PUBLIC INQUIRY PAPER

Review of Access List and Mandatory Standard on Access

25 September 2008

This Public Inquiry Paper was prepared in fulfilment of Sections 55(2), 55(4), 59 and 61 of the Communications and Multimedia Act 1998.

CONTENTS

PREFACE 1

ABBREVIATIONS AND GLOSSARY 3

SUMMARY OF ISSUES FOR COMMENT 9

PART A: BACKGROUND 23

1 OVERVIEW 23

1.1 Structure of this PI Paper 23

1.2 Purpose 24

1.3 Role of this Public Inquiry 24

1.4 Public Inquiry scope 24

1.5 Outputs of this Public Inquiry 25

1.6 Matters outside scope 25

1.7 Public Inquiry process 25

1.8 PI on Access List in 2005 26

1.9 The current Public Inquiry 27

1.10 Process informing this PI Paper 30

1.11 Relevance to high speed broadband services 33

1.12 Ministerial Direction on HSBB and Access List 36

1.13 Issues for comment and preliminary views 37

2 LEGISLATIVE CONTEXT 39

2.1 Current Access List Determination 39

2.2 Legislative powers and requirements 40

2.3 Amendment to Mandatory Standard on Access 41

2.4 Public Inquiry Process and Determination 42

2.5 Objects of the CMA and NPOs 43

2.6 Overall regulatory approach 44

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3 ACCESS REGULATION AND THE SKMM’S METHODOLOGY 45

3.1 Regulatory approach 45

3.2 Access concepts 46

3.3 Access in the Malaysian context 47

3.4 Implications and limitations of access 49

3.5 Regulating for the long-term benefit of the end user (LTBE) 50

3.6 Interpretation of other criteria 55

3.7 The bottleneck test 55

3.8 Conclusion 57

PART B: REVIEW OF EXISTING MARKETS 58

4 RELEVANT MARKETS AND STATE OF COMPETITION 58

4.1 Market definition 58

4.2 State of competition 58

4.3 Steps in the SKMM’s assessment 61

4.4 Alternatives to market-based approach 63

5 FIXED TELEPHONY 64

5.1 Market definition 64

5.2 Access List facilities and services 64

5.3 State of competition 66

5.4 Existing facilities and services on the Access List 68

5.5 Potential facilities and services on the Access List 80

6 MOBILE TELEPHONY 90

6.1 Market definition 90

6.2 Access List facilities and services 91

6.3 State of competition 92

6.4 Existing facilities and services on the Access List 98

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6.5 Potential facilities and services on the Access List 111

7 UPSTREAM NETWORK ELEMENTS 123

7.1 Market definition 123

7.2 Access List facilities and services 123

7.3 State of competition 124

7.4 Application of LTBE criteria 127

8 INTERCONNECTION 131

8.1 Market definition 131

8.2 Access List facilities and services 132

8.3 State of competition 132

8.4 Application of LTBE criteria 134

9 LEASED LINES 144

9.1 Market definition 144

9.2 Access List Facilities and Services 145

9.3 State of competition 146

9.4 Application of LTBE criteria 149

10 BROADCASTING TRANSMISSION 159

10.1 Market definition 159

10.2 Access List facilities and services 159

10.3 State of Competition 160

10.4 Application of LTBE criteria 162

11 EXISTING BROADBAND SERVICES 169

11.1 Market Definition 169

11.2 Access List Facilities and Services 170

11.3 State of competition 171

11.4 Current developments 174

11.5 Existing facilities and services on the Access List 178

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11.6 Potential facilities and services on the Access List 182

PART C: REGULATION OF HIGH SPEED BROADBAND SERVICES 184

12 REGULATION OF HIGH SPEED BROADBAND SERVICES 184

12.1 Introduction 184

12.2 NGN technology overview 186

12.3 Initiatives to rollout high speed broadband services 191

12.4 Importance of Broadband 192

12.5 Access Issues 195

12.6 Regulation of high speed broadband services 196

12.7 Elements and definition of regulated high speed broadband services 209

12.8 Regulation of ANE and existing broadband services in a high speed broadband environment 221

PART D: REGULATION OF WIRELESS BROADBAND SERVICES 239

13 REGULATION OF WIRELESS BROADBAND SERVICES 239

13.1 Introduction 239

13.2 Forms of wireless broadband technologies 240

13.3 WiMAX assignments 241

13.4 Market definition 241

13.5 International developments in WiMAX access regulation 245

13.6 Potential access issues 245

13.7 Regulatory options 247

13.8 SKMM preliminary view 251

PART E: ACCESS LIST RATIONALISATION 252

14 ACCESS LIST RATIONALISATION 252

14.1 Network Origination Service and Network Termination Service 254

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14.2 Transmission Service 255

PART F: MANDATORY STANDARD ON ACCESS 256

15 MANDATORY STANDARD ON ACCESS 256

15.1 Amendments to the Mandatory Standard 256

15.2 Overview of Mandatory Standard (Access) 256

15.3 Previous amendments to MS (Access) 258

15.4 General comments on MS (Access) 259

15.5 General comments on access agreements 262

15.6 Disclosure obligations (subsection 5.3) 264

15.7 Negotiation obligations (subsection 5.4) 265

15.8 Forecasting obligations (subsection 5.6) 265

15.9 Ordering and provisioning obligations (subsection 5.7) 266

15.10 Point of interface procedures (subsection 5.9) 267

15.11 Network facilities access and co-location (subsection 5.13) 267

15.12 Billing and settlement obligations (subsection 5.14) 268

15.13 Technical obligations (subsection 5.16) 269

15.14 Term, suspension and termination obligations (subsection 5.17) 270

15.15 Churn obligations (subsection 5.18) 271

15.16 Legal boilerplate obligations (subsection 5.19) 271

15.17 Digital Terrestrial Broadcasting (DTB) Multiplexing Service (subsection 5.23) 272

15.18 Access to Network Elements (subsection 5.24) 272

15.19 Implementation of the Standard (subsection 6.2) 273

15.20 Annexure A: Dispute Resolution Procedures 273

15.21 Consequential amendments to MS (Access) as a result of amendments to the Access List 273

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ANNEXURE 1 - SUMMARY OF CONSULTATIONS WITH LICENSEES TO DATE

ANNEXURE 2 - DRAFT DESCRIPTIONS OF ACCESS LIST FACILITIES AND SERVICES

ANNEXURE 3 – DRAFT ACCESS LIST DETERMINATION

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PREFACE

The Malaysian Communications and Multimedia Commission ( SKMM ) invites submissions from industry participants, other interested parties and members of the public on the questions and issues raised in this PI Paper concerning the Review of Access List and Mandatory Standard on Access . Submissions are welcome on the specific matters on which comment is sought and the SKMM’s preliminary views. Submissions are also welcome on the rationale and analysis in this PI Paper where no specific questions have been raised. Such submissions should be substantiated with reasons and, where appropriate, evidence or source references. Written submissions, in both hard copy and electronic form, should be provided to the SKMM in full by 12 noon, 21 November 2008 .

Submissions should be addressed to:

The Chairman Malaysian Communications and Multimedia Commission 63000 Cyberjaya Selangor

Attention: Ms Karen Woo Email: [email protected]

Telephone: +603 8688 8000 Facsimile: +603 8688 1001

In the interest of fostering an informed and robust consultative process, the SKMM proposes to make submissions received available to interested parties upon request. The SKMM also reserves the right to publish extracts or entire submissions received. Any commercially sensitive information should be provided under a separate cover clearly marked ‘ CONFIDENTIAL ’. However, for any party who wishes to make a confidential submission, it would be of assistance if a “public” version of the submission were also provided (if possible).

The SKMM also proposes to conduct public hearings at which stakeholders may make oral submissions to the SKMM and seek clarification on the issues raised in this paper. All the public hearing sessions will be held at the Auditorium of the SKMM, Cyberjaya.

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The SKMM proposes to hold separate hearings on the following subject areas:

2pm, Monday 20 October 2008 Session 1: Non-broadband services

9am, Tuesday 21 October 2008 Session 2: Broadband services

Members of the public who wish to attend the public hearings should register with the SKMM on the above contact details by 12 noon on Wednesday 8 October 2008 . Parties who wish to address questions to the SKMM during the public hearings should also notify the SKMM of those questions in advance to the above contact details by 12 noon on Wednesday 8 October 2008 .

The SKMM thanks interested parties for their participation in this consultative process and looks forward to receiving written submissions.

