Malaysia is also facing controversy over its "on-again off-again" WiMax spectrum tender process which industry observers warned, does not reflect well on the Malaysian government.
AmResearch
The public display of contempt by the country's Energy, Water and Communications Minister Lim Keng Yaik for the Malaysian Communications and Multimedia Commission (MCMC) over the 2.3 GHz broadband wireless access (BWA)--also known as WiMax--spectrum tender process, has left observers scratching their heads in bewilderment.
Lim had pulled the plug on the tender exercise just before it was scheduled to close on Jul. 18, saying he was "a bit angry and disappointed with MCMC" for not getting the ministry's input on the tender.
The minister revealed that the tender had to be recalled because specifications were not established in accordance with ministry policies, and the conditions for the tender did not take into account the building of infrastructure and content.
In the wake of the Lim's public rebuke, the MCMC--which regulates the country's telecommunications and multimedia industries--confirmed it would defer the evaluation of the submissions. The commission was originally due to announce its decision by Oct. 31.
The turn of events baffled analysts and stumped the 17 companies which had already submitted their bids. The situation got murkier a week later when news reports indicated that the tender was back on track but this time, with four new conditions added.
However, industry observers agree that it would be difficult for bidders to meet the original October deadline with the new specifications.
Was government "too hasty"?
A telecommunications analyst argued that the minister was "too hasty" in deferring the tender. "It seems to runs counter to his frequent statements that Malaysia's broadband penetration is too low, and [that the market] needs a faster takeoff of broadband services," said the analyst, who declined to be named.
"After the disappointment [over the 3G licensing saga], we now have the WiMax debacle. It certainly does not reflect too well on the government," he said. The analyst is from a Malaysian research house and specializes in the telecommunications sector.
In March this year, Malaysia's third largest mobile phone operator DiGi.Com, failed to win a lucrative 3G mobile phone license because of its foreign ownership.
The decision to bypass DiGi, majority owned by Norway's Telenor AG, and award 3G licenses to two non-mobile phone companies had sparked controversy in the local industry. DiGi's two larger rivals, Telekom Malaysia and Maxis Communications had received their licenses last year.
According to some reports, DiGi was overlooked because the government gave preference toward local companies. Minister Lim had reasoned that while the government is not against foreigners investing in Malaysia, "3G spectrum is a scare national resource".
Said the Malaysian analyst: "There is frustration in the industry over some of these issues. For example, DiGi, being the most qualified of the three candidates, felt they were unfairly treated in the 3G spectrum tender."
Fiona Leong, deputy head of research at Malaysia's AmResearch, said: "If potential investors are to commit their investments into the sector, they would want to see the telecommunications industry well-regulated with clear policies and guidelines."
Although the allocation of WiMax licenses is expected to be delayed, the impact is not likely to be severe.
Leong explained: "Based on the original tender [deadline], it was projected that commercial WiMax services would roll out in late-2007 or early-2008.
"Now with the delay, the earliest roll out for WiMax services is expected to be early 2008 or later," she said.
Leong suggested that the telcos and other bidders were not necessarily too disappointed by the delay. "The business case for broadband is not so clear," she said. "Is it commercially feasible? Will it be as big as Wi-Fi? The telcos are evaluating between WiMax and other technologies. They are closely watching WiMax-related developments overseas."
"They will not be too quick to roll out WiMax services," Leong noted. "However, the key players are hedging their bets and applying to get the WiMax spectrum."
For example, Maxis Communications CEO Jamaluddin Ibrahim said recently that having a WiMax license was necessary to meet the varying needs of customers.
"The whole broadband technology is required to serve customers and sometimes--one technology is not sufficient," he said, when asked to comment on the need for Maxis to bid for a WiMax license since it is already a 3G service provider.
Industry players would also have noted that alternative technologies to WiMax are currently available.
An IDC Asia-Pacific spokesperson said: "In the Malaysian context, IDC believes that with sufficient spectrum available for non-WiMax solutions, the market for these technologies will be sustainable and will act as a differentiator in terms of wireless broadband technologies."
The industry researcher said that alternative BWA technologies claim to be superior to WiMax in a number of areas such as spectral efficiency, bandwidth capabilities and mobility.
However, the IDC analyst noted that the benefits remain questionable to many and "the jury is still out in regards to testing in Malaysia".
Lee Min Keong is a freelance IT writer based in Malaysia.
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