Interview: David Storrie of Nucleus Connect

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Singapore plans competition at the set-top box for fibre-to-the-home customers

Residential customers in Singapore connected by the country’s carrier-neutral FTTH operator, Nucleus Connect, will soon be able to pick and choose between different telecoms operators

David Storrie: multi-tiered approach has challenges. If you’re
vertically integrated, everything is under your own control 

The Singapore telecoms regulator is commissioning the development of a set-top box that will allow customers to take services from different telecoms operators at the same time via the country’s next-generation national broadband network.
The box — which will bring the market in telecoms right to consumers’ homes — will be connected to the national carrier-neutral fibre-to-the-home network, which is operated by a local company, Nucleus Connect.
“The project is being managed by the government and the plan is to have the specification by the end of this year,” says Nucleus Connect’s CEO, David Storrie. Following that, the box will be available in prototype in the second quarter of 2011, he adds.
The FTTH network that Nucleus Connect operates was launched at the end of August 2010 with coverage reaching 55% of the island republic. Building continues and the system is on schedule to reach 65% by the end of the year.
In three years coverage will effectively be nationwide: from the start of 2013 the project will have a universal service obligation, with Nucleus Connect — the operator — and the separate infrastructure owner required to connect any home or business in seven days.
Once the new set-top box is available, customers will be able to take services from several different operators at once via the same fibre, choosing from each according to price and availability. It will bring an unequalled level of competition to Singapore’s residents and businesses.
The FTTH project has already seen an increase in competition between different operators in Singapore. On September 1, the day after the network was launched, two providers offered a 100 megabits a second service via the fibre, taking other operators by surprise, and one of them had a special one-day-only price offer. “They expected 300 customers on the day and got 1,000,” says Storrie. “We didn’t expect so many in the early days.”
Singapore is one of the first countries to build a nationwide carrier-neutral network — though it has taken what some regard as a remarkably complex approach. The Infocomm Development Authority, the government regulator, decided that the network would be built by one company and then operated by another.

Intelligent nation

The Next Generation Nationwide Broadband Network, as the project is called, is designed to help Singapore achieve its aspiration to become “an intelligent nation and a global city”, a strategy called Intelligent Nation 2015 or iN2015.
The aim is to offer competitively priced ultra-high broadband speeds of one gigabit and more to all companies and residents of Singapore.
After a competition, the IDA awarded the construction contract to OpenNet, a consortium led by a Canadian company, Axia, with 30% shareholding. Other partners in OpenNet are SingTel, the local incumbent, which also owns 30%. Singapore Press Holdings has 25% and Singapore Power’s SP Telecommunications the other 15%.
But OpenNet is not allowed to offer services on the NBN. That’s the job of Nucleus Connect, which won another IDA franchise contest. Nucleus Connect is 100% owned by, but physically and operationally separate from, another Singapore telco, StarHub — a company that started out as the local cable TV operator. (See GTB interview with Neil Montefiore, CEO of StarHub.)
“The network company is passive and the opco, Nucleus Connect, is the service provider,” explains Storrie. There’s a further layer of separation, as Nucleus Connect is a wholesale-only company, with no retail customers of its own. It provides services to any telecoms operator in Singapore — not just the existing players in this highly competitive market, but any others, local or foreign, that want to bid for business from customers.
Nucleus Connect provides the active network equipment. Huawei is the main supplier, with OSS/BSS from Alcatel-Lucent. OpenNet also uses OSS/BSS from Alcatel-Lucent, but that was a separate decision, he says.
Experience of the first few weeks shows that this arrangement “is not working quite as smoothly” as it should, says Storrie. “It has had its teething problems, but you always expect teething problems.”
When a customer wants service there has to be close collaboration between three operators: OpenNet has to ensure the infrastructure is in place and is working; Nucleus Connect then provides the wholesale service between the resident or business and the operator; and the actual retail operator provides the chargeable service to the end user.

