With the three major telephone
companies being 'related' in one form or another, and in varying
shades of ownership that tie up with GLCs, the final beneficiary is
Temasek.
This perfect monopoly in an environment of supposed open
competition is the result of ingenious virtual reality at work that
lull the minds of a greedy and slow witted population.
Whither
cellphone pricing? It's not so
transparent
IVAN PNG
FOR THE STRAITS TIMES
UNTIL April 1997, SingTel held a legal monopoly over public mobile
and fixed-line telecommunications services in Singapore. Then along
came M1 as the country's second mobile telephony service provider.
Three years later, in April 2000, StarHub entered as Singapore's
second fixed-line and third mobile telecoms service provider.
The accelerated liberalisation of the telecom sector brought about
intense competition - in terms of services offered, quality and
price. There were daily promotions by SingTel, StarHub, M1, and
their various retail distributors in newspapers, television and
radio. The intense competition yielded huge benefits to Singapore
consumers and businesses.
Mobile telephony, for instance, has been transformed from a luxury
for bankers and doctors to an almost universal service. By last
December, 3.5 million persons here had subscribed to mobile phone
services.
February 2004 may prove to be another watershed in the development
of Singapore's telecom sector - but in a different direction.
On Feb 21, StarHub took out full-page
advertisements for its cellphones, but these did not state
handset prices. Promising 'better handset prices than any other
advertised', it offered to charge $1 less than any
advertised price.
One week later, SingTel followed suit with full-page advertisements
in the Lianhe Zaobao and The Straits Times. These did not publish
handset prices either. Instead, the ads declared that
'SingTel's offers are better than FREE! - $1 will be yours
for any $0 mobile phone advertised'.
The odd man out, M1, boldly advertised a selection of eight
handsets - variously made by Nokia, Sony Ericsson, LG and Motorola
- for $0 each.
What do these price-beating offers portend for competition in
mobile telecom services? Superficially, offers to beat prices by $1
may seem to be extremely competitive.
Closer inspection, however, reveals them to be a subtle
means of price segmentation. Different customers pay
different prices. Consumers who are aware of M1's prices can
purchase from SingTel and StarHub and pay $1 less than M1's
prices.
Because SingTel and StarHub did not publish any handset
prices, consumers who do not know that
these two retailers are offering to better any competitor's price
could end up paying more than if they had purchased at
M1.
Does the offer to beat competing prices signal low prices? Not
necessarily. Indeed, the objective of price segmentation is
to focus the price discount at the informed consumers
only.
In a perfectly competitive market, there is clear information about
value and price. All buyers swing to the seller offering the best
value for money. Where prices are not transparent, the
forces of competition are blunted.
The next few weeks will be revealing. Will M1 also cease to
advertise handset prices? If it does, local mobile telecom
providers will have switched to a new mode of competition, one in
which price is no longer transparent.
As a market strategy, this is probably not surprising given that 83
per cent of the Singapore population already subscribe to mobile
services. There is not much uneaten cake left: SingTel,
StarHub, and M1 can each only grow at the expense of one
another.
Under these circumstances, it
makes sense for them to de-emphasise price. That would be
good news for shareholders, but not such
good news for business and personal users.
The writer is Kwan Im Thong Hood Cho Temple
Professor and professor of information systems and business policy
at the National University of Singapore
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