MCMC Defends 4G-LTE Spectrum Award: No Track Record Needed

MCMC's defence of the award of the biggest share of the 4G-LTE spectrum to Puncak Semangat is lame, and the excuse not to auction the license doesn't even begin to make sense.

Malaysian Communications and Multimedia Commission (MCMC) has defended its decision to award the biggest share of the 4G-LTE spectrum to Puncak Semangat Sdn Bhd which is owned by tycoon Tan Sri Syed Mokhtar Al-Bukhary.

Its chairman, Datuk Mohd Sharil Tarmizi said on Tuesday that the award is to "introduce additional competition".  He said "look at the market now, if we left those 8 players on their own, where would the solutions, applications and innovation be?"

Datuk Mohd Sharil Tarmizi also said that MCMC has the power to "take back the spectrum" should players fail to meet their targets.

The MCMC Chairman's response defies all logic because, if the 8 existing players are "not" competing by providing "innovation" today, then MCMC must be responsible for allowing the collusion between the 8 parties. Under the Malaysia Communications & Multimedia Act, the MCMC is the authority to promote competition and bar collusion between telecommunication players. And certainly, by international standards, 8 players are more than sufficient to generate a highly competitive environment. Most other developed nations have far fewer than 8 players in the industry, and yet remain highly competitive and innovative.

While we are all for competition in the industry, the manner in which the license and quota is awarded must be questioned.  Some of the companies awarded with 3G and WIMAX licenses by MCMC have failed miserably, proving that MCMC is not an all-seeing "oracle".

The fact that MCMC has the power to retract its award at any time does not give basis to an award of the largest share of the bandwidth to a completely new player in the industry.

Furthermore, a regulator's role is certainly not to play "judge" in evaluating business plans, but to facilitate competition, prevent monopolistic practices and ensuring quality service provision.

If the argument that the arbitrary award to Puncak Semangat is to improve competition rest on shaky grounds, then Datuk Sharil's statement that MCMC decided against an auction for the bandwidth because "the highest bidder may not necessarily be the one with the best ideas" holds even less water.

MCMC's decision against an auction for the bandwidth is contrary to international best practices where both developed and developing countries have raised valuable income for the Government while promoting a highly competitive telecommunications industry. UK, Germany, Sweden and even Thailand have held auctions, raising billions of ringgit in proceeds, while Singapore, Taiwan and Brazil are planning their auctions for next year.

Datuk Sharil was quoted by The Edge Financial Daily that "an auction is best when the spectrum is convenient and quality of the spectrum is not a problem" does not even  make any sense. It sounds like a response designed to confound the people, without even beginning to answer the question.

A company that is committed and believes it will trump the competition will be more than able to participate in an auction for the new spectrum. And should the company fail, the MCMC still has the power to withdraw its award while keeping the proceeds of the auction. Hence under such circumstances, there is even greater incentive for the players to compete and innovate to ensure a successful business. This will at the same time benefit consumers.

MCMC must commit to the Prime Minister Datuk Seri Najib Razak's own slogan that "the era where the Government knows best is over", and let the market play its part in determining the winner.  MCMC should instead focus on its role to prevent collusion between industry players, punish players who fail to provide quality services and create an even playing field for all parties in the industry.

Otherwise, it becomes clear that MCMC is over-extending its regulatory role to play "god" of the industry by deciding which company's profit to fatten, and ignoring the interest of the millions of telecommunication users in Malaysia.

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4G-LTE Spectrum Award: No Track Record Needed

It is become endemic of the Malaysian regulatory authorities to award quotas and licences to companies with questionable financial credentials and without any track record in the relevant industries.

Last week, Malaysian Communications and Multimedia Commission (MCMC) announced the allocation of the 4G-LTE spectrum where all 7 existing broadband players in the market – Maxis Broadband Sdn Bhd, Digi Telecommunications Sdn Bhd, Celcom Axiata Bhd, U Mobile Sdn Bhd, Redtone Marketing Sdn Bhd, YTL Communications and Packet One Networks (M) Sdn Bhd were granted 20MHz of bandwidth.

However, what took the industry by surprise was the award of the largest share of the bandwith of 40MHz to a little known entity Puncak Semangat Sdn Bhd, owned by tycoon Tan Sri Syed Mokhtar Al-Bukhary.

The most straightforward question to ask MCMC is – why is it that a company with zero track record in the industry has been given the privilege of securing the largest chunk of the bandwidth?

It appears that MCMC which has landed in controversy in the past, is persisting in awarding licenses to companies with little track record or financial capabilities.  In the past award of bandwidth for the 3G and WIMAX spectrum, several companies have failed to deliver the services or have effectively sold their license for a quick profit.

