Telco Deep Dive 2017: Malaysian spectrum refarming: Where are we after a year?: Page 2 of 3

What’s up, Malaysia?

According to industry insiders, the three big players – Digi, Maxis and Celcom – have all but concluded their respective refarming activities nationwide. Maxis and Celcom have also handed over their 900MHz spectra to both Digi and U Mobile. Reciprocatively, Digi has also given up its 1800MHz to Maxis, Celcom and U Mobile.

This timeline to do so is in accordance with stipulations laid out by the MCMC, which specified that all refarming activities of both 900MHz and 1800MHz spectra must happen by June 2017.

When asked what were some of the challenges facing mobile operators embarking on spectrum refarming projects, Stephen Wilson, principal analyst with telco consultancy Analysys Mason said he can’t be specific about the challenges faced by Malaysian operators.

But based on work done elsewhere around the world, Wilson told DNA in an email that one big consideration is to ensure that the quality of the GSM network remains sufficient despite the use of less spectrum.

A Malaysian-based industry insider who has direct knowledge of the spectrum refarming work and whom DNA spoke to said the reduction of all operators’ 2G spectra to 2 X 5MHz will limit their ability to serve their respective subscribers with anything but basic voice communication.

“There’ll be virtually no data capabilities while on 2G and voice will be rudimentary at best. The voice quality at certain low coverage areas would also be choppy and not smooth,” said the insider.

Quizzed further as to how well Malaysian operators have fared in managing their respective refarming exercises, the insider said that for the most part, the overall quality for 3G and LTE services have not been affected as the refarming exercise only affected 2G services.

“I would say that for those who are still using 2G services, the degradation they experience would be 10% to 15% worse than what they had been enjoying before,” he explained. “For example in practice, they may experience 10% to 15% more drop calls than before.”

However, the insider also said that all operators have made it a condition that the vendors and their respective subcontractors doing the refarming work will have to ensure that they deliver “equal or better quality” as part of their key performance indicators (KPIs) for the projects.

Contractors involved in this refarming work include incumbent equipment providers Huawei Technologies Co Ltd (for Maxis) and ZTE Corporation (for Digi). There are also several  small independent wireless subcontractors involved in these works.

Quizzed as to whether the operators have received negative feedback from 2G subscribers after the refarming work, the insider said it’s hard to say as there isn’t an active feedback mechanism to gauge how bad the quality may have become. 

“I’m not aware of any feedback mechanism for complaints they may get from after the 2G refarming work but I suspect that this would be minimal as people are quite used to dropped calls these days.

“Also, a lot of these 2G subscribers using basic feature phones are based in rural areas and I suspect that they wouldn’t bother complaining as much as if the quality of 3G or LTE were to drop in urban centres where the more affluent subscribers with their fancy smartphones would likely complain more.”

A straw poll conducted by DNA amongst users noted that 2G services have indeed suffered since the refarming. Anecdotal evidence confirmed what the insider said, with some complaining that 2G services had really gone from bad to worse.

“My Celcom service is quite bad now, when it’s not on 3G or LTE,” said a senior IT executive DNA spoke to on condition of anonymity. “I can’t get data at all on 2G and voice quality is choppy.”

Another challenge for operators, said Analysys’ Wilson, is that they have to struggle with the availability of devices that support LTE on the different frequency bands.

“There are devices that support LTE in 900MHz frequencies but this number is some way behind the number of devices supporting LTE in the 1800MHz band,” he explained.

What this means is that operators can’t just provide LTE in 900MHz and expect subscribers to upgrade their handset due to the unavailability factor, even when an operator's network can support LTE 900MHz.

 Switching off 2G?

Which leads to the next question – will Malaysia turn off its 2G services, and if so, when would it?

For the record, some operators in Australia have begun switching off their 2G network as have Singaporean operators. Based on Ovum’s research, other countries considering doing so include New Zealand, South Korea and Thailand, which is one of the first movers in SEA to do so.

Nokia’s Kleemann said amongst the considerations when it comes to making the decision to switch off a technology like 2G include looking at the number of subscribers who are still using the service and managing the existing subscriber base during the transition phase, which can impact network performance and overall customer experience.

“This also means that, besides simply spectrum refarming, operators must consider offering subscribers attractive transition packages to encourage them to move to the upgraded network,” he argued.

Ovum’s Inderpreet concurred with Kleemann about attracting subscribers to switch over using bundled packages but added that more could be done.

“It’s important to match the LTE/ 4G coverage with the 2G network to ensure people would not switch back to 2G; boost the capacity of 3G/ 4G networks to avoid network overload which can lead to quality issues; ensure availability of low cost smart devices that match the pricing of basic feature phones to simulate migration at the bottom of the pyramid.

“Other methods include device buy-back plans or device trade-in offers and to offer a good good lead time for subscribers to learn and understand the new services, as well as train and equip support staff to help subscribers during the migration phase.”

Neil Shah of Counterpoint Research feels that the biggest challenge for Malaysia is that one in three mobile subscribers are still reliant on 2G network. In Malaysia, that number equates to approximately between nine and 13 million subscribers or approximately 25% to 30% of the total mobile subscribers in Malaysia.

“So operators have to make sure that the number of 2G subscribers goes down to below 10% before any switching off of 2G can be considered without any disruption to existing subscribers,” he said in an email.

A senior executive familiar with regulatory issues DNA spoke with said that the shutting off of the 2G service “isn’t realistic” yet in Malaysia as there are too many challenges, which will directly impact both operators and consumers.

The person said that although the MCMC had been flirting with the idea of turning off 2G, the fact that there are still over 10 million subscribers that are on 2G means that this will not happen “anytime soon.”

“There are political and economic considerations at play,” the executive argued. “Shutting down 2G means that invariably, the lower income group – many of whom live in outlying areas of Malaysia – will be impacted. They would need to upgrade their mobiles to get 3G and LTE services, and many of them can’t afford to do so.

“In Malaysia, the big impact to this class of people isn’t realistic and given the impending Malaysian General Election around the corner, you can’t just kill off 2G service for the conceivable future.”

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