THE subject of spectrum allocation is a testy one in Malaysia, not least because billions of ringgit stand to be made by telcos from this prized resource.
No surprise then that when the Malaysian Communications and Multimedia Commission (MCMC) announced the selection of eight companies last week as recipients of the 2.6 GHz bandwidth, which telcos will ride on to provide 4G services, the regulator was dogged by complaints of favouritism.
But at a briefing yesterday with analysts and the media, MCMC chairman Datuk Mohamed Sharil Tarmizi stood firm on its decision, reiterating the approach the commission has been pursuing: that of equitable distribution.
The charismatic Sharil, who used to be an investment adviser, was visibly proud of how far the industry has come, pointing out that three out of the FTSE Bursa Malaysia KLCI's top 10 firms by market capitalisation were telcos.
He emphasised, however, that it was important not to let the established companies get too big for their boots.
“If nothing is given to the smaller players, we can't negotiate with the giants. The more spectrum we give to the big boys, the more lansi (arrogant) they become,” he contended.
It is with this reasoning that both old and new firms were granted access to the 4G bandwidth, although the largest block of 40 MHz was given to Syed Mokhtar Al-Bukhary-linked newcomer Puncak Semangat Sdn Bhd.
“Puncak Semangat does not have the lion's share. The 40 MHz it received is the minimum amount it needs to start out,” Sharil explained, adding that the tier 1 telcos Maxis Bhd, Celcom Axiata Bhd and DiGi.Com Bhd had each amassed in excess of 100 MHz over the years from previous spectrum allocations.
More competition, Sharil noted, is something Puncak Semangat, a provider of IT and e-services to the Government, will bring to the table.
Citing an example, he said that when DiGi entered years ago into a mobile market dominated by Maxis and Celcom, it spooked the incumbents with a prepaid SIM pack priced at RM99. The others had then sold their services at above RM100.
“We have seen a healthy decline in prices. You can now buy a prepaid pack for RM8.50. The core price of mobile has plunged by over 90% in the past 12 years.
“This shows there is competition in the sector. That is why once in a while we have to shake things up to tweak the market. If we don't push for collaboration, the telcos will all go and build their own infrastructure and remain in their silos.”
He added: “Of course, the whole experiment can fail. The regulator can only create the conditions, it is the market that determines success or failure. The fate of the new player is in their hands.”
Sharil was also quick to stress that the MCMC had no qualms about using the stick when the carrot does not work. “While it is not in our interest to harm the licensees, we can take back spectrum in cases of non-compliance.”
Asked about the possibility of the MCMC auctioning off bandwidth, a lucrative practice foreign regulators have used to raise cash, Sharil said this may not be the best approach.
“There is a lot of talk about auctioning off spectrum, but this only happens when an equitable distribution is possible. If not, it will just end up with those who can pay for it, but they may not always have the best ideas, and that is against our development agenda.
“Only in the past 10 years did people start talking about the scarcity of spectrum. Auctioning is said to be an efficient way to allocate spectrum but it is not as simple as that.
“An auction mechanism is best used when coverage and service quality are not a problem, demand outstrips supply, and everyone is of parity in size.”
On expectations that the commission will refarm some of its frequency, Sharil said this may be carried out in the next three to four years.
The exercise will be a challenging one, he warned, as it will mean that everyone using a 2G handset has to migrate to the 3G platform, a situation complicated by the fact that many in the rural hinterlands of Sabah and Sarawak are still on the 2G network.
“So please dump your old handphones,” he joked. This, he noted, was why the Government introduced the smartphone subsidy in Budget 2013.
Nonetheless, Sharil is upbeat about where the industry is headed with the advent of 4G.
“UniFi-type speeds will be possible on your mobile. Compared to past networks, it could take only three seconds to download music, 23 seconds for a picture and 34 seconds for video.”