Malaysian 5G rollout – FDI promissory trap


EMIR Research has been calling for a comprehensive reevaluation of Malaysia’s 5G rollout.

Malaysia must ensure its long-term interests and gains of its 5G policies far outweigh the short-term benefits even if it means reviewing contracts and reversing policies.

Wrong model

The decision to pursue a single wholesale network (SWN) model, specifically the multi-operator core network (MOCN) where mobile network operators share all infrastructure except their core networks, is not a winning formula globally (see “Malaysian 5G Rollout – Topsy Turvy Innovation”).

The SWN model is a failed model globally, save for one or two extreme or exceptional cases, such as New Zealand and Brunei.

In particular, the SWN/MOCN removes competition at the infrastructure level, which is crucial for driving innovation, service quality and affordability. 

DNB and its rollout model have garnered criticism at home and even from world-renowned telecom industry experts such as the Global System for Mobile Communications Association (GSMA). (See “Malaysian 5G rollout: Bending the truth like no other). 

Wrong entity

DNB’s role as a sort of spectrum monopoly middleman and its SWN approach are not the same as those of regulated monopolies of water and electricity.

Unfortunately, water and electricity are not comparable to 5G in terms of pace and evolution of innovation and  technology. 

Furthermore, unlike genuine utility providers, DNB does not have the internal capabilities to develop the network. It merely contracts the jobs out to other parties, which locks Malaysia out of access to the pool of rapid global innovation in the telecommunications industry for a decade or more, at the minimum. 

More recently we saw DNB trying to fix this through equity participation of telcos. This is complicated and unnecessary. Putting wholesalers and retailers under one roof would be tricky if not conflicting. It might promote anti-competitive behaviour, which is against the Communications and Multimedia Act 1998.

As mentioned in the MCMC’s communications dominance guideline, one of the factors the commission would assess to determine whether functional levels of the supply chain are separable or subject to constraint is “whether demand from one relevant level of the supply chain affects the demand at another level. For example, if competition at the retail level constrains the prices that a wholesaler could profitably charge, this may suggest that the retail level and wholesale level should form part of the same market.”

Needless to say, business interests could clash with the objectives of a government-owned DNB. 

The Edge owner Tong Kooi Ong claims that private banks are financing DNB without a government guarantee. What happens when financial institutions are no longer funding DNB? 

Note that this is excessive monetisation through the exclusive use of spectrum by DNB, which was never needed in the first place.

Wrong focus

The DNB model focuses only on last-mile service delivery, which will not resolve internet problems in rural areas.

It is pointless to blame telcos for being unable deliver quality, affordable internet services to rural areas because the problem is due to Malaysia’s longstanding lack of a national fibre backhaul. We should be talking about the need for a government-owned monopoly for dark fibre as a neutral entity — an entity not involved in the retail business of the fibre. This is where we can equate it to a necessary regulated utility monopoly. After all, the internet is like water which will only run where you lay the pipes, in this case the dark fibre.

As reported by GSMA, Malaysia’s 5G adoption rate is behind its neighbours’ at only 1%, as of December 31, despite more than 50% 5G coverage of populated area, ending January. Not a great outlook for the “supply-driven” model! 

This is a sign for a decision to halt the “speed to spend” and an excellent opportunity to recalibrate the model towards delivering genuine outcomes and impacts for the national

GSMA has reiterated calls for Malaysia to enable 5G infrastructure competition by allowing telcos to have multiple 5G networks as the sure pathway to efficient and effective 5G rollout, as manifested in the bulk of global experience thus far! 

Wrong excuse

It was reported in the Financial Times article, “EU and US warn Malaysia of ‘national security’ risk in Huawei’s bid for 5G role” dated May 2, 2023, that the Western representatives have told Malaysia of the risks to foreign investment if the country’s telecommunications infrastructure were to be opened up to other players, such as Huawei, a natural global competitor to Ericsson which is the appointed 5G network equipment provider for the Malaysian SWN model. 

It is hypocritical of the US and EU to speak of contractual obligations and trustworthiness, justice and transparency and “stability” of policies as if they are speaking from a moral high ground. We can write a history book on how these nations have been violating legal documents and treaties for decades.

Emir Research would like to point out that at home, the EU enacts regulations against what it preaches in Malaysia. The Body of European Regulators for Electronic Communications (Berec), as an organisation representing the consumers’ interests, maintains a unanimously negative view of MOCN (DNB’s exact model) due to its potency to substantially reduce the differentiation capacity of the sharing parties in terms of service quality (refer to “Berec Common Position on Mobile Infrastructure Sharing”). Among the active forms of sharing, Berec urges national regulatory authorities to carefully assess spectrum pooling (MOCN) and national roaming on a case-by-case basis restricting its application to areas with very low population density where infrastructure-based competition is infeasible (which DNB is not doing).

The Anwar administration, taking over the wheels of a country that has struggled to get out of the middle-income trap and reach high-income status nation, must think strategically so that Malaysia does not repeat the same mistakes

Who is to say that deals with other 5G providers won’t be sweetened by similar or even better FDI initiatives for Malaysia?

Wrong excuse, again

In addition to financial and legal issues, the Financial Times article also reported that Brian McFeeters, the US ambassador to Malaysia, warned of “national security risks” unless Malaysia stuck with its original plan for 5G deployment.

However, does not simple common sense suggest that being at the mercy of one technology supplier is a far greater security risk? 

The US banned Huawei from its 5G networks back in 2019 and as it has pressured other nations to do the same. But it’s interesting to note that the EU representative to Malaysia focused its criticism in the FT article on the contracts instead of national security issues.

This is likely because Huawei is also a 4G and 5G vendor in many EU nations. How hypocritical they are to urge Malaysia to do otherwise.

In addition, even if we study other countries closer to Malaysia, Huawei have also been deployed in Singapore, Thailand and The Philippines. Even South Korea, the home of Samsung,  LG U+ uses Huawei. All these countries, including the EU, surely must have considered their national security risks.

In “Independent Oversight on DNB and 5G is Necessary”, the International Consortium of Investigative Journalists highlighted how both Ericsson and Huawei have questionable dealings.

The security issue goes both ways, and Malaysia’s best bet is to not put all its eggs into one basket. It makes sense economically and in terms of national security and infrastructure resiliency and redundancy. 

There is no reason to be beholden to one private entity, one core network, one government spectrum middleman and the pressures of one geopolitical or economic bloc. This will only stall innovation and increase the risk of corruption, over-dependence and over-reliance, with diminished flexibility for change.

As such, Emir Research welcomes the decision to pursue a dual wholesale network as announced by Communications and Digital Minister Fahmi Fadzil on May 3. This is a step in the right direction, but the devil is in the details. Emir Research will provide a commentary on the announcement in a separate article. – May 6, 2023. 

* Rais Hussin is Emir Research CEO.

* 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.


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