Will Malaysia’s single wholesale 5G network gamble pay off?

• Technical, timeline, commercial challenges abound; no template exists to follow
• A level playing field is key; industry wants transparency in dealings, contracts

ANALYSIS: THE upcoming deployment of 5G technology through the use of a single wholesale network (SWN) in Malaysia by Digital Nasional Bhd (DNB) is expected to face several significant technical and financial impediments, according to several industry analysts.

On Feb 22, the Malaysian government announced that it will embark on an audacious plan to deploy its national 5G network via a government-owned ‘special purpose vehicle’ called DNB.

This flies in the face of using a more traditional approach of directly leasing spectra to qualified mobile operators to roll out 5G either via an auction or to the best operator assignment commonly known as a ‘beauty contest.’

The government argues that DNB will cut through red tape, speed up deployment due to being state-owned, and roll out a national 5G network in a more uniformed manner as opposed to letting profit-driven operators do so.

READ MORE: Malaysia’s single wholesale 5G network gambit draws questions

According to Neil Shah, research director at Counterpoint Research, the mechanics of rolling out a commercially-viable 5G network is expected to be complicated as a traditional 5G network rollout strategy and footprint should be a superset of the combined current 2G/ 3G/ 4G footprint of all the operators.

Speaking to Digital News Asia (DNA) in an email interview, Shah says in practical, what this means is that the 4G coverage fallback from 5G should be seamless.

As such, all the Malaysian mobile networks’ 5G coverage should at least match or be close to their respective footprints. This is difficult to do as all operators in Malaysia have over 90% 4G coverage.

“This is a tall order for the government although not impossible,” Shah said. “However, building it by the end of 2021 with an ongoing pandemic is wishful thinking.

“The recommendation would therefore be for the government to closely work with the operators to build a 5G network footprint matching the strengths of their respective 4G footprint, usage patterns and where they have identified as the greatest low-hanging fruit opportunities.”

But for that to happen, Shah (pic) argues that existing operators will have to share critical and competitive data with the government.

“They may be cagey with this plan especially if the government seeks to give a bigger pie of the 5G network to incumbent player Telekom Malaysia (TM) Bhd,” he contends, noting that TM being the incumbent operator has always been chosen to play a more active role in national-type projects such as in Malaysia’s high-speed fixed broadband network.

“It will be a challenge for the government to please all the operators as far as prioritising which pockets to build 5G infrastructure first.”

For its part, the government, via industry regulator the Malaysian Communications and Multimedia Commission (MCMC), assures that urban and industrial areas would likely have commercially available 5G coverage by the fourth quarter of 2021, in addition to some rural centres to bridge the digital divide.

Its chairman, Fadhlullah Suhaimi, says that while DNB will own all 5G assets, it will strictly be under the purview of the MCMC and that there will not be any changes in ownership throughout the 10 years of its operation.

DNB, he adds, will minimise duplication of network elements, reduce the inefficiencies in spectrum allocation, and address infrastructure and land approval challenges.

IDC senior research manager Zaim Halil, points out in an email interview with DNA that SWN looks like a simple concept on paper but in reality, it will be extremely complex to integrate various mobile operators’ infrastructure into the government’s SWN.

“Assuming that DNB would build a single 5G radio access network (RAN), then each of the larger mobile operators will need to build a standalone core so this becomes a multi operator core network (MOCN) and will introduce new complexities,” he told DNA in an interview.

Zaim said another big question mark is what DNB’s pricing and procurement policies are and whether the negotiations with operators will be handled transparently and openly for all to scrutinise, which to date is unclear.

To this, Fadhlullah assures that DNB will allow fair and non-discriminatory access to capacity, that all licensed telcos will have equal access to infrastructure and networks.

Also, DNB will only lease wholesale bandwidth and not be involved in the retail sector to avoid any conflict of interest, he stresses.

Technical challenges

ABI Research’s industry analyst Miguel Castaneda (pic) told DNA in an email interview that based on 5G deployments in other countries in the region, the expedient way for operators to roll out 5G networks is through a non-standalone (NSA) 5G deployment, as opposed to building an end-to-end standalone (SA) 5G network.

