Thursday, October 21

Tracing the broadband map

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In an era where staying connected online is a key priority for consumers and businesses, it is important for the government to ensure that progress is made in enhancing Malaysia’s broadband connectivity.

And taking up the mantle is newly minted Communications and Multimedia Minister Gobind Singh Deo, who has been aggressive in his efforts to energise the telco sector, calling on local telecommunication companies to provide cheaper broadband services for Malaysians and increase the speed of its services.

This comes as Gobind lauded Telekom Malaysia Bhd’s (TM) move to reduce prices while increasing the speed of its broadband services.

SOURCE: MCMC, Kenanga Research

TM unveiled a new entry-level broadband-only plan that is priced at RM79 per month and is exclusive for those with household monthly income of below RM4,500.

The telecommunications company also announced plans to provide higher speeds for existing subscribers at no additional cost.

“This is in line with Pakatan Harapan Government’s policy to provide greater Internet services with higher speeds and quality broadband to all,” he said in a statement.

Gobind called upon other telcos to come up with proposals on how they can reduce price and increase the speed of their broadband services.

“I hope they too will make efforts to realise PH government’s push for more affordable and improved quality Internet services in Malaysia,” he said.

From NFP to NCP

To accelerate national broadband reach, the previous government led by Barisan Nasional introduced the 2017-2019 Nationwide Fiberisation Plan (NFP) which aims to connect some six million premises, including an estimated two million premises in the rural areas to a fibre network.

The plan, however, came under review post the newly formed Pakatan Harapan PH government.

Recently in July, Communications and Multimedia minister Gobind Singh Deo said the new government plan will combine fibre optic and wireless connectivity to solve the fibre optic dependent NFP (2017-2019) hiccup.

He added the existing plan involved pulled fibre optic issues as it cannot easily be planted in the challenging topographical makeup of rural Malaysia, which hinders or limits the continuous internet connectivity area penetration goal.

“To me, fibre is an important thing. We must stress fully on laying of fibre but at the same time, we must also understand that fibre might not reach (rural areas) because of what is called as the ‘last mile’,” said Gobind when making his first official visit to the Sabah Communications and Multimedia (KKM) Building in Kepayan, Sabah.

“We must still ensure that there must be a mix or combination of fibre and wireless technology. So fibre will go up to the areas with its infrastructure and from there we will have wireless facilities that can include the places outside of the fibre areas.

“What we can do is from the Nationwide Fiberization Plan (NFP), we might change it to National Connectivity Plan (NCP) that will stress on both fibre and also methods that can enable us to connect with the last mile.

“So, this is under the attention of my ministry, announcement will be made in the near future. I am in the process of discussing this matter with the involved telcos,” he added.

While the details of the NCP has yet to be unvielved, analysts at Kenanga Investment Bank Bhd (Kenanga Research) understand that the new government plans to combine fibre optic and wireless connectivity to solve the fibre-optic dependent NFP hiccup given the latter has been affected by the topographical issue, especially in the rural areas.

Fixed broadband: Widening the network

On the fixed broadband front, the true broadband experience is mainly reliant on the access of the fibre-optic internet connectivity.

Although the Malaysia’s high-speed broadband (HSBB) project – powered by fibre-optic – was introduced during the year 2010 followed by the HSBB2 and SUBB plans thereafter, the number of subscribers have consolidated to 2.6 million in the first quarter of 2018 (1Q18) versus 3.1 million in end-2014.

The uninspiring trend, said the research team at Kenanga Researche, was mainly due to the consolidation in the fixed broadband space and fixed-to-mobile migration.

(SOURCE: TM, Kenanga Research)

“Telekom Malaysia’s (TM) broadband base experienced a strong four-year cumulative annual growth rate (CAGR) of seven per cent to 2.2 million in the end ogf 2014, thanks to the continued traction and wider coverage in HSBB.

“However, the progression has been slow since then and merely secured 2.3 million subscribers in 1Q18 due to a stagnant number of fixed lines and the growing dominance of mobile broadband,” it said.

Kenanga Research also saw that the other smaller fixed broadband player – Time Dotcom Bhd (TIME) – is playing a vital role in the multi dwelling unit segment. The group has officially launched its broadband service in early 2010 with speeds up to 500Mbps.

“While the detail of the group’s broadband subscriber base is uncertain, our channel check with the industry player indicated that the group’s network has expanded its premises passed to 450,000 in end-CY17 and set to surpass the 1m mark in two to three years,” it added.

