Does M'sia need nine broadband licensees?

A couple of weeks ago, the local press reported that the government was about to allocate blocks of 20Mhz spectrum each in the 2.6GHz band to nine players in the country for the development of fourth generation wireless system, or better known as 4G or Long Term Evolution (LTE).

LTE is touted as the next-generation wireless technology after 3G that is expected to usher in speeds of up to 100 megabits per second (Mbps), allowing the mobile user to experience close to, if not the same speeds as fixed network fiber technology.

The name of the firms, according to this report were, the four cellular firms--Celcom Axiata, DiGi.Com, Maxis Communications and U Mobile--four WiMAX players--Asiaspace, Packet One Network (M), REDtone International and YTL Communications--and a new entrant, a company said to be linked to prominent businessman, Syed Mohkhar Al-Bukhary.

These players have been told that they are to submit detailed business plans on how they plan to use the allocated spectrums and have also been allowed to conduct trials using frequency bands.

Almost immediately, industry tongues started wagging, of which the most asked questions were: Why nine blocks of spectrum to nine players? And aren't nine players too crowded for the local scene?

Citing a source, the local report noted: "The government is not going to deprive any player that is serious about rolling out next generation-type services which can help them offer rich applications for users."

In the early days of GSM in the 1990s, the government did allocate spectrum to the local telco players not quite unlike what they did last week, and did so for good reason. But the wireless landscape has changed tremendously since the early days of wireless technology development.

For starters, the driving need in those days was to transition the country's wireless system from that of an analog to a digital platform to combat, inter alia, fraud and the cloning of cell phones. A digital platform also meant bringing in other advantages such as encryption, international roaming, more consistent billing and standardization of handsets.

Malaysia then progressed to third-generation cellular or 3G, where as early 2002, the government, through the industry regulator, the Malaysian Communications and Multimedia Commission (MCMC), went through a series of evaluations to determine which company was worthy of a licensing spectrum for 3G.

Known in industry parlance as "beauty contests", the exercise, as I remembered it, was thoroughly comprehensive in nature, in which many reams of documents were submitted by telco players to the MCMC, for them to assess who was the worthy winner of the spectrum.

So it seems strange, at least to me, that the government would make such a unilateral decision to allocate precious spectrum in such a manner that has caught quite a number of people offguard.

In fact, one can argue that the government's approach to spectrum assignment this round is done in quite a laissez faire manner, especially given the fact that it is giving out what could possibly be the next biggest thing in wireless technology for some time to come.

Spectrum today is far more precious than the early days of GSM, and indeed, even the days when 3G licenses were awarded eight years ago.

Why?

Simply put, the wireless industry today is worth billions of ringgit because not only has the technology progressed so much since the hey days, but the entire ecosystem of networks, handsets, applications and service, have come together to form one humongous cash cow for the telco players and vendors.

Industry professionals I spoke with were also puzzled, with one even questioning if this is the right move as to how LTE spectrum should be approached.

"The government seems to me to be naïve about how they are approaching the allocation of LTE," said a veteran regulatory official with a local telco. "Would allocating nine blocks of LTE spectrum to a country the size of Malaysia help the country or cause more issues?"

This person, familiar with the letter sent by the government, noted that while he understands the government's wishes to give smaller players a chance, the question that remains is whether or not some of the said players have the track record to pull off rolling out a full-fledged wireless network based entirely on a new technology.

As it stands, for instance, there are still some players struggling to roll out their respective WiMax networks. Of the four licensees, only P1 Networks has made some inroads rolling out their coverage but the general consensus among consumers is that their quality of service leaves a lot to be desired.

REDTone has been confined to East Malaysia, with not much being reported as to its rollout there. Asiaspace WiMax has claimed, and is still claiming, to be restructuring itself. And the much-talked-about, darling of the four, YTL Communications, is slated only to launch in November with a big bang, but has yet to prove its capability in the market.

U Mobile, which has gone nowhere with its 3G rollout since it announced its intention to challenge the established cellular players back in October 2007. And don't even start about this new entrant, connected to Syed Mohktar, a company which we know very little about.

Another telco executive I spoke with also made a good point. Spectrum, he said, should not so liberally given out because the true worth of that spectrum may not be fully appreciated as players do not have a stake in it.

This, he added, could lead players to not be fully accountable for the precious commodity with which they have been bestowed and cause others to be impacted negatively, which would otherwise not have happened if it weren't given spectrum in the first place.

A lot is riding on this next-generation wireless roadmap spectrum assignment. This not only includes big profits for the telco industry as a whole but also the social impact of technology in matters to do with bridging the digital divide where Malaysia is concerned.

The country has seen its fair share of failures with some companies not having utilized a precious commodity such as spectrum to the best in the past.

With all the government's grand plans of the Economic Transformation Plan unveiled recently on the horizon, Malaysia can ill afford to experience another letdown in its crucial era of connectivity to the Internet.