What is most disappointing the the award of licenses in Malaysia is there is not auction requirement as practised in most other developed countries.  The auction process will not only ensure the most committed companies to take part in the exercise, but will also raise valuable revenue for the Government.

For example, the Office of Communications, the independent telecommunications regulator in the United Kingdom has set a reserve auction price of GBP1.3 billion for the 4G-LTE licences and the industry expects the Government to raise between GBP3 to 4 billion!

In 2010, the highest bid in the German spectrum auction was 7.5 Million Euros for two blocks in the 800 MHz band.

In 2008 Sweden concluded an electronic 16-day auction for nine 15-year 4G-licenses for a total bandwidth of 190 MHz in the 2,6 GHz band. The total required minimum bids were SEK 50,000,000, but the total winning bids were USD314 million.

Other countries such as Taiwan, Singapore, Brazil are planning for 4G auctions in 2013.  Similarly, Thailand has only just concluded their 3G auction, netting their Government US$1.4 billion in the process despite a more depressed market environment, and alleged collusion to lower the auction price.

It appears that in Malaysia, our regulators are more interested in enhancing the profits of our telecommunication companies, and even then favouring certain connected parties despite their lack of track record.

The above is the clear cut case of lost opportunity for the Government to raise valuable funds to provide much needed services and facilities for Malaysians, such as toll-free highways and affordable homes.

Pakatan Rakyat will ensure that all licenses granted by our various regulatory bodies, particularly in the energy and telecommunication will be awarded in an open, transparent and competitive manner to ensure that the best bids will win the licences and the Government will also be able to maximise its revenue in the interest of the rakyat.

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50% Broadband Penetration by 2010?

After struggling for 8 years, the Government has only managed to achieve broadband penetration of approximately 24%. Hence the BN Government's National Broadband Plan target of 25% household penetration by 2006 and 50% by 2008, has clearly failed miserably. The Government has now set a new target, which has been endorsed by none other than the Prime Minister himself. I had sought clarifications from the Deputy Minister of Information, Communications and Culture, Heng Seang Kie.

...saya hendak tanya Yang Berhormat Timbalan Menteri, target sebenar bagi National Broadband Plan bagi Malaysia adalah untuk mencapai 50% penetration pada tahun 2008, tetapi sampai sekarang kita tidak sampai lebih kurang 25%. Saya difahamkan melalui media statement yang dikeluarkan oleh Yang Berhormat Menteri, Datuk Seri Utama Dr. Rais Yatim, dia kata dia hendak capai 50% pada tahun hadapan.Jadi, kita ingin tahu apakah langkah yang akan diambil untuk mencapai 50%? How realistic is this? Adakah ini menubuhkan KPI yang fix bagi Menteri ataupun disebutkan sebagai sasaran sahaja? Adakah ini sasaran KPI seperti sasaran KPI antara kementerian yang lain? Apakah dibuat untuk menjamin supaya sasaran ini akan dicapai? Terima kasih.

And the Deputy Minister's reply is as follows:

[...] Seterusnya ialah tentang soalan yang ditujukan oleh Yang Berhormat PJ Utara lagi iaitu untuk pengetahuan Yang Berhormat PJ Utara, sebenarnya sasaran kadar penembusan yang telah ditetapkan pada akhir tahun 2009 adalah 30% dan seterusnya 50% pada akhir tahun 2010, bukan pada tahun 2008 seperti mana yang telah didakwa oleh Yang Berhormat PJ Utara tadi.

Satu lagi ialah tentang soalan yang dibangkitkan sama ada ini merupakan KPI, sama ada penembusan perkhidmatan jalur lebar ini merupakan KPI kementerian, jawapannya ialah ya.

Listen to some of the replies from the Ministers, and you can understand why we can get frustrated in parliament. I can understand that the newly appointed Deputy Minister has no clue about the previous National Broadband Plan targets of wanting to achieve 50% penetration by 2008.

But while she has confirmed that the 50% target for 2010 is indeed the Ministry's KPI, she didn't say how this was going to be achieved, beyond earlier stating that the Highspeed Broadband project worth RM11.3 billion has been awarded to Telekom Malaysia.

We have only 24% penetration today, do you think we'll achieve the 50% target by December 2010? Forgive me for being a pessimist, but based on the answers and actions taken by the Government today, we should be thankful if we hit 35% broadband internet penetration.

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Why Was Telekom Given Wired Broadband Monopoly?

The Deputy Minister for Information, Communication and Culture, Heng Seai Kie was wrapping up the budget debate policy stage for the Ministry yesterday. You can read her reply on issues relating to broadband in the Hansard here (pg 63 onwards) and decide for yourself if we have the right competence in this ministry (headed by Rais Yatim)

The government was reiterating its commitment to achieve top quality broadband services and maximum penetration in the shortest possible time. Sri Gading said something sensible this time, asking why is there no competition.

