Malaysia's 5G spectrum conundrum: A blessing in disguise?

• Malaysia delayed its aggressive 5G rollout plans pushed by previous government
• But not necessarily bad as benefits a long way off; hybrid 4G/5G the way to go

THREE years might not seem like a long time but as far as developments within the telecommunications (telco) industry are concerned, it could mean a world of difference. In 2017, Digital News Asia (DNA) explored the progress the country had made over the allocation and management of frequency spectra, the finite, scarce resources over the air needed to power the wireless industry. 

DNA concluded then that Malaysia’s wireless telco policy was generally heading in the right direction, after major operators embarked on the refarming of 2G spectra in a bid to allow mobile operators to support the more efficient 4G technology, which is far superior to that of 2G.

After that took place, there weren't major shifts within the industry as far as telco policies go. But the following year in May 2018, Malaysia experienced a watershed general election and surprisingly returned a non-incumbent government, thereby creating a new ministerial line up, political appointees to key positions and policy shifts with regard to the country’s telco landscape.

In particular, the then Pakatan Harapan government emphasised two consequential telco policies championed by the communications and multimedia minister, Gobind Singh Deo. They were: the sharp reduction in  fixed, fibre-based broadband prices for consumers whilst raising the maximum transmission speeds; and the escalation of the country’s preparedness for 5G technology.

In tandem with this development, Gobind appointed an outsider, Al-Ishsal Ishak, to lead the influential regulatory authority, the Malaysian Communications and Multimedia Commission (MCMC) in October 2018.

Formerly the CEO of Pos Malaysia Bhd, Al-Ishsal was seen to be more open and transparent than the previous MCMC chairmen because he was not part of the old regime, eager to do things differently from previous administrations, industry watchers noted.

He was also more marketing and media-savvy than his predecessors, most of whom were bureaucrats with one being a lawyer, and not as approachable with the media, they added. 

Amongst the things he tried to do was to engage industry and the public more by promising to release more details of MCMC’s ideas through public inquiry exercises. He also called for the use of open tenders in dealings with industry.

Under his watch, he implemented Gobind’s policy directive pretty well, especially that of unbundling the fixed broadband prices, say industry observers. With regard to 5G, he established a national 5G task force that comprised industry professionals as well as regulators and academicians to try and chart what needed to be done going forward.

One of his more ambitious, albeit less than popular ideas, was to award a number of spectrum blocks via open tender based on a concept he championed known as “a single consortium”.

The idea came about after the MCMC conducted a public inquiry in July 2019. By January 2020, the MCMC concluded its public inquiry report and recommended that the 700MHz and 3.5GHz bands being considered for allocation be done via “a single entity comprising a consortium formed by multiple licensees, instead of individual licensees.” 

“The MCMC will undertake [an open] tender process for this purpose and this approach is intended to lower capital expenditure (capex) by minimising costs and preventing the duplication of infrastructure, at a time where improvements in 4G networks are continuing,” the report read.

“As this is a new approach, the MCMC will only make available 2x30MHz of the 700MHz band and 100MHz of the 3.5GHz band. The remaining frequencies of these bands will be considered for assignment at a later stage,” it added.

But alas the 5G spectrum award did not happen largely due to two factors: another change in government and the arrival of the biggest public health crisis in the world – Covid-19.

New administration, a bad thing?

In March 2020, the Pakatan Harapan administration collapsed. With a new prime minister – Muhyiddin Yassin who replaced Mahathir Mohamad’s government – at the helm, the inevitable had to happen. Just three months shy of the end of his two-year contract, Al-Ishsal was axed, and a new MCMC chairman, Fadhlullah Suhaimi, was appointed by the newly-minted communications and multimedia minister, Saifuddin Abdullah (pic).

A former executive at Telekom Malaysia, Fadhlullah was also a commissioner at the MCMC but left in 2018. Prior to his appointment as MCMC chairman, he was the vice-chancellor and CEO of Perdana University. Meanwhile, Saifuddin also announced the appointment of the former CEO of Telekom Malaysia, Zamzamzairani Mohd Isa, as his advisor.

With new players in the game, industry insiders who spoke to DNA anonymously due to the sensitive nature of the subject said they were unsure what will happen to Gobind’s and Al-Ishsal’s push for 5G.

For example, was the new administration going to follow through with the single consortium concept? What about the timetable to issue the coveted 5G spectrum? Will the government push ahead with 5G spectrum allocation or will it delay? Will it be done via an open tender? Is it to be auctioned or done via a 'beauty contest,' also known as 'may the best operator win concept?' 

