Goh Lim Thye from Universiti Malaya said to ensure the viability of both networks, Digital Nasional Berhad (DNB) would have to build additional infrastructure to enable spectrum-sharing and maintain the 100 Mbps speed requirement.
This would require substantial investment, leading to financial strain, he said.
“To cover these costs, telcos might raise prices. For instance, countries with duopolistic telecom markets, like Australia, have seen higher prices compared to more competitive markets.
“Financial viability concerns could also lead to compromises in service quality and technological advancements,” he told FMT.
In 2021, Malaysia planned for DNB, a state-owned agency, to control the entire 5G spectrum, with various carriers using the infrastructure for mobile services. However, DNB came under scrutiny due to its monopoly over the spectrum, with critics arguing it would stifle competition and innovation.
Last year, communications and digital minister Fahmi Fadzil announced Malaysia would transition from the current single wholesale network (SWN) model to a dual network model.
At the time, Fahmi said the switch would “foster healthy competition and ensure good quality and affordable 5G services for the public.”
Duopoly
However, Goh said the resultant duopoly – in which the market is controlled by two players – may see a replication of issues which arose from the previous “telco oligopoly” which existed, including higher prices and lower service quality.
An oligopoly arises when a market is controlled by a small number of players.
Goh said oligopolies allow companies to “collude tacitly” to restrict output, fix prices or keep prices high without direct coordination to achieve higher-than-normal profits.
He added the country’s larger telcos are already able to generate high profits due to economies of scale, reducing their per-unit costs and increasing profit margins.
“By also providing premium services and leveraging brand loyalty, they maintain high average revenue per user (ARPU),” Goh told FMT.
He said these strategies have made the telco business extremely profitable.
“In 2023, Maxis reported an Earnings Before Interest and Taxes (EBIT) margin of 27.5%. Celcom’s EBIT margin in 2023 was approximately 25.8%. Digi reported an EBIT margin of 30.2% in 2023,” Goh said.
He said the existence of an oligopoly, however, disadvantaged consumers who tend to pay high prices but are often faced with slower services.
Goh pointed to a Malaysian Communications and Multimedia Commission (MCMC) report which found that the average broadband price in Malaysia was in the region of RM100 per month, but with broadband speeds lagging behind regional counterparts such as Singapore and South Korea.
Anti-competitive
Meanwhile, T Saravanan, CEO of the Federation of Malaysian Consumers Associations (Fomca), expressed concerns that the duopoly could also be anti-competitive.
“Insider knowledge due to representatives from the second network developer being on the board of DNB could lead to conflicts of interest, where decisions may benefit network providers over consumers.”
Previously, Putrajaya required all telcos vying to develop the second network to acquire a stake in DNB.
Following that, CelcomDigi, Maxis, U Mobile and YTL Communications announced they had met the conditions set out in a share subscription agreement, allowing them to collectively acquire a 70% stake in DNB.
In June, Machang MP Wan Ahmad Fayhsal Wan Ahmad Kamal criticised the move, saying it could give rise to a conflict of interests. He called for Putrajaya to halt plans for the second 5G network.
Earlier this month, Tasek Gelugor MP Wan Saiful Wan Jan expressed similar reservations about the plan.
Two weeks ago, former science, technology, and innovation minister Khairy Jamaluddin warned that introducing a second 5G network could lead to DNB’s failure.
He said reports suggested that the allocation of unused equipment to the second network may result in DNB writing off assets worth RM900 million.
Goh cautioned that the rollout of the second network could result in DNB’s failure due to unfair competition, with potential losses ultimately borne by the public.
He called for enhanced regulation and stricter oversight to prevent anti-competitive practices.