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ABBREVIATIONS AND GLOSSARY

AAG Asia-America Gateway submarine cable system ACMA Australian Communications and Media Authority ACCC Australian Competition and Consumer Commission access agreement An agreement entered into between licensees whereby the Access Provider provides access to an Access Seeker in accordance with the terms contained in such an agreement and which is to be registered with the SKMM in accordance with the CMA. Access List The list of facilities and services determined by the SKMM under Chapter 3 of Part VI of the CMA, in respect of which the Standard Access Obligations apply Access Provider In relation to the Access List is: (a) a network facilities provider who owns or operates facilities on the Access List; and/or (b) a network service provider who provides services on the Access List; and (c) includes a holder of a registered licence under section 278 of the CMA;

and in relation to the MSA is: (a) a network facilities provider who owns or operates facilities on the Access List; or (b) a network service provider who provides services on the Access List; and (c) who is a licensee as defined in the CMA. Access Seeker A network facilities provider, a network service provider, an applications service provider, or a content applications service provider who is a licensee as defined in the CMA and who makes a written request for access to network facilities or network services on the Access List. ADSL Asymmetric Digital Subscriber Line AIP Applicant Information Package No. 1 of 2002 and Applicant Information Package No. 1 of 2005 Anacom The regulatory authority in Portugal ANE Access to Network Elements APCN2 Asia Pacific Cable Network 2 submarine cable system ARD Access Reference Document, which is a document of the terms and conditions required to be formulated by an Access Provider under the MS (Access). ASP Applications Service Provider BBGP Broadband for General Population BGR Border Gateway Router BRI-ISDN Basic Rate Interface ISDN CASP Content Applications Service Provider

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CBD Central Business District Celcom Celcom (Malaysia) Berhad CIIP Common Integrated Infrastructure Provider CMA Communications and Multimedia Act 1998 Commission Act Malaysian Communications and Multimedia Commission Act 1998 ComReg Commission for Communications Regulation in Ireland CRTC Canadian Radio-television and Telecommunications Commission DEL Direct Exchange Line DiGi DiGi Telecommunications Sdn. Bhd. DSLAM Digital Subscriber Line Access Multiplexer DTT Digital Terrestrial Television DTTB Digital Terrestrial Television Broadcasting DVB-H Digital Video Broadcasting – Handheld DVB-T Digital Video Broadcasting – Terrestrial DWDM Dense Wavelength Division Multiplexing EC European Commission EU European Union ERG European Regulators Group EDGE Enhanced Data-Rates for GSM Evolution EDTV Enhanced Digital Television ETSI European Telecommunication Standards Institute FCC Federal Communications Commission of the United States of America Fiberail Fiberail Sdn. Bhd. Fibrecomm Fibrecomm Network (M) Sdn. Bhd. FTA Free-To-Air FTTN Fibre to the Node FTTP Fibre to the Premises GPON Gigabit Ethernet PON GPRS General Packet Radio Service GSM Global System for Mobile (Second-generation mobile telephony standard) Guidelines on ANE Guidelines on Implementation of Access to Network Elements (SKMM/G/04/05) dated 28 September 2005 Guideline on Access Guideline on Registration of Access Agreements Agreement Registration Guideline on VoIP Guideline on the Provisioning of VoIP Service dated 31 January 2001

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HSBB network High Speed Broadband network to be deployed by TM pursuant to the agreement with the Government of Malaysia dated 16 September 2008 HSDPA High Speed Downlink Packet Access IDA Infocomm Development Authority of Singapore IEEE Institute of Electrical and Electronics Engineers IMS Internet Protocol Multimedia Subsystem IP Internet Protocol IPLC International Private Leased Circuit IPTV Internet Protocol Television IP-VPN Internet Protocol – Virtual Private Network IRU Indefeasible Right of Use ISDN Integrated Services Digital Network ISP Internet Service Provider ITU International Telecommunications Union Jaring Jaring Communications Sdn. Bhd. Licensing Exemption Communications and Multimedia (Licensing) (Exemption) Order Order 2000 LLU Local Loop Unbundling LLC Local Leased Circuit LTBE Long-term benefit of end users MAFB Malaysian Access Forum Berhad (the Access Forum, designated by the SKMM as such under section 152 of the CMA) Maxis Maxis Communications Berhad The Minister The Minister for the time being charged with the responsibility for communications and multimedia Ministerial Direction Ministerial Direction on Equal Access, Direction No. 3 of 2006 on Equal Access Ministerial Direction Ministerial Direction on High-Speed Broadband and Access List, on HSBB and Access Direction No. 1 of 2008 List Ministerial Direction Ministerial Direction to Determine a Mandatory Standard on Access, on MS (Access) Direction No. 2 of 2003 Ministerial Direction Ministerial Direction on Number Portability, Direction No. 2 of 2004 on Number Portability MMS Multimedia Messaging Service MNP Mobile Number Portability MSAN Multi-service access node MS (Access) Commission Determination on the Mandatory Standard on Access, Determination No. 2 of 2005

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MS (DTT) Commission Determination on the Mandatory Standard for Free to Air Transmission of Digital Terrestrial Television Service, Determination No. 2 of 2006 MS (Pricing) Commission Determination on the Mandatory Standard on Access Pricing, Determination No. 1 of 2006 MVNO Mobile Virtual Network Operator MyICMS 886 Malaysia’s strategy for Information, Communications and Multimedia services from 2006 to 2010 MyIX Malaysian Internet Exchange NEAP Numbering and Electronic Addressing Plan NIPI National Internet Peering Initiatives NGA Next Generation Access NGN Next Generation Network NFP Network Facilities Provider NPOs The National Policy Objectives for Malaysia’s communications and multimedia industry, as set out in section 3(2) of the CMA NRA National Regulatory Authority NSP Network Service Provider OECD Organisation for Economic Co-operation and Development Ofcom Office of Communications of the United Kingdom OFTA Office of the Telecommunications Authority of Hong Kong Oftel Office of Telecommunications of the United Kingdom (now known as Ofcom) OLTE Optical Line Termination Equipment OPTA The regulatory authority in Netherlands OSA One Stop Agencies OSI Open Systems Interconnection PABX Private Automatic Branch Exchange PI Paper This Public Inquiry Paper PI on Access List in The Public Inquiry held on the Access List from February to June 2005 2005. See PI Paper on Access List, PI Report on Access List, Access List, MS (Access) and Guidelines on Implementation of ANE. PI on Dominance in The Public Inquiry held on Dominance held from August to 2004 December 2004. See PI Paper on Dominance, PI Report on Dominance and Commission Determination on Dominant Position in a Communications Market, Determination No. 2 of 2004. PI on MNP in 2005 The Public Inquiry held on MNP from September to December 2005. See PI Paper on MNP and PI Report on MNP. PI Paper on Access Public Inquiry Paper: Review and Expansion of Access List List Determination (8 February 2005) PI Paper on Public Inquiry Paper: Assessment of Dominance in Communications Dominance Markets (August 2004)

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PI Paper on MNP Public Inquiry Paper: Implementation of MNP in Malaysia (1 September 2005) PI Report on Access A Report on a Public Inquiry: Review and Expansion of Access List List Determination (27 May 2005) PI Report on Report on a Public Inquiry: Assessment of Dominance in Dominance Communications Markets (December 2004) PI Report on MNP A Report on a Public Inquiry under Section 55(2), 55(4) and 61 of the CMA 1998 on Implementation of Mobile Number Portability in Malaysia (28 December 2005) POA Point of Access POI Point of Interconnection PON Passive Optical Network POP Point of Presence POTS Plain Old Telephony Services pre-PI process SKMM’s initial consultations with stakeholders which have contributed to this Public Inquiry Paper PRI-ISDN Primary Rate Interface ISDN PSTN Public Switched Telephone Network QoS Quality of Service SBC State-backed Company SDSL Symmetric Digital Subscriber Line SDTV Standard Digital Television SEA-ME-WE3 South East Asia Middle East Western Europe 3 submarine cable system SEA-ME-WE4 South East Asia Middle East Western Europe 4 submarine cable system SKMM Malaysian Communications and Multimedia Commission SMP Significant Market Power SMS Short Messaging Service SRSP Standard Radio System Plan SRSP-521 DTT SRSP on Requirements for Digital Terrestrial Television (including digital terrestrial sound) (DTT) service operating in the frequency bands 174 MHz to 230 MHz and 470 MHz to 742 MHz Standard access The obligation to provide access to facilities or services included on obligations (SAOs) the Access List in accordance with section 149 of the CMA SS7 Signalling System Number 7 TAF Telecommunications Access Forum in Australia TIME TT dotCom Sdn. Bhd. TM Telekom Malaysia Berhad TM Net TM Net Sdn. Bhd. U Mobile U Mobile Sdn. Bhd.

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UMTS Universal Mobile Telecommunications System UMTS (M) UMTS (M) Sdn. Bhd. UNCTAD United Nations Conference On Trade And Development USP Universal Service Provision VDSL Very High Bit-Rate Digital Subscriber Line VoIP Voice Over Internet Protocol WiFi Wireless Fidelity WiMAX Worldwide Interoperability for Microwave Access WLL Wireless Local Loop WLR Wholesale Line Rental WSIS World Summit on the Information Society 3GPP Third Generation Partnership Project

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SUMMARY OF ISSUES FOR COMMENT

The SKMM welcomes comment on the following questions and issues raised in this PI Paper:

Number Section Question/Issue

1 3.8 The SKMM seeks views on the methodology applied in determining whether a facility or service should be included in the Access List. Are there any other tests that could be considered by the SKMM?

2 4.4 The SKMM seeks views on the proposed market based approach in considering facilities and services for inclusion/removal from the Access List.

3 5.3.5 The SKMM seeks comments on the state of competition in the fixed telephony service, particularly with respect to retail pricing and innovation.

4 5.3.5 Do you consider that there is evidence that VoIP services have become substitutes for more traditional fixed line telephony services?

5 5.4.1(e)(i) (a) The SKMM seeks views on whether there is a distortion in the current service description, and whether the Fixed Network Termination Service should be amended to restrict its applicability to termination to end users only and exclude transit. (b) What would be the likely implications of such a limitation?

6 5.4.1(e)(ii) Do you agree with the SKMM’s preliminary view that freephone 1800, tollfree 1300 and other similar services should be available from public payphones?

7 5.4.2 The SKMM seeks views on whether the Fixed Network Origination Service and Fixed Network Termination Service should be retained on the Access List.

8 5.4.4 What will be the likely impact, including to the end users, in the event that Equal Access (PSTN) Service is removed from the Access List?

9 5.4.6 (a) What will be the likely impact of removal of the Internet Access Call Origination from the Access List? (b) Specifically, what will be the impact on marginal subscribers in Malaysia?

10 5.5.1(b) The SKMM seeks comments on the precise nature of any difficulties currently experienced in acquiring PRI ISDN service, and any proposed solution to resolve the difficulties.

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Number Section Question/Issue

11 5.5.2 (a) The SKMM seeks comments on including a PRI ISDN Service via freephone 1800 and 7 or 8 digit numbers on Access List? (b) The SKMM seeks comments on whether regulation via the Access List will resolve the problems arising from the operation of this service in its current form?

