Singapore's IDC market "unhealthy"

SINGAPORE--There are too many government-backed Internet data centers (IDCs) here and this could be unhealthy for competition, so claimed managing director of Global Switch Rob Kelly.

Many of Singapore's IDCs are backed by either government-owned or government-run companies, said Kelly. As examples, he pointed to National Computer Systems stake in Digital Centrix, Singapore Technologies in i-STT, MediaCorp in 1-Net, Keppel in DataOne, and Singtel having its own IDC.

Kelly argued that if Singapore wanted to attract international players to its shores by, for instance, deregulating its telco market, the last thing it needed was a "quasi-deregulated market" with the government's own corporations having a stake in activities. He saw this not as an opening up of the market but, rather, the creation of "artificial" competition.

"It doesn't really create open competition, and it devalues the deregulation process that the Singapore government has set out to do, as it makes it an artificial deregulation," he said. Kelly was in town recently to prepare for the opening of Global Switch's Singapore operation later this month. The facility costs S$105 million to set up and covers some 24,500 sq ft in Tai Seng Avenue.

Kelly's comments came just weeks after complaints were raised within the Australian business community regarding Singapore Telecommunications Ltd's acquisition of Cable & Wireless Optus Ltd. Fears regarding possible interference from the Singapore government had surfaced prior to the closing of SingTel's A$14 billion (S$13 billion) takeover of Australia's second largest telco at the end of August.

On the current Singapore IDC model, Kelly even called it "a recipe for disaster" and "an unfortunate model". He argued that achieving success as an IDC meant more than just using funds to buy the space and equipment needed. Understanding customer expectations, how telecommunications worked and how infrastructure played a part were equally important, he said. Kelly added that if these requirements were not a core competency of a company, it should not be in the IDC market.

However, To Chee Eng, principal analyst at the Gartner Group, disagreed with Kelly's views. According to To, Singapore does not have a unique IDC model--it's the same as what's happening in countries like Hong Kong, Korea and Japan.

While he agrees that several large IDC players in Singapore are publicly-listed companies, with substantial government ownership, they nonetheless operate like private enterprises. Government backing does not give them any added advantage in this market, he said.

DataOne, Digital Centrix, i-STT and Singtel were not willing to comment. 1-Net had not responded to enquiries at press time.

On the IDC market in Asia, Kelly believed the regional slowdown contributed to the consolidation in the market. He also attributed the slowdown to the Asian IDC market being one generation behind that of the US and Europe.

He also said his experience working in Asia has led him to believe that many Asian executives tend to be more reluctant than their Western counterparts in having their business data handled by an outsider.

One of the concerns that arose over the SingTel-Optus deal was that the government-affiliated carrier might compromise the security of Australian communications due to shared use of satellites. Australian media mogul Kerry Stokes, who controls Seven Networks Holdings Ltd, was reported as saying he opposed giving a foreign government control over Australian communications satellites, partly used for military communications.

On the future, Kelly saw the need for the further deregulation of the industry. He also believed the emergence of countries like India and China would have a positive impact on the IDC market. He predicted a 12-18 month slowdown in the market before a rebound in about two years' time.

According to Kelly, Global Switch is a carrier-neutral co-location company, allowing customers to access more than just one carrier. In Singapore for example, its carriers are SingTel and StarHub. The company is looking at inviting other carriers as they become available.

Its target market includes many of the tier-1 telcos and multinationals. Asia Global Crossing, whose founding shareholders include Global Crossing Ltd, Microsoft and Softbank, has already agreed to come on board when the Singapore operation opens.