Introduction

On 7 July 2015, the Info-Communications Development Authority of Singapore (“IDA”) issued a public consultation to seek further industry feedback in relation to the proposed framework pertaining to the upcoming spectrum allocation exercise and the introduction of a new entrant in the mobile market in Singapore (“Public Consultation”). This follows the IDA‟s first public consultation on Proposed Allocation of Spectrum for International Mobile Telecommunications (“IMT”) and IMT-Advanced Services and Options to Enhance Mobile Competition, which was released on 22 April 2014.

The Public Consultation may be accessed at:

http://www.ida.gov.sg/Policies-and-Regulations/Consultation-Papers-and-Decisions/Store/Second- Public-Consultation-on-Proposed-Framework-for-the-Allocation-of-Spectrum.

The deadline to respond to the Public Consultation is 12 August 2015.

Proposed Framework

The IDA‟s goal is to establish Singapore as a „Smart Nation‟ underpinned by a high speed, trusted and resilient infocomm infrastructure, comprising fixed and wireless networks. To ensure the efficient allocation of Singapore‟s spectrum resource while seeking to enhance the competitiveness of the local mobile market, and based on responses from the first consultation, the IDA has put forward the following proposals for consultation:

Facilitation of New Entry

Due to the strong interest from potential new entrants and the overall benefits brought about from greater competition and vibrancy in the mobile market, the IDA has proposed to structure the spectrum allocation exercise to facilitate the entry of a new Mobile Network Operator (“MNO”) by means of the following proposed measures:

  1. Setting aside 60 MHz out of the 225 MHz of spectrum currently proposed for allocation in a separate spectrum auction where only qualified potential new MNOs are eligible to bid;
  2. Setting a lower reserve price of S$40 million – 60 per cent lower than the normal reserve price of S$100 million - for the proposed spectrum set-aside;
  3. In terms of the auction format for the spectrum set-aside, introducing either a simple ascending round auction or a single-round second price sealed bid auction;
  4. Requiring incumbent MNOs to provide interconnection and mobile number portability at reasonable terms within a reasonable timeframe to the new MNO upon request, and to negotiate in good faith with the new MNO to provide access to common antenna systems, while complying with existing regulatory obligations to ensure optimal use of the spectrum they acquire; and
  5. Requiring the new MNO to comply with rollout deadlines of 18 months for nationwide coverage (except underground MRT stations/lines and road tunnels), and 60 months for underground MRT stations/lines and road tunnel coverage upon adoption of the proposed spectrum set-aside, while complying with the relevant regulatory frameworks governing mobile networks and services under the following arrangements:
    1. Quality of Service standards: Requirements to be imposed on the new MNO in phases after the nation-wide rollout deadlines; and
    2. Telecom Service Resiliency Code and audit framework: Requirements to be imposed a few years after the nation-wide rollout deadlines.

The IDA has also proposed to facilitate the entry of Mobile Virtual Network Operators (“MVNOs”) by aiding the negotiations for “thick” MNVOs. The IDA believes that “thick” MVNOs, which have more control over their operations, customer databases and services to be offered, can bring about innovative or niche services to benefit consumers on a larger scale and compete in a more sustainable manner, compared to “thin” MVNOs. The proposed key negotiation principles for “thick” MVNOs cover aspects relating to the technical and commercial Service Level Agreements, as well as the price structure and level that MNOs offer to MVNOs.

Allocation of Spectrum Bands

In view of the increasing demand for mobile data consumption, the IDA has proposed allocating a total of 225 MHz of spectrum from the 700 MHz, 900 MHz (including the Extended GSM (“EGSM”) band), 2.3 GHz and 2.5 GHz bands for the next spectrum allocation exercise to be conducted in early 2016.

Other than the 60 MHz under the proposed spectrum set-aside for the new MNO as mentioned above, the rest of this spectrum shall be open to all players in the mobile market. Outside of the proposed spectrum set-aside, the IDA also proposes to set the reserve price of the spectrum in the 700 MHz and 900 MHz bands at S$20 million per 5 MHz pair, and that of the 2.3 GHz and 2.5 GHz bands at S$5 million per 5 MHz block. Furthermore, the IDA has proposed that the long-term spectrum rights for these bands last between 12 to 16 years. To facilitate the allocation, the IDA is considering adopting a „Clock Plus‟ auction format for the general spectrum auction, and imposing caps and regulatory obligations to ensure optimal use of the spectrum.

The IDA‟s proposals in relation to the assignment of the available spectrum in each band are as follows:

  1. 700 MHz band: The 700 MHz band is the ASEAN region‟s digital dividend from Analogue Switch Off (“ASO”). Singapore and our neighbouring countries are targeting to make available the full 700 MHz band for mobile broadband services from 2018 at the earliest. In the event of a delay in the ASO timeline, the IDA has proposed building in mechanisms to allow the delay of the commencement date, expiry date and the payment due date of the 700 MHz spectrum right.
  2. 900 MHz band: The IDA has decided to allocate the 900 MHz band to be used for mobile services in accordance with international trends, with spectrum rights commencing on 1 April 2017. This ensures that even if there is a delay in the deployment of the 700 MHz band, the new MNO can nevertheless commence rather than wait, thus allowing for more competition sooner. For the EGSM band, based on the timeline on Indonesia‟s migration of their EGSM band to minimise cross-border interference, and the commencement of Singapore-Malaysia High Speed Rail, the IDA is proposing to allocate spectrum in the EGSM band under a short-term spectrum right on a First Rights of Refusal basis, and where possible, extend it to a long-term right to either the spectrum right holder or other qualified participants at the winning bid price.
  3. 2.3 GHz and 2.5 GHz bands: The IDA has revised the spectrum available in the 2.3 GHz band due to constrained frequencies and the „half-band‟ sharing arrangement. As for the 2.5 GHz band, to prevent or minimise network interference, the IDA is proposing the use of a guard band; the possible adoption of suitable restriction levels for Block Edge Mask; synchronisation of the frequency, phase and time components of the networks; or any other suitable mitigation measures. Alternatively, the IDA is proposing that MNOs who are allocated long-term spectrum rights should coordinate with neighbouring countries‟ operators to address the potential co- channel interference. Spectrum rights in both bands will also commence on 1 April 2017.