12 5.5.4 (a) The SKMM seeks comments on whether wholesale line rental should be regulated in Malaysia. (b) If so, would you acquire it and for what purpose? (c) Have you attempted to commercially negotiate access to a wholesale line rental service? (d) What are the factors that are considered a prerequisite in acquiring a wholesale line rental service?

13 6.3.5 (a) What is your view of the state of competition at the retail level for mobile services in Malaysia? (b) Has it become more or less competitive over time?

14 6.4.2 (a) Do you consider that the Mobile Network Termination Service should be retained on the Access List with amendments? (b) Do you consider that there are any developments since 2005 including the implementation of MNP that may warrant removal of the Mobile Network Origination Service from the Access List? (c) What are the negative impacts that may arise, taking into consideration that Mobile Network Origination Service would still be available on a commercial basis?

15 6.4.4 (a) Do you consider that 3G-2G Domestic Inter-Operator Roaming Service should continue to be retained on the Access List? (b) Should the scope of the service be expanded to include initiation and reception of data services and connectivity?

16 6.4.6 (a) Do you consider that there are any issues that have yet to be addressed during the implementation of MNP and that could be addressed via access regulation? (b) If you are of the view that the service should be retained on the Access List, what aspects of the service should be regulated by the Access List?

17 6.4.7(b)(ii) (a) What has been the impact of access regulation on infrastructure sharing in Malaysia? (b) What are the issues faced when sharing the infrastructure of SBCs and can these issues be addressed through access regulation?

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Number Section Question/Issue

18 6.4.7(b) Has the inclusion of a technology-neutral infrastructure sharing (iii) service assisted in respect of access for broadcasting services?

19 6.4.7(b) (a) The SKMM seeks comments on the commercial difficulties, (iv) if any, faced by new operators in relation to in-building coverage that warrants it to be addressed under access. (b) Do you have any views on whether access regulation can be used to address the in-building coverage issues noted above? Is it technically feasible? In particular, the SKMM invites comments about appropriate access arrangements that could apply to CAS.

20 6.4.8 (a) Do you agree that Infrastructure Sharing should be retained on the Access List?

(b) What further improvements can you propose to ensure that Infrastructure Sharing operates more effectively?

21 6.5.2 (a) Do you have in place, or have you attempted to reach, commercial arrangements for 2G inter-operator domestic roaming nationwide, other than East West Highway? (b) Do you consider that the benefits of regulating domestic roaming in underserved areas of Malaysia would outweigh the costs, including technical costs?

22 6.5.4 (a) Do you have any views on whether a 3G-3G roaming service should be included on the Access List? (b) Do you have any views on the technical feasibility of such regulation?

23 6.5.6 What do you consider will be the impact on the mobile services market if MVNO regulation is not imposed through the Access List?

24 7.3.5 What is your view on the state of competition in the domestic segment of the international service, including the backhaul element?

25 7.4(c) The SKMM would like to seek feedback on the pervasiveness of the POA arrangements, and whether the issues raised under POA arrangements can be addressed through Domestic Connectivity to International Services.

26 7.4.2 (a) Do you agree that Domestic Connectivity to International Services should continue to be retained on the Access List? (b) Do you consider that any specific backhaul routes are competitive, and why?

27 8.4.1(b) (a) The SKMM seeks comments on issues of quality of service of the Interconnect Link Service. (b) The SKMM seeks comments on the implementation of

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Number Section Question/Issue Interconnect Link Service with Network Co-Location Service, and the prevalence of one-way charging by Access Providers.

28 8.4.2 Do you agree that Interconnect Link Service should be retained on the Access List?

29 8.4.3(b) (a) The SKMM seeks comments on the prevalence of access issues to co-location services within buildings and the resulting effect on operators. (b) The SKMM is also interested in comments on whether the access regime is the appropriate place to address this issue.

30 8.4.3(b) The SKMM seeks comments on the use of the Network Co- Location service for purposes not related to facilities or services on the Access List. The SKMM would like to understand the prevalence of this activity currently and the views of operators on this issue.

31 8.4.4 Do you agree that Network Co-Location Service should be retained on the Access List?

32 8.4.6 (a) The SKMM seeks comments on whether the Network Signalling Service should remain a separate service on the Access List. (b) The SKMM also seeks comments on whether the current Interconnect Link Service is sufficient to address any access issues associated with Network Signalling.

33 9.3.5 How would you describe the state of competition in leased lines at the retail and wholesale level?

34 9.4.2 (a) Do you consider that the Private Circuit Completion Service as amended should be retained on the Access List? (b) Are there any outstanding issues that could be addressed by amending the current service description?

35 9.4.3(d)(i) The SKMM seeks detailed proposals on the criteria to be applied to specific routes that may be competitive in the Domestic Network Transmission Services, and evidence to demonstrate that competitiveness.

36 9.4.4 (a) Do you agree that Domestic Network Transmission Service should be retained on the Access List? (b) The SKMM seeks views on whether the current service description for Domestic Network Transmission Service is appropriate in an NGN environment where Ethernet services are critical.

37 10.3.2 (a) What is your view of the state of competition at the retail

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Number Section Question/Issue level for Broadcasting services in Malaysia? (b) Has it become more or less competitive over time?

38 10.4.1(b) What effect has the regulation of the Broadcasting Transmission Service had on price, quality and other terms of the service?

39 10.4.1(d) What effect has the regulation of the Broadcasting Transmission Service had on infrastructure investment by broadcasters?

40 10.4.2 (a) Do you agree that Broadcasting Transmission Service should be retained on the Access List? (b) Do you have any comments on whether any particular trunk routes used in respect of the Broadcasting Transmission Service are sufficiently competitive to warrant a relaxation of regulation on those specific routes?

41 10.4.3(b) The SKMM seeks comments on whether any access issues may be addressed through Digital Terrestrial Broadcasting Multiplexing Service and Broadcasting Transmission Service.

42 10.4.4 The SKMM seeks comments on its preliminary view to retain the Digital Terrestrial Broadcasting Multiplexing Service on the Access List and its proposed service description.

43 11.3.5 The SKMM invites comments on the competitiveness of the retail broadband services market.

44 11.4.1 (a) The SKMM invites comments on the competitiveness of the wholesale broadband services market. (b) The SKMM seeks comments on the issues pertaining to the wholesale digital subscriber line service, and whether some of the terms and conditions for the wholesale digital subscriber line product could be considered for the Bitstream Services. (c) The SKMM seeks comments on the demand for Naked DSL service with justifications, and whether parties are able to commercially negotiate for service.

45 11.4.2 (a) The SKMM invites views on the membership process and on ways that delays to join MyIX can be addressed. (b) The SKMM invites views on whether other than those noted, there are issues faced by new ISPs which prohibit them from benefiting from the services of MyIX, which is the ability to exchange domestic Internet traffic efficiently.

46 11.5.1 The SKMM invites comments on whether the Internet Interconnection Service should continue to remain on the Access List given that the MyIX now provides ISPs the ability to exchange domestic Internet traffic.

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Number Section Question/Issue

47 11.5.3 (a) The SKMM invites comments on the means by which regulation could be applied under the Access List to ensure the provision of a Naked DSL service. (b) Is it reasonable that an Access Seeker can only offer a Naked DSL service through acquisition of the Line Sharing Service on the condition that the customer pays line rental to TM?

48 11.6.1 The SKMM seeks comments on whether wholesale broadband services provided over WiMAX and mobile networks are likely to be competitively provided and whether regulation is required of these wholesale broadband services.

49 12.2.4 The SKMM invites comments on NGNs generally and, in particular, the advantages likely to accrue to suppliers and end users from NGN.

50 12.4.6 The SKMM invites comments on the importance of broadband and the competitive supply of broadband services in Malaysia.

51 12.6.1 Do you think another high speed wireline-based broadband network as extensive as TM’s HSBB network is likely to be deployed in Malaysia?

52 12.6.2 (a) The SKMM invites comments on its proposal that the access network component of the HSBB network is likely to constitute a bottleneck and that there are grounds for regulating the provision of services over the access network. (b) The SKMM also invites comments on the level of likely competitive constraint that wireless broadband providers will place on the HSBB network, particularly for advanced services such as IPTV.

53 12.6.3 The SKMM invites comments on whether the transmission component of the HSBB network is also likely to constitute a bottleneck.

54 12.6.4 The SKMM invites comments on whether there is likely to be significant demand side and other risks associated with the HSBB network investment which is not otherwise offset by the Government’s funding contribution.

55 12.6.6 (a) The SKMM invites comments on whether regulatory forbearance is an appropriate response when considering whether to regulate high speed broadband services over the HSBB network. (b) The SKMM also invites comments on whether there are other countries not considered above where regulatory forbearance has been considered, with particular emphasis on those countries which are likely to have application to

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Number Section Question/Issue Malaysia. (c) The SKMM also invites comments on the risks if the SKMM decided not to impose regulation on high speed broadband network owners.

56 12.6.7 The SKMM invites comments on whether the imposition of a non-discrimination and openness requirement on the provision of high speed broadband services over the HSBB network is a proportionate regulatory response.

57 12.6.8 The SKMM invites preliminary comments on the effect of cost- based regulation on incentives to invest and risk of investment in high speed broadband networks.

58 12.7.2 The SKMM invites comments on the feasibility of unbundling fibre networks and whether there would be demand for unbundled fibre network elements.

59 12.7.4 The SKMM invites comments on whether regulation should be applied to a Layer 2 or Layer 3 network service.

60 12.7.5 The SKMM invites comments on the proposed QoS regime described in Table 13.

61 12.7.6 The SKMM invites comments on how different speeds should be offered to customers of high speed broadband services and whether the network owner should pre-define these speeds and/or whether the Access Seeker should control these speeds (or both).