In an NSA scenario, a fresh network element called 5G new radio (NR) is combined with existing 4G/LTE radio cells providing dual-connectivity.

This scenario may be chosen by operators that wish to leverage existing 4G deployments by combining existing LTE resources with 5G NR resources, which will deliver 5G mobile services.

Castaneda explains that an NSA 5G deployment leverages the existing LTE network base and enables operators to quickly deliver enhanced mobile broadband (eMBB) services to their subscribers.

The downside though, he explains, is that an NSA deployment will not provide the full game-changing capabilities that a standalone (SA) 5G network is famed for.

This includes massive machine type communications (mMTC), network slicing (the ability to allocate different bandwidths to different users based on quality of service)  or ultra-reliable low latency communications (URLLC) applications.

For this to happen though, Castaneda explains that the deployment of a SA 5G would require the government to build 5G capabilities on top of the operators’ 4G networks.

“Local media has reported the MCMC chairman as saying that all operators would “enjoy equal access to the network in return for a wholesale fee.”

“But this is hard to achieve and is very complicated to implement because the underlying infrastructure of the NSA 5G network will be fragmented based on the existing LTE network rollouts of the respective operators.

“And SA 5G will in fact require heavy network densification to deliver features such as network slicing, multi-access edge computing (MEC) and/or private 5G networks.”

Counterpoint Research’s Shah points out that a government entity such as DNB would not inherently have core competency to build the network, so it will have to ideally outsource to system integrators and network infrastructure vendors to build the network.

“All eyes will be on who wins that contract as well.

“Also, all the operators have different infrastructure vendors which have built the legacy networks, so the biggest challenge for DNB would be to build a ‘highly interoperable’ infrastructure that works seamlessly with all the operators.”

The Edge reported on April 19 that eight vendors have been invited to participate in DNB's 5G tender, that will be administered by its tender board with strintgent processes in place.

The usual suspects in tow are Ericsson, Nokia Corp, Huawei Technologies Co Ltd, and ZTE Corp. Less obvious players include Samsung Networks, Cisco Systems, Japan's NEC Corp and China-based FibreHome. The tender is expected to be completed by mid-year after which, work will immediately begin on the building of the SWN, the business weekly noted.

On timelines, Castaneda says if DNB is building a network based on SA 5G, the Q4 2021 timeline would be quite unrealistic.

“To put things in context, Singaporean operators are also opting for SA 5G and they are only expected to provide 50% island-wide coverage by 2022 and full coverage by the end of 2025.

“These timelines are based on Singapore’s smaller geographical area and population size,” he argues. “A SA 5G deployment in Malaysia will most probably have a more protracted timeline given the larger population and geographical area compared to Singapore.”

Singapore’s strategy

As a bellwether of telco progress within the region, Singapore is oft-cited as amongst the most efficient and best models of mobile network deployment.

This is due to its compact geographical size, advanced infrastructure, clear government policies, efficient regulatory enforcement, commercial prowess and highly competitive market forces.

In May 2019, Singapore’s regulator the Infocomm Media Development Authority (IMDA) proposed that its existing operators adopt SA 5G in a public document seeking industry feedback on 5G policies.

However, Singapore operators in July 2019, led by its largest players, Singtel, pushed back on the idea to jump straight ahead onto SA 5G, citing the uncertainty of the chipset and network gear roadmap for SA 5G network architecture, reports trade publication Light Reading.

The IMDA relented and said it would support Singapore’s mobile operators’ plan “to ride on existing 4G networks to deploy NSA 5G as part of trials to allow consumers to enjoy partial 5G experiences in the short-term, with faster mobile speeds as a key feature.”

A year later, Aileen Chia, director-general of telecoms at IMDA told a seminar that the regulator initially pushed for SA 5G because of the emphasis on innovation and what a full-fledged capability of SA 5G can bring to the island state.

Industry observers believe Southeast Asia’s most advanced economy is already so fiberised with speeds of up to 1Gbps.

Complementing this is the fact that the island-state is so is blanketed with pretty high speed 4G and 4G+ (LTE Advanced) coverage, which meant that there wasn’t a justifiable case for fixed-wireless access, which is one of 5G’s first and most common use cases.

