Marketing Plan for 3G Spectrum
Tariff Rebalancing for Fixed-Line Telephony
Initiatives in the first two months of 2002 from the Ministry of Energy, Communications and Multimedia (MECM) and the Malaysian Communications and Multimedia Commission indicate that this is likely to be an eventful year for the communications industry.
The highlights of the latest developments from the commission are the marketing plan for the assignment of spectrum for 3G networks and tariff rebalancing for fixed-line telephony.
Marketing Plan for 3G Spectrum
Ministerial Direction 5 of 2001(1) stipulates that the mandatory standard for IMT 2000 shall be based on IMT 2000 Code Division Multiple Access Direct Spread and IMT 2000 Code Division Multiple Access Time Division Duplex.
Subsequently, on February 5 2002 the minister of energy, communications and multimedia determined that the following three blocks of frequency bands will be reallocated for spectrum assignment:(2)
- 1920 megahertz (MHz) to 1965 MHz;
- 2110 MHz to 2155 MHz; and
- 2010 MHz to 2025 MHz.
A spectrum assignment confers rights to an individual to use one or more specified frequency bands in accordance with certain conditions.
Following the ministerial determination, the commission issued Marketing Plan 1.(3) The plan states that the aforementioned frequency bands will be assigned by way of tender. Only companies that are incorporated in Malaysia under the Companies Act 1965 are eligible to submit applications for the spectrum assignment.
Tender evaluation criteria
Each applicant must submit its proposed business plan to the commission. An applicant's proposed business plan should outline its proposals for utilizing the spectrum to be assigned for the entire 15-year duration of the assignment, and demonstrate the applicant's ability and capacity to fulfil the commission's tender evaluation criteria.
Each applicant's proposed business plan should contain information regarding:
- service rollout plan and coverage;
- commitment to infrastructure sharing;
- commitment and capability to provide domestic roaming;
- financial standing and projections;
- contribution towards development of IMT 2000 technologies, applications and content applications services; and
- management and technical experience in mobile communications in the past five years.
Selection of successful applicants
The commission bases its selection of suitable applicants with reference to the submitted business plan. The weighting accorded to each of the evaluation criteria are as follows:
| Basis | Weighting % |
| Service roll-out and coverage | 45% |
| Infrastructure sharing | 20% |
| Roaming | 10% |
| Financial considerations | 10% |
| Industry development | 10% |
| Management and technical experience | 5% |
| Total | 100% |
The commission intends to award the tenders to three successful applicants. Each of these applicants must achieve at least 60% of the weighting points. Successful applicants will submit their business plans to the commission within six months of the announcement of the awarding of the assignment.
The commission reserves the right not to issue the assignment if there is a material deviation from the proposed business plan in the detailed plan. The successful applicant's detailed plan constitutes part of the conditions of the spectrum assignment, and is final and binding on the applicant upon issuance of the spectrum assignment.
Non compliance with the commitments made in the detailed plan constitutes a breach of the conditions of the assignment, and the penalties in the Communications and Multimedia (Spectrum) Regulations 2000 will apply. Penalties that may be imposed include cancellation of the spectrum assignment and recovery of any money due to the commission, including the full price of the spectrum assignment.
Assignment fee
The price of each spectrum assignment is RM50 million (approximately $13 million), which is payable in the manner set out in the plan. In addition to the aforementioned fee, an annual component fee for the maintenance of the spectrum is imposed on the assignment holder. The annual component fee is calculated on the basis of the number of transmitters required by the assignment holder's network for time division duplexing(4) and frequency division duplexing(5) as audited by the commission annually.
Timetable
The tender document is available for purchase or download from the commission's website(6). The deadline for the submission of tenders is May 20 2002. The commission intends to announce the results of the tender by July 30 2002.
Tariff Rebalancing for Fixed-Line Telephony
Following liberalization of the mobile telephony rates with the repeal of the Gazette tariffs (which took effect on August 1 2000), the MECM has announced a revised tariff for fixed-line telephony. Previously, the tariff structure was governed by the Telephone Regulations 1996 issued pursuant to the (now repealed) Telecommunications Act 1950.
According to the commission's latest communications and multimedia industry statistics,(7) there were 4.7 million fixed-line direct exchange line connections as of September 2001. In a population of 23.7 million at the same period, the commission's statistics indicate that 20% of the population has a fixed-line connection, a percentage which is significantly lower than the penetration rates of Singapore or Hong Kong. The incumbent Telekom Malaysia Berhad reportedly has 95% of the Malaysian market share of fixed lines.
The minister has stated that the tariff rebalancing aims to attract more investments for fixed-line infrastructure roll out. In addition, the revised tariff is intended to raise the charges for local calls to more accurately reflect the cost of making them. Prior to the tariff rebalancing, Telekom had subsidized its loss-making local fixed line charges with more profitable domestic long-distance and international call charges. The new tariff increases the cost of making local calls and reduces charges for domestic long-istance and international calls. The price increase in local call charges caused by the new tariff structure has been met with widespread criticism and protests by consumer groups.
The Telephone Regulations 1996 have been repealed with effect from March 1 2002 and Sections 197 and 198 of the Communications and Multimedia Act 1998 took effect on the same date. The Communications and Multimedia (Rates) Rules 2002 now set out the level of rates to be charged for specified or classes of services.
The Communications and Multimedia Act 1998 provides that tariffs should be driven by market rates. Section 197 provides that any network facilities services provider, network services provider, applications service provider or content applications service provider may set rates in accordance with the market rates, subject to the Communications and Multimedia (Rates) Rules 2002. Section 198 lays down the principles according to which rates may be established by any of the aforementioned providers. However, the minister retains the power to intervene at the commission's recommendation in order to determine rates for any competitive facilities or services, as public interest may require under Section 199.
For further information on this topic please contact Sharon Suyin Tan at Zaid Ibrahim & Co by telephone (+603 257 9999) or by fax (+603 254 4888) or by email ([email protected]).
Endnotes
(1) Ministerial Direction 5 on the Standards for International Mobile Telecommunications 2000 Terrestrial Component dated December 11 2001.
(2) Ministerial Determination 1 of 2002.
(3) Issued on February 7 2002 pursuant to the Communications and Multimedia (Spectrum) Regulations 2000. The marketing plan can be viewed in full at www.cmc.gov.my/newsframe.htm.
(4) A technique of radio transmission that uses unpaired frequency (ie, the same frequency for transmitting and receiving), by allowing time for transmitting and receiving to achieve two-way communication.
(5) A technique of radio transmission that uses paired frequencies for transmitting and receiving to allow two-way communication.
(6) www.cmc.gov.my.
(7) Updated as at January 2002, see www.cmc.gov.my/Industry_Statistics.pdf.