Red tape dogs Asia's WiMax deployment

Spectrum allocation and other regulatory issues continue to dog WiMax adoption in Asia, according to industry observers. One Malaysian analyst warns that such uncertainties could also cloud investor confidence in the local market.

Speaking to ZDNet Asia in a telephone interview, Victor Liu, an analyst at market research company In-Stat, said most Asian regulators have pigeonholed the 2.3GHz and 2.5GHz spectrums for WiMax services.

However, Liu said deploying WiMax services on the same spectrum will be most ideal because equipment vendors can benefit from economies of scale. "People can also roam from one network to another [seamlessly]," he added.

"But this is difficult because different spectrums have been allocated in different countries," he said. "It's hard to find a commonly available spectrum for WiMax to ride on."

And even if regulators have decided on which spectrum to allocate for their country's WiMax services, they also need to consider interference issues that may result from spectrums adjacent to the ones used by WiMax applications, Liu explained.

"[Regulators] may have allocated adjacent spectrums to other services. At the 2.5GHz spectrum, for example, there might be problems with satellite signals," he said.

The solution, he suggested, may be for regulators to shift satellite services to another spectrum by negotiating with satellite players. He added that regulators will also need to iron out interconnection issues between existing telecoms operators and WiMax service providers.

For example in Hong Kong, agreements that address call interconnections between operators as well as billing issues, have already been established between fixed-line and mobile operators.

"In Hong Kong, they have mentioned that [service providers] can put data and voice on WiMax," Liu said. "But the problem is when you enable voice on top of WiMax, regulators have to come up with a solution on how the interconnections can be done between WiMax service providers and existing operators."

He added that Hong Kong regulators have to either fit WiMax into the existing interconnection framework, or to come up with a completely new model.

"It's difficult because they have to balance the interest of different parties, such as 3G operators who have paid a lot for their licenses," he said.

WiMax hazy in Indonesia, too
In Southeast Asia, Liu also singled out Indonesia as the country with potential issues that could put a damper on WiMax services.

"Previously, the Indonesian government even charge license fees for the Wi-Fi spectrum," he said. "So, it's going to be even more difficult for WiMax service providers to enter the local market."

According to media reports, the Indonesian government tried to block Intel's WiMax equipment from being shipped to the country last year. The local authorities also reportedly raided Internet cafes in Yogyakarta that were operating Wi-Fi access points.

Liu also highlighted issues in Japan, which has traditionally been a competitive market for communications services.

"When WiMax first surfaced, many people were interested in getting into the business," he said, adding that the number of licenses allocated in Japan may be fewer than the number of interested parties.

"The Japanese government has to decide to whom they should allocate the spectrums," Liu said. "If they can only issue three licenses, there might be an issue if there are six or seven applicants."

In China, the government has always been protective of their own companies and technologies, Liu said. He noted that the delay in the rollout of TD-SCDMA--China's homegrown 3G technology standard--could also hamper the deployment of WiMax, since it is in the government's interest to see its own technology succeed.

Liu said WiMax is particularly effective in providing wireless broadband access to rural parts of China. To maximize coverage in a cost efficient manner, Liu said wireless operators may choose to use the 750MHz spectrum, which can cover a wider area with fewer base stations.

"That means China's WiMax equipment may not be compatible with other WiMax networks in other parts of the world," Liu said, adding that it could be possible that China might issue WiMax licenses on lower frequency spectrums to allow domestic vendors to produce equipment for the Chinese market.

Malaysia is also facing controversy over its "on-again off-again" WiMax spectrum tender process which industry observers warned, does not reflect well on the Malaysian government.

The public display of contempt by the country's Energy, Water and Communications Minister Lim Keng Yaik for the Malaysian Communications and Multimedia Commission (MCMC) over the 2.3 GHz broadband wireless access (BWA)--also known as WiMax--spectrum tender process, has left observers scratching their heads in bewilderment.