62 12.7.7 The SKMM invites comments on the POIs to high speed broadband networks.

63 12.7.8 The SKMM invites comments on this proposal to consider two services for inclusion on the Access List: (a) an HSBB Network Service with QoS; and (b) an HSBB Network Service without QoS.

64 12.7.9 (a) The SKMM invites comments about whether there are any other services or amendments to existing services required to ensure the origination and termination of telephony services over the HSBB network. (b) Should the proposed services over the HSBB/NGN network by the SKMM in this PI Paper co-exist with TM’s commercially negotiated services over the HSBB network, or do TM’s services render redundant the need to regulate services over the HSBB network?

65 12.8.3(a) (a) The SKMM invites comments about whether the copper based Full Access Service should be available on a transitional basis until the HSBB network is available in an

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Number Section Question/Issue area. (b) The SKMM also invites comments about whether TM should continue to make available “redundant” copper between the exchanges and the node when it is replaced with fibre in the HSBB network.

66 12.8.3(b) The SKMM invites comments on whether the Full Access Service should be regulated in areas where the HSBB network will not be located.

67 12.8.4 (a ) The SKMM invites comments on whether it would be commercially feasible for the Sub-loop Service to be made available outside the HSBB areas. (b) The SKMM also invites comments about the commercial feasibility and cost/benefit of requiring the supply of the copper based Sub-loop Service until the HSBB network is rolled out.

68 12.8.5 (a) The SKMM invites comments on whether the Line Sharing Service should be regulated in areas where the HSBB network is not located. (b) The SKMM also invites comments on whether a phase-out of the copper based Line Sharing Service in HSBB areas should be considered, having regard to the fact that the service would only be available for a short period of time while the HSBB network is being rolled out.

69 12.8.6(a) The SKMM invites comments on whether the Bitstream Service in HSBB areas is effectively replaced by the HSBB services (with or without QoS).

70 12.8.6(b) The SKMM invites comments on whether the Bitstream Service should be retained on the Access List in areas outside the HSBB areas.

71 12.8.7(a) The SKMM invites comments on whether the Digital Subscriber Line Resale Service should be removed from the Access List in HSBB areas.

72 12.8.7(b) (a) The SKMM invites comments on whether the Digital Subscriber Line Resale Service should be retained on the Access List outside the HSBB areas. (b) The SKMM also invites comments on whether the Digital Subscriber Line Resale Service should be replaced with a service which is more similar to the TM Streamyx service outside HSBB areas.

73 13.4 (a) The SKMM invites comments on whether wireless broadband and fixed broadband services should be included in the broader broadband market or whether the SKMM should consider them to be in separate markets.

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Number Section Question/Issue (b) The SKMM also invites comments on whether WiMAX termination should be considered to be most similar to mobile termination or fixed termination services.

74 13.6 (a) The SKMM invites comments on any potential issues between WiMax operators and the fixed line and/or mobile operators that affects any-to-any connectivity. (b) The SKMM also invites comments on whether there are any other issues concerning interconnection by WiMAX operators.

75 13.8 The SKMM seeks views on the regulatory options discussed in section 13.7 to address any-to-any connectivity with, say, WiMAX networks.

76 14 The SKMM invites comments on the proposed rationalisation of certain facilities and services into generic categories, with justifications.

77 14.1 The SKMM invites comments on the implications of rationalising Network Origination Service and Network Termination Service, including the ability to differentiate between different technologies (for example, fixed and mobile) for the purposes of determining pricing.

78 14.2 The SKMM invites comments on the implications of rationalising Transmission Service.

79 15.4.1 (a) The SKMM seeks feedback, with justification on the enumerated list of facilities and services that require additional terms and conditions, including whether there are any other that could be considered. (b) The SKMM seeks feedback on the proposed way forward by holding a separate public inquiry on the MS (Access). (c) Do you consider that there could be a role for the MAFB such as developing some of the areas as access codes?

80 15.5.1 Do you consider that the MS (Access) should be replaced by, or supplemented with, a model set of non-price access terms and conditions?

81 15.6.1 The SKMM seeks further views from the industry on the quantum of comprehensive general liability insurance in subsection 5.3.9 of MS (Access).

82 15.7.1 The SKMM seeks further views about the fast track mechanism in subsection 5.4 of the MS (Access), particularly ways in which it may be improved to encourage use by parties.

83 15.8.1 The SKMM seeks input on the prevailing industry practice in relation to forecasting procedures, and whether there are any

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Number Section Question/Issue difficulties faced by new operators in this respect.

84 15.9.1 (a) The SKMM seeks feedback, with justification in relation to the comments received on the indicative timeframe for delivery. (b) The SKMM seeks feedback on the prevailing industry practice in relation to ordering procedures, and any difficulties faced by the newer operators.

85 15.12.1 (a) The SKMM seeks feedback with justification on the proposal received to remove subsection 5.14.5 of the MS (Access) and the impact of its removal on the inter-operator billing arrangements. (b) The SKMM seeks feedback with justification on whether there is merit to consider the proposal that the withholding of disputed amounts provided under subsection 5.14.11 of the MS (Access) should exclude voice services. (c) The SKMM seeks feedback with justification on the impact if backbilling in subsection 5.14.16 of the MS (Access) is restricted to the immediate next invoice. (d) The SKMM seeks feedback on the treatment of provisional Invoices after 60 days under subsection 5.14.17.

86 15.13.1 The SKMM seeks feedback on the adequacy of current technical obligations specified in subsection 5.16.9 of the MS (Access), including any proposals for suitable QoS parameters that could be included for transmission services.

87 15.17.1 (a) The SKMM seeks views on the standard bitrate allocation for SDTV, as applicable under MPEG-4. (b) The SKMM also seeks views on whether the standard bitrate allocation is necessary for HDTV, and the appropriate bitrate.

88 15.21 The SKMM seeks views and comments on the proposed amendments to the MS (Access).

89 Annexure 2 The SKMM seeks comments on the proposed new facilities and services and other amendments to the Access List, including the rationalisation of services into generic categories.

Table 1: Summary of questions and issues for comment

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SUMMARY OF SKMM VIEWS ON AMENDMENTS AND ADDITIONS TO THE ACCESS LIST

The following Table 2 summarises the SKMM’s preliminary views on amendments to the Access List.

The SKMM stresses that this PI Paper only sets out the SKMM’s preliminary views. The SKMM invites comments in response to those preliminary views and the questions raised in this Paper in order to finalise an appropriate Access List Determination. A more detailed explanation of the SKMM’s reasoning for reaching the preliminary views is set out in the following table and discussion:

Service SKMM’s preliminary view

Fixed Network Origination Service Retain on the Access List, with amendments to the service description. In addition, this service is considered for rationalisation under Network Origination Service.

Fixed Network Termination Service Retain on the Access List, with amendments to the service description. In addition, this service is considered for rationalisation under Network Termination Service.

Equal Access (PSTN) Service Considering removal from the Access List, and seeks comments on likely impact.

Internet Access Call Origination Considering removal from the Access List, and Service seeks comments on likely impact, including on marginal subscribers.

VoIP PRI-ISDN Service Has not reached a preliminary view and seek comments.

Wholesale Line Rental Service Has not reached a preliminary view and seek comments.

Mobile Network Origination Service Seeks comments on any negative impact if the service is removed from the Access List. If retained, this service is also considered for rationalisation under Network Origination Service.

Mobile Network Termination Retain on the Access List, with amendments to the Service service description. In addition, this service is considered for rationalisation under Network Termination Service.

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Service SKMM’s preliminary view

3G-2G Domestic Inter-Operator Retain on the Access List. Roaming Service

Inter-Operator Mobile Number Seeks comments on any access issues that are not Portability Support Services addressed that warrant retaining the service on the Access List.

Infrastructure Sharing Retain on the Access List, with amendments to the service description.

2G-2G Domestic Inter-Operator Considers that it may be applicable to underserved Roaming Service areas, and seeks comments.

3G-3G Roaming Service Not to include on the Access List.

Mobile Virtual Network Operator Not to include on the Access List. Service

Domestic Connectivity to Retain on the Access List. In addition, the International Capacity backhaul component is considered for rationalisation under Transmission Service.

Interconnect Link Service Retain on the Access List.

Network Co-Location Service Retain on the Access List.

Network Signalling Service Considering removal from the Access List, as access issues may be addressed under Interconnect Link Service.

Private Circuit Completion Service Retain on the Access List, with amendments to the service description.

Domestic Network Transmission Retain on the Access List, with amendments to the Service service description. In addition, this service is considered for rationalisation under Transmission Service.

Broadcasting Transmission Service Retain on the Access List. In addition, this service is considered for rationalisation under Transmission Service.

Digital Terrestrial Broadcasting Retain on the Access List. Multiplexing Service

Internet Interconnection Service Retain on the Access List.

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Service SKMM’s preliminary view

Full Access Service (a) In HSBB areas: Due to the Ministerial Direction on HSBB and Access List, the Full Access Service will not be available for 7 years from 16 September 2008 to 15 September 2015. However, the SKMM seeks comments on the cost and benefit of making Full Access Service available till HSBB is rolled-out in the area; and whether TM should continue to make available “redundant” copper between the exchanges and the node.

(b) In non-HSBB areas: Seek comments on whether this service should be retained.

Line Sharing Service (a) In HSBB areas: Due to the Ministerial Direction on HSBB and Access List, the Line Sharing Service will not be available for 7 years from 16 September 2008 to 15 September 2015. However, the SKMM seeks comments on the cost and benefit of making Line Sharing Service available till HSBB is rolled-out in the area.

(b) In non-HSBB areas: Seek comments on whether this service should be retained.

