Telco Deep Dive: Spectrum refarming in limbo?: Page 2 of 2

Possible permutations

Despite the urgent need for the spectrum refarming exercise, the industry insider said it won’t be an easy thing to do as the MCMC “has a lot on its plate,” including the ongoing furore over how the Good and Services Tax (GST) is to be implemented on prepaid users.
 
However, if spectrum refarming were to be carried out, there are a few scenarios that could emerge, according to Ovum.
 
The London-based telco research and consultancy firm said that while it’s difficult to predict how the MCMC will reassign spectrum, nevertheless the process will likely start with the 900MHz band and likely to be then followed by the 1800MHz band.
 
Vivek (pic above) said the MCMC could use three common methods to refarm spectrum: By auction; by the best business and technical case proposal (more commonly known in the industry as ‘a beauty contest’); or by grants.
 
The reason for addressing the 900MHz band refarming first is because it has the largest unequal distribution and is perhaps the most contentious amongst the big three operators to realign, he argued.
 
Vivek suggested the first possibility that could play out is that Digi acquires an additional portion of the 900MHz band at the expense of Celcom and Maxis.
 
“This will be the most favourable case for Digi as it creates a level-playing field and will enable it to free up some portion of its 1800MHz band for 4G.
 
“It would also enable DiGi to move 2G users from 1800MHz to 900MHz, something Celcom and Maxis are finding it easy to do now owing to their excess 900MHz allocations,” he explained.
 
The second scenario would be that U Mobile receives 900MHz, assuming the first possibility still holds true, according to Vivek.
 
U Mobile currently only has access to 3G frequency (1920MHz to 2170MHz) and the 2600MHz LTE band. If it does get a 900MHz reassignment, it would allow U Mobile to add to its existing 4G band and allow it to expand to rural areas, he ventured.
 
The third possibility is that the non-cellular players are assigned some 900MHz, which is unlikely to happen, he said.
 
“[If this happens], this would be predominantly WiMax players, which already have some 2600MHz allocations for 4G use.
 
“However, if Telekom Malaysia (TM) happens to win any additional spectrum, it will definitely create an imbalance, considering that TM now has access to 850MHz, 2600MHz and 2300MHz [via its 57% stake in Packet One Networks (P1)] – all of which can be used for 4G,” he added.
 
Vivek said another scenario that could surface would be that U Mobile gets some of the 1800MHz band, since the big three operators have equal 1800MHz allocations (2x25MHz each).
 
He ventured that MCMC could decide to reassign 1800MHz to accommodate U Mobile. This will bring challenges for Maxis and Celcom as they currently use a portion of their 1800MHz band allocations for 4G, while Digi is expected to do the same soon, he said.
 
“This may lead to the possibility of [900MHz] spectrum sharing between the big three and the smaller players if the regulator decides to reallocate both 900MHz and 1800MHz,” he added.
 
WiMax players
 
Meanwhile, the country’s two WiMax players – P1 and YTL Communications Sdn Bhd (YTL Comms) – would be determined not to be left behind either.
 
Currently, P1 and YTL Comms each have 30MHz of LTE spectrum in the 2600MHz band. Both companies have also been relatively quiet about their plans, preferring not to announce anything to the media in the past year.
 
According to an industry insider, P1 and YTL have hard choices to make as WiMax is really a sunset technology and there is no more support globally.
 
“It’s likely both of these companies have yet to break even and become profitable after investing heavily  in WiMax,” said the insider.
 
“And now they have to pour more money into TD-LTE (Time Division-LTE), which is the only migration path available to them.”
 
Another industry source concurred, noting that the real question is not whether they would migrate away from WiMax to TD-LTE, but when.
 
“My view is that they will choose to migrate eventually to one frequency band. Once they do so, both of them need to determine what their original frequency allocation will be used for.
 
“If I were TM [via P1], I would use the 2300MHz frequency as a form of wireless UniFi [TM’s high-speed broadband offering] so that I can expand the coverage of its fibre network, and use the 2600MHz for the pure mobile network offering.
 
“From a technology standpoint, I believe the frequency addition is simpler for YTL since it has built a mobile network from day one, but for P1, it may be a little more complicated given it also has some legacy equipment that supports fibre (fixed) connections,” said the insider.
 
Transparency, urgency needed
 
Whatever the refarming scenario, most industry players believe that the issue of spectrum management in Malaysia must proceed ahead with more transparency and urgency.
 
Ovum’s Vivek said he expects operator consolidation to happen in Malaysia, as there are just too many players operating in a relatively small market.
 
“One catalyst for this consolidation will be spectrum, as the larger operators will seek smaller operators to boost their spectrum supply,” he said.
 
An industry insider DNA spoke to concurred. “The industry today has too many players, which either creates price wars or semi-cartels.
 
“The MCMC shouldn’t just let more players in [to increase competition], but should better manage the anti-competitive activities that occur, sometimes subtly, sometimes overtly.
 
“The regulator has for far too long been focused on technical regulation and has not given enough emphasis on economic regulation. As a result, we see high degree of cosiness amongst the three mobile incumbents – to a point where their competitiveness is very staged,” he argued.
 
The industry insider also noted that more sharing beyond infrastructure such as towers and common antennae must be encouraged, and the MCMC should draw on LTE lessons and notice that the operators can share the spectrum.
 
“So if they can share the 4G [2600MHz] spectrum, my argument would be that they surely can also share the 900MHz spectrum,” he argued.
 
“Perhaps MCMC can give these mobile operators a ‘licence fee holiday’ for a year on condition that the fees that are saved will be used to help defray the cost of migrating customers.”
 
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Will TD-LTE make a difference for YTL Comms?
 
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