Besides these burning questions, minister Saifuddin was also embroiled in a controversial move, when he reneged on an earlier directive over spectra assignments he gave to MCMC. These developments caused the wireless industry to be on edge with uncertainties over 5G's progress amidst the pandemic being the last thing industry needed.

But does the change in government and the uncertainty over a 5G roll out put Malaysia at a disadvantage? Ostensibly, the MCMC may announce details of 5G spectrum allocation so that its rollout could "happen before 2022."

[Ed: Paragraph updated.]

According to ABI Research not many countries have rolled out 5G in Southeast Asia (SEA). As it stands today, only operators from Philippines, Singapore and Thailand have started their 5G coverage and services, and even then, only to select regions within their respective countries, noted Miguel Castaneda, its industry analyst.

Counterpoint Research analyst Parv Sharma (pic) noted that amongst other SEA countries, Vietnam could possibly launch 5G services later this year. But with the onset of the pandemic, many SEA countries are likely to re-evaluate or delay 5G rollout.

As for Malaysia, Sharma said, "Malaysia has already delayed its 5G spectrum assignments and in Indonesia, there isn't much impetus on the 5G due to having no clear roadmap on spectrum allocation nor interest from operators."

Meanwhile in Singapore, StarHub was first to launch a six-month trial network for its subscribers in August 2020, which was quickly followed by a three-month trial by Singtel a month later.  The island-state is not expected to have a full-fledged 5G until 2024-2025, industry observers have said.

Widely watched as the most advanced market in the region, Singapore is expected to provide learnings for other SEA countries, albeit these learnings will need to be contextualised according to a particular countries' market size, per capita income, and different needs of various industry sectors, among other factors.

ABI's Castaneda said the Philippines, Singapore and Thailand have opted to allocate spectrum based on a hybrid ‘auctions/beauty contest’ mechanism.

"The emphasis for SEA countries seems to be based on the expedient adoption of 5G," he told DNA. "Mitigating costs is also another aspect that has influenced spectrum allocation."

As expected, the MCMC does not think that the delay of the allocation of 5G spectrum is a bad thing, arguing that at "no time will Malaysia be left behind."

In response to queries from DNA last October, an MCMC spokesperson argued that as 5G networks will be used initially by enterprise customers, the regulator has used the 5G demonstration projects  that have been running since (5GDP) to encourage  industries and operators to undertake pilots that will provide lessons for the right process changes and business decisions around 5G adoption. The spokesperson pointed out that the 5GDP had been extended until 31 December 2020, and, if required can be extended further. The 5G pilots have thus far spawned 71 use cases.

"The technical requirement for a 5G rollout is predicated by a strong foundation of 4G coverage and fibre rollout, without which, 5G rollout will not realise the optimal benefits of the new technology," the MCMC argued.

The Covid-19 factor

Without doubt, the one factor that wasn't in any government's control and that has completely upended Malaysia's 5G spectrum allocation plan is the arrival of Covid-19. 

The highly contagious coronavirus, which causes Covid-19 has not only caused 2.4 million deaths worldwide but has also turned hundreds of economies around the world on their heads due to stringent lockdowns needed to control the spread of the coronavirus, including here in Malaysia.

Under Muhyiddin’s government, billions of ringgit have been poured into the economy in various ways to jump-start it. Part of these efforts include a new national digital infrastructure plan known as Jalinan Digital Negara (Jendela), which the government claims will lay the foundation for comprehensive and high-quality broadband coverage facilities, as well as prepare the country for the transition towards 5G technology.

On the back of Malaysia's Covid-19 economic recovery effort, the MCMC said Malaysia's focus now is to strengthen the foundation for immediate economic recovery needs. It added that the country has "the opportunity to reorganise the spectrum lease so that it can benefit more from a harmonised spectrum award."

The MCMC contends that, as the country comes out of the economic downturn, what Malaysia requires is a robust network immediately to support all the initiatives that are centred on digitalisation. 

"The present applications and the processes can technically be well served by an improved fixed fibre rollout and 4G coverage and optimised spectrum use," replied the regulator to questions from DNA. 

"Rushing into a 5G rollout, which includes the early award of the spectrum does not make for a focused approach and a better use of financial and technical resources. Hence, the measured approach towards a 5G rollout and spectrum award."

The regulator also noted that it had undertaken a "laboratory-based" consultative approach to decide how to go about navigating through the new Covid-19 era. This involved multiple government agencies and key service providers putting their heads together between July 17 and August 14 to detail out the new approach, which resulted in Jendela.

