Commission Seeks Industry Input

IMT-2000 Mobile Cellular Services
Universal Service Provision
Access List

The Communications and Multimedia Act 1998 introduced the policy objectives and regulatory framework for the telecommunications industry. The act sets out broad regulatory parameters and leaves the details to be further defined in specific instruments issued by the minister of energy, communications and multimedia, or the Communications and Multimedia Commission.

During the last quarter of 2000, the commission issued three consultation papers for comment from industry players and interested parties, as follows:

• Concepts and Proposed Principles on the Implementation of IMT-2000 Mobile Cellular Services in Malaysia;
  
  
• System of Universal Service Provision; and
  
  
• Access List Determination and Statement on Access Pricing Principles.

This initiative by the commission to seek input from the industry is a welcome approach. Previously consultation was only carried out with licensees. The following sets out a brief overview of the three papers (for further details see the commission's web site at www.cmc.gov.my).

IMT-2000 Mobile Cellular Services

The commission has formed a Third Generation (3G) Joint Working Group to discuss the policy on the introduction of IMT-2000 (international mobile telephony) services in Malaysia.

Current situation
At present, the industry initiatives for mobile wireless access to the Internet is restricted by bandwidth limitations. According to the discussion paper, network development in the second generation (2G) digital systems is ongoing (eg, the Global System for Mobile Communication (GSM) 900 system is approaching nationwide availability and the GSM 1800 has reached 35% roll out). The spectrum for 2G systems has been substantially used. It is anticipated that the upgrade of the 2G systems should allow providers to offer broader band data services. The commission also envisages that many new multimedia services could be introduced even before IMT-2000 is initiated, due to the ability of the new systems to offer higher access speeds. The commission has therefore invited comments on the proposition that there should be more emphasis and investment on rolling out 2G for the purpose of providing greater geographical coverage before new investments in 3G are permitted.

At the same time as debates in other jurisdictions on the applicable standards continue, the 3G Joint Working Group has proposed that Malaysia adopt the choice of the '3G global partnership project', due to its large support base and the success of the existing GSM grouping (which was built on the 3G partnership project group). The commission sought comment on the choice of the IMT-2000 standard being proposed for adoption.

Approach to 3G
The commission has sought input on its approach to spectrum allocation. In light of other countries' experiences which have auctioned the spectrum at a high cost to licensees, the local industry is of the view that this method of allocation may not be suitable in Malaysia. This is because the cost is likely to be passed on to the consumer.

While in other jurisdictions the award of an IMT-2000 licence is coupled with the right to use an allocated spectrum, in Malaysia the new technology-neutral categorization of the industry does not require the issuance of specific IMT-2000 licences. Thus, an operator that has a network service licence need only obtain the necessary spectrum allocation. This means that there is a possible separation of the service and facilities provisions. In reality, however, most network service providers have their own network facilities.

The licensing of the industry in terms of providers of network facilities, network services and applications services enables several operators to use the spectrum held by a single spectrum holder.

The commission is of the view that competition should be encouraged at service level, rather than at spectrum holder level. The commission would prefer that the industry compete in the delivery of quality services rather than in the roll out of infrastructure, which can result in the duplication and waste of resources. The commission has sought comments on the proposition that only one spectrum holder should provide wholesale airtime services to other service providers.

The commission is aware that consumers may not rush to use IMT-2000 services, especially if their present needs are met by the existing 2G services. The industry has therefore been invited to comment on the proposition that in the immediate term, IMT-2000 services are likely to serve only a niche market in Malaysia.

Universal Service Provision

Pursuant to the Communications and Multimedia Act 1998, the minister has directed the commission to determine a system to promote the widespread availability and use of network services and/or applications services. This is to be achieved by encouraging the installation and provision of network facilities and services in underserved areas or for underserved groups within the community.

Current situation
Notwithstanding licence obligations to make provision for universal service, the roll out of such services has been slow. The previous regulator determined that it was more effective to designate the incumbent operator (Telekom Malaysia Berhad) as the sole universal service provider. Therefore, Telekom Malaysia undertook the responsibilty for universal service without any contribution from other industry operators. In 1998 the regulator issued a determination requiring five operators (including Telekom Malaysia) to make financial contributions towards the cost of universal service. Each operator's contribution was proportional to its network revenues. The cost of universal service for the year was determined by the regulator, based on the avoidable costs and lost revenues if Telekom Malaysia did not provide services to areas and subscribers that were uneconomical to serve.

The services which fall within the obligation of universal service are:

• basic (voice) telephony to all unprofitable areas and to unprofitable low-spending customers in areas which are profitable overall;
  
  
• emergency call services; and
  
  
• public payphones in rural areas.

The way forward
The act now provides for the establishment of a Universal Service Provision Fund, to which licensees may be required to contribute. The establishment of the fund enables the obligation of universal service to be more easily undertaken by operators other than Telekom Malaysia, because the cost can be reimbursed from the fund. Contributions towards the fund will apply from 2002. Public comment is sought on the following issues.

The commission seeks comment on its broad objective (as indicated in the minister's direction) to "promote the widespread availability and usage of network services and/or applications services throughout Malaysia". The commission proposes to define the two forms of availability and usage as (i) 'collective access', which refers to the idea that communications services are reasonably available to a collective group of target end-users, and (ii) 'individual access', which refers to the idea that communications services are reasonably available to individual end-users in a target area.

