Shared Wholesale Networks

A discussion paper concerning

5G Shared Wholesale Networks
with reference to Malaysia

September 2021

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Summary
Much has been written about the decision of the Malaysian government to create a Special Purpose
Vehicle (SPV) to implement its shared wholesale 5G network (SWN). Much of this commentary has been
critical with an emphasis on the potential for failures. Cognitio aims to provide a balanced view, within
the context of both regional and global 5G initiatives. We develop and present a SWOT analysis to show
both the upside and downside of the Malaysian approach.

Figure 1: Summary SWOT analysis of the Malaysian SWN approach

Strengths
The creation and mandate for DNB is coherent with the Malaysian MYDigital programme, which set the
overall agenda for 5G, covering regulation, digital enablement and transformation. It establishes a
mandate for DNB beyond just more cheap data for MNOs and a vehicle for ecosystem development
which has parallels in many other countries. It also leverages the whole of the telco infrastructure in
Malaysia.

Weaknesses
Of course, a key weakness to this approach is that it has not been widely tested elsewhere. 4G network
sharing and wholesale is very different from a network-sliced 5G offering and so even these
comparators have limited usefulness.

Opportunities
As observed by GSMA and others, network sharing can have key economic benefits, and these are
potentially even greater as we move towards ORAN and highly densified networks. There is also the
opportunity to have both public and private involvement in this development, and for which regional
comparators are available in the telecommunications sector. The development of DNB fosters both

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innovation and a ‘learning by doing’ approach which is bold and consistent with contemporary
approaches to innovation management.

Threats
There are threats from the regulatory complexity and lack of maturity in the regulatory regime, and
potential for agency effects to enter a PPP-type regime. The programme management and vendor
management challenges cannot be underestimated. The development of a wholesale 5G network is
unlikely to be simple and requires critical expertise and best practice applied to the PMO. Generally,
experience from global deployments would suggest that the PMO is critical and central to the success of
the development: these kinds of development have a habit of taking twice as long and costing twice as
much. There should also be a double-blind check between the operating unit and the PMO. In this
instance by PMO, we mean the function of building the network and operations and not just the vendor
management and rollout function.

The wholesale model is likely to be especially complex once network slicing is also considered and this
could lead to unintended consequences creeping into contracts downstream.

Introduction
5G promises a wealth of new use cases and can be viewed as a paradigm shift. Aside from simply faster
speeds and greater volumes of data, the architecture of 5G supports massive growth in the use IoT
devices with millions of more connections; 5G service will feature far higher levels of reliability, and it
provides considerable potential for differentiating services by exploiting these new features together
with a capability termed network slicing. However, not all of this will occur on day one because 5G
comes in two variants. Non-standalone (NSA) uses existing 4G networks with the more efficient 5G
radios piggybacked onto it, whereas the variant called Stand Alone (SA) uses a completely new core
network. Because of the evolutionary nature of NSA, it is to be expected that it will dominate networks
in the early days of 5G deployment.

Figure 2: Various use cases for 5G1

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https://static1.squarespace.com/static/5f9ae3501ca8fe42c7bb08ef/t/5ff5ba3a7d71db6c4c56f3f6/1609939517429/Interview+with+Ric.pdf

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Most operators today are deploying 5G selectively to optimise their cost-per-bit without much prospect
for increased ARPU, but there is considerable opportunity for the development of services around new
use cases which could boost revenues and ARPU.

In many ways, we find ourselves in a similar position to the one we faced with the advent of 3G. At that
time, it was unclear what new use cases would be available. Most operators provided a limited range of
services within ‘walled gardens’ which excluded third-parties. At that time, few could have foreseen the
disruptive impact of Over the Top (OTT) players offering every sort of service on top of the existing
network of telecommunications operators. Similarly, it may be equally difficult to foresee the ultimate
impact that 5G will bring to such sectors as medicine, education, transport or government. However, the
next wave of innovation enabled by 5G could be far ranging and go well beyond the range of services
offered by network operators. It seems likely that the coming 5G platforms will be utilised for much
more than simply greater volumes of traffic with Netflix, YouTube and WhatsApp. As Bloomberg notes2

Figure 3: Extract from Bloomberg article concerning 5G

We believe there is a case for government intervention to accelerate deployment of fully capable 5G
national networks and for them to foster the development of new services supporting novel use cases
so that nations secure these economic gains as early as possible whilst simultaneously maximising the
chances of developing national service champions for both domestic and international markets.

