Economist warns: Second 5G network to drive up costs

The rollout of 5G technology has been a significant milestone in the telecommunications industry, promising faster speeds, lower latency, and more reliable connections. However, the introduction of a second 5G network in Malaysia is expected to make this technology more expensive, according to economists. The shift from a Single Wholesale Network (SWN) model to a dual network system could have far-reaching implications for both consumers and the industry.

Dr. Shankaran Nambiar, an economist at the Malaysian Institute of Economic Research, has expressed concerns about the financial impact of introducing a second 5G network. "The economics at this time don’t stack up, and maybe the best option would be to work on a solution using DNB’s infrastructure," he noted. This sentiment is echoed by other industry experts who believe that the cost of deploying a second network could outweigh the benefits.

The Cost of 5G Technology

5G technology is inherently expensive to deploy. It requires significant investment in new equipment, including cell towers, small cells, fiber optic cables, and specialized radios and antennas. According to a report by Deloitte, the total cost of building a nationwide 5G network in the US ranges from $130 billion to $275 billion. These costs are not unique to the US; similar financial burdens are expected in Malaysia.

The introduction of a second network means duplicating much of this infrastructure, which could drive up costs for telecommunication companies. These costs are likely to be passed on to consumers in the form of higher prices for 5G services. Currently, the average monthly fee for 5G is around $89 compared to $68 for 4G, and this gap could widen with the introduction of a second network.

Impact on Consumers and the Industry

The primary concern for consumers is the potential increase in the cost of 5G services. Unlimited 5G rates are already more expensive than 4G, and the introduction of a second network could exacerbate this issue. In countries like Switzerland, the gap between 5G and 4G prices is as high as $72 per month. Similar trends could emerge in Malaysia, making 5G less accessible to lower-income groups.

From an industry perspective, the introduction of a second network could lead to increased competition, which might benefit consumers in the long run. However, the initial financial burden could stifle innovation and slow down the overall rollout of 5G services. Dr. Geoffrey Williams from the Malaysia University of Science and Technology pointed out that "having a second 5G network would increase competition and benefit consumers," but the immediate financial implications cannot be ignored.

The Role of Digital Nasional Berhad (DNB)

Digital Nasional Berhad (DNB) has been at the forefront of Malaysia's 5G rollout under the SWN model. The company has faced criticism for its monopoly over the 5G spectrum, with some experts arguing that this approach stifles competition and innovation. However, DNB has made significant progress, achieving 57.8% coverage of populated areas and aiming for 80% by the end of the year.

The government's decision to introduce a second network aims to break DNB's monopoly and foster competition. However, this move has been met with skepticism. Dr. Rais Hussin, president of EMIR Research, criticized DNB’s spectrum monopoly, stating that the SWN approach is not the same as regulated monopolies in utilities like water and electricity. He argued that unlike genuine utility providers, DNB lacks sufficient internal capabilities to develop the network independently.

Financial and Regulatory Challenges

The financial implications of introducing a second network are significant. DNB has already borrowed RM2 billion from the local banking system to fund the 5G rollout. The government guarantee for DNB expires in December 2024, and without additional financial support, the company could face a cash crunch. This uncertainty adds another layer of complexity to the already challenging 5G rollout.

Regulatory challenges also loom large. The deployment of 5G networks can be more challenging and costly in certain regions, such as rural or mountainous areas. The regulatory environment in a given country can also impact the cost of deployment. Some governments, like those in the US, China, Japan, and the UK, provide subsidies or other incentives to encourage the rollout of 5G networks. It remains to be seen how the Malaysian government will navigate these challenges.

The introduction of a second 5G network in Malaysia is a double-edged sword. While it promises increased competition and potential long-term benefits for consumers, the immediate financial implications cannot be ignored. The cost of deploying a second network could drive up prices for 5G services, making them less accessible to the general population.

As Malaysia navigates this complex landscape, it is crucial to weigh the potential benefits against the financial and regulatory challenges. The decision to introduce a second network should be made with careful consideration of its long-term impact on both consumers and the telecommunications industry.