A new expert report from GSMA assessed the 5G plan from the Malaysian Government to deploy a Single Wholesale Network (SWN) network through a special purpose vehicle, Digital Nasional Berhad (DNB).
Digital Nasional Bhd (DNB) is wholly owned by the Ministry of Finance (MOF) and regulated by the Malaysian Communications and Multimedia Commission (MCMC). It will exclusively own, build and operate the 5G infrastructure and offer 5G as a wholesale network service to other Telecommunication companies. Malaysia has identified the 700MHz, 3.5GHz and 26/28GHz as the pioneer spectrum bands for the roll-out of 5G in Malaysia.
Meanwhile the GSMA represents the interests of mobile operators worldwide, uniting more than 750 operators with almost 400 companies in the broader mobile ecosystem, including handset and device makers, software companies, equipment providers and internet companies, as well as organisations in adjacent industry sectors.
DT Economics LLP, a specialist consulting firm based in London was commissioned by GSMA to produce the report, titled “Safeguarding the road to 5G in Malaysia“.
The report examined the track record of Single Wholesale Networks (SWN) in other markets around the world, uncovering evidence of failed deployments, slow rollout, poor service quality and profitability challenges. The report warned that without clear mitigation strategies, the proposed SWN network for 5G in Malaysia faces specific risks, hindering the country’s ambition to be a leader in the regional digital economy and high-income nation.
DT Economics said, “Malaysia has made a bold decision to implement a government-owned Single Wholesale Network (SWN). However, national SWNs have a poor track record of successful implementation in other countries (including Mexico’s SWN recently filing for bankruptcy protection in July 20212). Lessons learned elsewhere, including those outlined in our case studies for Australia, UK, South Korea and Mexico, suggest a number of serious risks for the current 5G plan in Malaysia. Without clear mitigation strategies, Malaysia’s vision to become a regional leader in the digital economy is under threat.
By entrusting the 5G network deployment to the DNB, a competitive wholesale mobile market structure for 5G will be replaced with a nationalised monopoly. While the existing MNOs will be allowed to continue to compete in the provision of 4G (and lower technology) mobile services, they will be entirely reliant on wholesale access to the DNB’s network for 5G services.”
It also said, “We have not been able to identify a clear market failure to justify the proposed intervention in the 5G market. A monopolist with exclusive rights to offer 5G wholesale services (and with no clarity on the framework for how its prices will be regulated) will be, in our view, to the detriment of consumers and enterprises and the broader ambitions of Malaysia to digitise the economy.”
Below are eight (8) key potential risks associated with the introduction of the Digital Nasional Berhad (DNB) in Malaysia, according to the expert report commissioned by GSMA:
- Lack of clarity in policy objectives
Clarity on these objectives is a must to ensure the DNB is fit for its purpose, subject to an appropriate regulatory framework and its performance is judged against an appropriate set of indicators.
- Adverse impact on economic efficiency
Given one of the Malaysian Government’s key considerations is to reduce the deployment costs of the 5G network, there is a risk that productive efficiency (eg lower costs of network deployment) is maximised to the detriment of allocative and dynamic efficiency (eg innovation in the type and quality of 5G services offered over time). As a monopoly network operator, it is vital that the DNB is
incentivised to invest and innovate.
- Unclear approach to spectrum pricing
When allocating spectrum to the DNB it is important that Government implements an approach (including pricing) which minimises potential competitive distortions (between different mobile services and/or MNOs).
- Unclear regulatory approach to wholesale prices
As a monopoly network operator, the DNB would have the incentive and ability to use its position for its own commercial advantage. This would be particularly the case when negotiating wholesale access prices (either in relation to its 5G network or other operators’ assets, such as towers and fibre).
- Poor Quality of Service (QoS) outcomes
There is a risk that, in the absence of regulation, the level of quality offered on the DNB network does not fulfil the requirements of end-users. This risk is particularly important in the context of the innovative applications that 5G is expected to provide in the enterprise sector, some with critical service delivery requirements.
- Unclear approach to network resilience
Clarity is key on how the DNB is planning to secure network resilience (including mitigating against the risks of relying on a single vendor) and whether the cost implications of this have been considered in the funding requirements.
- DNB funding and financing risk
The DNB has yet to set out how it proposes to take to minimise key project related execution risks, including financing (to ensure the upfront cash required to build the network) and funding (to ensure the long-term maintenance and operation of the network) requirements.
- Lack of clarity of DNB mandate
It is important for the Malaysian Government to clarify the DNB’s strategic priorities, including its role and responsibilities. It is also vital to confirm that the DNB is a wholesale only operator.
Some of the actions proposed by GSMA to the Malaysian Government include:
- Clarify DNB’s mandate and regularly monitor its performance against its strategic objectives
- Introduce a fit for purpose wholesale regulatory regime at the same time as the DNB starts its commercial operations
- Retain flexibility to allow alternative delivery options for 5G networks and services in Malaysia
The full PDF report can be downloaded below.
Last week, Dato’ Izzaddin Idris, President & Group Chief Executive Officer of Axiata told MalaysianWireless that “Celcom is not allowed to build its own 5G network. The Government has awarded all 5G spectrum that is needed to DNB”. Celcom is currently discussing the commercial terms with DNB for a wholesale 5G service.
Over the past few years, mobile network operators (MNOs) in Malaysia have extensively trialed, invested and tested 5G networks/solutions. The Telcos were given the impression that they will be rolling out their own 5G network, following a public consultation with MCMC. However, a new Malaysia Government came into power and took an opposite direction to award the 5G spectrum exclusively to Digital Nasional Berhad (DNB). No tender was called.
Digital Nasional Berhad (DNB) recently appointed Ericsson (Malaysia) Sdn Bhd (Ericsson) to provide vendor financing for the supply, delivery, and management of the entire 5G network in Malaysia.
No further detailed information are available about the multi-billion 5G network despite DNB has a website (link) but it is not accessible to the public. 5G in Malaysia is expected to be launched by end 2021 in Kuala Lumpur, Putrajaya, and Cyberjaya.
[PDF]– Safeguarding the road to 5G in Malaysia report by DT Economics and GSMA