Tuesday, August 17, 2010

Cellular industry needs to consolidate, save spectrum and avoid duplication

FROM seven players over a decade ago the cellular industry in Malaysia had to consolidate to a three-player environment.
We know the reasons for that and all the “bailouts.”
Along the way, a fourth player got a 3G spectrum and that brought the number of mobile players to four.
And not so long ago licences for WiMAX were dished out to help push broadband penetration rates in Malaysia. Now there are four companies with the 2.3GHz spectrum.
That adds to eight the number of players offering, or supposed to offer, wireless/mobile broadband services. Not all eight are in the fifth gear; some have not even rolled out services and others are still looking for investors and/or merger partners.
Those who are in the game are cherry picking, focusing on prime areas, leaving a lot of space uncovered and the rural areas with no decent broadband services.
Granted, we should not subscribe to a monopolistic environment and having more players creates competition. We need competition as this drives prices down and, hopefully, improves quality of services.
But is every player delivering and did anyone look at their business plan to see if they have kept up to the plan? If not, why are they not taken to task?
Essentially the situation has not changed from over a decade ago. In fact we have more players and, like the old days, “some are in trouble.”
In comes 4G technology.
The mere mention of 4G excites so many WiMax players for they believe they have the 4G standard to take them into the future.
Agreed, the 2.3GHz spectrum gives them the ticket but it is also too early to say which standard will reign as the battle for 4G supremacy between WiMAX and LTE (long-term evolution) is getting hot.
The 4G technology is the enabler of the next evolution in computing – mobility. Therefore it does represent an important shift in the market.
The need for 4G networks arises with the uptake of mobile broadband and smarter mobile devices. The 4G enables the necessary data support for devices and is much better equipped to handle the way smart devices communicate in small bursts. But you may have to wait four to five years before 4G becomes widespread.
In the country it is not clear how many 4G spectrum blocks will be dished out as the regulator is looking at a spectrum re-farming initiative.
Demand for capacity and speed will force 3G players to adopt LTE. Whether they have invested enough and capitalised on their 3G networks is left to be seen but they surely want 4G as that is the natural evolution.
But the 3G players are not the only ones eyeing the 4G spectrum.
The lure of big margins and growth of Internet/broadband business has made some prominent businessmen excited about its potential and naturally the lobbyists’ work is at play.
It is definitely good for new players to enter the industry as new ideas are welcome but if the players are not going to focus on investment and delivery, then it is a waste of spectrum and duplication of resources should be avoided at all cost.
So the onus is on the decision makers to ensure that when the bids for the 4G spectrum are called, there must be transparency and the award must be based on merit and delivery rather than political patronage.
As for the current eight-player environment, the decision makers should push for consolidation and cooperation, but no bailouts please.
They should get tough with players on non-delivery or else consumers will continue to get inferior services in parts of the country and any delays are seen as roadblocks to the Government’s dream of having a knowledge and innovation-based society.
Let’s learn from past mistakes and move on in the name of progress for the nation.
(Published in The Star On Aug 13, 2010 - Friday Reflections By B.K. Sidhu)

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