Datuk Haji Mohamad bin Haji Aziz [Sri Gading]: [...]Yang Berhormat menceritakan tentang jalur lebar ini begitu begini, begitu begini. Saya hendak tanya projek jalur lebar ini pun akan gagal kalau sistem monopoli TM ini berterusan. Kenapa, kenapa, kenapa, perempuan, perempuan, perempuan, kenapa dan mengapa, tidak ada pilihan lain kah? Mesti TM juga. Kenapa dan mengapa mesti TM juga? Tidak boleh kah dia beri peluang, rezeki ini kepada syarikat-syarikat lain. Jadi, kalau ada persaingan Tuan Yang di-Pertua, mungkin akan memberi faedah kepada rakyat yang ramai. Ini kerana, apabila ada persaingan ia tidak monopoli. Ia akan menjaga pelanggannya lebih kerana takut kehilangan pelanggan. Akan tetapi, kalau dia punya sendiri, macam kepala bapa dia punya lah... [Ketawa] [...]

Puan Heng Seai Kie: Yang Berhormat, saya memang setuju bahawa apabila ada persaingan, maka ada kemajuan dan perkara ini memang adalah polisi kementerian untuk memperbanyakkan pemain di dalam bidang jalur lebar ini. [...]

Ummm... that's the answer? She said she agreed that with greater competition, there will be more progress... but then why Telekom monopoly, especially with regards to the HighSpeed Broadband project? I stood to ask (but it was damn tough asking IT questions in Malay... ;-))

Tuan Pua Kiam Wee [Petaling Jaya Utara]: Saya sebenarnya bersetuju dengan pandangan yang telah pun dibentangkan oleh Yang Berhormat Sri Gading. Saya agak jawapan yang diberikan oleh Yang Berhormat Timbalan Menteri itu macam tidak selaras dengan hakikat iaitu sebenarnya pada masa ini, buat lane line broadband secara berwayar, hanya satu syarikat sahaja diberi.

Ada orang lain boleh pakai tetapi perlu sewa daripada Syarikat Telekom dan Syarikat Telekom akan sewa dengan harga yang mahal. Oleh sebab itu, tidak ada syarikat lain yang ingin memberikan perkhidmatan broadband secara berwayar. Ada sedikit persaingan melalui wayarles tetapi secara berwayar boleh dikatakan dengan most convenient sebab tiap-tiap rumah ada telefon line, itu semua kuasa monopoli Telekom.

So, apakah langkah yang akan diambil oleh kementerian untuk memecahkan kuasa monopoli ini supaya lebih ramai pemain dari syarikat-syarikat baru dapat masuk dalam bidang ini.

Kedua, kita sudah tahu bahawa high speed broadband project ini akan dilancarkan dan mungkin akan habis pada tahun 2012 tetapi sehingga tahap 10MB per second sahaja. Akan tetapi banyak negara-negara lain sehingga tahun 2012 sudah akan sampai mencapai 1 GB dan bukannya 10MB. So, kita hendak tengok bukan sahaja rancangan dua tahun yang akan datang, apakah dasar bagi kerajaan untuk lima tahun, sepuluh tahun yang akan datang sebab ini akan menyebabkan memberi kesan kepada competitiveness sesebuah negara. Terima kasih.

And the reply was (after initially not understanding my question):

Puan Heng Seai Kie: Okey, terima kasih kerana membantu. Yang Berhormat Petaling Jaya Utara, berbalik kepada soalan yang ditujukan. Kita tahu bahawa bagi perkhidmatan jalur lebar ini merupakan sesuatu yang baru untuk Malaysia. Jadi, sebagai permulaan, kerajaan haruslah mencari satu rakan kongsi yang boleh dipercayai dengan latar belakang yang mantap.

Jadi, pada masa itu Telekom Malaysia telah dipilih sebagai rakan kongsi ini. Walau
bagaimanapun, kementerian ini memang maklum tentang dua isu yang telah dibangkitkan oleh Yang Berhormat Petaling Jaya Utara tadi. Percayalah buat masa ini, kementerian memang sedang mengambil usaha untuk memperbaiki keadaan ini. Tuan Yang di-Pertua, boleh saya teruskan.

And that was the answer. She said broadband is "something new for Malaysia". Excuse me? For 8 years we have been talking about MSC and broadband and have failed miserably with Streamyx or other wireless services, and the Deputy Minister claims broadband is something new for Malaysia? No wonder we are that far behind.

And being new is apparently the reason for TM to be chosen as the sole "rakan kongsi" and hence creating once again a monopoly, going exactly against what she had stated earlier, that is "ada persaingan, maka ada kemajuan"! Habislah macam ini!

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