5G rollout – DNB’s camouflaged costings


AS policymakers begin a serious revision of DNB’s 5G rollout model, Emir Research believes that for the benefit of decision-makers and public, it is timely to revisit some of the cornerstone aspects of the deal, which DNB has failed to address in a credible and transparent manner.

We begin with DNB’s claim of being able to provide lower prices to end users.

DNB (refer to An analysis of EMIR’s “Reviewing contentious DNB’s 5G ) said one of the “key points” to argue under its 5G rollout model that end-user prices would be “60% lower than with a deployment of six 5G networks” by individual telcos is that “5G deployment by each of the six mobile operators would need six times more cell sites than the single wholesale network (SWN) if the mandated 5G quality of service (100 Mbps download speed at the cell edge) is to be delivered”.

Emir Research would like to reiterate that DNB’s “key point” is a massive overestimate based on its very bold assumption that telcos would not share cell sites.

Let us remember that cell site construction requires a permit, a tower with 5G antenna, a hut or cabinets (to house the equipment) with a cooling system and cables connecting the tower and the hut. Out of these components, 5G antenna and transceivers (active infrastructure) are critical to maintaining an individual telco’s competitive edge. The rest of this infrastructure (passive), which by far constitutes the greatest component of cell site construction cost, can be painlessly shared by all the telcos to avoid cost duplication.

Infrastructure sharing (passive and even active) has been also a common practice for Malaysia’s telcos as early as 2005. Incentivising expansion of passive infrastructure sharing was also one of the key initiatives under The National Fiberisation and Connectivity Plan – a move in the right direction by the government, although without sufficient focus on fibre optic backhaul, which is the crux of Malaysia’s digital divide problem.

This alone would be enough to throw out the entire argument of the lower network ownership cost under DNB’s proposed model, which implicates their wholesale price. However, there are more nuances that DNB will never state openly.

For example, the company has not spoken (and certainly would not) about the significantly higher cost they incur due to the need to build both 4G and the 5G layers under their rollout as opposed to the telcos, who only need to add the 5G layer.

This also suggests that rollout by individual telcos could have been faster than by DNB. It is relevant to mention that the major Malaysian telcos were ready to start the 5G rollout in early 2019. All they needed at the time was 3.5 GHz spectrum to start immediately offering 5G services, without taking a sen of taxpayers’ money as Malaysia is a brownfield where 2G/4G towers are already covering most populated areas.

The end-user prices will consider the costs of both the 4G and 5G layers, at least until the 4G networks are withdrawn and switched off, and it becomes stand-alone 5G. So sharing, rather than duplicating the fixed costs between 4G and 5G layers, as in the case of the 5G rollout by individual telcos, has clear benefits for retail customers. So does the “cost duplication” appear to be an issue for DNB only when it suits the agenda to mislead the public?

But let’s not stop here.

Until now public does not know whether the DNB’s quoted total cost includes only the construction cost for a very basic 5G eMBB (enhanced mobile broadband or enhanced version of 4G) service, which is only the first of a few layers required to deliver the full 5G functionality or other elements as well – the area that policymakers now need to study carefully.

5G has two modes: non-stand alone (NSA) and stand alone (SA). The NSA mode greatly relies on 4G, and it requires an anchor band which in DNB’s case is likely 700 MHz, as their recent joint report with Plum Consultancy reveals. The anchor band is just an overlay that carries a signal. There is no traffic there! It will require either a 3.5 GHz band (and therefore a greater number of cell sites) or 4G to carry traffic.

It is also crucial to ascertain whether the following costs have been included in the total costing and cash flow projections by DNB, as accounting for these additional features will add significantly to DNB’s wholesale price:

  • Coverage beyond 80% of the population;
  • Industry’s traffic capacity increase over 10 years (need for network densification);
  • Comprehensive inbuilding coverage – according to the findings from RCR Wireless, an estimated 80% of cellular data traffic originates indoors, and 5G will require massive indoor coverage support, yet reported coverage by DNB focuses on traffic from outdoors so far;
  • Value-added services (e.g. network slicing, private networks, bespoke coverage, future capabilities).
  • In contrast, telcos currently enjoy a high operating leverage model, which leaves far greater room for end-user price reduction.
  • Given all the above, we now can see how the overall big claim of lower prices to end users under DNB’s proposition is highly uncertain and murky, if not outright and deliberately misleading.
  • Our policymakers certainly have much to do to safeguard taxpayers’ money and the future of our telecom industry. – February 11, 2023.

* Rais Hussin is the president and CEO of Emir Research.

* This is the opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insight. Article may be edited for brevity and clarity.


Sign up or sign in here to comment.


Comments