadband connections have picked up significantly. In fact, the government had developed and launched Singapore ONE, a nationwide broadband network, in 1996. Now it is planning to extend the broadband capabilities of Singapore ONE to the wireless realm, thus providing users with the combined benefits of high-speed connectivity and mobility. The government hopes that by 2006, wireless broadband access in Singapore will be pervasive, with 50 percent of households on broadband. Broadband service in Singapore is being offered by all the three leading ISPs SingNet (offers a service called SingTel Magix), Pacific Internet and StarHub Internet (called StarHub Cable Vision). While SingTel Magix and Pacific Internet provide broadband using ADSL technology, StarHub Cable Vision, SCV (formerly Singapore Cable Vision) offers broadband services via its hybrid fiber coaxial cables with cable modem. Currently, only SingTel s ADSL network provides open access, allowing other ISPs to resell its bandwidth. In July 2000, SingTel began to offer wholesale ADSL to independent ISPs to resell the access. SingNet launched its broadband Internet service, called SingNet Broadband, in September 2000, while Pacific Internet s broadband service was launched in October 2000. Due to technical constraints faced by SCV, it was incapable of allowing competing ISPs to provide broadband Internet services over its cable network. However, with advancement in technology, open access on SCV s cable network has now been made possible. SCV is currently upgrading its network for open access. Although the commercial launch of cable open access for ISPs to offer broadband over the cable network to residential customers happened by December 2002, there are still some issues that need to be sorted out before other ISPs start reselling SCV s cable Internet service. Both SingNet as well as Pacific Internet have expressed interest in reselling SCV s cable Internet service. A major development in the Singapore ISP market during 2002 was the merger of StarHub and Singapore Cable Vision. While StarHub is a full-fledged carrier and brings with it fixed-line, wireless, long-distance and Internet service business units, but with limited access network, SCV is a cable TV operator with access to more than 80 percent of homes and a headstart in broadband access. Together, they make a more formidable competitor to SingTel with a full suite of services. With the merger, StarHub Internet is now capable of competing on an equal footing with SingNet as it is capable of offering broadband Internet service with Singapore Cable Vision s broadband network. The merger resulted in Singapore Cable Vision being a wholly owned subsidiary of StarHub and is branded under the StarHub umbrella (called StarHub Cable Vision). The year 2002 also saw the proliferation of hot spots, or broadband access stations, where users can plug in their notebooks and other Net-ready devices to download or upload information. The growth of hot spots is further fueled by the reduction in the cost of the wireless LAN (WLAN) technology and notebook computers. The convenience of getting access to media-rich content while on the move has prompted many industry players particularly those in insurance, education and healthcare to jump on the broadband bandwagon. In September 2002, Wireless Internet Service Providers (WISPs) collaborated to create a showcase demonstrating their solutions. With a single identity and password, subscribers were able to use hotspots operated by all participating WISPs and receive a consolidated bill from their own ISP. 3 October 2003 3
Over the last year, all the three major ISPs in Singapore have their own wireless broadband service. SingTel has launched both home and outdoor broadband service, called Home Wireless Surf and Outdoor Wireless Surf respectively. StarHub has introduced a wireless broadband service called Wireless Broadband Hub, covering major public venues. Pacific Internet has launched wireless broadband services for smaller enterprises in Singapore. The service, Wireless@Work, targets small office/home offices (SOHOs), small and midsize enterprises (SMEs) and companies wanting more flexibility within the office environment. ISP Profiles Table 1: SingNet Ownership Structure Internet Address Date Internet Launched Total Revenue (fiscal year ending March 2003) Access Types Wholly owned subsidiary of Singapore Telecom http://my.singnet.com.sg July 1994 S$305 million (US$170.4 million), for year ended March 2003. All Internet-related revenue as reported by Singapore Telecom. Public Switched Dial-up modem service with speeds up to 56 Kbps. Telephone Network (PSTN) Integrated Yes, with guaranteed speeds of 64 Kbps or 128 Kbps. Digital Network (ISDN) ADSL-LAN Leased Connections Yes, with speed ranging from 64 Kbps to 512 Kbps. SingNet One-Net Access Service 24 hours dedicated leased-line access to Internet via Singapore ONE at 64 Kbps to 512 