Govt mulls creating single netco to drive 5G rollout


  • Telcos Premium
  • Saturday, 30 Nov 2019

TM is said to be eyeing the whole of the 700MHz spectrum to roll out 5G

THE government is considering setting up a single national network infrastructure company (netco) to own and run the nation’s 5G network, which will have multiple shareholders, sources say.

Separately, TELEKOM MALAYSIA BHD (TM) has ambitions to become the nation’s infrastructure player for 5G.

It has even written to the government about the proposal. TM has even put up a billboard in Subang Jaya suggesting it will be the nation’s 5G infrastructure provider.

However, sources say that the government has yet to identify the exact model and structure for the 5G netco.

The rationale for having a 5G netco is seen as a cost-effective way of having 5G services across the nation, as there will be sharing of cost to roll out the infrastructure.

The cost of rolling out 5G networks is said to be more than double that of earlier generation mobile networks.

It is understood that the government is looking at several models employed by countries such as Japan, Korea, Singapore and Australia.

“All major telco operators can be shareholders of the company. This infrastructure company will then use the shared resources to build one 5G network, which the shareholders will own and use, ’’ says an industry executive.

He says that one plan being considered by the government will see the netco being professionally managed and operating as an independent entity.

Access to the network would then be open to all players at a “wholesale” level on equal terms. Competition in the industry would then be left to take place at the retail level.

The government’s interest in 5G lies in the expected economic spinoffs.

Reports say there has been “significant improvement in technology that will accommodate the exponential growth in devices and mobile data through improved spectrum efficiency and higher performance”.

As it is, there are 25 live 5G networks in 14 countries globally.

5G networks still use existing 4G networks as back-up when they are out of range of 5G areas, just like 4G does with 3G.

Ericsson in its mobility report says that by 2025, there will be 2.6 billion 5G subscribers globally.

The average data consumption per smart phone is expected to climb from 7.2GB to 24GB per smartphone.

This allows for a 30-minute HD video to be streamed a day.

Gartner, a market research company, predicts that by 2020, there will be 26 times more connected things than people. Internet of Things (IoT) devices will reach 22 billion by 2025.

With such predictions, it is no wonder that the government wants to get the players to work together to create a mammoth infrastructure company that will eventually own towers, fibre and mobile networks related to 5G.

However, industry players may have their own views on the matter.

TM, for example, has its own plans to champion the 5G course. Recently, Celcom Axiata Bhd and Maxis Bhd entered into an agreement to deploy 5G to defray the high cost of investments in 5G.

It is no denying that the players are forming alliances to defray the high cost of investments in 5G.

“It is still early days and the government needs to show how the plan will benefit players and consumers. The challenge will be to make sure the netco does not lead to a monopolistic environment, ’’ says an industry executive.

The idea of creating a netco is not new. It was floated many times over the years for earlier telecommunications networks. But the idea had fizzled out due to the complexities and challenges involved.

Perhaps, this time around, it will have a higher chance of taking off, given the high cost involved in deploying 5G and the impact this new technology will have on people, businesses and the economy.

Besides that, the government is also pushing for players to offer 5G services commercially by next July.

Some industry players reckon that this is a challenging target.

Yet another issue relates to spectrum allocation. In other words, how will spectrum for 5G be allocated to the player and the netco, if there is going to be one.

Telco operators also need to figure out their respective capital expenditure for 5G and this is tied in with how spectrum is allocated. National goals

Experts say that the netco model could help achieve national goals and the country’s ambition to achieve a 98% broadband penetration rate in 2023.

But there is a need to establish the framework and conditions under which the netco needs to be built and regulated.

“Shareholders or investors will need to know in advance the parameters of the regulatory framework before investing or financing, ’’ a source says.

The regulatory framework will have to spell out clearly the operational targets in relation to coverage, access pricing and performance, apart from the spectrum allocation issue.

“For those players that do not want to be part of the netco, will they be deprived of future spectrum? This is critical for investors to know, as some of the players are listed on Bursa Malaysia, ’’ says the source.

“For an equitable solution, perhaps the government needs to hold a golden share in the netco. This can be via Minister of Finance Inc or Khazanah Nasional Bhd, ’’ he adds.

Notably, though, Khazanah also has stakes in TM and Axiata Group Bhd.

Some industry players also suggest that the creation of a netco may come at the expense of innovation. “It could hinder some level of competition at the infrastructure rollout level, ” says one player.

Not all netcos have been successful. Experts cite the example of Russia where a 4G netco did not pan out as expected.

However, the Mexico model is said to have had more success, as besides the netco, there was also an alternative player.

“In Mexico, you can build or also seek access via the netco, ’’ says an executive.

The big question is, will telco operators be in favour of the creation of a netco?

One industry official expresses his displeasure at the idea.

“Why should we support this? We can build and maintain our own network better than the so-called netco. What is the logic behind having a netco?’ he asks.

Another says there are a lot of factors to take into consideration before coming up with such a plan but remains positive.

“We will have to look at the detailed plan. It may benefit us, ” he opines.

The 700MHz conundrum

While there are lots of issues that need ironing out, TM is wasting no time in drawing up a plan to be the country’s 5G national infrastructure provider.

Apart from putting up the signboard in Subang Jaya that is also plastered with several logos of the ministry and regulator, it is also said to be eyeing the whole of the 700MHz spectrum to roll out 5G.

Whether the signboard is a sales-marketing gimmick is unclear.

But certainly, its move has all the industry players riled up. They want to know if the government is working with TM to create the netco.

