Tuesday, December 14, 2021

Telco failed to deliver, but remained greedy on 5G

The 5G rollout was supposed to begin, but statements from the Ministry of Communications and Multimedia indicate Tun Dr Mahathir aligned telcos succeeded to pushback DNB-led 5G and government to waver.    

Minister Tan Sri Annuar Musa played the good cop role to consider all views, but revealed his intention from the next move. While, his Deputy Dato played bad cop with the awkward claim decision was made unilaterally by Minister of Finance. Tengku Zafrul Aziz and Dato Saifuddin Abdullah have since denied.

It came as a surprise that UMNO Deputy President, Dato Mohamed Hasan joined the fray and seemed indifferent to Mahathir's interest. Politics and partisan interest reared its ugly with a stern warning from Tan Sri Muhyiddin Yassin. Nevertheless, the hands of the greedy and self preserving telcos is obvioud.   

5G is needed to "power more sophisticated next-generation economic activities faster and better", boost existing sectors, and kick start economy. Compared to the experiences of South Korea, Taiwan and Singapore, the detour does not look Malaysia's catch-up will succeed 

The 5G debate is a policy decision to determine the future economy and hopefully prevent young Malaysians, including Malays, migrating abroad. Unless revealed insidious plan and putting aside political and commercial rivalries, the Single Wholesale Network is the way to go. Telcos failed Malaysia! 

The Mole article by Salahuddin Hisham published yesterday reproduced below:       

DNB simply needed to kickstart 5G

THE global rollout of 5G began in 2019 after it came on the market the year before but the excitement in Malaysia only began last February 18, the day then prime minister Tan Sri Muhyiddin Yassin announced the government’s 5G rollout 5G via the ministry of finance-owned Digital Nasional Berhad.

Teething problems can only be expected with any new initiative but it should not detour DNB from rolling out the single wholesale network (SWN). 

Putting aside the reservations, SWN is the suitable approach to kickstart 5G and catch up on the race for connectivity. It is the much needed impetus for various economic sectors and to restart the economy.

Telcos failed to meet the expectation on 4G and left us trailing behind our neighbours. They had either been dragging their feet or were bogged down with chicken and egg issues till it required the government to step in.

When DNB was announced, murmurs among the telcos were that it was building a completely new network. The 4G network of telcos should be the foundation for the 5G network to build on but the current state of 4G is less than satisfactory. Though logical and more efficient, telcos should not expect their role to remain status quo.

Under the previous chief executive of the Malaysian Communication and Multimedia Commission, facility-sharing between telcos was created, with initiatives on collaboration to reduce duplication, minimise recurring capex for infrastructure, and get 4G network at par. It did not quite get off the ground and possibly turf war was the stumbling block.

Thus it justified giving DNB the authority, ownership and role over a facility to be shared under SWN to resolve the impasse.

Instead of assigning a spectrum to mobile network operators (MNOs), the range of 5G spectrums would be assigned solely to DNB. Telcos offering 5G can hook on to a common network built by DNB.

Finance Minister Datuk Seri Tengku Zafrul Aziz promised lower cost to telcos at 50 per cent lower than the option of having to spent on capex. One report said Celcom only needed to pay DNB RM8.1 billion over 10 years than RM15 billion on its own. The lower cost of deployment will enable more MNOs to offer 5G and in turn, economies of scale.

The SWN approach enables 5G services to users without the constant pressure for infrastructure capex and relieve MNOs the burden of continually raising new capital. Thus resources can be directed to the products and service needs of end users. 

More importantly, it lowers service charges to customers, bring cost of connectivity down and increase usage. 

As a government vehicle which is not solely profit driven, DNB could afford to do so and is done without the government having to spend money.

Nevertheless, there seems to be resistance from the MNOs. Though not voiced out directly and openly, proxies are indirectly expressing the telcos’ concerns and it was getting louder.

Groupe Speciale Mobile Association (GSMA), an association of global mobile operators and playing the role of lobbyist for the industry, wants the government to abandon the SWN approach. 

