When two giants work together
The tie-up between TNB and TM in the broadband arena raises monopolistic concerns
TENAGA Nasional Bhd (TNB) is fast becoming a sought after partner for the thousands of kilometres of fibre optic cables it has running along its power lines and in the ground.
The cables promise potential but remain not fully utilised until talks of a second fixed broadband player emerged lately that got the incumbents of the telecoms industry worked up.
On Tuesday, Telekom Malaysia Bhd (TM) entered into a memorandum of understanding with TNB to look into ways on capitalising on those fiber assets to help the Government deliver on the Nationwide Fiberisation Plan (NFP).
The NFP is about providing broadband for a wider population at “double the speed and half the cost’’ by next year.
“The coming together of TNB and TM is like a merger of two giants. But the question to ask is whether it will create another monopoly and possibly encourage cartel pricing, stifle the entry of new players or help in realising the Government’s objective,’’ asks an industry expert.
Whatever the talk within the industry, the tieup did surprise many. And it came soon after little-known Broadnet Networks Sdn Bhd was named by the Government to undertake the NFP. It is said the Government will take a golden share in Broadnet, led by some high profile corporate chiefs and civil servants.
The entry of a new player, like in any industry, does disrupt a market and puts the incumbent on guard because of impending competition. As it is, TM is the only player with a high speed broadband (HSBB) network, built under a private-public partnership with the Government but most of the industry players lease its network to offer fast speed broadband services.
However, the talk of a second fixed broadband network player is not new. It is an old story with a new twist. Many players in the past have obtained licences but few have fully capitalised on it.
Initially, the hope was on Time dotCom Bhd to be the second player but it did not live up to expectations and till today remains a niche player.
With digitalisation being the buzz word these days, the Government wants to ensure there is ample capacity, wider reach, faster speeds at lower prices so that the nation is connected digitally. This is crucial since it is inviting foreign investments into digital free trade zones and other initiatives, though most of the urban and sub-urban centres are connected, and even some rural areas, however, the speed is not same across the areas.
For any telecoms player to roll out services, it has to make business and economic sense and there must be return on investments. That explains why the HSBB was a public-private partnership with the government putting in funds to push for fast speed broadband access.
There are also arguments that the price of fast broadband is too high compared to neighbouring countries but an expert pointed out “it should be apple to apple comparisons.’’
Still, paying RM129 a month for 10Mbps of fixed broadband here is higher than the RM125 in Philippines, RM118 in Indonesia and Brunei.
“Prices should come down. They don’t because there is no real competitor in the fixed broadband space. Most of the players are riding on TM’s HSBB to offer services,’’ says the industry expert.
He adds that “for the Government to talk about doubling the speed at half the price, it must have done its own homework.’’
That explains why Broadnet has mushroomed.
Broadnet is believed to be working with Redskill, a specialist strategy consultancy firm from Britain, to map out its strategy to offer fast broadband in the country at low cost. Those in the know claim that Broadnet had met TNB to use its backbone infrastructure to reach out to a wider market place, but it not clear what the outcome was. However, TNB said on Thursday that it was willing to work with any parties so long there is “value creation.’’
Broadnet has since remained silent and many are wondering where will it get the funding to get into the fixed and wireless broadband business.
The real beneficiary of all this impending fight in the fast broadband space is really TNB as its sits on a “gold mine’’ of fiber that has yet to be fully exploited.
With the Energy Commission anticipating lower electricity demand growth of 2.5% per annum due to higher focus on renewable energy and energy saving efforts while anticipating lower usage from the industrial segment, TNB can now see fibre as a means to supplement its income by monetising its fibre network.
As it is, it has several clients on its network including Time dotCom. Some are quick to predict that TNB can make up to RM200mil a year in revenue if it leases out its fibre.
TNB’s journey into fiber dates back to 1975 when it put up the 500KV cables and a fibre-op- tic cables were installed to run parallel to the 24 strands of conductor lines. Over the years, it added more fibre into the ground and those run in parallel to the power cables across the nation. It has about 12,000km of fibre optic cables and is said to have spent RM10bil over the years. It power lines are connected to 9.2 million customers in the country.
“It was a requirement for TNB to have the fibre for its fault-tracking system called Scada and remote metering systems and all that is sunken cost now,’’ says an industry source.
He adds that “a lot of TNB’s bandwidth is unused because it uses very little for its monitoring purposes. As telecoms companies move from 4G to 5G, they need a lot more bandwidth to cater for growth, so fibre is the way to go,’’ he adds.
Power companies globally have been leasing out fibre to telecoms for many years. Korea Electric Power in South Korea has since 1993 opened its fiber network to telecom players. In 2001, Japanese regulators mandated the use of electricity poles and ducts for provision of fiber to homes.
In the US, power providers are obligated to allow pole access for telecoms purposes for over 30 years now, and Thailand has done that for deployment of high speed broadband services.
The bulk of TNB’s fibre is on its high voltage lines of 275KV and 132KV, very little at the 11KV, which are essentially the connection to homes, or commonly known in the telecoms industry as the last mile connectivity.
“With smart applications, smart cities and smart homes taking centre stage, TNB needs to plant more fibre cables especially on the 11KV lines. If it does that on its own, it could potentially become the largest fibre player in the country and with the 9.2 million customers it has, the whole nation can be wired with fibre,’’ he adds.
TM has over 2.35 million of the 2.5 million broadband subscribers in the country as at end-August 2017, whereas TNB has 9.2 million customers. There are 34.1 million mobile broadband customers.
Apart from having its own fiber network, TNB also has a 49% stake in Fibrecom Network Sdn Bhd, another fiber optic network provider in the country. TM holds the remaining 51% stake in Fibrecom. TNB has its own ICT unit to manage its fibre network.
Fiberail Sdn Bhd is another company in which TM has a 51% stake, and the rest shared between Petrofibre Network (M) Bhd and Keretapi Tanah Melayu Bhd. It owns three fiber optic cable networks along the railway and gas pipeline corridor from Padang Besar in Perlis to Johor Baru and branches out from Gemas to Tumpat and Rantau Panjang in Kelantan.
Valued asset: On Tuesday, TM entered into a memorandum of understanding with TNB to look into ways on capitalising on the national power company’s fiber assets to help the Government deliver on the Nationwide Fiberisation Plan. — Reuters