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A world cup for the red-green giants (only)

Even before soccer's biggest show - the FIFA World Cup - has even started, the public is already divided. The facebook group lobbying for the boycott of Singtel-Starhub world cup packages has gathered storm over the past week and, surely, this is no mere rhetoric because succumbing to the high prices will only prove that Edward Ying is right. He infamously said, Singaporeans have an insatiable appetite for football and will pay the price. Whilst he meant this literally (i.e. subscribers will pay more fees), there is a figurative element to it as, to concur with this increase simply sets the precedent for the escalation of prices in future - unless we rethink our market system. Thus, this unsavoury predicament is  no longer just about the 2010 World Cup, but the duopoly market system now lay bare.

So, how did things culminate to this extent in the first place? Why did the conventional wisdom of market liberalisation fail to bring about the benefits of competition for the consumer dollar?

Well, it all began with the bidding for the English Premier League (EPL) broadcasting rights between the two telcos. While Singtel refused to disclose its bid for the rights, the fact that the bidding was concluded within one round can only imply that it must have had a large winning margin. And since Starhub's hefty bid was $250 million in 2007, analysts had speculated the 2010 bid by Singtel to be about $300 to $400 million.

Even though Singtel has offered an affordable subscription price of $23 for now, the contracts for this package are only up till 2011. It is rather evident that consumers are likely to shoulder the initial losses Singtel would have incurred for the first year of 'affordable subscription - by way of an upward revision in prices.

In any case, the governing body of international soccer, Fédération Internationale de Football Association (FIFA), seeing the two teleco giants fight tooth and nail, has exploited their willingness to pay exorbitant prices by jacking up the price so high that neither telecos could in essence pay for it. But as a cosmopolitan self-proclaimed first-world country, the notion of Singapore being relegated to the sidelines in the broadcasting of the 2010 World Cup is preposterous. So, as the 'kiasu' syndrome eventually kicked in, the government decided to act - albeit, very belatedly. At the very least, by preventing exclusive carrier content, the government has forestalled any similar outbidding exercise as with the EPL broadcasting rights.

But there is a pervading question - is Singapore ill-suited for a duopoly system? In fact, the topic of the extent to which market liberalisation should occur has emerged frequently since the middle of 2000's, and this question is precisely the reason why this World Cup fiasco should be taken seriously.

With regard to the viability of a duopoly – where two companies hold major shares in the market, the first few years when SBS Transit started operating the North-East Line (NEL) and SMRT took on bus routes is telling. The promise of competitive pricing was impeccably fraudulent as while each company diverted resources to secondary markets it was unfamiliar with, it still monopolised its share over its core area. This unique model of duopoly in the public transport system still gave them the free reign over their respective turfs.

In another form of duopoly at work, Starhub used to have exclusivities over the sports channels available but Singtel’s recent coup has led to uncertainties on its pricing for the forthcoming EPL season - which was even before the ridiculous pricing for the world cup packages were revealed. No doubt, the only certainty is that the fight for leverage over certain programs is at its worst right now.

The point though is that by simplifying the market mechanisms without considering the nature of the goods is bound to ultimately victimise the consumers. A duopoly system only works insofar as appropriate government regulation is undertaken as to harness public goods, a free market cannot be left to its own devices. The problems that America’s economy is facing are manifestations of the exigencies of such self-regulating behaviour. In this particular case, the additional actor – FIFA - complicates the situation, and its opportunistic exploitation of the loophole in the system would be the first of many to come - unless appropriate government regulation takes place.

Most unacceptable of all to many is Singtel’s arrogant statement, through its chief of content and media services, Edward Ying, that “it's only $1, less than 1 cup of coffee, I think they can afford it”.  As John Chua, creator of the aforementioned facebook group, says, “Their greed is evident for all to see. Starhub and Singtel are clearly going to recover a lot of whatever amount that they paid for the rights with advertising/sponsorships and the $1888-$28888 that they are charging per TV in public outlets. I certainly don't see any reason to give in and reward them for these sorts of behaviours since there are plenty of others ways to catch the world cup without signing up.”

One industry analyst from consultancy firm Frost & Sullivan also adds, "The EPL bidding war had a knock-on effect on the costs of the World Cup broadcast rights.” However, the telecos’ image conflates into a deteriorating one of arrogance and greed as they repeatedly deny that the high prices are due to a spill over effect from the EPL outbidding.

For now though, consumers can choose to grit their teeth and burn a hole in their pockets (yet again) but this will be at the risk of the perpetuation of similar blatant exploitation - because it will always be “only $1, less than 1 cup of coffee, Iink they can afford it”. Or, we can, for once, say enough is enough and take the road less travelled (in Singapore, at least) for once – boycott. Surely this is the wiser choice as the losses will not only be Singtel’s and Starhub's but for Temasak Holdings as a whole (since it is a major stakeholder in both companies). It is clear that the government has already realised the need to regulate the markets - from the decision to disallow exclusive carrier content in March - but the boycott would nevertheless drill the point through that consumers cannot be held ransom to ridiculous pricing, and that there are limits to abusing the willingness of fans to fork out a premium for their passion.

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By Tng Ying Hui

Images courtesy of the facebook group Mass Boycott Starhub/Singtel Overpriced World Cup Package

The group presently counts 18,815 fans and continues to grow exponentially

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