JAN 21 — “In this case, it pays to be paranoid,” said a worried telecommunications industry executive in reaction to the news that a Syed Mokhtar al-Bukhary company, Puncak Semangat Sdn Bhd, had won the bid to build, manage and operate the infrastructure for Malaysia’s Digital Terrestrial Television Broadcast (DTTB) service over a 15-year period.
The telco executive is worried that Puncak Semangat is actually eyeing the much-coveted 700MHz spectrum band and that the DTTB bid is just a tactical move by Puncak Semangat to grab as much of this spectrum as it can when the time comes for spectrum re-farming in Malaysia.
Note that Puncak Semangat already has 40MHz of spectrum in the 2.6GHz band for its LTE (Long-Term evolution) rollout to be carried out by its telco arm Altel Communications Sdn Bhd. The spectrum was awarded in December, 2012.
Puncak Semangat submitted its DTTB bid in July 2012 before being shortlisted in November 2012, and finally declared the winner in January 2014.
The telco executive’s concern is premised on the belief that it will be very challenging for Puncak Semangat to make a viable business case for its DTTB rollout, and that, at some point, it will position its DTTB service as a form of national service to ensure all Malaysians, especially those in rural areas, enjoy digital TV.
“In return, it will ask for a chunk of the 700MHz spectrum as a form of payment,” speculated the executive, who requested anonymity.
What’s interesting is that the big three incumbent telcos themselves made an attempt to safeguard the 700MHz band for themselves by supporting Celcom Axiata’s bid for DTTB in July 2012.
According to an executive familiar with the bid, “we had an informal agreement to share the 700MHz between us, and that Celcom’s DTTB bid would act as a sort of representative for the interests of the telcos.”
Celcom however, much to its vexation, was not even picked to be among the final shortlisted three for the DTTB tender conducted by industry regulator the Malaysian Communications and Multimedia Commission (MCMC).
The 700MHz spectrum is a coveted low-band spectrum that substantially improves in-building coverage, making it ideal for urban areas as well as coverage in rural areas. It also travels greater distances than high-band spectrum and therefore is a more efficient way to provide coverage at the edge of cities and in less densely populated areas.
Telcos in the United States have been using it to boost their LTE coverage and just last week, T-Mobile announced it is paying Verizon US$2.37 billion (RM7.81 billion) for 700MHz spectrum that it will use to boost its LTE coverage.
In a December 2013 briefing by MCMC chairman Sharil Tarmizi, 2018 was mentioned as the year when telcos in Malaysia could use the spectrum to increase their level of services for customers.
It should be noted that during a December 2012 MCMC briefing to the media and analysts, Sharil described the allocation of spectrum in the 2.6GHz band as a form of spectrum rebalancing, specifically to give the Tier 2 telcos (Packet One Networks, REDtone Marketing, U Mobile and YTL Communications) the same amount of 2.6GHz spectrum as the Tier 1 telcos.
The MCMC is almost using the spectrum rebalancing as a form of leverage, with Sharil having said, “There is no way we can negotiate with the Tier 1 players if we do not have strong enough Tier 2 players.”
With the MCMC planning to push the big three of Celcom, DiGi and Maxis harder on quality of service issues this year, the billion-ringgit question is, if MCMC is not happy with the efforts from the incumbents, will this same leverage approach be used when the 700MHz spectrum is allocated?
It is a provocative question and will leave the incumbent telcos squirming uncomfortably.
Spectrum in the 700MHz band will become available, likely around 2017, when broadcasters in Malaysia stop transmitting analogue signals over the spectrum and move to the lower band of 470MHz and 694MHz.
And while both broadcasters and telcos have been lobbying for the right to use the 700MHz band for their industry, the MCMC, in making the DTTB announcement on Jan 8, 2014, added that the 700MHz band or Digital Dividend spectrum will be used for more high-speed mobile broadband services.
That got the attention of the telco industry and brings into sharp focus the method that the regulator will use to determine how the 700MHz band will be allocated.
Spectrum roadmap visibility needed
In response to Digital News Asia’s (DNA) query on this, the MCMC played it safe with its response: “As the Digital Dividend spectrum will be freed up after the Analogue Switch Off, the relevant provisions under the Act will be taken into consideration in assigning this spectrum and the method of assignment will be determined at that time.”
The ‘Act’ in question refers to the Communications and Multimedia Act 1998.
To Sigve Brekke (pic), executive vice president and head of Telenor Asia, the preference is for bidding but he recognises that each country will take its own approach.
What he wants above all else is visibility of the roadmap in Malaysia, “it is not clear for us what is the future roadmap for spectrum [in Malaysia],” and transparency, he told DNA recently.
“If it will be via a beauty contest, then it must come with clear criteria,” said Brekke, who also sits on the DiGi board as chairman.
According to him, as telcos head into the data era of their industry, where even the bottom of the pyramid market is now demanding data, managing spectrum requirements is going to become much more sophisticated.
“Operators need spectrum in the various bands – it is not enough to have a lot in one or two bands. Our point to the regulator: Provide us an entire spectrum map and we would like a bit across all the bands. That is the most efficient way of using data,” he said.
Brekke highlighted the 700MHz and 800MHz bands as extremely important for DiGi to get a hold of.
Meanwhile, Altel chief executive officer Nik Abdul Aziz Nik Yaacob (pic) is all for the beauty contest approach to allocating spectrum in the 700MHz band.
“To the best of our knowledge, the MCMC has never chosen the route of spectrum auction and the industry is not expecting it to change this position in the near future,” he said.
The auction approach, according to Nik Aziz, “is an opportunity for players to present innovative business plans that offer better services while competing with the incumbents.”
Highlighting the negative aspects of the auction model, Nik Aziz pointed out that “new innovative players with no legacy network will not be facing a level playing field in competing with established carriers with deep pockets.”
He also highlighted the hefty price of spectrum acquisition that would impact both the telco and ultimately its customers.
“This could cause unnecessary curtailing of innovative product and services, and competitive packages for consumers. Consequently, this might mean lower take-up and delayed deployment and rollout, especially in areas which might have a longer payback – thus not benefiting the masses,” he said. — Digital News Asia