The points raised in its paper released in July influenced the views of industry players, politicians and tech media. Lately, policy makers have begun to buy into it.

GSMA cited few failures of countries using SWN to deploy 4Gs and technical arguments. Generally, it is concerned over how and why it might fail. The experience could contribute to the blueprint for other countries to implement a successful SWN for 5G.

Using the neo-liberal mantra of competition, GSMA advocates reverting to the previous practice of auctioning spectrums to MNOs. 

There was no auction in Malaysia, claimed an article in The Edge on November 1. Telcos made tens of billions of ringgit from the spectrum given away cheaply and were spoilt by easy money generated from less challenging efforts.

Spectrums were given to few selected companies at prices fixed below that of other countries. The cost of a spectrum in Malaysia is three to five per cent of earnings before interest and tax compared to nine to 15 per cent in Singapore, Taiwan and Canada.

The root of the problems came from privatised telcos deviating from the original objective.

When Malaysia corporatised and privatised public utility services in the 80s, privatisation was supposed to make telephone services readily available and more efficient.

The privatisation of Celcom was to raise national connectivity. As more players came in, the pursuit for connectivity subsequently gave way to maximising shareholders’ value. 

Early MNOs pursuing national connectivity were at a disadvantage and unfairly overtaken later by purely profit-driven MNOs.

Introducing competition did not turn telcos to be efficient and progressive. Over time, they instead became entrenched and grew more complacent.

Studies indicated Malaysian MNOs are poorly ranked globally in delivering the mobile experience of good connection for most demanding popular apps. Malaysia trails other major Southeast Asian countries and even Laos.

Download speed of leading MNOs services are significantly slower than that in Singapore and Thailand.

It has been on the decline over the past 3 years. Despite increased data consumption, telcos are reluctant to invest in upgrading and maintaining the quality of service.

Don't let village kids risk falling off trees to get 5G connectivity by Life of Annie

Open Signal study found connection to 4G in sparsely densed area was available 44 per cent of the time vis-a-vis 83.7 per cent for urban area. Regional disparity in the quality of service was more glaring.

Peninsular Malaysians were aghast by news of a female student in rural Sabah forced to study atop a tree house in order to get access to the Internet. It was not an isolated case and highlighted that demand-based deployment practised by telcos had contributed and accentuated the digital divide.

Privatisation should provide access to the capital market and enable capacity expansion and improvement in the quality of product and services.

The converse is true.

Privatised telcos remain directly or indirectly reliant on government for guarantees and grants. Recently, the government announced a budget of RM28 billion for the Jendela programme to expand and upgrade 4G which is supposed to be done by the telcos. [Read NST here]

Since 4G was introduced in 2013, telcos have spent RM26 billion for capex through RM10 billion of borrowings and RM16 billion that was internally generated. It means the RM181 billion accumulated and combined revenue of three MNOs were generated literally from thin air!

Since 2013, the average EBIT for telcos were a whopping 29 per cent. It is an additional 13 per cent above the international average, which equates to RM24 billion of “free” money. It did not include the benefits from capital restructuring. 

The insane returns to telco shareholders came at the expense of sub-optimal quality and coverage, and rising costs to consumers.

An unpublished study said the average Malaysian spent more on phone bills than in  neighbouring countries except Singapore. 

Using Gross Domesic Product as a yardstick, consumers in Malaysia spend higher than those in Australia, New Zealand and Singapore. Simply put, Malaysians are charged higher than consumers in many countries.

Taking that into consideration, it begs the question: Can telcos be expected to spearhead the 5G rollout and salvage the country from trailing too far behind in the regional technology race?

If left entirely to them, it would take forever for 4G to achieve the optimal coverage. Thus it is fair for sceptics to doubt the telcos ever getting 5G started. Unless the government takes a firm stand to step in, telcos’ procrastination will persist and embarrassingly, Malaysia will end up without 5G.

So voices criticising DNB’s monopoly and preaching the competition mantra seem rather preposterous.

Greed had been too good, perhaps?

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