Bitstream Service (with and (a) In HSBB areas: Bitstream service is replaced without Network Service) by the functionally equivalent HSBB Network Service with QoS and HSBB Network Service without QoS.

(b) In non-HSBB areas: Bitstream service is retained.

Sub-loop Service (a) In HSBB areas: Due to the Ministerial Direction on HSBB and Access List, the Line Sharing Service will not be available for 7 years from 16 September 2008 to 15 September 2015. However, the SKMM seeks comments on the cost and benefit of making Sub-Loop Service available till HSBB is rolled- out in the area.

(b) In non-HSBB areas: Seeks comments on whether this service should be retained having regard to the costs and benefits and the commercial feasibility of acquiring Sub-loop Service.

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Service SKMM’s preliminary view

Digital Subscriber Line Resale (a) In HSBB areas: Digital Subscriber Line Resale Service Service may not be as relevant.

(b) In non-HSBB areas: Seek comments for retaining in non-HSBB areas.

HSBB Network Service with QoS Include on the Access List for HSBB areas.

HSBB Network Service without Include on the Access List for HSBB areas. QoS

Network Origination Service Rationalisation of Fixed Network Origination Service, Mobile Network Origination Service (if retained), origination services from WiMAX and NGN.

Network Termination Service Rationalisation of Fixed Network Termination Service, Mobile Network Termination Service, termination onto WiMAX and NGN.

Transmission Service Rationalisation of Domestic Network Transmission Service, Broadcasting Transmission Service and backhaul of Domestic Connectivity to International Services.

Leased Lines Covered by Private Circuit Completion Service in an NGN and non-NGN environment.

Table 2: Summary views

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PART A: BACKGROUND

1 OVERVIEW

1.1 Structure of this PI Paper

This Public Inquiry Paper ( PI Paper ) is structured into 6 parts containing the following chapters:

Part A: Background

Chapters 1 to 3 are an introduction to this review, covering the legal and regulatory context.

Part B: Review of Existing Markets

Chapters 4 to 11 review the existing Access List facilities and services in each of Malaysia’s 7 communications and multimedia markets. The SKMM gives a preliminary view on the continuing regulation of each of those facilities and services, including any potential new services.

Part C: Regulation of High Speed Broadband Services

Chapter 12 provides the SKMM’s preliminary views on the appropriate regulation of high speed broadband services in Malaysia.

Part D: Regulation of Wireless Broadband Services

Chapter 13 considers the regulatory arrangements for wireless broadband services, specifically Worldwide Interoperability for Microwave Access (WiMAX ).

Part E: Access List Rationalisation

Chapter 14 is a discussion of the potential rationalisation of certain Access List facilities and services into more generic service categories.

Part F: Mandatory Standard on Access

Chapter 15 reviews potential amendments to the Mandatory Standard on Access ( MS (Access) ) arising from its operation and implementation to date and other amendments

Page 23 necessary as a result of the SKMM’s preliminary views in this Public Inquiry regarding changes to the Access List. This includes a discussion of whether more substantial (rather than incidental) amendments to the MS (Access) are necessary, and whether these should be more fully considered as the subject of a separate Public Inquiry.

1.2 Purpose

This PI Paper has been issued by the SKMM to solicit views from industry participants, other interested parties and members of the public to assist the SKMM to determine whether:

(a) existing Access List facilities and services should be removed;

(b) the definitions and scope of any Access List items that are to be retained on the Access List remain appropriate or should be revised;

(c) additional facilities and services should be included in the Access List;

(d) any other facilities and services in general should be included or removed; and

(e) in relation to the MS (Access), existing provisions should be amended or new provisions should be included.

1.3 Role of this Public Inquiry

Under section 55(1) of the CMA, the SKMM may, from time to time, make a determination on any matter specified in the CMA as being subject to SKMM’s determination. The relevant matter in this case is the question of access under Part VI, Chapter 3 of the CMA.

Access regulation, or forbearance in respect of access regulation, has long-term consequences: overall economic implications for industry, financial implications for firms, impacts on consumers and technological innovation. The SKMM has adopted the widest possible consultative approach under the legislation in order to obtain maximum industry and public input. The SKMM’s approach is also designed to promote certainty and transparency in the exercise of its powers.

1.4 Public Inquiry scope

In conducting this Public Inquiry, the SKMM will be undertaking the following tasks:

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(a) applying a robust and transparent methodology for determining which new facilities and services will be considered for inclusion on the Access List, and which existing facilities and services should be removed or amended;

(b) a review of the state of competition in the Malaysian communications and multimedia industry and an assessment as to whether there are any potential access issues which arise;

(c) an analysis of the likely market structures and outcomes arising from access regulation, in particular whether the inclusion of certain facilities and services on the Access List would be consistent with the objects of the CMA; and

(d) reviewing and/or drafting supporting regulatory documents such as drafting a revised Access List and reviewing the MS (Access). This is required in order to update such supporting documents to accommodate any changes in the access regime arising from this Public Inquiry. It is also envisaged that this task will enhance the certainty of the SKMM’s decision-making processes, for the benefit of the industry and end users.

1.5 Outputs of this Public Inquiry

The outputs that are intended to be achieved as a result of this Public Inquiry are:

(a) a revised Determination on the Access List; and

(b) a revised Determination on the MS (Access).

1.6 Matters outside scope

Matters that are outside the scope of this review include:

(a) determinations on pricing; and

(b) consideration of exemptions from the standard access obligations (SAOs), which are subject to the grant by the Minister.

1.7 Public Inquiry process

The legislative requirements of the Public Inquiry process are detailed in section 2 of this PI Paper. In particular, the SKMM highlights the following factors:

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(a) this Public Inquiry will result in two outputs. Given that both outputs noted in section 1.5 above are all related to this Public Inquiry, the SKMM will combine these inquiries into this single Public Inquiry. This is consistent with the SKMM’s powers under section 59 of the CMA and also for efficient regulatory best practice;

(b) section 55(5) of the CMA requires the SKMM to make a determination within 45 days of the conclusion of its Public Inquiry. Under section 61(1)(d) of the CMA, the Public Inquiry period must be a minimum of 45 days, within which public submissions will be invited. In consideration of the fact that this is a wide ranging and critical Public Inquiry for the future of the communication and multimedia industry, the SKMM will provide stakeholders with about 2 months to provide their comments. The SKMM will then make any determinations arising out of the Public Inquiry during the 45 day period following the close of the Public Inquiry;

IMPORTANT NOTE: The SKMM has provided a period for submissions of about 2 months. As a result, the SKMM will not be providing extensions of time for late submissions.

(c) the regulatory instruments that may potentially be issued following this Public Inquiry may be summarised as follows:

(i) a Determination that varies the existing Determination on the Access List or a new Access List Determination. This Determination would be issued with the retained facilities and services (as amended) and any new facilities and services to be included in the Access List Determination. The 2005 Access List Determination would be either modified, varied or revoked under sections 56 and 146 of the CMA; and

(ii) a Determination that varies the existing Determination on the MS (Access). This Determination would be issued pursuant to sections 56 and 106 of the CMA.

1.8 PI on Access List in 2005

The SKMM undertook a comprehensive review of the Commission Determination of Access List, Determination No. 1 of 2001 and the Commission Determination on the Mandatory Standard on Access, Determination No. 2 of 2003 from August 2004 to May 2005. The current Access List was given effect by a Determination dated 12 June 2005.

This level of detail in the previous review was necessary for several reasons, including:

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(a) the Access List had not been amended since its inception in 2001 and did not reflect the dynamic technological and structural changes that had occurred;

(b) the telecommunications-centric and narrowband focus of the Access List was inconsistent with the SKMM’s rationale of convergence; and

(c) one of the SKMM’s priorities was to ensure that access to network elements (ANE ) could be facilitated.

It resulted in the following:

(a) individual consultations with licensees conducted in September/October 2004;

(b) a Public Inquiry Paper dated 8 February 2005;

(c) public hearings on the Public Inquiry Paper in March 2005;

(d) a Public Inquiry Report dated 27 May 2005;

(e) the new Access List Determination noted above, dated 12 June 2005;

(f) amendments to the MS (Access), resulting in a new Determination dated 12 June 2005; and

(g) Guidelines on Implementation of Access to Network Elements (SKMM/G/04/05) (Guidelines on ANE ) dated 28 September 2005.

1.9 The current Public Inquiry

Generally speaking, it is contemplated that the breadth of work for this current review will not be required to be as substantive as the PI on Access List in 2005. This is because this Review will take the 2005 Access List as its starting point and focus on changes since that time to determine whether the rationale for the determinations made by the SKMM which resulted in the 2005 Access List have changed. Where it appears that the circumstances existing at the time the SKMM made the determinations relating to the 2005 Access List have changed, the focus of this Public Inquiry will be on the implications of those developments for the SKMM’s determination as to the network facilities or services that shall be included on or removed from the Access List.

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The PI on Access List in 2005 also placed a significant emphasis on explaining the concept of access regulation, and the application of the National Policy Objectives (NPOs ) in the Communications and Multimedia Act 1998 ( CMA ) to the access methodology which was applied. It is not proposed to repeat that conceptualisation and application in as extensive detail. As set out in section 3 of this paper, it is instead proposed to include a more concise reference base for access and its relevance to the facilities and services within individual markets. 1

This review of the Access List is of significant interest to the public as well as current or prospective licensees under the CMA. Important changes in some markets since the time of the Access List warrant a review including changes in the broadband market, the entry of new competitors, and developments in technology and innovation. Further, a regulatory authority should consistently review its regulations to ensure they are relevant and proportionate to the relevant markets. One of the fundamental aspects of this Public Inquiry is to challenge or confirm the scope and relevance of the assessment of competition in the 7 markets in the communications and multimedia sector previously identified by the Dominance Inquiry and applied in the previous Access List review.

