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Malaysia government intervenes to drive 5G forward

The government of Malaysia pledges to spend 15bn ringgit to set up an entity that would be granted spectrum and operational scope to manage 5G roll-outs

Malaysia is speeding up 5G deployments in the country through a “special purpose vehicle” (SPV) that will receive 5G spectra, as well as build, operate and lease 5G infrastructure to new and existing telcos by the end of 2021.

Announced by Malaysian prime minister Muhyiddin Yassin, the SPV is part of the country’s new MyDigital economy blueprint, which aims to bolster its national fibre infrastructure and incentivise major cloud suppliers to set up local datacentres, among other things.

Speaking to the media on 22 February to elaborate on the government’s 5G plans, Fadhlullah Suhaimi, the Malaysian Communications and Multimedia Commission (MCMC) chairman, said the SPV will be fully owned by Malaysia’s ministry of finance (MOF).

The yet-to-be-named SPV is expected to invest a total of 15bn ringgit (US$3.7bn) over the next decade and will be given the appropriate spectrum to own, implement and manage 5G infrastructure. 5G services will be commercially available by the fourth quarter this year, Suhaimi revealed.

The frequency bands chosen for 5G in Malaysia are 700MHz, 3.5GHz and 28GHz. Spectrum bands already allocated to existing operators cannot be repurposed for 5G usage to ensure continued focus on 4G development, Suhaimi said.

The head of Malaysia’s industry regulator said urban and industrial areas would likely have commercially available 5G coverage by the fourth quarter, in addition to some rural centres to bridge the digital divide.

Suhaimi also stressed that all licensed telcos will have equal access to infrastructure. “The SPV is a single entity that will come under the purview of the MCMC. We will ensure all players – existing and new ones – will have fair access to the network and its capacity,” he said.

“We are mindful that we don’t want any anti-competitive behaviour, and we have the relevant tools under the Communications and Multimedia Act 1998 to regulate this [space].”

The Covid-19 factor

According to Suhaimi, the Covid-19 pandemic had galvanised the government to consider the importance of connectivity, especially in suburban and rural areas where even 4G coverage and quality is marginal at best.

He said internet traffic in Malaysia has not only increased by up to 70%, but has shifted to residential areas by the same percentage. Speeds have reduced by up to 40% and complaints on poor indoor coverage have increased by up to 70%.

The MCMC chairman said another factor exacerbating these challenges is the high investment needed for 5G network roll-outs, which could cost between 25% and 75% more than what was needed for 4G, citing an unnamed study.

“Covid-19 has been a stress test for Malaysia’s digital infrastructure,” Suhaimi said. “A new approach is now needed to address the demand for a better digital economy, and that is why we need a new national approach to managing Malaysia’s 5G roll-out.”

Even through the SPV will own all 5G assets, there will not be any changes in ownership throughout the 10 years of its operation, Suhaimi said. Such an entity, he added, will minimise duplication of network elements, reduce the inefficiencies in spectrum allocation, and address infrastructure and land approval challenges.

“We have spoken in the past about being engaged in service-based competition as opposed to facilities-based consumption,” he said. “Now this is it, service-based competition that benefits the consumer. Ultimately we want communications to work as a utility and pass on cost savings to consumers, while making it easier for them to get on board and use 5G.”

Suhaimi claimed that with the SPV in place, operators dealing with it will have clear and regulated activities, access to competitive and transparent wholesale pricing to promote better network infrastructure sharing.

He assured the industry that the SPV will allow fair and non-discriminatory access to capacity and networks. He also pledged that the entity would deal only with the leasing of wholesale bandwidth and not be involved in the retail sector to avoid any conflict of interest.

Shifting policies

The government’s move towards incorporating an SPV to manage the deployment of 5G spectrum is a new model, not yet floated before.

In previous years, when technologies such as 3G and 4G were rolled out, the MCMC mostly used the “beauty contest” method – the allotment of spectra to the most deserving operator based on financial and technical strength – for awarding spectrum.

In April 2019, Computer Weekly reported the then MCMC chairman, Al-Ishsal Ishak, as saying that Malaysia’s 5G spectrum biddings were not for profit.

Later in the year, Al-Ishsal championed what was then known as the “consortium” idea – a single entity comprising a consortium formed by multiple licensees, instead of individual licensees – for distributing 5G spectrum.

In March 2020, Malaysia experienced a change in government and a new communication and multimedia minister, Saifuddin Abdullah, was appointed, along with policy makers such as Suhaimi. At that time, industry players were on edge over the developments, which included how the allocation of 5G spectra was going to be handled.

To date, it is still not clear what led to the complete reversal in policy and why the government has opted to use an SPV to roll out 5G, or why the consortium idea was abandoned.

Furthermore, after Abdullah came into power, he downplayed Malaysia’s 5G roll-out, noting that it might only happen in 2022 or 2023. The minister had told a local daily that the government preferred to focus on beefing up 4G connectivity and coverage instead of actively planning for 5G.

Asked why 5G is back on track, MCMC’s Suhaimi conceded that while the government did de-emphasise 5G last year, that policy was not cast in stone and the timetable could be brought forward if situations warranted.

“We are satisfied with the investment the industry has made to improve fiberisation and 4G coverage last year, so we have decided to focus on 5G,” he said. “For Malaysia, we certainly want more foreign direct investment [FDI] and we need to move to the next level. 

Countries such as Singapore, Thailand and Vietnam are ahead in 5G roll-outs and Malaysia has to catch up quickly to remain competitive and continue to attract investors. This is why we have accelerated the timetable and brought the 5G roll-out forward.”

Industry reactions

Due to the sensitive nature of the topic, Computer Weekly spoke to two senior telco executives anonymously who said that while the broad strokes had been revealed, there are still many questions left unanswered.

“There are not many successful examples of government-owned SPV driven projects globally, and for those that have, they experienced significant delays,” said one senior executive involved with regulatory issues.

“Australia’s NBN is one example, but that’s for fixed broadband and that example is probably justifiable due to the extremely high capital expenditure costs. But it’s not the same for mobile broadband as we have moved away from monopolies for decades now, and have always thrived from healthy competition in this space.”

Another senior executive was cautiously optimistic over the developments announced and noted that, at least for now, there is greater clarity over how the industry can move forward with 5G.

One good development is that the SPV has decoupled wholesale and retail functions, which at least gives players a level playing field, the executive said.

“It’s a step in the right direction, but there are still a lot of details to hammer out,” the executive said. “Such as, ‘Who will run the SPV, what are the commercial and technical details, and how they are to be worked out are still in the offing?’. So, there will be a lot to do before we can see 5G appear.

“We also need assurance that since the SPV is a single entity, there will be redundancies as to how the services are kept running and ensure that there will be no single point of failure.”

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