“The lobbyists are at work and if the entire block of 2X45 of the 700MHz band is given to them, then it would be grossly unfair to other players. The spectrum should be tendered out to all, ’’ says an industry source.

He argued that the 700MHz should also not be fully dedicated for 5G.

Globally, most countries are using the 3.5G and 28G bands for 5G as is Malaysia, but only half of the 3.5G will be meant for 5G as the rest is for satellite players.

The 700MHz band was recently freed up after the migration of broadcasters from analogue to digital.

This is also not the first time one party is eyeing the entire 700MHz band. Several years ago, one new player got the band but the decision was reversed after the noise other players made.

However, in the public inquiry (PI) feedback document on spectrum allocation for the 700MHz, 2,300MHz and 2,600MHz band, it was stated that “Altel (owned by Puncak Semangat Sdn Bhd) and TM/Webe suggested that the whole 2x40 spectrum block be assigned to a single provider to enable faster data speeds and better quality of services through a 5G-ready mobile network.

“Their view is that the approach will prevent the duplication of radio and fiber networks, ’’ the document says.

There is talk in the market that TM is eyeing taking over Altel, but this could not be verified.

There are various other suggestions in the PI feedback document, including YTL Communications suggesting the band be prioritised for operators who have not been assigned with spectrum in the lower bands; Redtone suggesting that 2x20MHz be reserved for a neutral wholesaler and the remaining be assigned to others.

The other players - Celcom Axiata, Digi.com Bhd, Maxis, Sacofa and U Mobile - believe that all players should get a piece of the prized spectrum.

Most of the players prefer a tender process for the spectrum bands and not via special preference or political patronage.

“Let it be a clear tender process of spectrum allocation for the future. Giving to one party deprives others of such a spectrum and it just creates a monopolistic environment where prices will remain high with lack of competition at the infrastructure level.

“We have seen this happening in the past until the mandatory standard on access pricing (MSAP) was implemented for fast broadband. We should have learnt from the past mistake and avoid such things at all cost.’’

“For those players that do not want to be part of the netco, will they be deprived of future spectrum? This is critical for investors to know, as some of the players are listed on Bursa Malaysia, ’’ says the source.

“For an equitable solution, perhaps the government needs to hold a golden share in the netco. This can be via Minister of Finance Inc or Khazanah Nasional Bhd, ’’ he adds.

Notably, though, Khazanah also has stakes in TM and Axiata Group Bhd.

Some industry players also suggest that the creation of a netco may come at the expense of innovation. “It could hinder some level of competition at the infrastructure rollout level, ” says one player.

Not all netcos have been successful. Experts cite the example of Russia where a 4G netco did not pan out as expected.

However, the Mexico model is said to have had more success, as besides the netco, there was also an alternative player.

“In Mexico, you can build or also seek access via the netco, ’’ says an executive.

The big question is, will telco operators be in favour of the creation of a netco?

One industry official expresses his displeasure at the idea.

“Why should we support this? We can build and maintain our own network better than the so-called netco. What is the logic behind having a netco?’ he asks. Another says there are a lot of factors to take into consideration before coming up with such a plan but remains positive.

“We will have to look at the detailed plan. It may benefit us, ” he opines.

While there are lots of issues that need ironing out, TM is wasting no time in drawing up a plan to be the country’s 5G national infrastructure provider.

Apart from putting up the signboard in Subang Jaya that is also plastered with several logos of the ministry and regulator, it is also said to be eyeing the whole of the 700MHz spectrum to roll out 5G.Whether the signboard is a sales-marketing gimmick is unclear.

But certainly, its move has all the industry players riled up. They want to know if the government is working with TM to create the netco.

“The lobbyists are at work and if the entire block of 2X45 of the 700MHz band is given to them, then it would be grossly unfair to other players. The spectrum should be tendered out to all, ’’ says an industry source.

He argued that the 700MHz should also not be fully dedicated for 5G.

Globally, most countries are using the 3.5G and 28G bands for 5G as is Malaysia, but only half of the 3.5G will be meant for 5G as the rest is for satellite players.

The 700MHz band was recently freed up after the migration of broadcasters from analogue to digital.

This is also not the first time one party is eyeing the entire 700MHz band. Several years ago, one new player got the band but the decision was reversed after the noise other players made.

However, in the public inquiry (PI) feedback document on spectrum allocation for the 700MHz, 2,300MHz and 2,600MHz band, it was stated that “Altel (owned by Puncak Semangat Sdn Bhd) and TM/Webe suggested that the whole 2x40 spectrum block be assigned to a single provider to enable faster data speeds and better quality of services through a 5G-ready mobile network.

“Their view is that the approach will prevent the duplication of radio and fiber networks, ’’ the document says.

There is talk in the market that TM is eyeing taking over Altel, but this could not be verified.

There are various other suggestions in the PI feedback document, including YTL Communications suggesting the band be prioritised for operators who have not been assigned with spectrum in the lower bands; Redtone suggesting that 2x20MHz be reserved for a neutral wholesaler and the remaining be assigned to others.

The other players - Celcom Axiata, Digi.Com Bhd, Maxis, Sacofa and U Mobile - believe that all players should get a piece of the prized spectrum.

Most of the players prefer a tender process for the spectrum bands and not via special preference or political patronage.

“Let it be a clear tender process of spectrum allocation for the future.

Giving to one party deprives others of such a spectrum and it just creates a monopolistic environment where prices will remain high with lack of competition at the infrastructure level.

“We have seen this happening in the past until the mandatory standard on access pricing (MSAP) was implemented for fast broadband. We should have learnt from the past mistake and avoid such things at all cost.’’

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