The requirements of the CMA regarding the conduct of inquiries are strict in relation to timeframes and consultation processes. In addition, the SKMM has cultivated a reputation and an industry expectation of transparency and best practice, reasoned decision-making in its approach to regulation. Accordingly, it is recognised that even if the scope of this review is not as comprehensive as the SKMM’s previous Public Inquiry, the equivalent degree of rigour will need to be applied to its processes and outputs.

It is proposed that this review focus on the 4 areas identified in section 1.2 as follows:

(a) Whether existing Access List facilities and services should be removed

It is principle of good regulatory practice that the appropriateness of regulation is under review. This is to ensure that there is regulation of activities only where there is a clear justification. Removal of a network facility or service from the Access List may be appropriate where, for example, the conditions for competition have improved in a particular market and effective competition has emerged. Evidence that may support the existence of effective competition could include new entrants, competitive price and quality service offerings, and the ability of entities seeking access to network facilities or services to reach commercial arrangements for access in the absence of regulation. It should be noted that the removal of a network facility or service from the Access List is

1 See the Public Inquiry Paper, Review and Expansion of Access List Determination, 8 February 2005 at www.skmm.gov.my

Page 28 likely to be an indication that the existence of regulation has worked effectively to stimulate competition to the extent that formal regulation is no longer necessary.

(b) To appropriately revise the definition and scope of existing facilities and services

The communications multimedia industry is constantly and rapidly evolving. Therefore, reviewing the appropriateness of the definitions of network facilities and services set out in the Access List is an important part of this review. Particularly in light of the impending migration to a Next Generation Network ( NGN ) environment in Malaysia and WiMAX rollout over the coming year, it is necessary to consider whether the definitions of some Access List facilities services need to be revised.

The process to be undertaken by the SKMM in this regard is similar to the PI on Access List in 2005, to further update previous narrowband and telco-centric concepts to become compatible with multimedia thinking, reflect the trends in convergence facilitated through Internet Protocol ( IP ).

(c) To identify and assess the need to include new facilities and services

Following the issues raised above, the communications multimedia industry is constantly and rapidly evolving and new technologies are continually being developed. Market conditions can also change over time, for example, as a result of consolidation in the market. The existence of these factors mean that another important part of this review is to identify and assess the need to include new facilities and services. One issue that the SKMM will consider when determining whether there is a need to include new facilities and services is evidence whether Access Seekers have been able to obtain access to a facility or service on a commercial basis and on reasonable terms and conditions.

The PI on Access List in 2005 also included a discussion on the various new technologies as emerging services, specifically their relationship to access issues. Those new technologies included voice over Internet protocol ( VoIP ), wireless broadband, and interconnection with next generation networks. Some amendments were made as a result to certain service descriptions in the Access List, including a technology-neutral service description to accommodate VoIP interconnection; and a variation to the service description of the Domestic Network Transmission Service to include access by wireless broadband providers. In other areas such as NGN interconnection, the SKMM’s final view was that although (at that time) there were no grounds to examine NGNs for regulation, the Malaysian Access Forum Berhad ( MAFB ) was encouraged to examine future NGN interconnection issues.

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As discussed in section 1.11 below, the issue of NGN access is now a key issue and a significant focus of this current Public Inquiry. Globally, carriers are migrating to the NGN platform. The situation is no different in Malaysia with several licensees also planning a similar migration to NGN, and therefore it is timely to consider the access issues related to NGN. The extent to which the access issues arising from the recent HSBB announcement in Malaysia can be addressed through a variation to existing Access List items, or requires the addition of new facilities and services in the Access List, will be addressed in this review.

To the extent that access regulation of any other facilities and services that incorporate new technologies also warrant inclusion, this Public Inquiry will also deal with those issues.

(d) Whether any other facilities and services in general should be included or removed

To the extent that inclusion or removal of a facility is not covered by the above 3 areas, the SKMM will examine the outcomes of its initial meetings with operators and stakeholders conducted during April and May 2008. The case for or against consideration of a particular facility or service for inclusion or removal will be discussed in this PI Paper.

1.10 Process informing this PI Paper

The SKMM has received positive feedback from the industry in its preliminary discussions regarding the timing of this Review. Over April and May 2008, the SKMM undertook detailed discussions on an individual, confidential basis with the stakeholders listed in Annexure 1. In addition, the SKMM conducted two awareness sessions for the rest of the licensees on the access regime, Access List and MS (Access) on 18 April 2008 and 9 May 2008. A total of 85 participants from the industry attended both sessions.

The SKMM also distributed a set of questionnaires that covered:

(a) details about operator businesses, the facilities and services on the Access List that they acquire or provide, and issues that they experienced regarding the operation of the Access List and the MS (Access);

(b) questions regarding the state of competition in the individual markets in Malaysia for communications and multimedia services; and

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(c) key issues in broadband regarding the use of the 6-broadband-related services currently on the Access List, and the views on how those existing services will be relevant in an NGN environment, and how regulation should be adapted.

Some stakeholders as listed in Annexure 1 have submitted written responses of their preliminary views on the questionnaires. Unless the information provided by stakeholders in these preliminary discussions is publicly available, the SKMM has not attributed them to any party.

The SKMM considers that this pre-PI process is the optimal approach. The SKMM entered into those discussions and prepared this PI Paper with an open mind and without preconceptions regarding the content and direction of this Public Inquiry. Nevertheless, the discussions and written responses were useful to identify the issues which formed the basis of this PI Paper. Combined with the legislative requirements for this Review and the SKMM’s overall objectives, this has produced what the SKMM considers to be a relevant series of questions and preliminary views.

The answers to these questionnaires formed the basis of many discussions over several weeks and have provided clarity around 5 key themes that emerged:

(i) Any-to-Any Connectivity

The concept of any-to-any connectivity is central to the origination and termination services, to allow any user from any network to be able to call and communicate with another user on the same or different network. Any-to-any connectivity for any technology, whether existing or new and emerging technologies, such as WiMAX and NGN, is critical. During the pre-PI process, it was highlighted that the more established operators may not wish to seek access to the newer operators’ networks, and hence this may hamper any-to-any connectivity. This important issue would be considered in Chapters 5, 6 and 13.

(ii) Rationalisation of the Access List

It became apparent in the stakeholder discussions that the facilities and services that are currently being acquired or provided could, in some cases, not be readily classified into one of the items on the Access List. This meant that in some cases it was difficult to ascertain whether operators were acquiring or providing either a regulated or non-regulated facility or service. This then lead to practical issues about whether access to that facility or service is subject to an Access Reference

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Document (ARD ) or the Commission Determination on the Mandatory Standard on Access Pricing, Determination No. 1 of 2006 (MS (Pricing) ).

Considering these issues, one of the key matters for the SKMM to consider is whether it is desirable to rationalise some of the Access List items into broader categories. As an example only, there are several items on the Access List which pertain to transmission. Differentiating those transmission services into specific regulated services may be preferable because it enables a specific type of service (and hence with its own particular cost components) to be identified. Conversely, the current structure appears to have made it difficult in some cases to apply the correct service categorisation.

Accordingly, the SKMM has posed some questions for comment and preliminary views around the issue of rationalisation, which is discussed further under Chapter 14.

(iii) NGN regulation

The discussions regarding high speed broadband network revealed a diverse range of thinking regarding future broadband regulation. For some operators, it is apparent that they have considered, from a future-thinking perspective, how they might be able to utilise those services and what is capable of being offered in a high speed broadband environment. During the pre-PI discussions, many operators also commented about the proposed high speed broadband arrangements between the Government of Malaysia and Telekom Malaysia Berhad (TM ). They noted that the arrangements had not been concluded and the details had yet to be made public.

Nevertheless, there was general support expressed from stakeholders for the service descriptions in the current Access List to have applicability in an NGN environment. In terms of existing broadband services, a consistent series of concerns were raised about the pricing for some Access List items such as Digital Subscriber Line Resale Service and Bitstream Services. These issues are discussed further in Chapters 11 and 12.

(iv) Issues outside the PI scope, but within SKMM purview

Several stakeholders raised consistent concerns that are, strictly speaking, outside the scope of this Public Inquiry. Nevertheless, matters such as allegations of anti-competitive conduct fall within the scope of the SKMM’s functions and can

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be addressed. For such matters, the licensees are encouraged to lodge official complaints with relevant details with the SKMM.

(v) New services not being acquired or potentially redundant

Whilst there were again a diverse range of views on the continued relevance of certain facilities and services, it became apparent through the pre-PI process that specific facilities and services had zero or negligible take-up.

The SKMM attempted to inquire further as to the reasons for this. In some cases, it was found that certain technologies were becoming obsolete, whilst in other cases, operators raised concerns that the prices of certain facilities and services on the Access List prohibit them from seeking access.

The SKMM has indicated a preliminary view on some of these matters but also seeks comment on specific preliminary recommendations for the withdrawal of some services.

(vi) Pricing

Finally, following from several of the issues above, stakeholders consistently raised issues with the prices of certain facilities and services on the Access List. These ranged from unregulated pricing for components of certain facilities and services on the Access List 2005 to the quantum of prices.

At this juncture, the SKMM notes the urgency expressed by several licensees. However, it is more appropriate to address pricing-related terms under a separate review on the MS (Pricing), which is anticipated to commence after the completion of this Public Inquiry.

1.11 Relevance to high speed broadband services

The importance and thrust of broadband in Malaysia has resulted in the development of the National Broadband Plan which was approved by the Government in October 2004. Subsequently, the MyICMS 886 strategy was developed which also placed an emphasis

Page 33 on broadband and in particular on high speed broadband which will spur high speed Internet connectivity whilst a user is stationary or on the move. 2

On 15 May 2008, the Malaysian Government formally announced its decision to implement a national broadband network. 3 The Cabinet Committee announced that a broadband implementation plan was developed from both supply and demand perspectives which aim to achieve a target of 50% household broadband penetration rate by 2010. Accordingly, the government announcement included two categories of broadband:

(a) Broadband for General Population (BBGP) with speed of up to 2Mbps; and

(b) High speed broadband for selected high impact areas with usage between 10Mbps and 1Gbps.

