Telco Deep Dive 2018: The fibre broadband disruptor

• Aims to change balance of power in market from telcos to customers
• No contract lock-in or minimum number of infrastructure to lease

AN ELECTRICAL engineer by training, Shaharin Saman can lay claim to being the first Malaysian entrepreneur to receive Pioneer Status from MIDA (Malaysian Industrial Development Agency) in the mid 1990s for a VCD factory he built in Penang, a northern Malaysia state.

But today, Shaharin, the founder and chief executive officer of iFiber Sdn Bhd, stands poised to be a  disruptor in the fiber access broadband market in Malaysia through his Open Access concept of offering last mile broadband access to the market. “I want to change the balance of power in the market from the telcos giving you options of their broadband plans to giving consumers choices of which ISP (Internet Service Provider) to choose from for their connectivity needs.”

He plans to brand the areas he covers with broadband as gigabit cities ie KL Gigabit City, Bangsar South Gigabit City etc. His first project though will be in Johor Baru where JCorp has signed iFiber on to roll out Phase 1, Komtar JBCC complex upgrading to gigabit internet.

Basically, Shaharin, who has been involved in the fibre broadband space since 2006, starting in Kedah, will be wiring up commercial buildings and condos with last mile fibre broadband and inviting any interested party that wishes to be an ISP to start offering their services. This model separates the infrastructure part, that iFiber handles, from the actual broadband service part that the ISPs handle.

Shaharin actually pioneered the Open Access business model with Fiber@Home, a company he formed in 2010 through executing a management buy-out of a Kedah state-owned fiber company he was CEO of. In 2017, he sold Fiber@Home to a Singapore broadband company called ViewqWest that is now operating Fiber@Home.

Shaharin got his inspiration to provide Open Access from a similar model that is working very well in South Africa where a company called Vumatel has over 30 ISPs, most of them not-telcos, offering broadband services to customers through its open access network.

Shaharin’s Open Access model is built on the active Ethernet platform as opposed to the G-PON (passive optical networking) which makes it more flexible to deploy and allows him to deploy his business model. Telekom Malaysia Bhd’s high speed broadband (HSBB), on the other hand, is built on that G-PON platform (see chart below).

iFiber not only handles dealing with developers but then wires up each unit in a building at its own cost. It is an attractive proposition to ISPs, which by the way, could be any company out there, ie an FMCG player, media company, electronic devices seller, as their cost to reach customers is minimal.

How minimal? “Any potential ISP that wants to reach the customers I have wired up just need to connect to my central node in Cyberjaya for US$363 (RM1,500) a month.” That fee by the way, goes to the data centre company and not to iFiber.

It also does not charge ISPs a minimum contract lock-in or minimum number of infrastructure it has to lease. ISPs will pay him when they get customers.

iFiber’s business model is also simple enough – it just charges the ISP a wholesale price to access its last mile infrastructure based on the MSAP (Mandatory Standard on Access Pricing) set by telco regulator, Malaysian Communications and Multimedia Commission (MCMC).

His biggest challenge is mindset change and education. “I need to convince developers that my approach helps them and their tenants.”

Not surprisingly, he says, “The incumbent infrastructure players don’t like what I’m doing.” That could be an understatement.

For commercial buildings that offer broadband access, part of the requirements for them to get their Certificate of Fitness (CF) is to get a “surat sokongan” from a telco, which translates to “letter of support”. And when there were only a handful of players and with Telekom Malaysia Bhd being the dominant player, the cost to get a telco to equip a building to be broadband ready could run into the high six figures.

Developers didn’t like the high cost and worse, didn’t like the fact that their tenants then had to rely on one player to provide them their fibre connectivity. “And some telcos would not provide service to a building until a certain percent of tenants asked for it,” says Shaharin.

In comes Shaharin with his Open Access approach and not surprisingly the first developer he approached in 2014 when he was running Fiber@Home jumped at this.

“I needed a reference site and offered to do it for free and after proving the Open Access model can work, I was paid by another developer to wire up their project, my second,” he recalls.

Hoping to magnify the success he had with Fibr@Home, Shaharin, who has self funded iFiber till now to the tune of US$1.21 million (RM5 million) is now talking to investors to raise US$4.85 million (RM20 million). If successful, he claims to have a financial institution waiting to give him a US$24.2 million (RM100 million) debt financing loan for him to meet his target of wiring up 300,000 premises consisting of office units and condo dwellings within a 1 km range of 10 MRT stations along the Sg Buloh-Kajang line. He considers this target market a low hanging fruit.

If it sounds like Shaharin is trying to bite off more than he can chew with such an aggressive target, he draw an analogy to the PLUS highway that runs from the North to South of Malaysia. “I want to be like a PLUS highway. When the road is small no one comes but when you are big, many want to use your infrastructure. And, it’s going to be great for users.”