*IP services battle rages between key Asian hubs (see bolded sections on Singapore Telecom strategy)
By Nick Ingelbrecht
21 June 1999
IP services have become the latest battleground between Asia's telecoms hubs, with
Singapore Telecommunications Ltd. launching a major initiative to secure corporate
customers' regional traffic.
On 7 June the carrier rolled out an IP virtual private network (IP-VPN) service as part of a
40-million-Singapore-dollar (US$23.4 million) package of enhancements to its "ConnectPlus"
portfolio of products for corporate users. The company said it plans to double the size of its
S$100 million investment in corporate network infrastructure to date within the next two
years, the lion's share of which will be spent on IP facilities and bandwidth.
The new initiative comes hard on the heels of a spate of recent IP strategy announcements
from regional rivals such as Hongkong Telecom - now Cable & Wireless HKT - which last
month unveiled its own strategy of becoming Asia's "leading Internet and e-commerce"
center, as well as announcements by Japan's major carriers of plans to build core IP
multiservice networks.
Users have welcomed the carriers' new focus on corporate Internet products, but many have
warned that they will hold back on spending until quality-of-service issues are resolved.
"We have guaranteed bandwidth through leased lines, and when IP services can commit with
a similar set of guarantees, then that is the time most of the corporate users will look at them,"
said Alex Yu, executive council member of the Hong Kong Telecom Users Group (HKTUG).
Despite corporate users' reservations, Singapore Telecom is hoping its new Internet
investments will yield early returns. Last year, frame relay and leased circuit services
accounted for about 80% of Singapore Telecom's S$635 million revenue from data services.
By the end of 2000, the company estimates that leased circuits, IP and frame relay services
will each account for one third of its revenue from corporates.
"It is the start of what is going to be a core strategy for SingTel. The evolution is from circuit
switched to IP, and this is the first step to identifying how that will work out," said Craig
Racine, regional telecoms analyst for ING Barings, in Hong Kong.
Singapore Telecom is also under pressure to get its Internet strategy in place before its new
rival StarHub - backed by Japan's NTT and U.K. carrier BT - launches its range of IP-based
services next year.
"SingTel has a window until April next year to pull their finger out and capitalize on the new
IP framework. If they don't, they will find StarHub comes out with this [same strategy]. This
should be the first of a number of announcements over the next six months," said Racine.
Other analysts agree. "I think the timing [of SingTel's IP-VPN service] has to be a little bit
ahead of StarHub. It is to ensure that the corporate world knows they have everything in the
product portfolio," said Amala Menon, telecoms analyst with Internet consultancy IDC
Asia/Pacific, Singapore.
Singapore Telecom's IP-VPN service forms part of a package of end-to-end managed network
services provided under the ConnectPlus banner. These include international leased circuit
services, IP, frame relay, corporate voice, router management and other value-added
products, which it currently offers across 11 regional economies with direct links to the
United States and the United Kingdom.
Lim Chuan Poh, executive vice president for Singapore Telecom's corporate business group,
said his priority is to ensure connectivity, even in parts of the region that are traditionally
difficult to reach. "The launch of ConnectPlus IP-VPN will further strengthen SingTel's
position as the preferred and leading telecommunications hub in the Asia Pacific," he said.
Singapore Telecom is luring users of its IP-VPN service with the prospect of shaving "as
much as 40%" off their telecoms operating costs, compared with the cost of leased lines.
Users welcome the prospective cost reductions and acknowledge that regional carriers such
as Singapore Telecom and Cable & Wireless HKT are going down the right track with their
Internet strategies.
In the longer term, however, analysts and users agree that carriers will have to graduate
beyond simply selling network access and bandwidth into providing enhanced services such
as interactive multimedia, e-commerce applications and unified messaging. To do this, they
will have to work closely with content and service providers.
"The scene is set for [Cable & Wireless HKT] and SingTel to be very aggressive in
announcing relationships with enhanced service providers," said Racine.
However, the transition from traditional telephone companies to next-generation carriers will
not be easy, warned Alex Chong, telecoms analyst for Pyramid Research in Singapore. Chong
said Singapore Telecom and other regional incumbents face a dilemma: they cannot compete
with the cost structure of Internet start-ups, but neither can they compete single-handed
against the global telecoms alliances, he said.
"SingTel has been pretty active in the region, buying up AIS [in Thailand], Globe [the
Philippines] and Bukaka SingTel [Indonesia]. On a regional basis, they probably have the
capacity to go it alone. They are sitting on a huge amount of free cash and to establish an
Internet presence is not going to be as expensive a proposition as laying out fiber optic
networks such as in the U.S. with Qwest and Level 3," said Chong.
For more traditional telecoms services, however, Chong said SingTel may still require
alliances with regional partners such as Japan's KDD Corp. and Australia's Telstra.
Singapore Telecom officials acknowledge the need for alliances in the provision of services
to corporate users. "At the moment, the strength of ConnectPlus lies within Asia. We do not
see any one party can do everything on their own and 'strategic partnership[s] to deliver
total solution[s]' will continue to be the cornerstone of our strategy," said Christine Koh,
Singapore Telecom's regional marketing manager for global services development.
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