HIGH prices and low coverage for fixed broadband in Malaysia are due to Telekom Malaysia Bhd’s market dominance, which has stifled competition, said the World Bank Group. 

While TM has played a critical role in development of the telecommunications sector, its continued dominance pose a challenge to market development, it said in a report launched today. 

Task team leader and lead economist Richard Record presented “Malaysia’s Digital Economy: A new driver of development”, in Kuala Lumpur today.

The report said TM’s dominance over the upstream market and vertical integration gave it a structural advantage, while inconsistent rules at the state level prevented new competitors from emerging. 

With more than 4.1 million customers, TM has a 92% share of the fixed broadband market. 

“TM has an outsized presence in the international connectivity market, and appears to have used its market power to restrict access of other domestic companies,” the report said.

The company, which has an ownership stake in 12 of the 20 submarine cables that land in Malaysia, does not allow co-location arrangements for its cable landing stations, despite the Malaysian Communication and Multimedia Commission’s regulation on Domestic Connectivity to International Services (DCIS).

The report also pointed to the TM shareholder’s report that indicated that the telecommunications company “used its market to restrict access and charge higher prices than would prevail in a competitive market.” 

TM allows interconnection and leases backhaul facilities to other operators, but is reported to route data through circuitous paths on leased networks – a practice known as “troboming.”

Additionally, it does not lease “dark fibers”, which are unlit and therefore represent excess capacity,  to other broadband operators. 

The report said Malaysian service providers also paid relatively higher IP transit prices than those in neighbouring countries.

“As a result, fixed wholesale costs paid to the incumbent remain as high as 70% of retail costs in Malaysia as opposed to 50% in the UK.” 

“At US$7.16 (RM29.70) per month for 500MB of prepaid, handset-based mobile broadband, Malaysia is slightly below the global median, but well above the Asean median. Within Asean, only consumers in Singapore and Brunei pay more, with the gap at only 8 cents.” 

The report said higher prices and lower affordability were the likely major factors responsible for lower adoption. 

The report also said Malaysia underperformed in the provision of high quality fixed-line infrastructure, and had slower download speeds than most advanced economies.

In Malaysia, the average download speed for mobile broadband, at 18.6 Mbps, slightly slower than the median.

Chile is the only Organisation for Economic Co-operation and Development member country with a slower mobile download speed while nations with comparable per capita incomes – Hungary, Turkey, Mexico and Poland – all have faster mobile download speeds. 

Among Asean countries, Singapore, Myanmar and Vietnam have the fastest mobile download speeds, the report said.   

Malaysian consumers also pay more than consumers in most other Asean countries for similar mobile and fixed broadband plans, it said.  

The World Bank Group recommended that the Malaysian government consider using existing infrastructure more efficiently through regulatory action such as promoting open access across all levels of the broadband value chain to increase the ability of competitive providers to lease capacity or facilities on non-discriminatory terms. 

The government also needs to attracte more private capital to close other coverage gaps, such as in South Korea and Singapore, it said. –  September 12, 2018.