Lim had pulled the plug on the tender exercise just before it was scheduled to close on Jul. 18, saying he was "a bit angry and disappointed with MCMC" for not getting the ministry's input on the tender.

The minister revealed that the tender had to be recalled because specifications were not established in accordance with ministry policies, and the conditions for the tender did not take into account the building of infrastructure and content.

In the wake of the Lim's public rebuke, the MCMC--which regulates the country's telecommunications and multimedia industries--confirmed it would defer the evaluation of the submissions. The commission was originally due to announce its decision by Oct. 31.

The turn of events baffled analysts and stumped the 17 companies which had already submitted their bids. The situation got murkier a week later when news reports indicated that the tender was back on track but this time, with four new conditions added.

However, industry observers agree that it would be difficult for bidders to meet the original October deadline with the new specifications.

Was government "too hasty"?
A telecommunications analyst argued that the minister was "too hasty" in deferring the tender. "It seems to runs counter to his frequent statements that Malaysia's broadband penetration is too low, and [that the market] needs a faster takeoff of broadband services," said the analyst, who declined to be named.

"After the disappointment [over the 3G licensing saga], we now have the WiMax debacle. It certainly does not reflect too well on the government," he said. The analyst is from a Malaysian research house and specializes in the telecommunications sector.

In March this year, Malaysia's third largest mobile phone operator DiGi.Com, failed to win a lucrative 3G mobile phone license because of its foreign ownership.

The decision to bypass DiGi, majority owned by Norway's Telenor AG, and award 3G licenses to two non-mobile phone companies had sparked controversy in the local industry. DiGi's two larger rivals, Telekom Malaysia and Maxis Communications had received their licenses last year.

According to some reports, DiGi was overlooked because the government gave preference toward local companies. Minister Lim had reasoned that while the government is not against foreigners investing in Malaysia, "3G spectrum is a scare national resource".

Said the Malaysian analyst: "There is frustration in the industry over some of these issues. For example, DiGi, being the most qualified of the three candidates, felt they were unfairly treated in the 3G spectrum tender."

Fiona Leong, deputy head of research at Malaysia's AmResearch, said: "If potential investors are to commit their investments into the sector, they would want to see the telecommunications industry well-regulated with clear policies and guidelines."

Although the allocation of WiMax licenses is expected to be delayed, the impact is not likely to be severe.

Leong explained: "Based on the original tender [deadline], it was projected that commercial WiMax services would roll out in late-2007 or early-2008.

"Now with the delay, the earliest roll out for WiMax services is expected to be early 2008 or later," she said.

Leong suggested that the telcos and other bidders were not necessarily too disappointed by the delay. "The business case for broadband is not so clear," she said. "Is it commercially feasible? Will it be as big as Wi-Fi? The telcos are evaluating between WiMax and other technologies. They are closely watching WiMax-related developments overseas."

"They will not be too quick to roll out WiMax services," Leong noted. "However, the key players are hedging their bets and applying to get the WiMax spectrum."

For example, Maxis Communications CEO Jamaluddin Ibrahim said recently that having a WiMax license was necessary to meet the varying needs of customers.

"The whole broadband technology is required to serve customers and sometimes--one technology is not sufficient," he said, when asked to comment on the need for Maxis to bid for a WiMax license since it is already a 3G service provider.

Industry players would also have noted that alternative technologies to WiMax are currently available.

An IDC Asia-Pacific spokesperson said: "In the Malaysian context, IDC believes that with sufficient spectrum available for non-WiMax solutions, the market for these technologies will be sustainable and will act as a differentiator in terms of wireless broadband technologies."

The industry researcher said that alternative BWA technologies claim to be superior to WiMax in a number of areas such as spectral efficiency, bandwidth capabilities and mobility.

However, the IDC analyst noted that the benefits remain questionable to many and "the jury is still out in regards to testing in Malaysia".

Lee Min Keong is a freelance IT writer based in Malaysia.