Kbps. Also allows choice of 512 Kbps (local access) and 64 Kbps (international access). Frame Relay Service provided by Singapore Telecoms. Mobile Can access e-mails via Wireless Application Protocol (WAP)-enabled cellular phones and general packet radio service (GPRS) phones. Satellite (Very Small Service provided by Singapore Telecom. Aperture Terminal [VSAT]) Number of Points of Presence (POPs) National International Source: Gartner. National coverage with two POPs in Singapore. SingNet has direct links to more than 20 countries via peering with other ISPs and via SingTel-IX direct links worldwide. SingNet has some of the largest cable connectivity to the U.S. at 155 Mbps. Table 2: Pacific Internet Ownership Structure SembCorp Ventures (30.8 percent) and SIM Ventures (10.4 percent); the rest (58.8 percent) is publicly held. Internet Address www.pacific.net.sg 3 October 2003 4
Table 2: Pacific Internet Date Internet Launched Total Revenue (fiscal year 2001) Access Types PSTN ISDN ADSL-LAN Leased Connections Frame Relay Mobile Satellite (VSAT) Number of POPs National International Source: Gartner. September 1995 S$157 million (US$90.5 million) for year 2002. This included the revenue of its five other subsidiaries and affiliates. Dial-upmodemservicewithspeedofupto56Kbps. Network ISDN provides speeds ranging from 64 Kbps to 256 Kbps. Corporate leased-line access with speeds of 64 Kbps to 2 Mbps. Allows receiving and sending of Pacific Internet e-mails on Global System for Mobile Communications (GSM) mobile phones. Three local POPs. Pacific Internet maintains POPs in 29 cities worldwide. Pacific Internet provides direct overseas connectivity to the Internet with 7 X E1 (14 Mbps), 5 X E1 (10 Mbps) to the U.S. and 2 X E1 (4 Mbps) to Japan (with access to the U.S. and Europe via 775-Mbps multiple links). Table 3: StarHub Internet Ownership Structure Internet Address Date Internet Launched Total Revenue Access Types PSTN ISDN ADSL-LAN Leased Connections Frame Relay Mobile Satellite (VSAT) Number of POPs National International Source: Gartner. Wholly owned subsidiary of StarHub. StarHub is owned by Singapore Technologies Telemedia, Nippon Telephone and Telegraph, Media Corporation of Singapore, Singapore Press Holdings and British Telecommunications. www.starhub.com March 1996 (formerly known as CyberWay). Data not available. Dial-up modem service with speeds of up to 56 Kbps. Yes, with speeds up to 128 Kbps. This service is offered by StarHub. Dedicated leased line with speeds of 64 Kbps to 155 Mbps. Allows e-mails to be accessed via WAP and GPRS phones. Two local POPs. National coverage. Relies on StarHub Internet Exchange to provide international connectivity. StarHub IX is a part of NTT/Verio s global IP network. 3 October 2003 5
ISP Table 4: SingNet: Business Internet Managed IP Dial Managed Intranet Security Options Offered Content Management Managed Lotus Notes/Domino IP Voice IP Fax Service Additional Hosting Web Design Electronic Commerce Consulting/Project Management Other Support Number of Support Centers Availability of Support Service-Level Agreements Available Billing Options Yes, managed firewalls. Intranet roaming service Domain name setup International global roaming with ipass and Global Reach Internet Consortium (GRIC) SingNet provides a number of support centers. It has, however, outsourced its onsite customer support. 24 7 technical and customer support. Also 24-hour monitoring of network. SingNet gives customers a credit of one day s service charge if there is an hour or more service downtime experienced within a 24-hour period. For a total of three or more daily outages of service within the same calendar month, a rebate of one month s service charge will be offered. Also, for services such as HiWay Biz Access 24 hours of dedicated leased-line access to the Internet SingNet guarantees 24 hours of uptime or money back. SingNet must also comply with IDA s QOS for Internet access service. Bills can be paid via GIRO (auto deduction from bank account), telebanking, automated teller machines, postal automated machines, self-service automated machines, NETS Kiosks, by check or at any post office. 3 October 2003 6
Table 4: SingNet: Business Internet Pricing Elements Internet Access Intranet Source: Gartner. Dial-Up (Personal/Business and student plans) Access Plan I Monthly fee S$9.50 (personal/business) or S$7.50 (student), 13 free hours. Access Plan II Monthly fee S$24.95 (personal/business) or S$19.95 (student), 35 free hours. Access Plan III Monthly fee S$59.95 (personal/business) or S$47.95 (student), 90 free hours. Access Plan IV Monthly fee S$84.95 (personal/business) or S$67.50 (student), 135 free hours. Unlimited Monthly fee S$100 (for personal/business as well as student plan). Additional usage for Plan I-IV will be charged at S$0.05/min. There is also a onetime registration fee of S$40 for personal/business plans and S$20 for student plans. Personal Broadband Volume-Based