Finally, the IDA has also made the following suggestions for other spectrum bands (800 MHz and 1.4 GHz):

  1. 800 MHz band: To re-farm the 800 MHz band, the IDA proposes to adopt a suitable band plan depending on the impact on existing users of the band. In addition, to avoid interference with such services, the IDA is proposing to adopt a phased approach for re-farming and migrating current users of the band to facilitate the re-farming.
  2. 1.4 GHz band: Given the ongoing study of the 1.4 GHz band on its potential use for mobile services, the IDA is proposing to designate it for wireless broadband in Singapore in the longer term, and to allocate the band for trial, temporary use and/or commercial services in the interim period.

Comments

In going ahead to put forth the proposed measures in the Public Consultation despite incumbent MNOs‟ comments on the competitiveness of the mobile market, IDA clearly recognises that there is likely to be scope for greater competition through lower prices and importantly, service innovation through innovative mobile plans for example, in the market.

In relation to facilitating the entry of a new MNO, the lower reserve price is a reflection of the IDA recognising that new MNOs may not have the financial resources to participate and compete on a level playing ground in the same spectrum auction with the incumbent MNOs to obtain the spectrum required, given the significant upfront capital investments that a new entrant will need to put in to deploy nationwide services for consumers, as well as the other entry barriers that it will face in the context of the mature market in Singapore. The combination of low and high frequency spectrum that has been allocated under the proposed spectrum set-aside is designed to allow the new MNO to achieve both greater service  coverage and better  data capacity to  meet the  intensive mobile  data requirement of consumers. This should allow the MNO to achieve some capex efficiency in providing nationwide mobile coverage and to set up a network more quickly. With more incentives being offered by the IDA this time round, it is more likely that a fourth player may emerge in the upcoming auction and potentially shake up the mobile services market by bringing to the table innovative services and more competitive offerings for end-users.

It is worth noting, however, that whilst the IDA has introduced better terms in a bid to attract new entrants, it has not adopted certain suggestions raised by interested entrants during the first consultation, such as MyRepublic‟s proposal on imposing new obligations on Radio Access Network (“RAN”) sharing, or Consistel‟s submission on introducing same level and same cost of access to the international gateways and/or backhaul as the incumbent MNOs. At the same time, certain conditions that may further decrease the barriers to entry, such as mandated national roaming or relaxed coverage requirements, have not been included in the proposal to level the playing field for new entrants. In this respect, the IDA has noted that there are already regulatory frameworks in place which, amongst other things, govern the provision of building access and space for mobile deployments and the sharing of infrastructure in locations where there is limited deployment space.

This follows from the IDA‟s view that any regulatory intervention has to be proportional and should not dis-incentivise incumbent MNOs or the new MNO from investing in their network deployments. The new MNO must be able to sustain its business and compete on its own standing, after the initial facilitation measures. Nonetheless, given the mature state of the Singapore mobile market, and the fact that many consumers are currently locked into long-term contracts with the incumbent MNOs and may be deterred from switching to a new MNO given the switching costs and termination fees, it is arguable that perhaps more needs to be done to allow the new MNO to establish a foothold in the Singapore mobile market.

The IDA has also taken the view that the appropriate and balanced policy approach to bring about the benefits and sustainable competitive effects of new entry is to facilitate one new MNO to enter the market. Based on the IDA‟s study, the entry of two or more new MNOs could result in a fragmentation of spectrum holdings among the new MNOs, which is not conducive to providing high-speed mobile broadband services to meet the increasing consumer demand, as well as a smaller market share for each player, which is unlikely to be viable for the new MNOs in the next few years, given the current size of the Singapore market. This suggests that the IDA is taking a conservative and phased approach towards increasing the number of players in the market, seemingly counter-intuitive to facilitating greater competition. Yet, it reflects the ex-ante regulatory approach adopted, whilst leaving competition in the mobile market to take its course once entry has been allowed, an ex-post approach. There are clearly pros and cons to such an approach.

Last but not least, the IDA‟s publication of negotiation principles to guide negotiations between “thick” MVNOs should aid potential MVNOs, who are generally in a weak bargaining position vis-à-vis the host MNO. While the scope of the negotiation principles, as contained in the consultation document, may be too broad to provide real guidance and support to MVNO-MNO discussions, the IDA‟s statement that, in case of dispute, it may mediate between the MNO and the “thick” MVNO using these negotiation principles as the point of reference, may give MNOs more impetus to consider and apply the spirit of these principles in their discussions with potential MVNOs.

Concluding Words

The IDA‟s proposals in the Public Consultation to ensure optimal use of Singapore‟s spectrum and create a more vibrant wireless and mobile landscape in Singapore are, together with the IDA‟s other initiatives such as the Heterogeneous Network (HetNet) programme,  part of  the IDA‟s vision of establishing Singapore as a „Smart Nation‟.

Whilst potential market players have generally expressed support for the proposals, they have also noted that the IDA can do more to put in place a framework that can bring about sustainable innovation and competition in the market. Given the implications of the proposed framework on industry players and members of the public, it is pertinent that the relevant parties review the IDA‟s proposals carefully and provide their feedback to enable the IDA to adopt a balanced and appropriate policy approach.