Fixed broadband: Widening the network
On the fixed broadband front, the true broadband experience is mainly reliant on the access of the fibreoptic internet connectivity.
Although the Malaysia's highspeed 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-tomobile migration.
“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 fibreoptics 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 fibreoptic 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 StandardofAccessPricing(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.”