Singaporean upstart MyRepublic got a glory run in the popular press yesterday with its CEO having some fun bashing the NBN’s use of fibre to the node for half of its network. A four letter word was used and the media ran with it, predictably free of any context or any evaluation of MyRepublic\’s substantial self-interest in pushing such a line. MyRepublic is the kind of carrier that NBN FTTH fanbois love. It is a disruptive carrier taking on the Singaporean old guard of SingTel and StarHub, offering ‘gigabit’ services over that country\’s NBN. Its business model is openly based on offering services over government-funded NBNs—it does the same in New Zealand—and it positions itself with slogans such as “small is mighty” and “celebrate change.”
What do the fanbois like most about it? It offers its premium gigabit service for under S$50 (about A$50) a month. So why was its CEO dropping four letter words over the Financial Review yesterday? A simple reason. A self described small, mighty carrier cannot match the larger telcos for marketing dollars. So it throws the vaudeville switch and goes controversial, Virgin and Ryanair style.
It has made great hay in Singapore slagging off its (much larger) competitors for apparently resisting the push to next gen NBN and attempting to milk legacy assets. It goes on about their ‘heavily contended’ broadband services and ‘old’ ways of thinking.
But MyRepublic has a little secret: there is no way it can offer gigabit services for under S$50 without adopting the same very contention policies it criticises in others. A gigabit broadband service is very much like a red sports car that can do 250km/h in theory but is only driven in 60km/h zones.
A P2P passive fibre service in Singapore is priced at S$3500 per month from Netlink Trust, the entity that provisions the Singapore NBN.
It offers passive lines contended at between 1:16 and 1:24 (GPON) for considerably less, beginning from $15 or basic residential connections and $50 for non-residential. Right now there is actually little one can do with a residential connection that requires more than a score or so of megs of committed bit rate. Gigabit services are, literally, the flashy red sports cars of telco.
Of course, there are a few other secrets behind MyRepublic’s business formula, which so far has netted it 5% of the Singapore market, or around 30,000 connections. Singapore is the self-described tiny red dot, with a population density of 8,000 people per square kilometre mostly in massive MDUs. There are about 1.2m households and businesses almost entirely housed in a mere 30,000 buildings (compared to the 13m premises to be covered in Australia).
The next gen NBN was funded with S$750m of government money, with the subsequent entity sold at a substantial discount to a SingTel-linked company. Thus, nominal shared fibre connection prices do not necessarily reflect their real cost of provision.
Unlike Australia, Singapore’s NBN provides only a passive infrastructure. RSPs must set up their own “actives” or buy from the “active” provider of last resort: Nucleus Connect. MyRepublic uses its own, something it cannot do in Australia. But Nucleus’ pricing is quite informing: its actual “active” wholesale pricing for a gigabit product with 250Mbps committed information rate is around $120-$140 depending on service quality: nearly 3 times MyRepublic\’s retail rate for the same product. Each additional 5 megabits is priced at between $1 and $6 depending on service quality.
Unsurprisingly, a quick look at Singapore\’s equivalent of Whirlpool— Hardware Zone—is quite revealing. A thread devoted to MyRepublic service quality has foundation gigabit customers complaining that their peak speeds have fallen from 400-700Mbps in the early days to as low as 30-40Mbps now the network is loaded. MyRepublic’s big marketing push is now into mobile: indeed, it seems that its strategy is to use fixed broadband as a loss leader to be supplemented with bundled margin-generating products in the future.
That’s all in the market with effectively the most desirable economics for broadband in the entire world. Singapore’s population density is only exceeded by two tiny micro-markets: Macau and Monaco who between them are just 32sq km in size and thus irrelevant to a national comparison.
Let’s contrast with Australia where NBN has a universal mission to provide broadband to everyone, everywhere: something it originally planned to do with four technologies (satellite, LTE, P2P FTTH and GPON FTTH) and to which it has now added two more (FTTN and HFC). Something it has to do with a positive rate of return under its investment mandate.
The geographic market size for NBN Australia is 7.7m square kilometres. Singapore’s is 700. That’s right. Singapore is 0.01% the size of Australia.
Even the settled parts of Australia are considerably less dense than Singapore. The city-state’s population density is 8,000 people per square kilometre. That is an AVERAGE. In Australia just 22 square kilometres of the nation’s seven million sq km mass have a population density that matches or exceeds the average density of Singapore. As the map here shows, most of Sydney and Melbourne have population densities of less than 500 people per square kilometre. As we all know, low densities means more civil works which means much more cost.
A 1000Mbps service contended at say 1:50 would cost $550 per month for the RSP to source. A 100Mbps service was priced at $38 per month and contended at the same 1:50 rate with CVC would have costed $78 to source. These are prices that, remember, were based on heroic and now discredited assumptions about network rollout and take-up. They shot low of reality.
So they can only come down if you reduce the network rollout cost (and, indeed the CVC has now been reduced to $17.50 and AVCs for lower speed increments are much cheaper and essentially match DSL).
The use of FTTN and HFC is designed to keep those NBN build costs down. The proof of the pudding will be, of course, in the delivery.
But with HFC supporting gigabit at the node and G.Fast and vectoring promising a minimum of a 100mbps when nodes are distributed at 500m increments it is clear that the current path is a legitimate one. 80% of all Australian premises are ALREADY within 500m of a existing Telstra pillar. Many of them are much closer and will get hundreds of megabits. Everyone should be able to get a bare minimum of 25Mbps and generally 50Mbps in the lowest decile. It\’s fair to say that the Turnbull NBN will pack a punch, patchworked or not.
Sorry but the idea that MyRepublic could barge into Australia and profitably offer low contention gigabit or even unlimted FTTH-derived 100Mbps plans for under $50 or, for that matter, $80 under any style of NBN tech mix— ALP or Coalition—can only be described in one word. Bulls**t.
You can have pervasive FTTH. Or you can have affordable broadband. But you cannot have both.
*****Grahame Lynch is the founder of CommsDay and the former editorial director of Telecom Asia, Telecom China, America\’s Network and Telepress Latin America.