In EMIR Research’s opinion, the question to proceed with the Single Wholesale Network (SWN) or Dual Wholesale Network (DWN) as per ongoing discussion is a wrongly formulated question(!) because both options (SWN or DWN) will lead to the absolutely identical inimical impact to the Malaysia telecom industry and the nation as a whole.

And that is very fundamental because a healthy telecom industry ecosystem is one of the critical pillars of the fourth industrial revolution (4IR) and beyond. So, the real danger of making the wrong decision now is not in potentially losing billions of Malaysian Ringgit but a destroyed ecosystem with long-term consequences for the nation.

Therefore, the correctly formulated policy-decision making right now should aim at identifying an alternative 5G rollout model (not SWN or DWN) that would sufficiently disrupt the telecom industry’s “status quo” to unlock the desired effects such as greater network quality and a more even network coverage nationwide, without the heavy expense of adversely affecting the telecom industry development as a whole.

Also, note that this would not necessarily mean complete dismantling and reversal of DNB but rather its strategic restructuring.

Bear in mind that SWN and DWN are both detrimental to the nation as both models lead to a highly undesirable monopolistic effect on the telecom industry leading to low competition and, as a result, low innovation and quality of the internet—this is the axiom of strategic management. And the global data proves this once again.

Kindly refer to the earlier published article by EMIR Research titled “Malaysian 5G Rollout “Unanswerable” Questions” from February 21, 2022, where we provide a detailed case-study analysis of the known to the world 4G SWN initiatives and global data visualization of their outcomes.

The unanimously mediocre, at best, performance in terms of network quality and nationwide penetration by all the countries that adopted SWN-model (government-led or MNO consortium-led alike) for their 4G rollout is glaring in comparison with the nations who did not—these are outcomes. If we analyze deeper, the same countries who pursued SWN for 4G are among those unable to flex their 4IR muscles until now—these are the long-term national impacts.

Interestingly, the same data illustrates that Mexico has done relatively better in its 4G network quality and reach than the rest of the SWN-countries group. 

The former observation appears to be attributed to the fact that the Mexican government wisely auctioned the excess 4G spectrum to local MNOs operating outside of the Mexican SWN. This is probably also one of the reasons why its SWN did not survive and filed for bankruptcy. And this is also why DNB, not unreasonably, foresees that in the presence of the second MNOs consortium-led SWN, it will not survive, and we will still end up with the SWN even though led by the private sector. 

In a series of articles on the topic (“Deconstructing 5G Rollout in Malaysia” in two parts and “Malaysian 5G Rollout — Exhibit “A” for Misplaced Solution”), EMIR Research presented detailed analysis from various angles considering the national future while advancing the argument against the SWN (or even DWN). This is because this model not only does not solve Malaysia’s network wounds but significantly jeopardizes its sovereign digital future.

In the article titled “Malaysian 5G Rollout “Unanswerable” Questions”  (Tables 1 and 2 in this article are critical and should be carefully examined by the policymakers), EMIR Research has presented the third option for 5G rollout, which would help solve not only 5G but the existing 4G problem as well. Therefore, let us re-emphasize that third option here. 

DNB should become the neutral entity that will solely focus on actively expanding passive network infrastructure—fiber, backhaul and towers/poles only (for 5G, it will be even more massive than what 4G requires). Note that while the lack of passive network infrastructure, especially in the underserved rural areas (and this is the primary reason they are underserved), is at the core of Malaysia’s internet problem, the DNB proposition, in its current form, does not address it at all.

Furthermore, as far as financing is concerned, the Universal Service Provision (USP) fund should be continuously geared towards solving this problem.

This government-built and government-owned passive network infrastructure is to be shared equally by all the telecom players while sharing active radio access network (RAN) equipment is optional.

Here we must understand that spectrum sharing is identical to active RAN sharing (one is not possible without another) and therefore is a matter that requires very careful consideration.

On one side, spectrum sharing helps overcome the limited availability of bands suitable for 5G and boosts resulting maximum internet speed. However, on the other hand, it would necessarily result in active RAN sharing and, therefore, a lack of competition based on quality. 