Broadband Student Plan monthly fee S$38 for first 250MB (price cap at S$85). Standard Plan monthly fee S$38 for first 250MB (price cap at S$95). Regular Plan monthly fee S$58 for first 500MB (price cap at S$95). Excess usage charge: S$0.295 per MB. Also introduced a promotional offer called JetPack, which gives 512 Kbps connection at a monthly fee of S$19.76 for the first 200MB. Additional usage charged at S$0.3068 per MB. Unlimited plans Unlimited Plan (256 Kbps). Monthly fee S$57.20. Unlimited Plan (512 Kbps). Monthly fee S$78.00. Above unlimited plans for new subscribers only. Individual and packaged tariffs depend on access type and speed. Table 5: Pacific Internet: Business Internet Managed IP Dial Managed Intranet Security Options Offered Content Management Managed Lotus Notes/Domino IP Voice IP Fax Service Additional Hosting Yes, managed firewalls and antivirus mail guard. Yes, PI provides corporate Web hosting and Domain Name System (DNS) hosting. 3 October 2003 7
Table 5: Pacific Internet: Business Internet Web Design Electronic Commerce Consulting/Project Management Other Support Number of Support Centers Availability of Support Service-Level Agreements Available Billing Options Yes, PI provides Internet and intranet consulting. Software Development Network Configuration Installation/Maintenance of hardware, firewall and other security structures Internet advertisements (on PI s home page) Online services Internet Data Center services Internet Telephony services Pacfone 1500 Prepaid calling card E-mail Short Messaging Service (SMS) Enhanced, E-mail Paging, World Fax Domain name setup International roaming with ipass and GRIC Portal site Pacfusion.com Pacific Internet provides both phone and virtual help desk. It has a comprehensive online help clinic. 24 7 technical, customer support and network monitoring. Pacific Internet must also comply with IDA s QOS for Internet access service. Pacific Internet allows users to check their statements of accounts online or change their paying methods online. GIRO (auto deduction from bank account), Internet banking, NETS Kiosks, credit card and cash or check payment at any selected Pacific Internet shops. 3 October 2003 8
Table 5: Pacific Internet: Business Internet Pricing Elements 3 October 2003 9
Table 5: Pacific Internet: Business Internet Internet Access Intranet Corporate Classic Plan Classic Plan (up to 10 users), Classic Plan (up to 25 users), Classic Plan (up to 50 users), Classic Plan (up to 100 users), Classic Plan (up to 150 users). Tariffs depend on customer requirement. Dial-Up Easy Access 2000 S$5.15 for 13 hours. Additional usage is charged at S$3.07 per hour or S$0.78 per 15-minute block (S$2.03 per hour or S$0.52 per 15-minute block for students). Easy Access Plus 2000 S$20.75 for 40 hours. Additional usage is charged at S$3.07 per hour or S$0.78 for 15-minute block (S$2.03 per hour or S$0.52 per 15- minute block for students). Unlimited Access 2000 S$31.15 for unlimited hours. Personal Broadband Volume-Based Broadband Power 1500K Monthly fee is S$41.60, free 250MB usage, additional volume charged at S$0.104 per MB. Onetime activation charge of S$41.55. Time-Based Broadband Express Monthly fee is S$51.90 (S$41.50 for students), free 25 hours usage, additional usage charged at S$3.06 per hour or S$0.78 per 15-minute block. One-time activation charge of S$41.55. Unlimited Broadband Unlimited 512K Monthly fee S$68.54 (promotional fee until December 2003; normal fee is S$78.00). Onetime activation charge of S$41.55. Unlimited Broadband Unlimited 384K Monthly fee S$51.90 (promotional fee, valid for the first six months, the fee being S$53.98 for the next 12 months. Normal fee is S$62.30). Onetime activation charge of S$41.55. Broadband Wireless @ Home Plans Volume-Based Wireless Broadband Power 1500K Monthly fee S$41.60, free 250MB usage, additional volume charged at S$0.104 per MB. Onetime activation charge of S$41.55. Unlimited Wireless Broadband 512K Monthly fee S$68.54 (promotional fee until December 2003; normal fee is S$75.00). Onetime activation charge of S$41.55. Unlimited Wireless Broadband 384K Monthly fee S$51.90 (promotional fee, valid for the first six months, the fee being S$53.98 for the next 12 months. Normal fee is S$62.30). Onetime activation charge of S$41.55. SOHO packages Unlimited SOHO Monthly fee S$99.00. Onetime activation charge of S$72.75. Unlimited SOHO Wireless Monthly fee S$99.00. Onetime activation charge of S$72.75. Broadband Wireless @ Work Plus Package Unlimited Wireless Broadband Plus Tariff depending on customer requirement. Individual and packaged tariffs depend on access type and speed. 3 October 2003 10