To note, fibre optics connectivity was adopted since the launched of the High-Speed Broadband Initiatives in the year 2010 to make high-speed Internet accessible and affordable to the Malaysia’s citizens.

Since then, the deployment of HSBB services has been implemented in stages and divided into three zones via using fibre-optics as the backhaul vs. copper cables previously.

Fibre to the x (FTTX) or fibre in the loop is a generic term for any broadband network architecture using fibre-optic to provide all or part of the local loop used for the last mile telecommunications.

FTTX is a generalisation for several configurations of fibre deployment arranged into two groups – (i) FTTP/FTTH/FTTB (fibre laid all the way to the premises, home or building) and FTTC/N (fibre laid to the cabinet/node, with copper wires completing the connection), according to Wikipedia.

Opening up fixed broadband competition

In other recent moves, the authorities has recently asked Tenaga Nasional Bhd (TNB) to open its fibreoptic network; and potentially ducts and poles to telecom players.

Should TNB agree, it could provide another access option (apart of TM’s ducts) for telecom players to deploy broadband services under the fibre space.

“The process of opening the ducts to all telecom players could speed up the deployment stage as players will no longer need to dig the ground to lay fibre, which is costly and subject to various state/local council’s approvals,” Kenanga Research highlighted.

“Having said that, the talk of a second fixed broadband network player is not new. Many players in the past have obtained licences, but few have fully capitalised on it.”

TNB has over 12,000km of fibre-optic cables across the country. Based on Kenanga’s channel check, TNB’s fibres are connected via the overhead earth wires and run parallel to the power cables at between the generating transformer and transmission stations and is said to have spent RM10 billion over the years.

The bulk of TNB’s fibre is on its high-voltage lines of 275KV and 132KV, and built along the North-South highway as well as interconnected to a grid. The missing puzzle is the connection to homes, where TNB would need to plant more fibre cables, especially on the 11KV lines to provide the last mile connectivity.

“All in, while we believe TNB is well-capable to roll-out its broadband services on it own, we do not discount that the group may look into monetarise their fibre infrastructures and collaborate with other technical know-how players to build the last mile connectivity as well as to reduce execution risk given the group’s core business is in the power rather than the communication sector,” it added.

“Based on our channel check with the other industry player, laying fibre into the ground could cost as high as RM100,000 (excluding the cost of fibre) per kilometre but will be 50 per cent cheaper or more for aerial option, depend on the location and other factors.”

TM, on the other hand, has over 540,000km of fibre nationwide and access to more than 190,000km submarine cables worldwide.

The group has increased its broadband coverages over time from the High-Speed Broadband Project (HSBB) to HSBB2 and Sub-Urban Broadband (SUBB) projects.

HSBB was introduced in early year-2010 to boost broadband penetration and providing an increased capacity for electronic commerce as well as offering more government services on line.

Deployment of HSBB services has been announced to implement in stages and divided into three zones with priority on the high economic zone followed by urban and semi-urban areas.

The ten-year HSBB2 project encompasses the deployment of additional access and core capacity covering state capitals and selected major towns throughout the country. Under the project, 95 additional exchanges will be made HSBB ready, providing access to 390,000 premises in other priority’s economic areas, including state capitals and selected major towns by 2017.

Meanwhile, the SUBB infrastructure will be rolled out over a period of ten years, involving the upgrading of existing Cooper lines to deliver broadband at downlink speeds of up to 20Mbps, or up to 100Mbps in those areas where FTTH technology is utilised.

In total, about 420,000 premises in sub urban and rural areas will benefit from the SUBB project by 2019.

As at the end-2017, TM has approximately 5.3 million broadband ports deployed nationwide, of which 2.6 million support speeds of 10Mbps and above, while over 7,500 WiFi access points were rejuvenated with high-speed backhaul for enhanced customer experience.

Competition intensifies

The cancellation by Tenaga Nasional Bhd (TNB) and Telekom Malaysia Bhd (TM) of their Memorandum of Understanding (MoU) on the national fiberisation plan is a boon to the industry, and does not affect the government’s agenda to roll out nationwide internet connectivity.

On this, the Communications and Multimedia Minister said the end to the cooperation between the two national utilities signifies a break of the monopoly in the industry.

“It also allows them (TM and TNB) to work independently with us and companies, to provide the infrastructure throughout the country. Several parties have voiced out their concern that if there is any cooperation between TNB and TM, it would cause a huge monopoly in the industry.

“This would be a barrier for companies to provide similar services, leading to competition and a better system,” he said in reply to a supplementary question by Kota Melaka MP Khoo Poay Tiong during a Parliament session.

