Malaysia’s 5G conflict explained

 

The introduction of 5G technology is set to revolutionise multiple sectors but critics warn that a second network may burden the taxpayer and create other issues affecting Digital Nasional Berhad and the telcos. (Reuters pic)

PETALING JAYA: 

The introduction of 5G technology is set to revolutionise key industries such as healthcare, business, manufacturing and smart infrastructure, significantly boosting Malaysia’s economy.

Deputy communications minister Teo Nie Ching said 5G is capable of making remote surgery possible, simplifying business operations and allowing employees to work together in real-time from anywhere.

In the manufacturing sector, 5G has already enhanced production processes through the use of autonomous robotics, augmented reality and virtual reality.

However, the government’s 5G deployment strategy has sparked a host of concerns, with critics warning that a second network risks wasting billions in taxpayers’ money due to disorganisation and redundancy. They also claim it could result in lower quality services being offered higher prices.

FMT takes a closer look at how the conflict has unfolded and the issues that have arisen.

Government monopoly

In 2021, the government awarded Swedish telecommunications giant Ericsson a contract worth RM11 billion to develop Malaysia’s 5G infrastructure under a single wholesale network (SWN) model.

Digital Nasional Berhad, a government entity, was set up to build and own the 5G network, and sell access to telecommunications companies (telcos) to provide 5G services to consumers.

At the time, then Malaysian Communications and Multimedia Commission (MCMC) chairman Fadhlullah Suhaimi Abdul Malek said having a government entity to manage the spectrum and infrastructure would lessen the costs incurred by telcos, allowing them to focus on expanding fibre networks and improving 4G service.

He added the single-network approach would also lower expenses by reducing auction costs and network duplication while encouraging infrastructure sharing. Fadhullah said the approach differed from the 4G rollout which required telcos to build their own networks and sell their services directly to consumers.

Concerns also arose that the SWN model would create a government monopoly, stifling competition and innovation, and leading to inefficiency and higher costs for consumers.

In response, the government decided to divest 70% of DNB’s shares to telcos under a shared subscription agreement. Telcos would collectively hold a 70% stake while the government retains a golden share of 30%.

Shift to a duopoly

In December 2022, newly sworn-in prime minister Anwar Ibrahim announced that the government would review the 5G rollout strategy.

Following that review, communications and digital minister Fahmi Fadzil announced in May last year that Putrajaya had decided to transition to a dual network model and introduce a second 5G service provider – to be selected through a tender process – once DNB has achieved 80% coverage in populated areas.

He said the second network would improve coverage, foster competition and ensure affordable and quality 5G services for the people, as well as provide redundancy to avoid single points of failure.

Whither DNB?

However, critics have questioned the methodology used to select the developer of the second network, saying it would potentially give rise to conflicts of interests, anti-competitive practices, and inefficient use of public funds.

Machang MP Wan Ahmad Fayhsal Wan Ahmad Kamal expressed concern over the decision to allow telcos that already hold a stake in DNB to apply to develop the second 5G network.

He argued that these telcos would have access to insider knowledge of DNB’s operations, creating an unfair advantage.

Tasek Gelugor MP Wan Saiful Wan Jan said the developer would be exposed to legal risks, citing Section 133 of the Communications and Multimedia Act 1998 which prohibits licensees from taking any action that would diminish competition in the communications market.

Meanwhile, former science, technology and innovation minister Khairy Jamaluddin also warned that billions in taxpayers’ money could be wasted.

He said RM900 million worth of equipment meant for the current network could go unused, and that DNB may require an additional RM1.6 billion to maintain its services due to spectrum changes.

Wan Fayhsal also voiced concerns that the second network could lead to DNB becoming a 

white elephant

, which may result in the government having to pump in billions of ringgit in bailouts.

Calls for a ‘pause’

T Saravanan, CEO of the Federation of Malaysian Consumers Associations, recently called for a 

strategic pause

 in the second 5G network rollout to allow for a reassessment of the financial implications and ensure cost-effective deployment.

He warned that the digital divide between rural and urban areas could widen if the second network prioritises more profitable regions.

Mohamed Awang Lah, former chief executive of Malaysia’s first internet provider Jaring, called for the government to bring its plans for the second 5G network to a halt.

If DNB wants to remain as it is, then there should not be a second operator — just one operator. The telcos should not be shareholders of DNB. DNB should stand alone and be neutral,

 he told FMT.

He suggested that the government collect fees from mobile network operators to recoup its investment.

Meanwhile, a telco’s former CEO who declined to be named recommended that the government divest its shares in DNB and sell it to a utility company unaffiliated with any mobile network operator.

He said the government should ideally avoid the risk of owning a 5G network on account of the risks posed by rapidly evolving technology. - FMT