Vertically integrated

This multi-tiered approach “has its challenges”, smile Storrie. “If you’re vertically integrated, everything is under your own control.”
There have been faults: in the first week up to 30-35% of new installations failed because there was no signal at the network terminating point in the customer’s premises. “After seven weeks, we’re now closer to 12%,” says Storrie, speaking to Global Telecoms Business in late October at the Broadband World Forum in Paris. “We should be down to 3% in a couple of weeks.”
One of the challenges is due to the enthusiasm with which customers have taken up the service — even though there still aren’t many services to justify even the minimum home package of 100 megabits a second.
There is an incentive for connecting quickly: free installation to residents if they take up the offer while OpenNet is constructing the network to within 15 metres of their home. If they refuse then, subsequent installation will cost S$220 (US $170).
And then “service providers have been creative” in offering service to customers, says Storrie. One company is offering 50 megabits each way, up and down, at only S$59 a month — or just S$39 to students, just US $30.
Quality of service is split into four classes — best efforts, mission critical, near real time, and real time — and the NBN can offer connection speeds in steps of 50 megabits from 100 megabits up to one gigabit a second, and one company is offering the full rate at $395 a month. “It’s quite a lot, but it is a gigabit,” says Storrie. “The packages are attractive, though there’s no real need for that speed yet.”
And the service has been launched at the start of the traditional holiday promotional season: Christmas is coming, followed by New Year, and then Chinese New Year. New orders are already coming in at the rate of 150 a day: and the government’s target is for 350,000 homes and 80,000 businesses to be connected by 2015. That’s an average of, say, 70,000 homes a year, or 1,400 a week.
Businesses will be the harder challenge, thinks Storrie, as many already have service from SingTel.
But businesses will need to work with the government, and the NBN is one of the government’s top projects. “The government is not pumping all this money into the project for nothing.”

Universal service

Storrie believes that the competitive market in Singapore will intensify over the next few years. “People like BT and Verizon are waiting for universal service, when we have 100% coverage.”
Singapore is already promoting itself as the location for the Asia hub of many multinational companies — and the ability of global service providers to connect directly with office buildings in Singapore via the network would be a significant attraction.
But the structure of the network also means that smaller operators in Singapore can compete for business with the giants, such as SingTel, M1 and StarHub. The network provides no volume discount “so the little guys get a level playing field”.
Though reluctant at first, SingTel itself now interconnects with the network — because the government said it would use it, “and that’s a fairly substantial amount of business”. Even small businesses are now saying that they want to be connected via the NG NBN.
Given that the network is as up to date as it can be in 2010, how will Nucleus Connect — and, indeed, OpenNet — take investment decisions in the future? “Once deployed, there will only be incremental spend on the fibre,” says Storrie, implying that OpenNet’s side of the deal will be fairly straightforward.
But for Nucleus Connect, the company will work with Huawei to ensure it is “at the front edge”, he says. “We have access to all of Huawei’s R&D.” Nucleus chose the vendor because it wanted a turnkey solution, with Huawei bidding with Alcatel-Lucent against a combination of Cisco and ZTE. “It was very close at the end of the day.”
Nucleus Connect has made a commitment to the Singapore government that “we will refresh as and when it makes sense”, though he notes that the company will “have a fairly good argument” to keep costs “about the same”.
It’s early, though. “The market is not known yet. We don’t know what the take-up will be or what the services will be.”

Video services

The government has submitted a request for proposals for video services — essentially an island-wide IPTV service to be delivered along the NGN into residents’ homes, via a set-top box with a common set of features. That’s why the idea of a standard box able to deliver services from a number of providers has emerged.
The set-top would be able to deliver services from SingTel, StarHub, M1 and so on, and “you can click on the one you want as long as you subscribe to the service provider”. Even better, you may be able to consume one company’s offer on a pay-as-you-go basis, he suggests. Free government information services would be there too.
The idea was given further impetus in October 2009 when SingTel won the rights to broadcast football matches from England’s Barclays Premier League in place of StarHub — leaving those who had subscribed to StarHub bereft of their regular fix of Manchester United, Chelsea, Arsenal and Newcastle.
“They had to go and buy a new set-top box from SingTel,” notes Storrie. So the question was raised: “Why not one set-top?”
While vendors are preparing their proposals to the IDA, Nucleus Connect is pondering the question of how the platform will operate. “Would we want to build the platform as well?” asks Storrie. “It’s attractive.” But that depends on the government’s precise requirements.
“There will be a challenge for vendors as they’ve never been asked for a multi-provider box before.” But he’s concerned that the market for Singapore, with only 4.7 million people, will be small.
That’s not helped by the fact that the Singapore model of how to build a nationwide broadband network has, so far, not been adopted by any other country.
“Is the Singapore model attractive for other markets? I think it is,” says Storrie. “It is transportable from Singapore but everyone has to look at what works best.”
And the NG NBN is still just a few weeks old. At the current rate of construction, it won’t be too long before we see how successful it can be. GTB

Further reading
GTB interview with Neil Montefiore, CEO of StarHub
GTB report on bidding process for NG NBN
GTB Executive Review on Singapore