The entities last month told Bursa Malaysia that their decision to terminate the MoU signed on Jan 16 this year was mutual and with immediate effect, without giving any reason.

However, they jointly said the discontinuation did not preclude them from considering other collaborations, should there be future business opportunities that are beneficial to both parties.

“We want to assure Malaysians that despite the termination of the fiberisation plan, the government would continue with its agenda to ensure internet connectivity nationwide,” he added.

Kenanga Research in its market strategy said moving forward, while all the industry incumbents are set to continue to expedite digital transformation as well as enhancing their operational efficiencies, the intensifying fixed broadband competition coupled with uncertainty of the government’s broadband/spectrum policy may keep investors at bay from the sector for now.

“With the HSBB now being regulated under the Mandatory Standard of Access Pricing (MSAP), fixed broadband competition is expected to escalate when more operators turning more aggressively.

“Besides, the upcoming 700Mhz spectrum award may change some Celcos’ strategy and capex plan, albeit there is no solid update from the authority so far.

“All in, while the operational and competition landscape remains challenging, the recent business decision and developments suggesting that players are moving into the right directions.”

Mobile broadband: Eyeing 5G efforts

Malaysia’s mobile broadband has experienced an exponential growth since 2014 where the penetration rate surged from 39 per cent with 17.6 million subscribers to 81 per cent or about 35.3 million subscribers in 1Q18.

This is attributed to to the affordable handsets and continued widening fourth generation mobile (4G) coverage whereby private players namely Maxis Bhd, Digi.com Bhd and Celcom’s 4G’s coverages reached 92,87 and 87 per cents of the population areas respectively, as of the end of 2017.

While Kenanga Research expect the mobile broadband subscribers base will continue to climb; the growth rate, however, is expected to be moderate in view of the current high penetration rate.

While 4G network is expected to continue playing a vital role, at least for the next couple of years, to lure mobile broadband subscribers, the local incumbents have started to take aproactive step to trial the upcoming fifth generation mobile (5G) technology.

(SOURCE: Kenanga Research)

This comes as Celcom had run Malaysia’s first-ever 5G trial in partnership with Ericsson in mid-2017.

Apart from Celcom, Digi’s parent Telenor Group has also started its first 5G test since March last year with technology partner Huawei, and will start with offering 5G in Norway before expanding to other countries.

“4G has become the leading mobile network technology worldwide since the launch of early commercial services approximately 10 years ago.

“While the 4G technology is set to remain as the key network for the next couple of years, the mobile industry continues to make progress with 5G, including trials and the approval of the non-standalone 5G new radio specifications in December 2017.

“A number of mobile 5G commercial launches are expected over the next three years with China, the US and Japan set to be the leading countries in 2025, according to GSMA.”

The research outfit also expected two-thirds of mobile connections across the world will operate on high-speed networks by year 2025, with 4G accounting for 53 per cent of total mobile SIMs and 5G at 14 per cent.

5G: The future network

To support customer migration and further drive consumer engagement in the digital era, global telco analyst GSMA is predicting that mobile operators will invest US$0.5 trillion in mobile capex worldwide between 2018 and 2020.

GSMA estimated that between 2018 and 2020, mobile operators in Asia Pacific are expected to invest 14 per cent of revenue or circa US$188 billion in mobile capex (excluding one-time spectrum acquisitions) with key focus still on upgrading 4G networks to faster speeds and lower latencies.

“Moving forward, network investments are set to shit to the 5G progressively, although there are little guidance on the potential necessary investment,” Kenanga Research opined.

While the network investments will depend on a number of factors (such as business model, targeted coverage area, the range of spectrum bands and the availability of fibre infrastructure), the research house said 5G is expected to cost less per unit of data than 4G given the better network and equipment efficiencies (as a result of newer technology) as well as the potential cost savings arising from network optimisation.

“Based on our understanding, network deployment strategies have firmed up to involve the dual use of standalone and nonstandalone architectures,” it said.

“Standalone builds refer to a new network, including sites, RAN and core (contigent on NR standars) while the non-standalone depoloyment would piggyback 5G RAN on existing LTE sites.

“If a lower frequency spectrum is available for use, operator indications are that deployment would use a standalone model in urban centres, according to GSMA.

“Alternatively, should lower frequency spectrum be not available; a dual-use strategy could be used where standalone networks are deployed in dense urban centers with non-standalone builds in suburban and rural areas.”

While many things along the journey to 5G are still uncertain, many elements of 5G technology are likely to be build on the current 4G networks to optimise the infrastructure investment, according to Mckinsey.