Many countries, and most especially those neighbouring Malaysia, have not been slow to realise this.
Thailand has combined CAT and ToT to form National Telecom and, in doing so, has established it as the
means of serving at least 10% of their population and of becoming the third operator with an explicit
aim of creating societal benefit. In Indonesia, KOMINFO has a programme to look at the broader picture
of use cases and intends to showcase these at the G20 summit in Bali next year. Beyond Asia, the UK
has invested £1.7bn in developing both enabling infrastructure and a national agenda for 5G and was
active in pushing forward the programme for the Shared Rural Network (SRN)3.

Malaysian context
Malaysia has taken a different approach, which some would say is quite bold, by creating a shared
wholesale network (SWN) for 5G. For this, the special purpose vehicle (SPV) Digital National Berhad
(DNB) will become a neutral host operator with a network that shares existing operator infrastructure.
Although the existing operators will continue to provide services from their current network, the
expected rapid adoption of 5G in the market means that they gradually evolve to primarily become

2
Huawei’s Decline Shows Why China Will Struggle to Dominate - Bloomberg
3
Home - Shared Rural Network (srn.org.uk)

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Mobile Virtual Network Operators (MVNO). This programme sits within a broader objective, the
MYDigital programme4 which has the following objectives (this is just part of the overall objective):

Figure 4: Objectives of the Malaysian MYDigital programme

The programme is bold and challenging, although the Malaysian government does recognise that it is
not fully formed, and will take time to develop the roadmap, implementation plan, and required
regulatory framework. The intention is to address 9 verticals in the economy, foster new use cases
specific to their needs and improve regional competitiveness.

4
MALAYSIA DIGITAL ECONOMY BLUEPRINT (epu.gov.my)

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Figure 5: Expected impact of 5G investment

In Malaysia, the MNOs are set to become MVNOs

It has been pointed out by DT Economics that the approach in Malaysia establishes a path along which
their MNOs must travel and which eventually leads to them becoming 5G MVNOs:

Figure 6: Extract from DT Economics ‘risk assessment of Malaysia's 5G plan’

MVNOs have continuously developed and achieved a competitive edge by capitalising on innovation,
differentiation and segmentation rather than merely competing on network connectivity and price.

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MVNOs offer mobile telephony services with flexible plans and with an approach where the added value
and differentiation of their services have a much higher weight in their business model than is provided
by simple connectivity and pricing alone, as shown in the two examples below:

BBC: MVNOs outshine UK's major

mobile operators5

UK's mobile network providers are

being outshone by their smaller rivals,
according to the annual survey from
the consumer group Which?

O2, EE, Vodafone and Three were

outperformed on customer service,
value for money and network
reliability by the MVNOs Giffgaff,
Tesco Mobile and Sky Mobile.

PCMag Readers' Choice for U.S.

Mobile Carriers 20216

PCMag Readers' Choice for U.S.

Mobile Carriers 2021 was once again
the MVNO Consumer Cellular for the
eighth straight year - with a score of
9.2 out of 10.

As in past years, the MVNOs have

higher satisfaction ratings than the
network providers themselves for
performance on the same network.

The goal for an MVNO is to make profit by fulfilling the expectations of the chosen segment, so that
customers experience the level of service that satisfies their needs. Such aspects as defined customer
segments, customer service and self-service, flexibility, sales strategies, value proposals and alliances
have allowed the MVNOs to distinguish themselves in the market from the MNOs. In addition, the
continuing advances in technology and usability, along with maturing markets, have provided the basis
for specialisation to occur within the industry value chain.

