In a surprise development, the Singapore Government has decreed the structural separation of new national broadband network infrastructure from the operating company that will operate its switches and routers. It also said it would provide up to S$750m of funding for the network which it is putting up for tender.
At a twilight press conference yesterday, the Singapore government issued a Request for Proposal for the passive infrastructure. Under the RFP, a Network Company, or NetCo, will be selected to design, build and operate Layer 1 passive infrastructure that will carry the NGN traffic, expected to range between 100Mbps and 1Gbps to the end user, with a minimum upload speed of 50Mbps.
A separate Layer 2/3 Operating Company or Opco will deploy the electronics such as switches and routers to manage the flow of traffic on the passive infrastructure. This same entity will offer wholesale broadband access to downstream Retail Service Providers, or RSPs. There must be operational separation between the Opco and the RSPs.
This effective double layer of separation appears to be the most extreme requirement of any NGN regulatory regime in the world and will likely prove controversial with those in the industry who say that separating out network design from the operator of its electronics is likely to lead to massive inefficiencies and friction.
Minister for Information, Communications and the Arts, Dr Lee Boon Yang said he expected the network to be complete by 2015 with 50% coverage by 2012.
SEPARATE OPCO COMPANY: A separate RFP for the Opco company will be issued by the second quarter of next year.
"A Next Generation Broadband Network will contribute to Singapore's continued economic success. It is also critical for the Next Gen NBN to provide effective open access to downstream operators. This will create a more vibrant and competitive broadband market. As a policy, we have therefore decided to adopt separation between the different levels of the Next Gen NBN to achieve effective open access."
"The RFP to construct the network will therefore provide for structural separation of the passive network operator from the downstream operators. If necessary, the Government is also prepared to consider legislation to achieve such effective open access for downstream operators in the next generation broadband market," said Dr Lee.
"The Next Gen NBN tender will require that the appointed NetCo be structurally separated from downstream operators and vice versa to be consistent with the policy objective of effective open access. The successful bidder in the RFP would have met the requirements of effective open access."
The RFP, which is expected to close on 25 March 2008, will be evaluated based on four key criteria:
1. Attractiveness of business plan to industry
2. Quality of network infrastructure
3. Level of Government grant
4. Financial proposition and strength of bidder
These criteria will be weighted with the first representing 43% of the importance of the evaluation criteria.
The Infocomm Development Authority of Singapore expects to award the winning bid in the third quarter of 2008.
Singapore's NGN policy development has been underway for one year now.
It has already published a list of 12 prequalified bidders but indicated last night this could be expanded. It said if new bidders are qualified or new consortium leads are appointed, the IDA will extend the closing date to 5 May 2008, or by about 40 days, in order to conform to government procurement guidelines
The 12 existing bidders include Singapore Telecom, Starhub, Deutsche Telekom, NTT, Hong Kong Broadband Network, BT, Axia of Canada and various consortia representing a mix of vendors, private equity investors and carriers.
IMPLICATIONS: The most obvious implication of the policy is that it might force the likely frontrunner for the tender, incumbent Singapore Telecom, to undertake a break-up of its domestic operation.
Singapore Telecom itself appears to believe this was the original intention, with an Australian document prepared by Optus-led consortium G9 in June opining "the Singapore Government has created a competitive environment for the construction of a national broadband network by calling for collaborative interest from the incumbent, and other potential infrastructure providers, for the construction and operation of the network. This project began, in part, from perceived delays by the incumbent in investing in high speed broadband infrastructure and also a desire on the part of the Singapore Government to lead other countries in investing in broadband infrastructure."
"To achieve this, the Singapore Government has created a competitive tender process and structure for the separation of network construction, operation and management of a national broadband network. This has created a credible threat of entry in the customer access network that will provide very strong incentives for the incumbent to offer reasonable terms of access and to proceed with broadband infrastructure investments."
-Grahame Lynch