To achieve this objective and national target, Malaysia will be classified into 3 zones:

(a) Zone 1 will be covered by high speed broadband and BBGP. This involves high impact or major economic areas such as Kuala Lumpur, Johor Bahru and northern east of Penang.

(b) Zone 2 areas will be covered by BBGP. Here, broadband access for the general public, the major initiatives to widen coverage of broadband will continue under the current strategies which include encouraging competition among the wireless technologies (3G or High Speed Downlink Packet Access ( HSDPA ), WiMAX) and fixed line.

(c) Zone 3 refers to the rural areas where the digital divide needs to be addressed with financing from the Universal Service Provision ( USP ) fund under the CMA and managed by the SKMM. The focus here will be on the initiatives to bridge the country’s digital divide.

It is the intention of the Government to collaborate with TM to enable a high speed broadband network to be deployed in high impact areas ( HSBB network ). Accordingly, the Government and TM entered into an agreement on 16 September 2008 regarding

2 Ministry of Energy, Water and Communication and SKMM, The National Broadband Plan: Enabling High Speed Broadband Under MyICMS 886 , pages 3 – 6. 3 Press Statement: Implementation Strategies to Widen Broadband Penetration in Malaysia , Minister for Energy, Water and Communications, Ministry for Energy, Water and Communication, 15 May 2008

Page 34 the deployment of Phase 1 of the HSBB project. Part C of this PI Paper deals with regulation of HSBB services.

In addition, the SKMM also notes there have been recent media reports of other deployment plans for high speed broadband, such as the fibre optic network to be deployed by TM and TT dotCom Sdn. Bhd. ( TIME ) at Nusajaya in Johor over the next 10 years which is intended to provide connection speeds of up to 100 Mbps for homes and 1 Gbps for businesses. 4 Other parties also made proposals such as the proposal on establishing an independent entity to deploy a high speed broadband backbone network at 100 Mbps (not covering the last mile) 5, the proposal by Pahang based High Speed Broadband Technology Sdn. Bhd. 6 and by Optical Communication Engineering Sdn. Bhd. (excluding the last mile) at RM3 billion. 7

The timing of this Public Inquiry is therefore opportune in terms of new services that may become relevant over the course of the next 3 years. In considering the regulatory approach, the SKMM needs to weigh the risk faced by the party deploying the high speed broadband network in relation to uncertainty in demand against the risk to the industry as a result of any first-mover advantage if there is regulatory forbearance. For this reason, it is a challenge for the SKMM or any regulator in such a position to be certain of making the best regulatory decision at this stage.

There are relevant considerations to be made in this Public Inquiry, including:

(a) examining the services that should be regulated over high speed broadband networks;

(b) examining the definitions of all existing Access List services to evaluate whether they are applicable in an HSBB environment; and

4 See The Star, Telecom Infrastructure and services in Nusajaya may cost up to RM600m , 4 July 2008 http://biz.thestar.com.my/news/story.asp?file=/2008/7/4/business/21736431&sec=business; and Business Times, TM, TIME to be a Nusajaya telco service providers , 4 July 2008 http://www.btimes.com.my/Current_News/BTIMES/Friday/Nation/uemtel.xml/Article/ 5 See The Star, RM5b broadband plan: New proposal aims to slash cost of building HSBB network by 80%, 4 September 2008, http://biz.thestar.com.my/news/story.asp?file=/2008/9/4/business/1943621&sec=business; The Edge, Jaring enters HSBB fray , 4 August 2008 http://www.theedgedaily.com/cms/content.jsp?id=com.tms.cms.article.Article_8ba52e07-cb73c03a- 21447f00-2de67acd 6 See The Malaysian Reserve, HSBT set to pursue broadband project , 4 September 2008; The Star, Pahang still hoping for HSBT licence , 5 September 2008, http://thestar.com.my/news/story.asp?file=/2008/9/5/nation/22236899&sec=nation 7 See The Star, More broadband proposals surface , 6 September 2008, http://biz.thestar.com.my/news/story.asp?file=/2008/9/6/business/1966098&sec=business

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(c) the continued relevance of the copper-based ANE services and digital subscriber line resale services.

The SKMM’s Public Inquiry is focused on the future importance of broadband and how access should be regulated in the future, particularly over the next 3 years. In particular, Parts C and D respectively address the issue of access regulation applicable to fixed and wireless broadband services.

It is important to note that in the event that the high speed broadband services are regulated, the SAOs will apply to all Network Facilities Providers ( NFP ) and Network Service Providers ( NSP ) who are providing those services. In the event the SKMM decides to include high speed broadband services in the Access List, there may be a need for detailed terms and conditions applicable to these services to be developed. This would involve considerable additional work for the SKMM, which would be outside the scope of this current review. For example, migration to the new high speed broadband network itself raises very detailed technical and operational issues.

1.12 Ministerial Direction on HSBB and Access List

A recent and highly relevant development in the SKMM’s deliberations in this Public Inquiry is the Ministerial Direction on High-Speed Broadband and Access List, Direction No.1 of 2008 ( Ministerial Direction on HSBB and Access List ) dated 16 September 2008, which came into operation when it was registered on 19 September 2008.

The Ministerial Direction on HSBB and Access List directs the SKMM on the regulatory framework to be applied to the TM HSBB network. Key features include:

(a) the SKMM is directed to review the HSBB network in relation to other networks. The factors to be taken into account in this review are specified to include:

(i) the long-term benefit of end users;

(ii) the effect on infrastructure investment;

(iii) the effect on competition, including any anti-competitive practices; and

(iv) the promotion of the NPOs;

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(b) the SKMM is directed to defer the implementation of Full Access Service, Line Sharing Service and Sub-loop Service where those services are provided over the HSBB network for 7 years from 16 September 2008 to 15 September 2015;

(c) a statement of TM’s intention that the 3 HSBB services specified and defined in the Ministerial Direction on HSBB and Access List (High-Speed Broadband Access Services, High-Speed Connection Services and High-Speed Transmission Services) will be provided to Access Seekers on a commercially negotiated basis; and

(d) in all other respects, the Access List remains unaffected.

The SKMM is directed to take all measures as may be necessary to give effect to the substance of the Ministerial Direction on HSBB and Access List.

The SKMM is therefore bound to comply with the Ministerial Direction on HSBB and Access List, as well as being obligated to give effect to the requirement to review the HSBB network relative to other networks. In particular, the “commercially negotiated basis” on which the HSBB services as specified in the Ministerial Direction on HSBB and Access List will be provided to Access Seekers is contingent on a future service description offering by TM.

This PI Paper has been drafted to ensure consistency with the Ministerial Direction on HSBB and Access List, as well as providing a basis for assessment of a future commercial offering by TM. The discussion of high speed broadband services and regulatory options in Chapter 12 has been drafted having regard to the Ministerial Direction on HSBB and Access List, but independent of TM’s offer to provide the 3 HSBB services specified in the Ministerial Direction on HSBB and Access List. The SKMM has invited comment on whether the services specified in this PI Paper can co-exist with the 3 HSBB services offered by TM, or whether TM’s services render redundant the need to regulate services over the HSBB network.

1.13 Issues for comment and preliminary views

Throughout this PI Paper, the SKMM has identified some specific questions and issues relevant to its analysis. A consolidated list of these questions is provided at the front of this document. The SKMM welcomes comment on these questions and any other relevant issues that stakeholders wish to raise.

It should be noted that where the SKMM has provided a “preliminary view” on any matters relevant to this Public Inquiry, this view is provided in the following context:

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(a) it is a proposition only which invites views from parties on whether they agree or disagree, and why;

(b) it is not to be taken as a final view of the SKMM; and

(c) it in no way pre-empts any position on pricing that may be subsequently made under the MS (Pricing).

In some cases, the SKMM has insufficient information at this stage to reach a preliminary view and therefore has asked stakeholders for more information before finalising its views.

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2 LEGISLATIVE CONTEXT

2.1 Current Access List Determination

The current Access List has been in operation since 12 June 2005. Its enabling Determination was the first amendment to the Access List since 1 April 2001.

The current facilities and services (23 in total) on the Access List are:

(a) Fixed Network Origination Service

(b) Equal Access (PSTN) Service

(c) Fixed Network Termination Service

(d) Mobile Network Origination Service

(e) Mobile Network Termination Service

(f) Interconnect Link Service

(g) Private Circuit Completion Service

(h) Domestic Network Transmission Service

(i) Internet Access Call Origination Service

(j) 3G-2G Domestic Inter-Operator Roaming Service

(k) Inter-Operator Mobile Number Portability Support Services

(l) Infrastructure Sharing

(m) Domestic Connectivity to International Services

(n) Network Co-Location Service

(o) Network Signalling Service

(p) Full Access Service

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(q) Line Sharing Service

(r) Bitstream Services (Bitstream with Network Service; and Bitstream without Network Service)

(s) Sub-loop Service

(t) Digital Subscriber Line Resale Service

(u) Internet Interconnection Service

(v) Broadcasting Transmission Service

(w) Digital Terrestrial Broadcasting Multiplexing Service

Items (a) to (i) above, with some amendments, comprise the original services on the 2001 Access List. Items (j) to (w) were added to the Access List in 2005.

2.2 Legislative powers and requirements

Under section 146 of the CMA, subject to section 147(2) the SKMM may determine that:

(a) a network facility;

(b) a network service; or

(c) any other facilities and/or services which facilitate the provision of network services or applications services, including content applications services, shall be included in or removed from the Access List.