As mobile connections increase and mobile penetration reaches a saturation point, traditionally-minded
MNOs find it increasingly challenging to compete and grow organically. Competition shifts from being

5
https://www.bbc.com/news/technology-56844819
6
https://in.pcmag.com/mobile-phones/141732/readers-choice-2021-mobile-phones-operating-systems-and-
wireless-carriers

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predominantly network based – where the MNOs compete on differences in network quality and
coverage – to service based, where competition depends on the ability and flexibility to match service,
price and features to specific segment needs and wants.

Figure 7: Issues facing MNOs in the evolving market

MVNOs have exploited the MNO issues described in Figure 7, above, to achieve a competitive edge and
capture market share. In doing so the MVNOs are benefiting from differentiation in the market and
segmentation rather than merely competing on connectivity and price.

Instead of viewing customers as large, singular and indistinct segments, MVNOs have adopted a
targeted approach, creating a unique brand positioning and value proposition to attract particular niche
customer groups. These segments could have particular group characteristics or be based simply on
demographics, but however the segment is defined the MVNOs then tailor their service, offer and
products to meet the needs, value, and lifestyle of this customer segment.

Operating in this way ensures that customer needs are more accurately identified and serviced. As a
result, customers respond positively, and the operator can win and hold market share within these
segments.

MVNOs can target a range of verticals and market segments by offering:

• Connectivity options that can be differentiated according to preference and context (i.e.,
differentiated data tariffs and connectivity for various sites, apps, location etc.).
• Platforms that allow customers to control their own connectivity and better manage their
business (Platform as a service, Software as a service, Connectivity as a service, Data Analytics,
etc.)
• Differentiated non-network services such as customer care, bespoke services, brand, and product
characteristics, which create a sense of belonging according to lifestyle.
MVNOs play a key role in penetrating key underserved segments, such as youth, the elderly, expatriates,
verticals, SMEs, travellers, communities, etc. These are segments that the MNOs struggle to adequately
serve.

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One view of the reasons why the MNOs struggle with this is that such segments are typically quite small
and they have difficulty justifying the effort that goes into tailoring their products and services. Another
view is that the MNOs are a vertically-integrated business involving network wholesale and service retail
and that the mindset required to be excellent in managing infrastructure networks is very different to
achieving excellence in retail.

Despite having separate management teams for addressing the network wholesale and service retail
parts of their business, in the end the MNOs are capital-intensive businesses that must be focussed on
winning mass market sales to efficiently load their infrastructure. In contrast, the network costs of the
MVNOs are variable – albeit dependent on wholesale contract volumes – and so their business model
allows them to tailor offerings to smaller segments.

In large measure, the critical success factor for MNOs is competitive market share of network traffic
(made up of both direct sales and wholesale contracts with MVNOs) whereas for MVNOs this can be
based on the value-add of their segment offerings. The lean and agile business model of the MVNO
allows for highly focused targeting, resulting in benefits to the whole ecosystem: The MNO, the MVNO
and end-users.

Figure 8: Relative positioning of MNOs and MVNOs

MVNOs currently operating in Malaysia

MVNOs served by Celcom Axiata
In 2005, Celcom, which at that time was a wholly owned subsidiary of Telekom Malaysia Bhd (TM), saw
its market share shrink to such an extent that it became the smallest player amongst the Malaysian
incumbents in the prepaid segment.

Celcom implemented a performance improvement program (PIP), with a strategy aimed at arresting the
declining business, and then to stabilise various areas. The company improved its segmentation strategy

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and introduced partnerships with MVNOs XOX Bhd (the first publicly listed MVNO in Malaysia),
Merchantrade, Tune Talk and RedONE.

As a result of the PIP, Celcom registered 30 consecutive quarters of growth in both its top- and bottom-
line, an achievement that has yet to be broken by any of the other incumbents today.

In Q2 2013 Celcom could announce highest subscriber share in the industry including MVNOs under its
network, and it had achieved a total subscriber count of almost 14 million for the first time since the
start of its transformation program. The Celcom effort was recognised as Telecommunications
Wholesale Service Provider of the Year at the 2013 Frost & Sullivan Asia Pacific ICT Awards, underscoring
the telco’s substantial investments and partnership with local and regional communication start-ups.
This partnership with MVNOs is still important for Celcom Axiata today. On September 7, 2021, Celcom
Axiata reported a revenue of RM2.91 billion in the first half of 2021 (1H2021), rising 4.6% year-on-year
(YoY) from RM2.78 billion recorded in the same period last year.