One option for an MNO is to have a full spectrum in designated areas, and domestic roaming should be allowed. If the MNO is not performing in the designated area, it should be penalized. There should be wholesale pricing between all the MNOs, and the areas can be selected through bidding. As a compromise, there could be two or three MNOs per area to promote competition, but the spectrum divided by two or three is better than dividing by five or eight.

However, we should also consider the global experience in rolling out the 5G network where a majority of the countries proceeded with an early spectrum auction. Furthermore, if even the countries with a limited 5G spectrum availability prefer to do the spectrum conversion and free up the suitable spectrum bands to be still able to proceed with the auction or beauty contest option, there must be some collective wisdom that we may want to consult.

That is because ideally, the active RAN equipment should be left to be deployed by the individual telecom players to unleash the following mutually reinforcing dynamic that will keep the telecom industry agile: 1) innovation; 2) competition based on the primary characteristic—the quality of network and thus constantly raising the industry quality bar; 3) dynamic cost reduction of the overall network deployment while gradually and timely paving the way to the future generation networks.

As far as international investors are concerned, due to the quality of its public administration recently, in the eyes of investors, Malaysia has been establishing itself consistently and firmly only in one space — space of misplaced solutions, missed opportunities and “negative wisdom” when it comes to faithful strategic decisions. Now, the 5G rollout, according to the current DNB proposition, if not restructured urgently, is going to be yet another important “negative milestone” to a direly needed correct trajectory.

The failure of the SWN model is already evident from the international experience, as we indicated above. But, unfortunately, our policymakers decided not just to stop there but talk about “supply-driven” SWN.

Even from the analysis of the known SWN case studies worldwide, there was never a notion of a “supply-driven” model! We should pay attention to the Brunei case, which is rather unique and interesting and is also quoted by DNB in support of its arguments but clearly out of context. 

The CEO of Brunei’s Unified National Networks (UNN) specifically emphasized their demand-driven focus (on 4G and below) to recover the investments while organically preparing the platform for the future (5G)! The country also is benefiting due to its geography and small population size (below 500,000 citizens!). In addition, and notably, UNN has significantly expanded passive network infrastructure upon the concession of the network from MNOs to the government-owned entity.

Above all, experts agree that the 5G rollout must follow the country’s ability to monetize it, or, in other words, is intrinsically demand-driven! International investors would undoubtedly take note of this “negative innovation” on top of the already proven to be problematic SWN (or even DWN) model should we proceed with it further.

The sole determinant of international investors’ confidence (equity or direct investments) is the country’s ability to generate future cash flows on a nationwide scale! An impaired telecom industry (and SWN or DWN will certainly lead us to this) will decapitate our 4IR progress and entrench us as a digital colony (value consumers rather than value producers) therefore limiting those future cash flows. How would our “sorry, we cannot reverse even if it is wrong”, putting it literally, sound to this group of investors?

Meanwhile, if we choose the right 5G rollout strategy, there will be (literally) the whole world of investors who will incorporate this “positively wise” decision into their future evaluations of our country’s capacity. However, we already know that there is a much narrower group that is trying to secure their only cash flows by exerting external pressure on Malaysia while jeopardizing its national future.

Is it not evident to our policymakers that we should cater to that larger group of investors whose interests are aligned with our national interests? Perhaps, the time when an election is just around the corner appears to be wrong for national strategic decisions?

In any case nationwide interests must always prevail!

This is the real turning point for Malaysia to choose either path towards its digital sovereignty or being colonized digitally.

Of course, it will take more than just getting our 5G rollout strategy right in order to secure our sovereign 4IR future and beyond. It is grossly overdue for the Rakyat to hear from the government a clear strategy and witness the sincere and relentless efforts to address such fundamental issues as strong infrastructure, conducive regulation and policies, highly innovative ecosystem, human capital development and healthy economic country profile, which all are the prerequisites of successful 5G rollout (refer for example to Europe 5G Readiness Index).

(Dr Rais Hussin, the CEO of EMIR Research, an independent think tank focused on strategic policy recommendations based on rigorous research.)