Southeast Asia: Emerging Challenges and Opportunities in a Time of Convergence
By Sean Bergin and Chris De Josslin
May 25, 2021
Nearly 10% of the world’s population live in South-East Asia. It’s an interesting, yet largely understood fragmented market, with significant potential upside given the developing nature of the economies within each country that within the region. Looking at recent pictograms of global cloud & data centre regions and their evolution, it’s pretty glaring that Singapore is the epicentre of all things cloud related in South East Asia which creates challenges, risks and as a consequence, opportunities.
One of the ‘building blocks’ of this cloud era we live in is of course, connectivity. Let’s take a quick look at the SE Asia and broader Asian connectivity environment, with a focus on the subsea space. Firstly, pricing. It’s really fragmented in the context of intra-Asia transport at a ‘local’ level. For example, it is twice as expensive to buy a 100G circuit between Kuala Lumpur and Singapore, than it is between Hong Kong and Singapore. Same can be said for Indonesia to Singapore, which is more than three times more expensive than Hong Kong to Singapore. Yes, most of this can be put down to volumes, however the underlying cost to build the systems don’t vary that much on a per km basis. It’s all about open access and competition. Based on the above pricing rationale, it’s easy to see that countries such as Malaysia and Indonesia have a long way to go when it comes to opening up their markets to genuine competition. Open access seems to be the driver behind markets that have done extremely well establishing themselves as a ‘hub’ such as Singapore and Hong Kong.
The open access regime in Singapore is well established and competition flourishes, yet one of the other key elements that drives ‘hub status’ is cross connection charges. However, these still remain relatively high across SE Asia when compared to other regions of the world such as Europe, with an average of around ~$140 per month per fibre pair, Vs Asia with an average closer to $210 per month, representing a 33% premium. So, in summary, open access at competitive prices coupled with compelling cross connect arrangements, tend to be the main ingredients in creating the environment for cloud providers to congregate and flourish.
It’s time that South East Asia re-thinks it’s strategy for long term development. An alternate ‘secondary’ hub (or hubs) to Singapore needs to be developed in order to get ahead of the opportunity in front of them, given that certain ‘logical’ alternate hubs continue to resist true open access, such as Indonesia and Malaysia. As Singapore is arguably becoming the submarine cable ‘choke point’ in South East Asia (it only has 193km of environmentally sustainable coastline), coupled with carbon footprint challenges and on top of that, has to deal with geopolitical issues such as neighbouring country’s cabotage laws, right now is the time for an emerging player to step in and grasp this opportunity. Singapore has always managed to innovate, so it’s suspected that challenges will be overcome in time, yet this clearly creates an opportunity for a new player to enter the market and replicate what made Singapore a logical choice in the first place.