“We took a slightly different path… the race is not to be the fastest, but how do you bring a technology that makes sense for innovation for the country,” she was quoted as saying.

An industry veteran familiar with 5G roll outs in the region DNA spoke to notes that although Singapore is committed to SA 5G, it still relented and scaled back to accommodate NSA 5G roll outs after being very aggressive about SA 5G.

“The Malaysian government has already decided to go down this SWN rabbit hole [via DNB] and so all operators will have to live with this.

“The issue now is with clarity and transparency of plans, as it’s not yet known how Malaysia is going to roll out its 5G network via DNB, whether via NSA or SA 5G. To do so via SA 5G will be risky to say the least, given that even Singapore is not going to be on SA 5G fully until 2025.

“Whatever the case, what is important is for DNB to be perfectly honest when dealing with all Malaysian operators in terms of network dimensioning and architecture and be thoroughly professional and not just pay lip service to operators with their plans.

“Perhaps then, it could be a win-win for everybody.”

Funding, budget issues

When MCMC’s Fadhlullah announced the government’s SWN plans, he pointed out that it would spend an estimated RM15 billion (US$3.6 billion) over the next 10 years on rolling out 5G.

To date, both MCMC and DNB have scarcely commented on the budget breakdown nor how it would be exactly spent.

The only indication so far is found in an exclusive interview with local business daily, StarBiz, which quoted DNB’s newly appointed chief Augustus Ralph Marshall as saying that, “the government will fork out RM15bil to fund the 5G rollout over a decade… a sum that would include maintenance charges and also capital expenditure.”

When asked if the RM15 billion over 10 years was sufficient for Malaysia to roll out 5G, ABI’s Castaneda expressed doubt, noting that the sum seems exceedingly low for a country like Malaysia.

“Saudi Arabia, a country with comparable population numbers and a higher rural population than Malaysia is expected to spend US$20.5 billion of mobile network capex between 2021 and 2025 alone,” he said.

Castaneda also questions whether the “maintenance charges” refers to operational expenditure (opex) items such as the capacity, skill and technology to build, operate and lease a network to retail players.

“Is this cost a part of the RM15 billion? To me, there seems to be some ambiguity as to who is responsible for the opex/maintenance of the SWN, as this isn’t clearly indicated,” he argues.

“It is therefore extremely important for DNB to explicitly outline to mobile operators [and to the public] what constitutes as maintenance charges.”

Castaneda also points out that by DNB running a SWN, Malaysia loses out on huge spectra leasing revenue generation potential, which other operators have benefited from by employing auctions and/ or beauty contests.

“The RM15 billion will therefore have to be secured from other budgets – which can impact existing/ future government services/ projects – or in the form of additional taxes that may penalise the citizens, which are the intended beneficiaries of this project,” he argues.

Contractual transparency

Meanwhile, both IDC’s Zaim and Counterpoint Research’s Shah stress that transparency will be a key factor if Malaysia’s 5G project were to make sense.

Shah says for the project to succeed, caveats should include a fair allocation by geography, interoperability support to integrate the 5G network to each mobile operator, a periodic report by MCMC on project status, and the establishment of a common grievances centre for the operators to redress issues.

Zaim (pic) goes further and recommends that DNB should not impose any commitment in terms of minimum limit of volume in data that the mobile operators should commit to and that there be a regular revision of wholesale prices to ensure that prices stay reasonable.

“The offered pricing scheme should also be consistent for all mobile operators, regardless of any other business relationship/ agreement they may have with existing players. 

“For example, DNB should not offer exclusive [or favourable] wholesale pricing to operators that provide fibre backhaul service or tower sharing service to DNB.”

Zaim also argues that the service level quality should be maintained at a standard that has been agreed to between all players and that every mobile operator should be treated fairly without any discrimination.

“The MCMC as the regulator should police and strictly enforce policies that hold DNB accountable and to ensure there are no misconducts in handling this wholesale business and any irregularities in managing the project such as ensuring fair play and maintaining the confidentiality of consumers’ data.”