Published April 4, 2009

StarHub lands second NBN tender

It will pump in $100m to set up new Internet unit without having to raise funds

By WINSTON CHAI

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HAVING lost the first bout to a SingTel-linked group, StarHub has emerged triumphant in the contest to be the wholesaler of bandwidth on Singapore's upcoming ultra-fast cyber highway.

MS YONG Pricing can't be raised for the first six years but can be brought down, so consumers are the winners

Singapore's second-largest operator yesterday beat out competing bids from rivals SingTel and MobileOne, as well as a company called IntelliNet, to land the government's Operating Company (OpCo) contract.

This is the final tender under the government's plan to build the Next-Generation NBN (National Broadband Network), a new nationwide fibre optic backbone capable of delivering speeds at least 10 times faster than today's.

After winning the deal, StarHub will set up a new unit called Nucleus Connect to be the OpCo - the company tasked to re-sell Internet bandwidth through the new broadband pipes.

StarHub will pump in $100 million over the next few years to set up its new Internet unit. The amount will be funded from StarHub's cash stockpile and there is no need to raise funds for the project, StarHub spokeswoman Jeannie Ong told BT.

The government will also extend a subsidy of $250 million to Nucleus Connect, which is expected to incur capital expenses of about $40 million a year over the next 25 years.

The creation of the new StarHub subsidiary is mandated by the Infocomm Development Authority of Singapore (IDA) to prevent unfair competition through practices such as preferential pricing for affiliated retail service providers (RSPs).

In StarHub's case, Nucleus Connect is required to have a separate board of directors as well as a different brand identity and office location from its parent.

'Nucleus Connect will be operationally separated from all RSPs. With such an industry structure, RSPs can obtain wholesale bandwidth services from Nucleus Connect on a fair and non-discriminatory basis,' said IDA chairman Yong Ying-I.

One of the key factors behind StarHub's victory was its 'attractive' wholesale pricing, she told reporters at a media briefing yesterday. For example, the firm will charge companies $21 a month for a 100Mbps (megabits per second) residential Internet connection and $121 for a 1Gbps (gigabit per second) link. A 100Mbps non-residential connection is priced at $75 a month.

While the eventual end-user pricing will be higher after factoring in the service provider's costs, it is still likely to be cheaper than the premium Internet access plans available today. Even with its ongoing promotion, StarHub is charging around $87 per month for a 100Mbps plan using its current broadband network.

'The prices (of broadband plans) may be similar but the bandwidth will be totally different (with the Next-Gen NBN),' Ms Yong stressed.

She added that Nucleus Connect's proposed wholesale pricing cannot be raised for the first six years but it can be brought down, so consumers have 'everything to gain'.

The+ first government tender for the Next-Gen NBN project was awarded last September to OpenNet, a consortium led by Canada-based Axia Netmedia and incorporating three other members - SingTel, Singapore Press Holdings and Singapore Power Unit SP Telecom.

This Network Company (NetCo) contract, which came with a $750 million government grant, is for laying the extensive fibre optic links needed to wire up every local home and office.

With the second building block now in place, M1 stands as the only local operator without a stake in either Next-Gen NBN contract. It joined hands with StarHub in the initial NetCo bid, but the two turned from allies to foes in the second tender.

Despite losing on both counts, M1 has reaffirmed its intention to branch into providing broadband services when the new fibre optic network is completed. 'Having invested resources into the submission of our proposal for the OpCo, we are obviously disappointed with this outcome. Nevertheless, M1's plan to be a retail service provider remains on track and we look forward to working closely with the appointed OpCo,' said M1's acting chief executive Karen Kooi.