The Edge Market - MCMC will hold DNB to 5G targets, provide engagement platform with private sector

22 Mar 2021 - The Edge Market


EXISTING telecommunications operators have been assured that there will be “a high level of engagement” with the private sector to ensure a win-win situation for all on 5G, while allowing continued returns on the investments that are being put in to upgrade existing 4G infrastructure.

“We have engaged with the CEOs (operators), providing them more clarity, [and have] advised them that the road to planning is now going to be different from what they have all been used to … This month (March), there will be an engagement arbitrated by the regulator between Digital Nasional Bhd (DNB) as well as the main licensees,” Malaysian Communications and Multimedia Commission (MCMC) chairman Dr Fadhlullah Suhaimi Abdul Malek tells The Edge, adding that the regulator would be moderating a “planning platform” between DNB and the existing operators to ensure smooth rollout of 5G in Malaysia.

“Their greatest concern was that they needed clarity, hence we informed them that the planning platform is being created for them to interact with DNB. That allayed the technical fear. [That] there will be (not joint planning) but a high level of interaction at the planning level allayed the second concern [of 5G network not being in areas they want]. On shareholders’ concern about what would happen to their current investment, [operators have been assured that they] will still be able to continue the existing services over the network that [they] own. Nothing will stop them from continuing to do that. At the same time, we also told them, as with all technologies, that it will take time for that technology to be adopted. Rolling out [5G] is one thing, for it to be widely used is another,” he adds, noting that it took a number of years for people to migrate from 3G to 4G, partly due to the cost of devices, and that there are still people on 2G currently.

In short, Fadhlullah says existing players will be able to continue offering existing services as per existing licensing conditions because “it will be a while” before all players in the telecommunications industry move towards full competition on service rather than infrastructure. “What’s important is we need to make sure that the direction gets traction and the decision made by the government actually allows that to happen faster rather than later [for the benefit of consumers].”

Apart from cutting duplication and rollout cost, the difference that a single 5G network can bring is that connectivity will arrive a lot faster in places deemed strategic for the country’s development than if it were a pure commercial decision by telecoms operators. Without high capital expenditure (capex), the telecoms operators would need less profits to cover their cost and this will lower the cost for consumers, which also helps increase demand and promote the country’s digitisation.

According to Fadhullah, network upgrades from 3G to 4G to sunset 3G by year-end is progressing “as scheduled” and details will be provided when the second Jendela report is issued in April. He also said telecoms operators would be allowed to refarm the 900MHz and 2100MHz spectrum that are currently being used by the country’s four largest mobile operators for 3G for the 4G network, with no change to expiry of 2032 and 2034 respectively.

While details on how 5G infrastructure will be rolled out in Malaysia will only be known once the 5G tender document is issued by DNB — the government’s special purpose vehicle (SPV) tasked to own and roll out Malaysia’s only 5G network — it is likely that the plan is to deliver a so-called non-standalone (NSA) 5G connectivity in selected key strategic areas by year-end, utilising existing towers, fibre as well as existing telecoms players’ core 4G network before implementing standalone (SA) or “true” 5G for more sophisticated applications.

“I don’t like to use the term standalone or non-standalone. What I’m very clear of are the principles. At the end of the day, the network must provide the level of service of what 5G should offer, which is speed and low latency and the ability at some point soon to cope with massive machine communications … As a principle, elements that are already available would be utilised for [5G] network buildup.” says Fadhlullah, who also allays concerns over tight government finances.

“Everyone thinks tender means people putting in money, but if you talk to investment bankers, they will tell you there are many, many ways things can be financed,” he adds.

Last Tuesday (March 9), Finance Minister Tengku Datuk Seri Zafrul Aziz said there will be an open tender process for 5G infrastructure development, which is estimated to cost RM15 billion — an amount “which will be invested by the private sector developers”, without divulging specifics. Financially savvy deal makers, however, saw that statement as confirmation that some manner of project-cum-vendor-financing will cut the need for the government to fork out any money apart from the cost of operating DNB, which is held under the Ministry of Finance.

Resources saved can also be redirected to extend connectivity — essentially opportunities for e-learning and e-commerce — to rural communities to bridge the digital divide. Vulnerabilities exposed by the Covid-19 pandemic proves that a different approach is needed fast if Malaysia hopes to catch up with the leaders and make up for lost time.

“When Covid-19 hit, we realised that our connectivity was not up to mark. Therefore, we had to aggressively get our service providers to invest on fibre, 4G coverage and quality of service on fibre as well as mobile coverage. That is a huge cost. Yet at the same time, the country needs to be attractive for investors … If Malaysia says we are going to roll out 5G in 2023, they will say ‘I will come back in 2023’; as a country, we can’t afford that. Therefore, there was a Cabinet decision on this and we as regulator will make sure that we facilitate the industry to deliver the target that has been announced by the prime minister,” Fadhlullah says.

He declined to provide a breakdown of who owns the 49,810 base stations in the country, citing industry sensitivities. Nonetheless, he assures that DNB “will be treated like any other licensee” and be asked to provide a plan with set targets that people can measure against to help everyone be on the same page.

Without commenting directly on wholesale prices, which is another industry concern, Fadhlullah did say that the single network is to save on cost so that services can be offered to consumers at lower prices.

When announcing the board and Ralph Marshall — who oversaw the rollout of Maxis Bhd and Astro Malaysia Bhd’s network during his tenure as executive director at billionaire Ananda Krishnan’s Usaha Tegas Sdn Bhd — as CEO of DNB on March 1, the Ministry of Finance had also said “public ownership with a professionally run management team is the right formula to ensure not just sufficient development expenditure but also to reduce the current digital gap and to realise the aspirations of the government’s Shared Prosperity Vision 2030” given that 5G infrastructure is necessary to accelerate innovation and build a robust, enabling digital ecosystem. Datuk Mohamed Sharil Tarmizi, who were among appointees to the DNB board, was former chairman and CEO of MCMC.

That policymakers want telecoms operators to compete on service and not infrastructure going forward would likely hasten structural changes to the industry in terms of promoting wider sharing of passive and eventually active infrastructure, even though telcos continue to own 4G networks, hold 4G spectrum and are expected to be allowed to use 3G spectrum to enhance their 4G network connectivity once 3G is decommissioned by year-end. This is an area that investors and the players themselves may well spend some sleepless nights on, until the dust settles.

For its part, Fadhlullah says MCMC “will ensure that the rule of law is always being upheld and whatever targets that have been committed will be tracked and monitored. We will just have to wait for DNB to share with the public what their rollout plan is and thereafter we, as the regulator, will certainly be monitoring to ensure those rollout plans are being executed accordingly”.


 

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