Malaysian govt sees 5G as key economic enabler, looking past any spectrum lobbying

• NFCP Protem Committee agrees to share infra in more ways, including active spectrum sharing
• Communications Ministry, MCMC guided by what’s best for consumers, businesses, country

[Article updated.]

As expected the released Final Report on the Allocation of Spectrum Bands for Mobile Broadband Service in Malaysia has generated excitement and anxiety across the telco landscape in Malaysia.

In particular, there is intense focus on the MCMC’s preference for a single company, but owned by various licensee holders, to run the infrastructure part of Malaysia’s 5G network. Yet this is not a new idea and was first mooted when 4G was being planned around 2011 with 4G launched in 2013.

The value proposition then was the same as it is now. To avoid wasteful duplication of backbone networks which do not provide any operator with a meaningful market advantage but results in costly and redundant infra that is purchased from foreign network operators, resulting in outflow of funds. The reduction of capex and sharing of network resources is expected to result in the mobile players being able to roll out services quicker and to win market share by innovating and offering better quality services.

But the telco players back then were able to talk the MCMC and then Minister of Communications and Multimedia, Lim Keng Yaik out of the idea, with various reasons given.

The end result has been two fold. The listed telcos have enjoyed above average financial performances with enviable EBIDTA margins, which is great for them and their shareholders.

But on the flip side, Malaysia has languished with average, at best, digital infrastructure performance with the MCMC sharing a chart (pix above) that shows Malaysia embarrassingly behind some of its regional neighbors like Thailand and Vietnam in terms of average download mobile broadband speeds. Malaysia is even behind Laos, but to be fair, the country has only rolled out 4G in its small capital, so that is not fair comparison.

In terms of fixed broadband download speeds, even with the dramatic speed upgrades enjoyed by customers in 2019, Malaysia is still ranked a middling 37 globally and third in SEA behind Singapore and Thailand.

Needless to say MCMC Chairman Al-Ishsal Ishak and Minister of Communications and Multimedia, Gobind Singh Deo, have not been impressed.

[Correction: MCMC Chairman's name was mispelt in an earlier version.]

More so Gobind, who regularly peppers his speeches with the exhortation, “Malaysia must lead/be leaders”. The signs are ominous however for the well regarded Minister who has maintained regular and open communications with the telcos. MCMC rolls out another chart that shows that the capital intensity in the Malaysian telco space has decreased over the past three years to 11%, well below the global average of 18%. (chart below).

And it does not seem likely that 5G will be a catalyst for increased investment by the telcos, judging by the 5G business plans that have been shared with the MCMC, which an executive in the know tells DNA “have been underwhelming to say the least.” Which means that the minister is likely not to get his wish when he urges for Malaysia to lead the way. Which then places the onus on the government to pull the right levers to ensure industry is motivated to play their part in the 5G rollout.

Increasing the urgency for Malaysia to get its 5G rollout right and not repeat the mistakes of 4G, is the strong link the government sees between future economic development and digital infrastructure. Here the MCMC shares a chart that links every 10% increase in fixed broadband penetration to a 1.38% GDP boost. (chart below)

At the same time, the need to share infra is also seen to be more practical and urgent in 5G, whose high speed and low latency networks require all telco towers to be fiberised, currently only about 40% are, and with many more small cell sites with line of sight.

You can expect to see cities like Kuala Lumpur and Penang dotted with small cell sites on traffic lights, light poles, billboards and buildings. Meaning, rollout will be more expensive and will likely be concentrated in economically feasible area, thereby widening the economic divide between urban and, sub-urban and rural areas. This is a scenario the MCMC and Gobind definitely do not want to see unfold.

Yet, despite the grave urgency felt by the government to get the 5G rollout done right and the likely temptation to bulldoze its way through, what is different about the current 5G approach is how much the MCMC and Gobind's ministry have engaged with all related parties. And it is also noteworthy that this is only the second time in the history of the MCMC that spectrum matters have been opened for Public Inquiry. The first was in May 2002 over 3G spectrum, which the MCMC tells me was focused on determining the standard to be used for 3G. The 2019 Public Inquiry had a much wider scope with identification of the band, manner of assignment and general approach to be taken on the planning for the relevant bands.

[Ed: Paragraph updated for accuracy.]

The Final Report that came out on 31 Dec was the result of not just a two month Public Inquiry from 1 July to 31 Aug 2019 but also, the 5G Task Force and from meetings with mobile network operators and vendors in Oct 2019 to obtain information on 5G business plans and readiness of the 5G ecosystems within the relevant spectrum bands.

And what is even more noteworthy about the single party infrastructure provider, is that the National Fiberisation and Connectivity Plan (NFCP) Protem Committee, while not specifically agreeing to the single infrastructure provider, did agree to share infra in more ways than currently, which includes active sharing of spectrum. To this, Al-Ishsal tells DNA: “It's an ongoing process to refine infra sharing approaches and execution that will avoid duplication, wastage, unnecessary costs and benefit consumers/businesses.”

 [Ed: An earlier version incorrectly stated that the NFCP Protem Committee agreed to the single infrastructure provider idea.]

The NFCP Protem Committee consists of Celcom, Digi, Maxis, U Mobile, YTL Communications, Telekom Malaysia, Time dotCom and edotco.   

To Al-Ishsal this is a big step forward towards the single infra provider: “Thus, the consortium for 5G can work because of the current understanding by the Protem which involves all the main telco players.”

[Ed: Paragraph updated for accuracy.]

While the MCMC is happy with the sharing proposal framework so far, says Al-Ishsal, there are more details to be worked out which is why he points out, “in our Final Report we called out the next steps per our process ie Marketing plan coming out [expect by end Feb] which industry can input via public consultation, and then the final tender for beauty contest will be out. This is not the end of the process, the Final Report is a beginning.”

In the old Malaysia, it would have been a beginning for more intense lobbying to sway policy and outcomes to the benefit of individual telco players. But in the new Malaysia, Gobind has, rightly so, directed all the telcos that came to see him on this matter, to the MCMC. And the MCMC has shown them its Final Report, which has been the result of extensive industry engagement with full transparency.

And maybe, Malaysians can hope that the outcome of the national 5G game plan, will be one designed to benefit consumers, businesses, entrepreneurs looking to build disruptive services and products around 5G technologies and, ultimately, the nation.