Telco Deep Dive 2017: Malaysian spectrum refarming: Where are we after a year?

  • Refarming completed, optimised as operators ramp up on 1800MHz 4G rollout
  • With over 10 mil users, no easy switchover from 2G, while 5G a ways off

 

Telco Deep Dive 2017: Malaysian spectrum refarming: Where are we after a year?

 

MALAYSIA’S telecommunication (telco) landscape has been hailed as one of the more advanced in the Southeast Asia (SEA) region, primarily because of forward thinking regulatory policies as well as the quick adoption of technologies.

For the most part, the country’s operators have largely kept abreast with market pressures primarily because of the fierce competition that exists between key mobile operators in Malaysia. This is certainly a good thing as it has forced these operators to embark on a series of modernisation projects over the past few years.

Last year, the cover issue of Digital News Asia’s (DNA) annual Telco Deep Dive outlook focused on the government’s spectrum redelineation plan needing to be implemented properly and in a timely manner. That plan was the first major such exercise the government had embarked on since it initially issued wireless spectrum in the early 1990s.

DNA’s Telco Deep Dive 2016 issue concluded that because redelineation was such a major undertaking, the developments in the next year or two were going to be significantly impactful for both operators and consumers alike.

Put simply, the industry is at an inflection point because for the first time since the early 1990s, all operators, including the smaller and newer ones, will have near-parity when it comes to spectrum.

For the record, spectrum is a term used to describe the range of frequencies by which the electromagnetic wave is transmitted from one point to another. The information embedded in the spectrum commonly includes radio, TV, mobile voice and data, and broadband wireless data.

As spectrum is a finite resource, the government, through industry regulator, the Malaysian Communication and Multimedia Commission (MCMC), leases out spectra in different blocks or bands to telco operators for them to utilise.

MCMC is tasked with ensuring that these spectrum blocks are managed in a way that meets the needs of spectrum users, with adequate provision for public and community services, and to maximise the allocation of spectrum efficiently.

So how far have we come since the government’s redelineation plan came into force? What have operators done with the reengineering of their respective spectra? And what can consumers expect going forward?

These are but some questions that DNA will try to answer in this year’s Telco Deep Dive.

 

The background

The massive project that the ‘big four’ major operators – Digi.Com Bhd, Maxis Bhd Celcom Axiata Bhd and U Mobile Sdn Bhd – have been undertaking these past nine months is the re-engineering of their respective spectra of wireless operating frequencies.

The move to reassign spectrum all started when Malaysian Prime Minister Najib Razak, in a review of the national Budget 2016 on Jan 28, surprisingly announced plans to “optimise government income by reallocating telecommunications radio spectrums and making operators bid for them.”

The plan called for Celcom, Digi, Maxis and U Mobile to be reassigned 900MHz and 1800MHz spectra for a 15-year period and for a specific fee. The MCMC has since confirmed that the total cost of a 2 x 5MHz block of spectrum in the 900MHz band is US$115.6 million (RM499.72 million) while the total cost of a 2 x 5MHz block in the 1800MHz band is US$50.2 million (RM217.77 million), according to a local media report.

The spectra assignments is understood to be as follows: Maxis and Celcom will be allocated two blocks of 10 MHz spectrum (2 x 10MHz) each, while Digi and U Mobile Sdn Bhd will each be allocated a 2 x 5MHz block, all in the 900MHz band.

In the 1800MHz spectrum band, Maxis, Celcom and Digi will each be allocated 2 x 20MHz, versus the 2 x 25MHz they were assinged previously. Meanwhile, U Mobile, which did not have any 1800MHz spectrum before this, will be allocated a 2 x 15MHz.

As explained in last year’s DNA Telco Deep Dive, the reassignment is key simply because the two bands – 900MHz and 1800MHz – are coveted spectra due to their optimum compromise between coverage and capacity.

The lower 900MHz frequency has the advantage of being able to service larger areas compared to the higher 1800MHz frequency. The lower 900MHz also means that it can penetrate deeper into buildings much better than that of 1800MHz.

The two biggest beneficiaries with these new assignments are Digi, which has been pining after a larger block of 900MHz for years now; and U Mobile, which is the smallest player by subscriber size and which to date does not own any 2G spectrum at 900MHz and 1800Mhz.

U Mobile, which came into being in 2007 as a late entrant only secured 3G spectrum allocation from the MCMC in 2006.

It struggled in its initial years to become a credible competitor to the three big players but of late has been gaining some ground. 

Both these players will now gain access to precious lower band spectra (900MHz and 1800MHz), which will help them expand their coverage and capacity without having to spend as much as they otherwise would have had to if they had not gotten these spectra reassignments.

 

Vacating of 2G spectrum

The key engineering activity that has been taking place since last September is the spectrum refarming of the aforementioned 900MHz and 1800MHz bands, two blocks of spectra that have historically been used for the transmission of legacy 2G (GSM) mobile communications.

In industry parlance, spectrum refarming is the vacating of dated wireless technology occupying a particular frequency band so that a new wireless technology can use that frequency band to improve telco services to consumers.

In Malaysia’s case, the aim is to reduce existing 2G technology occupying the 900MHz and 1800MHz band to make way for LTE/ 4G services in those same bands. This will enable better coverage and indoor penetration compared to operating 4G/ LTE in higher 2600MHz band, which all four operators already have the capability of doing.

At the same time, operators embarking on spectrum refarming cannot completely clear out all 2G spectrum as there is still a large community of consumers using 2G for basic telephony services. As such, operators would need to keep the minimum of 2 X 5MHz for this use (more on this later).

According to Nils Kleemann, global head of mobile solutions at Nokia Corp, the industry today has become more competitive than ever as end-users expect faster speeds and greater data at lower costs.

As a result, revenues of operators have remained flat while their investments continue to increase in a bid to jostle for leadership in network performance, he explained.

“Operators are focusing on efficient and cost-saving methods for their network investments and related operations,” said Kleeman in an email to DNA’s questions. “Today, we have 2G (GSM), 3G (WCDMA) and 4G (LTE) all of which are running in parallel in most countries.

“2G was to support wireless voice services; 3G, a hybrid technology for voice and data communication; and 4G which is designed for data. So the logical question is do operators still need to run all these networks when they are serving similar or overlapping services?”

Ovum telco analyst Inderpreet Kaur noted that spectrum refarming isn’t a new phenomenon and has been going on for a long time in many other countries in the region.

In an email response to DNA, she noted that historically many operators in the regional markets, including that of Australia, Japan, and Thailand, have embraced the refarming of 900MHz and 1800MHz frequencies so that they could deploy high-speed mobile broadband services.

More recent examples include Indian operators, RCOM and Tata Teleservices, which are now using the dated CDMA band (800MHz) to offer LTE and mobile broadband, she explained.

“From a regulatory standpoint, spectrum refarming is an essential tool for efficient spectrum utilisation and makes up a key part of spectrum management policy,” she said.

Noting that regulators in different countries have taken different roads to refarming, Inderpreet said regulators generally adopt technology-neutrality to facilitate use of mobile broadband technologies in the existing 2G spectrum.

“Still some have required a reallocation of spectrum once the licences of all existing operators expire to provide a more level playing field [which is what has happened in Malaysia],” she said.

 

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