Table 5: Pacific Internet: Business Internet Source: Gartner. Table 6: StarHub Internet: Business Internet Managed IP Dial Managed Intranet Security Options Offered Content Management Managed Lotus Notes/Domino IP Voice IP Fax Service Additional Hosting Web Design Electronic Commerce Consulting/Project Management Other Support Number of Support Centers Availability of Support Service-Level Agreements (SLAs) Available Billing Options Yes, firewalls and Internet security audit service. Internet Gateway Service Server colocation International global roaming through membership of ipass and GRIC Domain name setup Security services CliQLink fax and voice mail integration service via a single number. Allows users to make and receive real-time phone calls anywhere in the world through the Internet. Web Advertising Virtual e-mail One customer/technical support team. 24 7 technical and customer support. Also allows inquiry via telephone, fax and e- mail. StarHub Internet Gateway service provides SLAs which cover network availability and latency. StarHub Internet must also comply with IDA s QOS for Internet access service. Payment via Autophone, Internet banking, kiosks, credit card, cash, GIRO, check and post. 3 October 2003 11
Table 6: StarHub Internet: Business Internet Pricing Elements Internet Access Intranet Source: Gartner. Dial-Up The Infinity Plan Unlimited usage, monthly fee S$15.00. Broadband Volume-Based Wireless Broadband Executive Plan Monthly fee is S$50 for new customers and S$25 for established ones, free 20MB usage, additional volume charged at S$0.003 per KB for new customers and S$0.0015 per KB for established customers. Volume-Based Wireless Broadband Basic Plan Monthly fee is S$10 for new customers and S$5 for established ones, free 2MB usage, additional volume charged at S$0.003 per KB for new customers and S$0.0015 per KB for established customers. Both these plans have a onetime setup cost of S$10 (waived for established customers). Unlimited MaxOnline (cable service) Monthly fee is S$93. Onetime setup cost of S$50. Individual and packaged tariffs depend on access type and speed. Strengths and Limitations SingNet Strengths SingTel owns and operates SingTel Magix, SingNet and SingTel IX. SingNet is capable of leveraging synergies and capabilities across the group. SingTel is a carrier, so it owns capacity, which reduces its costs vs. independent ISPs. They also own last mile, crucial for broadband access. As the largest ISP, broadband access player and cellular player, it s in a best position to offer WLAN as an extension to these services, giving it a stronger service differentiator. Limitations New entrants into the market would cannibalize SingNet s corporate business. Pacific Internet Strengths Pacific Internet is the only local ISP with strong regional presence. Pacific Internet has licenses in six different Asian countries, including Hong Kong, Australia, Thailand, the Philippines and India. It is difficult for its competitors to replicate the footprint it currently covers in Asia. Pacific Internet is one of the largest ISPs by geographic reach. Equipped with a facilities-based operator license, Pacific Internet is capable of offering a range of telecommunications services in Singapore. It has begun providing IP telephony calls and prepaid calling cards. 3 October 2003 12
Limitations Failure to increase its revenue may hinder the growth and development of Pacific Internet s business, especially with its huge investments in its regional expansion plans. Unlike both SingNet and StarHub Internet (after its merger with SCV), Pacific Internet does not own the last mile to end customers. StarHub Internet Strengths Wholly owned by StarHub, StarHub Internet is capable of leveraging its parent s services and infrastructure to offer its services. After SCV and StarHub s merger, StarHub Internet is capable of leveraging on SCV s network and providing broadband Internet access. Limitations StarHub Internet is the only ISP still offering free Internet access, which is a drain on its resources. Insight Despite the overall slowdown in the economy, year 2002 was a period of strong growth for Internet. This segment was boosted mainly by the growth in broadband as well as corporate Internet. Broadband access in Singapore is expected to accelerate during the next 18 months, driven by price, and then flatten (as the market rapidly matures) as users here become more particular about the speed of their access. This would also be driven by the fact that content on the Internet is becoming more graphical, with large multimedia attachments and the availability of more online activities that require faster speed for smoother viewing. ISPs in Singapore will continue their focus on broadband strategies as this is projected to be the fastgrowing industry segment. ISPs will also concentrate on expanding strongly in the corporate market, which gives bigger margins. Coupled with the reduction in international telecommunications charges (due to the landing of the new submarine cables), which has so far been a key capital expenditure for ISPs, the ISPs will also increase their cost savings, thus improving their profitability. Chee-eng To Andrew Chetham 3 October 2003 13