LET us dissect Digital National Berhad (DNB) one more time on the ideas, plain logic and strategic policy planning with a detail analysis of the issue EMIR Research published earlier (“Deconstructing 5G rollout in Malaysia” in two parts on Jan 14 and Jan 24).
From a mainstream narrative, leaving aside the far-fetched claims made by DNB proponents, the two realistic impacts would be improving internet connectivity in rural areas and overall quality of internet connectivity in the country.
If these are the intended impacts, then the DNB proposal as it stands today can be best described as a misplaced solution. This is because the same impacts can be achieved in a more efficient, straightforward manner and would be agreeable to all stakeholders, provided the government does not flop on execution and conducts it with high standard of governance and integrity.
Therefore, DNB’s insistence on its original proposal of a Single Wholesale Network (SWN) model requires proper investigation by various authorities.
Strategic deployment
DNB’s “supply-driven” or “cost-recovery” model appears to ignore the basic and fundamental principle: The value of any technology is unlocked only if there is a solid foundation in the form of other compatible technologies (not forgetting necessary tech skills and knowledge base) which we call ecosystem, to create a conducive, enabling environment and demand for new technology, therefore, maximising the value per dollar invested in it.
In Malaysia, due to lack of digitalisation and nascent digital transformation, 5G will be enjoyed by selective enterprises and minority well-offs, with cutting-edge 5G-enabled phones for at least another few years.
Note that Kuala Lumpur has never appeared in the top 20 or 30 global startup ecosystem report (presented by Startup Genome group since 2012). And only in the 2020 report, we appeared as an “early globalisation phase ecosystem”, while Jakarta was declared as being in the “late globalisation phase” in 2019, positioning itself as an “attraction” to transcend into “integration” spaces, where other countries such as Singapore and South Korea have long established their strong presence.
For almost a decade, China, Singapore, South Korea and other nations championing 5G have been consistently leading various global digital skills and competitiveness rankings. The amount of digital integration, transformation, creative skills in these nations is simply astonishing, with the internet of things devices omnipresent across industries and social life. These are the antecedents or prerequisites, or critical success factors, for 5G-wide adoption.
At the same time, Malaysia has been consistently losing its 4IR plot because important decisive solutions are never made on time and where they are direly needed.
Our Global Innovation Index has been in permanent steep decline since 2013. From 2020 to 2021 alone, Malaysia has lost 20 positions in Smart City Index ranking that measures even mundane manifestations of digital transformation in society. With these weak fundamentals, a sluggish 5G demand inadequate to cover minimum coverage capacity will not only negatively impact telcos’ cashflows but also DNB’s “securitised” cashflows, and therefore, will become the taxpayer’s liability quickly.
In other words, 5G has time to grow organically in our country. Otherwise, over supply, inefficiencies and waste will always be ironed out by losers to the industry whether it is led by the public or private sectors. Although, on this 5G rollout, the private sector appears to be more sense-driven and grounded in reality.
It would be absolutely instrumental for our policymakers to borrow wisdom from “The 5G Readiness Guide” by the Economist Intelligence Unit (based on a study of 60 of the world’s largest markets), which lists the following as key strategies for successful 5G deployment: High capacity to monetise 5G, early access to 5G spectrum (early auctions took place in all those countries that DNB benchmarks), with equitable distribution to all operators, incentives to encourage infrastructure and spectrum sharing, government-industry collaboration for finding better application for 5G etc.
So, while we are still trying to roll out 4IR and 5G together, we cannot ignore the fact that coverage and quality of the previous generation networks in our country have serious issues. However, those can be addressed in a more efficient and effective way with less unwanted externalities to the entire national ecosystem.
Improving connectivity in rural areas
If Malaysia needs a monopoly to solve its internet access problem on a nationwide scale, then it should be a neutral entity controlled by the government and tasked to build, operate and maintain passive Radio Access Network (RAN) infrastructure (this can also include spectrum) with open access to all licensees.
If DNB proponents argue their supply-driven model in the context of previous generation networks are reliable, as 4G is sufficient to cover the needs of rural dwellers – the provision of fibre, including fibre to homes for fixed broadband and mobile broadband, is sufficient to satisfy the purpose of a supply-driven model.
The sharing of passive RAN infrastructure, which constitutes the largest cost for telcos, has no value added in itself and causes disruption in terms of duplication, but will solve a vector of problems in one go.
Telcos will now be more inclined to come to rural areas with their service offerings, at least for previous generation networks, to tap a market that has suddenly opened up for them. This move will also increase competition in the industry while preserving great potential for long-term competitive advantage driven by innovation, research and development in active RAN equipment and, therefore, keep the industry attractive.
On the contrary, the SWN model will make the industry competitive but on features that can be quickly copied by competitors, therefore, making the industry unattractive in the long term. Also, when fixed cost is covered, telcos will have more financial freedom to invest in innovation, research and development. If individual telcos don’t, the intensified competition will compensate for it.
The neutral and government-controlled entity owning the passive RAN infrastructure can initially focus on extending passive infrastructure to new areas but if need be, acquire the existing infrastructure on a willing buyer/willing seller basis. The government can also focus on policies encouraging the sharing of the existing infrastructure, which is a recent trend in the telecom industry worldwide.
Improving overall quality of internet
Malaysia’s telcos have been blamed by DNB proponents for “excessive profiteering” while providing substandard quality services. They were even claimed to be “among the most profitable in the world”, according to a business and financial weekly.
Global indexes provide reliable measures by covering the minimal requirement of having at least three data sources to capture a variable of interest. As such, DNB proponents’ claims seem to be rather exaggerated. Malaysia is at par with its regional peers even in terms of internet affordability (mobile included). Only Singapore significantly outperformed us, but the island city-state is in its own league. The only thing Malaysia is notably below the Asean group average is internet quality.
Global data indicates a strong link between proper governance and regulation and adequate internet infrastructure/quality. Therefore, issue of internet quality should be resolved by enforcing the appropriate standards in our telecommunication industry, for example, via revocation of spectrum licensing for substandard quality.
DNB’s proposal has raised serious questions from local and global industry leaders, analysts and members of parliament. However, DNB has yet to address those substantively.
As a first step, the government needs to come up with realistic and workable strategies so we can start benchmarking leading nations in 5G.
Dr Rais Hussin and Dr Margarita Peredaryenko are part of the research team of EMIR Research, an independent think tank focused on strategic policy recommendations based on rigorous research. Comments: letters@thesundaily.com