On a quarter-to-quarter basis (QoQ), the mobile network operator posted a revenue growth of 3.4% to
RM1.48 billion for the second quarter period (2Q2021) from RM1.43 billion. Celcom said the financial
performance recorded was driven by strong prepaid performance coupled with higher MVNO revenue.7

A Malaysian local government MVNO

The Selangor government (a state on the west coast of the peninsular of Malaysia) has launched its
subsidised internet packages, as part of the state’s Pakej Kita Selangor 2.0 (Our Selangor Package 2.0),
which aims to close the digital gap and make sure no child gets left behind with online learning.

Figure 9: Selangor State Government on the launch of the Pakej Kita Selangor 2.0

Pakej Kita Selangor will be providing 12 months of data through a free SIM card for the benefit of 70,000
Selangor citizens. The initiative is targeted towards specific segments i.e. selected students, single
mothers, small traders, farmers, e-hailing riders, online merchants and more. There are three SIM card
options available. The first package is from the MVNO LIFE*, by MBits Digital, which provides 15GB of
data with 100 free minutes of #voicecalls and 10 #SMS monthly. The package also provides free Health
Insurance that covers hospitalisation and COVID-19 infection. The package from Celcom is providing
15GB of monthly data and nothing else, meaning users will have to top up to make calls.8

Similarly, the Unifi package doesn’t have any voice minutes, but it does provide 45GB monthly data.

7
https://www.theedgemarkets.com/article/higher-prepaid-mvno-earnings-push-celcoms-revenue-46-yoy-rm3b-
1h2021
8
https://www.lowyat.net/2021/248143/data-internet-selangor-sim-pack-launches-with-12-months-of-free-data/

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Regional and international initiatives
Thailand
Thailand auctioned its 5G spectrum and has both state and private operators in the 5G arena. At the
same time, it consolidated two state operators (ToT and CAT) into National Telecom. These two
operators already provided wholesale network service to AIS, True and DTAC. The new mandate for NT
is:

The transformation of NT has not been without its problems, not least being the lack of commercial
operating experience within NT. However, it has a mandate driven by government to address what it
sees as potential market failures in new 5G use cases and societal demands.

9
https://www.bangkokpost.com/business/2056595/leaving-the-nest

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Indonesia
Indonesia has perhaps been slower and more cautious. It has issued licenses and the main operators
have launched 5G service. Kominfo (the regulator) has an initiative to foster growth of new use cases
and the broader portfolio of 5G.

Figure 10: The 5 working groups of Kominfo addressing 5G

Kominfo has developed 5 working groups to address the topics of 5G development and transformation.
This is a large task of national importance. The topics include spectrum plans, business models,
infrastructure, device and ecosystem as well as regulation as a consequence of the Omnibus law.

The UK
The UK was 74th to launch 4G and 5th to launch 5G. There are numerous initiatives taking place in each
region of the UK to foster new use cases and leverage the potential of 5G. Some of these are coming to
fruition as noted in an earlier Cognitio white paper10

Figure 11: UK government support for 5G

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https://static1.squarespace.com/static/5f9ae3501ca8fe42c7bb08ef/t/5ff5ba3a7d71db6c4c56f3f6/1609939517429/Interview+with+Ric.pdf

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A key insight is that up to 3.2% GDP improvement can come from non-MNO 5G activity, whereas only
1% is expected from 5G productivity gains secured by the MNOs.