The commission proposes to limit the scope of universal services to basic telephony and internet access services at this stage.

The commission proposes that Telekom Malaysia be designated as the universal service provider where it is in the best position to deliver universal services. Where other operators are equally well-placed to deliver such services, the commission proposes to invite expressions of interest from interested licensees to be designated universal service providers. Comment is also sought on various other issues related to the selection, planning and provision of universal services. The commission has already indicated its intention to designate Time Reach as the provider for collective access to basic telephony services. However, the commission is aware of the necessity to ensure that competition between universal service providers does not lead to inflated funding levels.

The commission seeks input on the amount of compensation a universal service provider should receive, including the methodology for determining loss arising from the provision of universal service and the manner in which compensation should be made. The commission's proposal is that if in a calendar year a universal service provider incurs a loss from supplying services as part of its universal service obligation, the provider may be entitled to payment.

The act envisages that the Universal Service Providers Fund will be funded either in part or in full by contributions from licensees. The commission proposes that contributions to the fund are to be based on each contributing licensee's weighted net revenues from designated services. Comment is sought on:

• the circumstances under which grants should be made;
  
  
• the liability to contribute towards the fund;
  
  
• the services which should be designated for the purposes of determining contributions to the fund;
  
  
• whether there should be an upper limit of universal service contributions; and
  
  
• the issues of information disclosure.

Access List

The Communications and Multimedia Act 1998 establishes a new regime for access to network facilities and services. Industry self-regulation is encouraged and the commission may designate an industry body as the access forum to assist in the regulation of access to facilities and services.

The act introduces the 'standard access obligation', which is imposed on network facilities and service providers to provide access to any other facilities or service provider who makes a written request for access to the facilities or services on the access list. The list is determined by the commission pursuant to consultation with the access forum. However, no industry forum has yet been designated (although the commission continues to consult closely with the industry).

The commission must request that the access forum prepare an access code in order to provide model terms and conditions for compliance with the standard access obligation. The code may address:

• timeframes for negotiation procedures;
  
  
• rate methodologies;
  
  
• protection of intellectual property;
  
  
• protection of commercial information;
  
  
• provisioning of facilities; and
  
  
• sharing commercial information.

The act empowers the commission to resolve disputes in relation to compliance with the standard access obligation, and the registration of access agreements and access undertakings.

Current situation
It was a licence condition under the previous regulatory regime that licensees were obliged to interconnect and grant access to other operators. In addition, the regulator issued a determination on cost-based interconnect prices requiring charges to be applied to those well-established services which used bottleneck facilities. These included:

• fixed networks (specifically local call termination, single tandem origination and termination);
  
  
• mobile networks (specifically call termination from a point of interconnection both within and outside the called party's home area); and
  
  
• fixed and mobile interconnect services that required the use of submarine cables between Peninsular Malaysia and Sabah/Sarawak, whereby an additional charge was to be added to the interconnect charge.

In the present framework, fixed interconnect charges are set closer to fully allocated costs and mobile interconnect services charges are set closer to long-run incremental costs. The determination has also addressed the provision of emergency services, the inclusion of customer numbers in telephone directories, and the provision of directories and directory enquiry services offered. Further, private circuit completion interconnection services are regarded as well-established services requiring the use of a bottleneck, therefore requiring that interconnect charges be cost based. However, the regulator has not determined specific charges.

Operators are to allow limited physical co-location for the establishing of interconnect links, subject to negotiation. Customer access arrangements were implemented by way of call-by-call selection from January 1 1999. Pre-selection was to be implemented by January 1 2001, but has been deferred.

In order to fund any increase of the net cost of universal service provision arising from the introduction of equal access, a Local Access Fund has been established. All local access network operators receive fund payments from interconnecting operators originating calls on their local access networks based on originating traffic minutes.

The way forward
Pursuant to the new framework, the commission has sought input from the industry on the facilities and services which should be on the access list. In the first instance, the commission proposes to include all facilities and services which are subject to interconnect obligations under the existing regime. The commission would then examine on a cost benefit analysis whether there is an economic case for expanding the access list to include other facilities or services.

In the government's aim to forge a knowledge economy, the minister has indicated that internet access provision should be liberalized, hence its categorization as an activity to be regulated by class licences (ie, light-handed regulation). To enable internet access providers to compete effectively, it is thought necessary for them to have access to end users that are directly connected to local access networks (such as that of Telekom Malaysia). To achieve this, the commission has decided to include 'internet call origination service' on the access list. This is because of the bottleneck characteristics of local access networks and the commission's intention to minimize the duplication of local networks.

With the inclusion of internet access on the access list, network service providers would be required to allow calls made by end users directly connected to its network to access the services of the internet access providers. This involves the carriage of communications between the end user and the point of presence of the internet access provider.

The commission anticipates further consultation on:

• whether payphone conveyance service should be included in the access list;
  
  
• whether there should be a moratorium on mandating access to digital subscriber line services; and
  
  
• whether an unbundled local loop should be included in the access list.

For further information on this topic please contact Sharon Tan at Zaid Ibrahim & Co by telephone (+603 257 9999) or by fax (+603 254 4888) or by e-mail ([email protected]).