Faced with resistance from mobile network operators (MNOs) to use Digital Nasional
Berhad’s (DNB) 5G infrastructure, the government has agreed to allocate 70% shares of DNB to MNOs.

However, only two MNOs have so far accepted the offer. The other major MNOs are still considering. According to a report, they have until June 30 to make
up their minds.

I have written before about the need to have an independent entity to build and lease fibre to telcos for 5G(and other services). This is to ensure all telcos can compete on a level playing ground using the same shared infrastructure. Structural separation between lessor and lessees is critical to prevent a lessor from competing against its own customers (lessees).

However, with the government agreeing to allocate shares of DNB to MNOs, the ecosystem is destroyed. MNOs (as retail providers) become part of the wholesaler. Everyone will
attempt to protect their own interest. A certain kind of cartel could develop. Who is protecting the end-users’ interest?

Previously, there was a consortium formed to lease international bandwidth in bulk and re-
lease to consortium members at cheaper rates. The consortium was effectively a wholesaler. “Big” members who also leased and re-leased international bandwidth were
not happy as they could not compete against the consortium at lower rates. “Small” members were happy because they could lease bandwidth from the consortium at cheaper rates. In the end, the quarrel could not be settled, and the consortium was disbanded.

A similar quarrel could develop between “big” and “small” shareholders in DNB. Personally, I was part of a retail service provider for around 25 years. We had to lease infrastructure from a big wholesaler to deliver our retail services to the end-users. The wholesaler also had a retail arm which was competing against us. The wholesaler knew exactly our cost. At a certain time, they would offer a discount to our customer and the customer then left us. We had to find new customers. The cycle continued.

When a customer subscribed to a service from us, the wholesaler had to activate the service since we used its infrastructure. Here another trick was used against us by delaying service activation. If the customer subscribed directly to the wholesaler service, service activation was very fast, faster than the standard activation period applicable to all.

The top management of the wholesaler might not be aware of these “unofficial” tricks. But the sales personnel down below would use any trick to achieve their sales targets. These little stories highlight the need to have an independent wholesaler, who should offer the same terms of service for all its retailers and who would not compete against its own customers (the retailers). Independence means separate company, board, management team and premises.

What is the best way forward for DNB, if it is still not too late? These are my views:

1. Focus on passive backhaul infrastructure – dark fibre, towers and poles – build oracquire and lease out to retail service providers on cost-plus basis. This should not be limited to the 5G service. Leave the last-mile portion to retail providers to compete – 4G, WiFi, FTTx and other services. End-users would have more choices.

2. Certain shared 5G spectrum can be operated and managed by DNB. However, every MNO should also be allocated with exclusive 5G spectrum for its own individual use. In this manner, we would have a bigger room for innovation and competition among MNOs.

3. DNB should be operated as a not-for-profit, self-financing company. Excess revenue should be used to expand the coverage. The leasing rate can be gradually reduced as the volume increases.

4. As for the dark fibre, the leasing rate should be on per link basis, distance independent (subject to transmission equipment). This will future-proof bandwidth cost for the retailers. Hopefully, the saving would be passed to the end-users.

One of the challenges is to determine the size and distribution of populated areas. I did ask our statistics department but the information is not available. The size in sq km would determine the length of fibre and the number of towers and poles, and hence the overall cost.

I believe the overall cost would be less than the current allocation for DNB. The neutrality of DNB must be maintained.

 

Mohamed Awang Lah has been involved in internet services since its inception in the mid-1980s. Before his retirement, he was the CEO of Jaring Communications Sdn Bhd.