Ingredients for our SWOT analysis

The advantages of shared networks
For quite some time there has been significant lobbying for the use of shared infrastructure. GSMA11
has summarised the potential benefits and risks as follows:

Figure 12: GSMA summary of the benefits and risks of shared networks

According to the GSMA Network Economics model, even conservative estimations predict that the
number of coverage and performance sites will increase by 50% as a result of 5G deployments and that:

Network sharing has precedents, as noted by DT Economics12 but sharing 5G could be a very different
prospect to the sharing of 4G networks or the sharing of fixed networks such as those in the UK and
Australia which they provided as examples in their report. Several aspects of 5G networks and future 5G
use cases could change the proposition considerably. Examples of this are:

• An estimated densification factor of x5 or more being required in many urban environments

• The digital divide experienced in many markets - no less so in Malaysia –naturally encouraging
the sharing of rural networks following the example of countries such as the UK
• Technical aspects of 5G (low latency and high densification), which are especially relevant for
non-traditional MNO use cases and which favour the use of a single network.
To summarise, a shared network has the potential to significantly reduce CAPEX and OPEX and can offer
benefits for future 5G use cases. That said, it is recognised that shared networks can give rise to

11
GSMA | Infrastructure Sharing: An Overview - Future Networks
12
DT Economics publishes an economic risk assessment of Malaysia’s 5G plan; September 2021

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problems in both the required regulatory framework that aims to ensure a smooth functioning and
competitive market and in their deployment.

Challenges for wholesale pricing and contracts

We believe that a big challenge for DNB will be the economic, pricing and contractual model. In 5G not
all bits are equal. For instance, services which exploit Ultra Reliability Low Latency Communications
(URLLC) are likely to result in bits being significantly more expensive than those of just faster mobile
broadband (eMBB). This could pose significant issues around the unintended consequences arising from
early contracts during the NSA deployment phase for DNB. Just some of the questions that need to be
answered include:

• What is the 5G production cost for NSA and SA?

• How are shared assets accounted for over time bearing in mind differing rates of traffic growth
for the range of differently specified services?
• How should pricing anticipate the price elasticity of unknown services?
• Will forms of cross subsidy be employed for services that promise considerable societal benefit
but which are unattractive to the various network operators?
As with existing mobile networks, unit costs will be a strong function of traffic volumes. It will be natural
for the existing MNOs to wish to ‘sweat’ their assets by loading their existing 4G networks with NSA
traffic to the maximum extent and to only use the DNB platform for SA service traffic. An important
consideration for DNB will be how their pricing can encourage existing MNOs to utilise the DNB platform
for NSA traffic that would otherwise trigger fresh investment in their own network – investments for
both growth and the replacement of fully depreciated or obsolete equipment – bearing in mind the high
traffic volume on existing networks and the low unit costs of traffic that they experience as a result. To
be competitive and thereby encourage this traffic onto the DNB platform, wholesale prices will need to
take account of the unit costs of such traffic in the various MNO networks so that the bulk of simple
MBB traffic eventually loads the DNB platform, making unit costs of traffic inherently competitive.

A high-level quantitative look at the effects of wholesale pricing

To illustrate the challenge associated with DNB pricing we present the results of a deliberately simple
model which provides a rough indicator of relative unit costs for traffic on the MNO and DNB platforms
(Figure 13, below).

Whilst we have shown Celcom and Digi as separate entities, we recognise that they are in the process of
merging. However, the intention of the model is to illustrate options for the ‘direction of travel’ which
are insensitive to this.

Scenario 1 in Figure 13 sets the scene by showing the relative market share across the major MNOs in
Malaysia with some NSA traffic having migrated to DNB after one year. Making some gross assumptions
about how traffic volumes relate to unit costs on different platforms – and recognising that substantial
differences in market share between, say UMobile and Celcom will likely give a significant spread in unit
costs – the essential take away is that the unit costs on the DNB platform will be substantially above
those of the MNOs. This implies that to move NSA traffic away from the MNOs to the DNB platform
requires either that the MNOs be obliged to use the DNB platform or else that wholesale pricing is

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deliberately held well below costs for a substantial period whilst competitive market share of traffic is
built up on the DNB platform.