That said, mobile operators can take an evolutionary approach to infrastructure investment, where operators could begin by upgrading the capacity of their existing 4G macro network by refarming a portion of their 2G and 3G spectrum, or by acquiring additional spectrum when available.

Prepare for 5G in Malaysia by 2022, 2023

Supporting the 5G movement is Ericsson (Malaysia) Sdn Bhd President Todd Ashton who said telcos in Malaysia must be ready to embrace 5G as it is expected to be used widely in Malaysia by 2022-2023.

He believed that the use of 5G in the country could be implemented less than five years if the groundwork is done now.

“The spectrum for 5G will be agreed globally in 2019 and the whole industry will need to create products once it has been agreed upon,” said Ashton at a press conference earlier this year.

However, Ashton warned that it would take some years before the 5G becomes a mainstream in Malaysia as the infrastructure would need time to be put in place.

Ericsson has been collaborating with Universiti Teknologi Malaysia since 2016 and Celcom Axiata Bhd, from last year, to conduct ground studies on the implementation of 5G.

“The studies conducted so far include the propagation of radio in tropical climate, the milimetre wave and spectrum that will be used for 5G and how 5G will work in Malaysia,” he said.

Players in countries such as South Korea are expected to launch 5G this year for the Olympic Winter Games in February, while Japan, China and the US are also anticipated to deploy the technology in 2018.

According to a recent mobility report by Ericsson, the global market is predicted to boast over one billion 5G subscriptions for enhanced mobile broadband by 2023, covering 20 per cent of the world’s population.

The 5G growth is expected to be driven by both organic demand due to its faster coverage speed and lower cost compared to 4G. It also offers new case uses, extending into fixed wireless access, smart manufacturing, transportation and logistics, and power-grid management.

In other 5G efforts, Malaysia is roping in South Korea’s mega conglomerate, SK Group, to realise its smart cities ambition — marking Cyberjaya to be the first smart city in Malaysia to boast 5G technology and other smart city infrastructures.

Government-owned Cyberview Sdn Bhd in February this year signed a memorandum of understanding with SK Group to develop Blue Ocean Smart Cities in the country, starting with Cyberjaya.

The move came following Malaysia’s partnership with Ali-baba Group to set up a traffic control system harnessing artificial intelligence for Kuala Lumpur.

SK Group’s unit, SK Telecom chief executive officer Park Jung-ho said the firm intended to test its 5G technology in Cyberjaya and South Korea by the end of the year.

He said the company was looking forward to working with telecommunications companies in Malaysia.

“(We hope) the (Malaysian) government can provide a spectrum for 5G, because for us to roll out this technology, we need the right equipment and infrastructure.

“We expect to test 5G in South Korea later this year and hope to do so simultaneously in Malaysia.

“This is because you (the government) provide a more open environment, especially in terms of legislation (for this technology).”

Ericsson report: Key industry trends

Each of the 10 key industries identified face numerous challenges due to industry trends, which could be addressed with the adoption of 5G digitalisation:

1. Manufacturing • Hypercompetition with no sustainable competitive advantages • Increasing volatility from business cycles and product lifecycles • Smart factory advancing from developments in the Internet of Things and automation

2. Healthcare • Increasing consumer attention on wellbeing • Increasing cost to fit with social demographic changes • Increasing demand on quality, patient safety and data storage

3. Media and entertainment • Shifting consumer role as a co•creator of media content • Increasingly interactive and immersive forms of entertainment • Expansion of digital content through new platforms and new market players (OTT and VOD)

4. Financial services • Disruption from Fintech (technology used to support financial services) due to online payments, e•wallets, etc. • Changing customer relations with online/mobile transactions and customized financial solutions • Structural changes – state involvement, protectionism and fiscal measures

5. Public safety • Growing public surveillance with video surveillance and wearable cameras • Cyber•attacks – global integration and the digital economy • Engaged and connected citizens – Internet of Things in public safety

6. Automotive • Autonomous driving and a connected traveler with telematics • Car sharing and changing commuter habits • Electric mobility with decreasing battery costs and a green agenda

7. Public Transport • Infotainment on the move • Urbanization and intermodality • Urban lifestyle and growing expectations on public transport

8. Energy and utilities • Electrification and renewable energy generation • New decentralized business models • Structural shifts with increasingly retiring assets

9. Agriculture • Increasing use of technology in smart farming • Changing agricultural techniques • Changing farming structure, such as vertical integration

10. Retail • Seamless e•commerce and omnichannel • Increasing use of big data analytics and personalisation • Smart logistics and in•store operational optimisation