Regulator taking light touch on fast-moving telco sector

Singapore

CONSOLIDATION is inevitable in the fast-moving telecom sector, says Aileen Chia, director-general of telecoms and post at the Infocomm Media Development Authority (IMDA).

And, while the regulator has taken a light-touch approach to over-the-top (OTT) media players - for now, at least - it is also keeping an eye on other industry developments, such as the use of data and algorithms.

The IMDA's attention is squarely on the issue of competition in the telecom and media industries, amid plans for a joint code to govern both. Its public consultation on the "converged code" was launched in February and will close on May 15 (see amendment note).

Updating Singapore's rules would be a timely move, Ms Chia, the IMDA's deputy chief executive for policy, regulation and competition development, told The Business Times.

"These are the two key impetuses: the change in technology and the shifts caused by convergence of the markets," she said, of the review.

One trend that the IMDA noted in its consultation paper was service bundling, which "may give rise to competition concerns in certain situations when implemented by an entity with significant market power".

Service bundling "can be observed across industries, and is no longer unique to telecommunication and media markets", it added: "For example, Grab has evolved from a company providing a platform to match ride hailing service between drivers and riders, to providing payment solutions, and food delivery services."

Rising competition from new digital services and platforms was also flagged as a key market development.

Media providers such as Netflix, as well as call services such as Skype, are not subject to the competition code, even though the IMDA recognises them as rivals to the telcos.

That's because the regulator would need to evaluate alternatives to these products, which is not part of the ongoing review, said Ms Chia. "We will have to look at substitutability (of products) for consumers, in terms of their behaviour: Do you substitute the pay-TV packages with OTT packages if there is a price increase?"

Still, given stiff competition and the rise of new OTT apps, the IMDA plans to no longer assume out of the gate that a dominant licensee's new services are also market-dominant.

Also at stake are "more forward-looking issues that some of the competition authorities overseas are looking at", as Ms Chia pointed to how new digital tools, like data and algorithms, can shape regulators' approach to issues such as predation.

The IMDA's consultation paper warned that a firm with free digital services "may engage in predatory innovation - investing in innovation that inhibits competitors' ability to compete effectively". Or, algorithms could be used for price collusion.

Even though data and algorithms are not covered by the proposed tweaks, the IMDA has said that it is watching this space closely.

Concerns include whether their use could entrench a company's market presence "because they enhanced the economies of scale and the economies of scope", Ms Chia said.

"Early movers into the market might have very enduring market staying power because of the use of data technology and algorithms."

Yet, on why action has not yet been taken, she said that most competition authorities are in wait-and-see mode for how the market shakes out.

"We are taking a similar cautious approach, as we also recognise that the emergence of innovative technology will have a positive impact for the industry in general," she added.

Of late, the telecom market here has been noticeably crowded, on the entry of mobile virtual network operators as well as network operator TPG.

But Ms Chia would not say directly whether the regulator had always expected the competition to get this fierce. "The market will always adjust and evolve - especially for a technology sector like ours."

In fact, the IMDA had decided to open the fray to a new network operator in 2016, on the grounds that the move would "enhance innovation and competition in the mobile market".

Asked if there are now too many cooks, Ms Chia said it was "not an easy question to answer" and said the IMDA must let the market take its course.

"There will always be consolidation, because there will be companies who can't keep themselves competitive, can't innovate further, and they have to close," she told BT.

"For instance, will all retail service providers for broadband, more than 20 of them, survive in the long term?

"Some may not. Market exits are part and parcel of competition in the telecom markets. The important thing for us, as regulator, is to have rules that protect the consumers."

Amendment note: An earlier version of this article incorrectly stated that the public consultation will close on April 17. The closing date has been extended to May 15, with the IMDA citing industry requests for more time to submit views and comments.