"[This approach] is to provide transparency and commitment to the respective targets and timeline. All this stemmed from the new demands and usage patterns following the Covid-19 pandemic which has yet to abate," the spokesperson said.

"The MCMC will undertake a transparent approach in tendering out the spectrum and will be guided by the needs of Jendela to ensure an optimal rollout without any single point of failure for the market."

Timetable not fixed

MCMC further clarified that the announcement of the spectrum tendering process will be undertaken when key milestones agreed by the industry are achieved amongst which will be the 3G network shutdown targeted for December 31, 2021 (For more on this, watch out for tomorrow's story).

"There is a measured approach on 5G to ensure that the industry makes the investment at the appropriate time, actual users utilise the new network at the right geographical locations and a reasonable cost of rollout to ensure consumers are not burdened by huge price increases."

Asked if there is a definite timetable for 5G to be rolled out, and if so, will it be on an open tender or auction basis, the MCMC said then (this was in Oct 2020) that it did not have a landing date and which model to be used. 

"Currently, there is no time-frame set for the MCMC to make the announcement. The end result of the tender will be premised on the criteria above to provide a balanced approach to benefit consumers and not to burden the industry negatively." 

Meanwhile, ABI Research believes that the consortium approach could still be an option for Malaysia moving forward as it can mitigate the overall impact of large capital expenditure commitments of 5G.

Castaneda argued that one of the biggest misgivings with the consortium approach was that the proposed bandwidth allocations are too small. 

"Malaysia’s new Jendela plan, oriented around long-term, large-scale expansion of a nation-wide 4G, and eventually, 5G connectivity can help free up more bandwidth to address this issue."

A staggered approach

According to the GSM Association (GSMA), 4G became the dominant mobile technology across the world with over 4 billion connections, accounting for 52% of total connections . 4G connections will continue to grow for the next few years, peaking at just under 60% of global connections by 2023, it added. The GSMA represents the interests of over 700 mobile operators worldwide. 

Because 4G is still so dominant, the GSMA noted that many operators have opted to look at 5G roll out by incorporating both technologies to co-exist side-by-side, which in effect gives operators and consumers the best of both worlds. The technology behind this is known as a non-standalone (NSA) 5G network.  

In a NSA scenario, a fresh network element called 5G new radio (NR) is combined with existing LTE radio cells providing dual-connectivity. According to the GSMA, 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. 

ABI's Castaneda (pic) notes that operators in SEA countries that have 5G, have used NSA to mainly provide increased capacity and delivery of enhanced mobile broadband (eMBB) services, while retaining existing 4G services for blanket mobile broadband coverage.

"NSA 5G in these SEA countries are in their early stages and so the 5G business models for these operators are still focused on improving traditional enhanced mobile media and fixed wireless access (FWA) services." 

The GSMA noted in a report entitled The 5G Guide that while NSA 5G was originally intended as an intermediate step for operators ahead of the full rollout standalone (SA) 5G, market realities will ultimately shape if, and when, the migration to SA 5G happens. 

"Both NSA and SA deployments are likely to coexist over the long term and some kind of upgrading would be required for a full-fledged 5G (SA) network," the report read.

Meanwhile from a spectrum standpoint, Castaneda also suggested that one way in which operators can maximise their existing 4G networks while integrating 5G spectrum and capabilities is through dynamic spectrum sharing (DSS). 

DSS is a technology that allows the deployment of both 4G LTE and 5G NR in the same frequency band and dynamically allocates spectrum resources between the two technologies based on user demand.

Arguing that DSS in 5G can facilitate the co-existence of the operators’ LTE and 5G networks by streamlining their spectrum allocation, the analyst noted that this sharing arrangement is dictated by the mobile data usage peak schedules of the respective network generations. 

"The main issue with static spectrum sharing – the re-farming of LTE spectrum for 5G – is that the network traffic that an operator would handle in initial [5G] deployments would still primarily come from existing LTE devices. 

"Assigning a dedicated carrier solely for 5G traffic is an inefficient utilisation of an operator’s spectrum resources as the carrier is essentially cordoning off a portion of spectrum that would be underused by sparse 5G subscriptions."

Counterpoint Research Sharma concurs, noting that 4G networks continue to be important for rolling out 5G NSA networks as a large mobile base will still be on 4G. 

"Concurrently, there will also be 2G and 3G subscribers migrating out into 4G networks. In the meantime, NSA and advanced LTE (Gigabit LTE) networks can support these users and operators would have more time to upgrade the overall network to support rich user experience to end-users."

Tomorrow Part 2 of this Deep Dive: With 3G gone, whither Malaysia's mobile network services?