A closer look at Malaysia’s 5G rollout

PETALING JAYA: The advent of 5G promises not only blazing fast broadband speeds for consumers but, perhaps more crucially, the capacity to accelerate automation and enable greater digital integration for businesses, to make all processes more efficient and connected.

The government established Digital Nasional Bhd (DNB) to build and manage the network, in a move that many have questioned.

Traditionally, building up the nation’s capacity is left to service providers.

FMT takes a look at what DNB is all about, the debate surrounding its creation, and why the government and critics are at odds about its merits.

What’s the background?

“Spectrum” is a national asset, and refers to the radio waves around us that allow wireless communication. Think of it as the ingredients a baker (the telcos) needs to make a cake (internet for customers).

“Network” refers to all the physical infrastructure that allow service providers like Maxis and Celcom to deliver internet to the people, such as cellular towers. Think of the network as the recipe a baker follows to turn their ingredients into a cake, which they can tinker with to give their customers the best product.

With DNB, the government is not allowing the operators to make their own cake. DNB will use their ingredients to make butter cakes, and all the telcos will buy the cake from them, with each able to add icing and decorate it however they please.

The 5G rollout, expected to begin at the end of 2021, will cost RM11 billion over 10 years.

The problem, those critical of DNB say, is that not everyone wants butter cake. Some might want pandan or chocolate, but now they have no choice. You can’t turn a butter cake into something it fundamentally is not.

As a result, while the government promises cheaper butter cake for all, operators are less able to tailor their products to their customers, individuals and businesses alike. If their customers love chocolate cake, they cannot bake that for them.

What has happened so far?

DNB appointed their board in March and named Ralph Marshall as CEO, formerly the right hand man to tycoon Ananda Krishnan, who owns Maxis through his company Usaha Tegas.

In April, they opened a tender process to find a strategic partner to handle the actual design, supply, construction and maintenance of the necessary infrastructure.

At the start of the month, DNB announced that Swedish telecommunications giant Ericsson (Malaysia) had been appointed, stating that they expected 5G to rollout in Kuala Lumpur, Putrajaya and Cyberjaya by the end of the year and the rest of the country by 2024, with an expectation the full project will cost RM11 billion over 10 years.

What do people think?

When unveiling DNB, finance minister Tengku Zafrul Aziz said it was a “win-win situation” for all parties, as with the government focusing on 5G infrastructure investments, the operators could concentrate on developing better products and services without being saddled with heavy capital costs. In theory, everyone can have lower-cost butter cake.

However, cost is relative. And not everyone wants butter cake.

The model will also allow all telecommunications companies equal and fair access to the 5G network in order to develop services based on the technology.

He also said that it would not require any additional government expenditure, as it could use cash flow from leasing the network and sukuk bonds to cover costs.

However, critics of DNB say the model is anti-competitive. GSMA Intelligence, a group representing over 750 global service providers, said in a recent report that “not assigning valuable spectrum to operators directly constrains their ability to gain a competitive edge through coverage and service differentiation”.

“It could create inefficiency by preventing them from optimising the use of their existing portfolios,” it added, as spectrum allocated to DNB is exclusive to them and thus cannot be used in conjunction with the operators’ existing assets.

GSMA also said that network competition has historically spurred much faster coverage and improved device adoption compared to special purpose vehicles of the past.

In March, PKR treasurer Lee Chean Chung described it as a regressive approach, as “it is not a cost-effective and efficient way to roll out our 5G infrastructure”.

“In Singapore and the US, the government would receive billions from allocation of 5G spectrum via open tenders. They also encourage industry players to optimise resources and reduce wastage through the formation of consortiums,” he said.

By : Imran Ariff – FMT

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