Scenario 2 of Figure 13 indicates the relative cost position between DNB and the MNOs after NSA traffic
has grown by 50% and SA traffic has grown to become 14% of total nationwide traffic. It is debateable
how long it would take to reach such a situation, but arguably this is measured in years rather than
months. In this situation you can see that the total traffic loading on the DNB platform from both NSA
and SA traffic brings unit costs into the same order of magnitude as the MNOs, holding out the prospect
of wholesale pricing which can just about cover costs.

Figure 13: Scenarios for NSA and SA traffic growth on MNO and DNB platforms

In scenario 3 of Figure 13 NSA traffic has grown by another 50% relative to scenario 2 and most of this
traffic remains on the MNO networks with the effect of reducing their unit costs accordingly. At the
same time, SA traffic has grown to become 40% of total national traffic and the effect is to bring unit
costs on the DNB platform well below those of the MNOs, and therefore much more competitive. This
situation raises the real possibility of wholesale prices prior to this point having been low enough to
have attracted NSA growth traffic away from the MNO platforms with the effect of reducing unit costs
still further. Clearly, the dynamics of this are beyond this illustrative modelling exercise.

Finally, in scenario 4 of Figure 13 we consider the effects of wholesale pricing which diverts the NSA
traffic growth of scenario 2 onto the DNB platform. The effect can be seen to reduce DNB unit costs to a
similar level to those of scenario 3 but this would, of course, happen at a far earlier stage in the
development of 5G SA services. To enable this, wholesale prices would need to be held below costs for

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some time and this would generate an additional funding requirement for DNB that would need to be
factored into their overall financing requirement. That said, the benefits of this promise to be
substantial and we anticipate that they would generate a positive return relative to the costs of finance.

Challenges in 5G rollout
For rollout, a key issue will involve permits and leases on multi-tenanted sites. Although DNB has a
modest initial target to deploy 500 sites before the end of 2021, all of the processes and working
methods, lease agreements and backhaul facilities will need to fit together across the existing operators.
This issue alone can be a significant challenge.

Historical context for government intervention

The early years in the development of basic fixed telephone networks in many countries saw small local
and regional private operators taken into public ownership. These public operators then developed
national networks over the course of many years before the momentum developed to move many of
these operators back into the private sector during the 1980s and 1990s. Although much political
rationale was presented for taking the early small operators into public ownership it is useful to remind
ourselves that there was a clear economic rationale as well. Government intervention enabled the sum
of smaller operators to be developed into a national network – thereby boosting the ‘network effect’ of
the telephone service which became more valuable as a larger proportion of the population joined it.
The same network effect rationale was behind tariff cross subsidies between long distance calling and
local line rental rates. In effect, the service was made cheap to join but expensive to use and this had
the effect of growing the penetration of telephone service within the population – network effect –
whilst containing the costs of expensive calling facilities.

It may be worth recalling how ‘privatisation’ during the 1980s and 1990s came about. A major concern
in the UK was that the public sector was too slow, insufficiently innovative and potentially required a
very large level of funding which would affect the UK Public Sector Borrowing Requirement.

We can see in this example of government intervention in early fixed telephone networks a parallel with
5G network development. In this case, government intervention can be justified in terms of the
economies of shared networks, but also as a means of accelerating the deployment of a fully capable SA
national 5G platform before such developments could be expected from private sector operators.

The usual justification for government intervention is to recover from the effects of market failure. A
pervasive and growing issue is Universal Service; providing coverage to areas that would be unprofitable
for the MNOs, at least for the foreseeable future. Of course, it has already been pointed out by DT
Economics that there are risks in such forms of government intervention, but let us assume that action is
taken to mitigate these risks so far as it is practicable to do so (bearing in mind that private operator
deployments also face risks). Assuming that government intervention occurs and that an organisation
such as DNB is established to make it happen, the long-term question is whether such a platform should
remain in public ownership once the objectives of intervention have been met and the scene is set for
private operators to take over.

Without wishing to engage in political debate on this matter we would simply point out that numerous
examples exist of where governmental operations are less efficient than similar operations in the private
sector. Assuming the right regulatory framework for shielding national interests from the effects of

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market failure, we take the view that the longer-term plans and policy of the Malaysian government
should aim to return the assets of DNB to the private sector once DNB has delivered its mission of
enabling a flourishing market in 5G services. Of course, there is inherent complexity in untangling state-
owned assets and returning them to the private sector. Indonesia is taking a Public Private Partnership
approach as an alternative to direct funding for its USO initiative.

