Telco Deep Dive: Spectrum refarming in limbo?

• Realignment has to happen this year; three possible permutations
• Spectrum management needs more transparency, urgency

MALAYSIA is considered a fairly advanced nation as far as its telecommunication infrastructure, products and services are concerned. Beginning with GSM (Second Generation) technology in 1994, the country eventually adopted 3G (Third Generation) technology in 2005 and rolled out 4G (Fourth Generation) networks in 2013.
 
This progress has been due in part to the proactive and forward-thinking nature of industry regulator the Malaysian Communications and Multimedia Commission (MCMC).
 
Also a key factor is the assignment of frequency spectra for different wireless operators to use when building their wireless networks.
 
But what exactly is spectrum?
 
Spectrum 101
 
The basis of all wireless communications is the superimposition of information onto electromagnetic waves, followed by the transmission of those waves from one point to another.
 
Spectrum is a term used to describe the range of frequencies by which the electromagnetic wave is transmitted from one point to another. The information embedded in the spectrum commonly includes radio, TV, cellular voice, and broadband wireless data.
 
In Malaysia, the MCMC is responsible for ensuring that spectrum is managed in a way that meets the needs of spectrum users, with adequate provision for public and community services, and to maximise the allocation of spectrum efficiently.
 
Spectrum is an extremely important issue for a country’s telecommunication infrastructure. It should be viewed as a natural resource that is limited and scarce.
 
In essence, there’s only so much spectrum to go around.
 
Because spectrum is essentially a commodity, no single company or party should have a monopoly over its usage. By dividing spectrum amongst a few companies, competition can be encouraged, ensuring that wireless services are competitively priced and the quality of services is sustained.
 
The most common spectrum range used today for cellular telephony and mobile data are 900MHz and 1800MHz for GSM services; 1920MHz to 2170MHz for 3G services; and 2300MHz for WiMax. Long-Term Evolution (LTE or 4G) uses the 2600MHz and 700-850MHz bands.
 
Currently, 700MHz is also used for analogue TV transmission, which is slated for decommissioning in 2015.
 
Malaysia’s three largest cellular operators – Maxis Bhd, Celcom Axiata Bhd and DiGi.com Bhd – own the lion’s share of spectrum in the country. The country’s fourth and smallest cellular operator, U Mobile Sdn Bhd, has a licence to operate 3G in the band between 1920MHz and 2170MHz.
 
While all these operators can essentially provide cellular services, not all of them can do so equitably, as some have more spectrum than others. For example, Digi currently only has 4MHz of the 900MHz band, while Celcom and Maxis have 32MHz and 34MHz respectively.
 
Spectrum refarming defined
 
With the burgeoning use of mobile data, the exponential rise in the ownership of smartphones in Malaysia, as well as the scarcity of spectrum (as it is finite in nature), the MCMC has been toying with the idea of ‘refarming’ the 900MHz and 1800MHz bands for some time now.
 
In industry parlance, refarming refers to the redistribution of spectra amongst mobile operators, thereby giving a chance to those who do not own certain bands to bid for them.
 
But refarming is a thorny industry issue, especially when it comes to the 900MHz band.
 
Digi has for years argued that it is disadvantaged by the fact that it does not own a significant portion of the 900MHz spectrum, which Maxis and Celcom do. The right to use 900MHz is acutely important for Digi as it is the only operator today that does not own vast quantities of the lower 900MHz frequency band that is needed for wider coverage.
 
Gaining the 900MHz band would also help it offload some of its 3G traffic from its current 1800MHz band to the 900MHz band, thereby enabling LTE on its 1800MHz spectrum, something its rivals Celcom and Maxis are able to do.
 
However, Maxis and Celcom will be unhappy to give up what they’ve essentially been licensed to use for some 20 years now, and would be loath to participate in any refarming exercise.
 
So, will it happen?
 
The wireless industry has been watching with bated breath as to when the MCMC will address what some industry observers believe as essentially an unbalanced playing field in Malaysian spectrum assignment.
 
However, a senior industry executive who is familiar with regulatory issues within the wireless industry told Digital News Asia (DNA) that two other more important spectrum-related issues need to be dealt with first before spectrum refarming can take place.
 
The first is the assignment of LTE spectra while the second is the assignment of Digital Terrestrial Television Broadcast (DTTB) spectra.
 
“The former MCMC chairman Mohamed Sharil Tarmizi (pic) wanted the first issue [LTE spectra assignment] out of the way, and that happened in 2013,” the executive said, on condition of anonymity.
 
“The DTTB spectra was then dealt with in 2014, and this year is the year the 900MHz and 1800MHz spectra refarming was to have taken place,” he added.
 
However, Sharil’s tenure as chairman was abruptly ended and the MCMC is now under the helm of a career bureaucrat in Dr Halim Shafie.
 
His appointment, while being generally lauded by the industry, may still have thrown a spanner in the works as far as the timing of the refarming exercise is concerned.
 
[The MCMC had not responded to DNA’s request for comments to this article as at press time]
 
The industry insider said that regardless who the chairman of MCMC is, the spectrum refarming should go on as the industry needs to redress the imbalance that exists now.
 
“There is an urgent need to start realigning 700MHz to 900MHz spectra sooner rather than later because the market is rapidly changing to becoming full broadband networks, as voice and SMS (short messaging service) are being substituted by over-the-top (OTT) trends – which means there won't be revenue to be generated from voice and SMS for much longer.
 
“The MCMC should put a firm commitment to designate these bands for mobile broadband and conduct a spectrum demand study before coming to any decision.
 
This is especially true for the 700MHz band as it is still currently being used by analogue TV transmissions, which are due to be turned off by 2018,” said the industry source.
 
Vivek Roy, research analyst at Ovum Asia Pacific, stressed that the issue of spectrum refarming is crucial in a developed mobile market, such as Malaysia, as the exercise creates a level playing field and increases competition in a market that is already saturated, and without much more to be done where coverage is concerned.
 
“The exercise also lays out a clear roadmap of technology evolution,” he told DNA via email. “That said, some operators might lose out on spectrum capacities.”
 
Next Page: The different possibilities available, and refarming issues