Your new favorite monopoly

John C. Tanner
10 Aug 2009

The telecoms sector is about to come full-circle on the monopoly front. Sort of. The 1990s oversaw massive efforts across the region by governments to privatize and liberalize their telecom sectors and open them up to competition. Now, in the latter years of the first decade of the 21st century, some government regulators keen on seeing their telecoms infrastructure advance to the next generation with ubiquitous broadband are reconsidering the idea of not only investing directly in the telecoms sector in the guise of national broadband network (NBN) projects, but also doing so in a way that would create facilities-based monopolies.

Granted, the current handful of NBNs is hardly a return to the days of state-run monopoly telcos. But they do indicate that governments not only see universal broadband access as a ticket to economic growth and job creation, but also have concluded that market forces alone can't make broadband truly ubiquitous.

Consequently, NBN projects were front and center at the imbX conference sessions at CommunicAsia this year, with ITU deputy secretary-general Zhao Houlin urging governments to get more proactive in closing the broadband gap with public/private partnerships to develop NBNs.

"Governments don't have the budget to do this themselves, and operators need more commercial incentive without sacrificing profitability, so partnering can help both sides achieve the benefits of broadband," Zhao said.

The story so far
The Asia-Pacific region already has several prototype public-private NBN initiatives under way. Zhao specifically cited the Malaysian government's broadband initiative with incumbent Telekom Malaysia.

"Malaysia wants to boost broadband penetration to 50% by 2010, with competition based on services, not infrastructure," explains Zaid Hamzah, senior VP of regulatory, legal and compliance at Telekom Malaysia (in which the government is still an investor). "The government is a co-investor in this project. Phase I will see $3.2 billion investment, $2.5 billion from TM and $284 million from the government."

A more elaborate example is the Infocomm Development Authority of Singapore's S$1 billion NBN project, which involves a three-level structure. OpenNet (whose backers include SingTel, Singapore Power, Singapore Press and Canadian-based Axia NetMedia) will roll out the dark fiber for the 100-Mbps network, while StarHub-owned wholesale provider Nucleus Connect will buy fiber from OpenNet to sell to retail service providers (RSPs).

According to OpenNet CEO Tan Kah Rhu, OpenNet's shareholders will spend more than S$100 million on the rollout to cover 95% of the island by 2012. The IDA is committed to contribute S$750 million to the network. NBN-based services are set to go commercial in the first quarter of next year.

Another high-profile NBN undertaking in Australia is still a work in progress. The Rudd government initially intended to tender out its ambitions for an NBN to the private sector, but in April this year, the government rejected all tender submissions as "not offering value for money" and formed its own venture, NBNCo, to build a FTTH network that will cover 90% of the country in eight years. The NBNCo is majority-owned by the government and will be financed mainly by the Building Australia Fund and the issuance of Aussie infrastructure bonds, as well as private sector investment.

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