Motivation for 5G government intervention

The motives for government intervention in 5G can be summarised as follows:

• To accelerate the development of a fully capable SA 5G platform

• To solve issues that the MNO’s wont necessary solve left to their own devices
• To foster an ecosystem approach to developments in areas such as Industry 4.0, transportation
and medicine where simple connectivity is not profitable for the MNOs
Whilst there are calls for operators to involve themselves with broader digital initiatives, there are risks
that the scale efficiencies of Google, Apple or Facebook could stifle a nations ability to capture value.

Much criticism of DNB centres around the state owning a monopoly asset for 5G and the lack of
maturity of the regulatory environment or wholesale model. It is somewhat ironic then to recall what
Margaret Thatcher reflected in her memoirs:

Figure 14: Extract from the memoirs of Lady Margaret Thatcher 13

Learning by doing
The Malaysian government recognises that the regulatory regime, business model and operating model
are not fully formed. Referring back to privatisation in the 1970’s the same could be said of the change
initiated at that time. There are clear benefits and proponents of this approach to economic
development using the Resource Based View of the Firm (RBVF). Inevitably there are risks with an
unknown approach just as there are with a known approach. The history of telecommunications projects
is littered with lengthy delays, severe increases in CAPEX and creative destruction, even for supposedly
well-known and understood developments. The critical aspect is that DNB recognises that this is what is
occurring and adapts its organisation to capture learning and embed knowledge.

13
https://www.instituteforgovernment.org.uk/sites/default/files/british_telecom_privatisation.pdf

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Cognitio view and insight
Cognitio has an interest in at least 3 aspects of the DNB development that it is somewhat qualified to
comment on given its recent work with consultants at WM5G, Kominfo and its implementation of
techno-economic modelling for several early-stage 5G deployments.

Overall strategic assessment

The DNB approach to 5G in Malaysia is bold, challenging and controversial. However, it draws on some
sound principles and contemporary ideas.

Project management
As DT Economics rightly notes there are deployment risks of an unknown quantity in a fluid and dynamic
operating environment. It is imperative that DNB competently follows standard project management
methodology.

There is a considerable difference between deploying a complex network and managing an established
operator. In view of this, one approach to organising for success is to separate the network deployment
from its operation and implement check and acceptance procedures before accepting elements of the
network– or all of it – into operation. This is a fairly well-known approach but one that DNB does not
appear to have followed. Implementing this proven approach would require two separately staffed
parts to DNB: a project office and an operations directorate. In our experience, attempting to
superimpose a PMO onto a line organisation carries a large risk by itself.

One of the single largest problems with this kind of network (where sites are shared) involves permits,
leases, site rentals and space allocation on towers. This is a critical path activity and usually results in
complexity and delay on most similar projects in development and even greater problems in the event
that the assets require separation in the future. It is vitally important that DNB attends to this issue.

Wholesale model
Proper development of the wholesale model for supporting pricing is not a trivial matter. In order to
create an effective and accurate model the full gamut of subsidies and cross charging needs to be
understood. However, this exercise is made all the more difficult by the later deployment of 5G Stand-
Alone and the services it will support. Developing a clear view of the cost of production on the DNB
platform will be relatively straightforward were it only to provide 5G NSA facilities and traffic volumes of
largely undifferentiated bits were being produced. However, the intention is to follow NSA deployment
with a full SA platform and as soon as features such as network slicing are introduced the production
cost of traffic volumes between services will vary depending on service specifications such as their
criticality, latency, resilience and grade of service. There are significant commercial dangers in not
getting this right and DNB should beware of approaches that draw on simple cost-accounting methods
involving cost allocation techniques. Volumes and costs need to be modelled bottom-up employing
sound engineering understanding and the insight it produces then needs to be linked to service
contracts and the commitments that must be made by the various contracts with MNOs.

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Authors

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Contact Cognitio

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