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StarHub’s Red Herrings June 14, 2007

Posted by Ned Stark in Uncategorized.
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Sometime ago talking cock remade several of Singapore’s national songs, one of which, Stand up for Singapore, was remade into Fare up for Singapore. In the light of recent events, a better title would be price up for Singapore; the latest being the raise in subscription fees to star hub.

Of course as expected Starhub, like NET, has come out to defend the price increase (of course they will defend the increase, which star hub director would not?) They have also denied being a true monopoly (ever heard of a fake monopoly?) and in support of that claim has stated that they face competition from the internet, cinemas, free to air television among others.

Unfortunately I must say that their evidence is rather flimsy and merely red herrings to distract people from the fact that fundamentally Star Hub is what is known as a Natural Monopoly. This is due to the high barriers to entry in the cable TV due to the need to setup a grid like system of cables to ensure that the service is sent to a large group of people. As a result only one company can exist in such an industry and that company is none other than Star Hub. As said in the article, Star Hub coughed up $600 million just to set up the cable network. Any other company wanting to break into the market will have to overcome that financial barrier and I dare say even with Mr Durai’s old pay it will take a long time to reach that level. Of course once the cable is set up it will be relatively cheaper to maintain it and thus the incumbent has a cost advantage which coupled with high “entrance” fee makes it difficult for the new kid on the block to come in.

The examples of Star Hub’s competitors are rather like Red Herrings. I would hardly believe that free to air television could be a serious competitor to cable. Cinemas too cannot be said to be a close substitute because of inherent differences, for eg, in a cinema there is no privacy for one. With regards to the internet, I must say there could be a fight, but I must also add that Starhub provides a service that is rather differentiated, and anyway it is illegal to download shows on the net for free as that will infringe copyrights and what have you.

Therefore, I am rather inclined to dismiss Starhub’s justifications and conclude that Starhub is making use of its power to increase their profits. A close look at the article in Today would show that there has been an increase in profit due to the World cup last year. Yes they did say that they took a long time to break even, but in the absence of more information it seems to be another poor justification in a long line of red herrings. Such an incident could be takent to be a somber reminder of the danger of unchecked monopolies. It makes one wonder what else will rise next…

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Comments»

1. fox - June 15, 2007

“Any other company wanting to break into the market will have to overcome that financial barrier and I dare say even with Mr Durai’s old pay it will take a long time to reach that level.”

Well, that is why the Singapore government bans satellite TV services and denies Singaporean consumers the benefit of increased competition. The irony is that Singtel does offer satellite services in Australia through Optus. Bloody hypocrites.

2. Ned Stark - June 15, 2007

Yeah Fox, i was kinda surprised when i found out. I must admit i am rather ignorant of this kind of services.


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