Section 147(1) also specifies a procedure by which the Access Forum may recommend to the SKMM that the same types of facilities and services described above shall be included in, or removed from, the Access List. In such a case, section 147(2) provides that the SKMM shall determine that the recommended facilities or services are included in the Access List provided that the SKMM is satisfied that the Access Forum has consulted in accordance with that subsection.

Accordingly, under section 146 of the CMA, the SKMM has the discretion to include in or remove from the Access List certain facilities and services, except where a

Page 40 recommendation by the Access Forum, which is the MAFB, under section 147 (in which case the SKMM is required to include in or remove from the Access List the relevant facility or service).

Some industry participants have previously argued that the SKMM’s powers under section 146 are only able to be exercised following a recommendation by the Access Forum under section 147. This is not the SKMM’s view, based on the interpretation above.

The SKMM has also sought to engage with the MAFB to ascertain whether it would make any recommendations on facilities and services for inclusion or removal from the Access List. To date, the MAFB has yet to make any recommendations on facilities and services to be included or removed from the Access List.

2.3 Amendment to Mandatory Standard on Access

As part of this Public Inquiry, consequential amendments to the Mandatory Standard on Access, Determination No. 2 of 2005 ( MS (Access) ) will also be considered. The MS (Access) was determined by the SKMM on or around 14 August 2003. It was further amended under the current Determination as part of the PI on Access List in 2005.

Under section 106(1) of the CMA, the SKMM may determine a modification, variation or revocation of a mandatory standard in accordance with section 55, if it is satisfied that the mandatory standard is no longer consistent with all the matters listed in paragraphs 105(1)(a), (b) and (c).

Paragraphs 105(1)(a), (b) and (c) of the CMA state that a mandatory standard shall be consistent with:

(a) the objects of the CMA;

(b) any relevant instrument under the CMA; and

(c) any relevant provisions of the CMA or subsidiary legislation.

It is likely that, if the Access List is amended by the inclusion or removal of relevant facilities or services, then the MS (Access) would not be consistent with the objects of the CMA or a relevant instrument made under the CMA. For example, in the absence of an amended MS (Access), there may be considerable regulatory uncertainty if new facilities or services are included on the Access List as part of this Public Inquiry.

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It is also possible that more than consequential amendments will need to be made to the MS (Access). Several stakeholders have indicated that there are some fundamental operational and commercial problems with its current functioning. There have also been suggestions that it would be preferable for the SKMM to devise model terms and conditions.

Whilst the SKMM does not necessarily endorse all of the views it has received, it is imperative for the MS (Access) to fulfil its objective to provide meaningful guidance to parties in expeditiously and efficiently negotiating their access arrangements. If in practice there are flaws in fulfilling this, the SKMM recognises that these should be addressed in the most expeditious manner to ensure there are long-term benefits to end users.

The SKMM has not formed a preliminary view on all matters raised pertaining to the MS (Access). Depending on the scope and detail of stakeholder submissions received in this Public Inquiry, the SKMM may decide that it is in the best interest of the industry and in fulfilment of its own statutory obligations to conduct a separate and an in-depth inquiry into the MS (Access).

A discussion of the MS (Access) is contained in chapter 15 of this PI Paper and draft amendments to the MS (Access) at Annexure 4.

2.4 Public Inquiry Process and Determination

The SKMM may undertake a Public Inquiry under section 55 on its own initiative. The SKMM is required to undertake a Public Inquiry under section 55 in order to include facilities or services in, or remove facilities or services from, the Access List. This is because determinations as to what facilities and services are to be included in or removed from the Access List are very likely to be of significant interest to all sectors of the economy, including end-users of communications services, and providers and potential providers of these services.

Section 146 of the CMA does not itself contain any explicit principles or objects which the SKMM is to consider when including facilities or services into or removing facilities or services from the Access List. However, under section 55(6), any determination by the SKMM is required to be consistent with the objects of, and any requirements provided in, the CMA which are relevant to the particular matter or activity. The objects of the CMA that are relevant to the determination by the SKMM of the network facilities and services to be included in, or removed from, the Access List are discussed in section 2.5 below.

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In relation to a determination to amend a MS (Access), section 106(1) requires that a determination is consistent with the objects of the CMA, any relevant instrument under the CMA and any relevant provisions of the CMA or its subsidiary legislation.

If two public inquiries are to be held, such as in relation to the Access List and the MS (Access), then the SKMM may combine these inquiries into one Public Inquiry pursuant to section 59 of the CMA.

2.5 Objects of the CMA and NPOs

As noted above, section 55(6) of the CMA requires that any determination by the SKMM shall be consistent with the objects of the CMA which are relevant to the particular matter or activity. Section 3 of the CMA sets out the objects of the CMA, which relevantly includes the promotion of NPOs for the communications and multimedia industry. The NPOs are set out in subsection 3(2) of the CMA and, relevant to the determination by the SKMM of the network facilities and services to be included in, or removed from, the Access List include:

(a) to establish Malaysia as a major global centre and hub for communications and multimedia information and content services;

(b) to promote a civil society where information-based services will provide the basis of continuing enhancements to quality of work and life;

(c) to regulate for the long-term benefit of the end user ( LTBE );

(d) to promote a high level of consumer confidence in service delivery from the industry;

(e) to ensure an equitable provision of affordable services over ubiquitous national infrastructure;

(f) to create a robust applications environment for end users; and

(g) to facilitate the efficient allocation of resources such as skilled labour, capital, knowledge and national assets.

In broad terms, the SKMM considers that the NPOs are generally consistent with one another. The SKMM also considers that the national policy objective of regulating for the LTBE encompasses, at least to some extent, the other relevant NPOs listed above.

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Therefore, in this Public Inquiry paper, the SKMM proposes to adopt the promotion of the LTBE as the primary reference point for guiding its assessment as to what facilities and services are to be included in or removed from the Access List. Where the SKMM considers that there is any relevant tension between the national policy objective of regulating for the LTBE and any other national policy objective, it will highlight this. Otherwise, references in this PI Paper to the promotion of the LTBE may be assumed to incorporate a reference to the other relevant NPOs identified above.

The SKMM will also be guided by the statutory functions of the SKMM pursuant to the Malaysian Communications and Multimedia Commission Act 1998 (the Commission Act ). The following statutory functions appear to be most relevant to the current task:

(a) encourage and promote the development of the communications and multimedia industry;

(b) encourage and promote self-regulation in the communications and multimedia industry; and

(c) render assistance in any form to, and promote cooperation and coordination amongst, persons engaged in communications and multimedia activities.

2.6 Overall regulatory approach

In making its determination as to what facilities and services are to be included in or removed from the Access List, the SKMM will keep firmly in mind the principles of good regulation in particular, that regulation by way of inclusion of facilities and services on the Access List is targeted to those facilities and services in respect of which a clear case has been made for regulation.

Generally speaking, the LTBE will be promoted through effective competition. Therefore, where the SKMM identifies that a market in which facilities or services are supplied is effectively competitive, that facility or service would be unlikely, in the absence of any other compelling reason, to be included on the Access List.

Section 3 of PI paper sets out in greater detail the access regulation framework and the SKMM’s proposed approach to its determination as to what facilities and services are to be included in or removed from the Access List.

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3 ACCESS REGULATION AND THE SKMM’S METHODOLOGY

3.1 Regulatory approach

Similar to many overseas jurisdictions, the communications and multimedia industry in Malaysia is subject to a specific access regime. The reasons why communications facilities and services are often subject to communications-specific access regimes include:

(a) the sector is characterised by high sunk and fixed costs that contribute to high barriers to entry and may limit the feasibility of facilities-based competition; and

(b) the relatively high degree of dependence on other operators in the communications sector to provide communications services that customers demand – that is, the need for “any-to-any” connectivity.

The presence of the factors identified above means that access regulation has an important role to play where a provider of communications facilities and services has an ability and/or incentive not to provide access, or not to provide access on competitive terms, to its facilities and/or services. Where the SKMM considers that the ability and/or incentive not to provide access on competitive price and non-price terms and conditions exists, the SKMM is likely to consider that inclusion of that facility or service on the Access List will be in the LTBE.

In Malaysia, like all liberalised regulatory regimes, competition (where appropriate) is considered to be the best means of promoting the interests of consumers. It is also generally accepted that since market forces typically provide optimal outcomes and the greatest efficiencies, regulation should only be imposed where there are failures in the operation of the market. This is the regulatory approach applied to the communications markets in Malaysia through the CMA.

The Access List is fundamental to the regulation of access in Malaysia’s communications and multimedia industry. This Public Inquiry is the SKMM’s process of identifying where regulation, through the inclusion of facilities and services on the Access List, is in the LTBE. Qualitative analysis (such as through the public hearing process, individual meetings with operators and written submissions) and, where possible, quantitative analysis (such as through statistical information gathering) will be used to make this assessment.

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3.2 Access concepts

The following information is provided as a convenient re-statement of the key access concepts that will be referred to in this Public Inquiry. An understanding of the distinction and relationships between the wholesale and retail level forms the basis of these concepts.

As noted above, access regulation is intended to promote competition in markets affected by essential inputs controlled by a particular operator, while encouraging efficient investment in infrastructure measured over the long term. Where vertically integrated operators (who control certain essential inputs) operate in upstream and downstream markets, as they do in Malaysia, then access regulation is intended to prevent unreasonable denial of access which may detrimentally affect competition in a related market. Denial of access may take many forms, including the levying of monopoly prices for access to essential facilities.

Access regulation is intended to target regulation of upstream markets in order to promote competition in downstream markets, while continuing to promote efficient infrastructure investment in the long term. As stated in the Explanatory Statement to the CMA:

“Chapter 3 of Part VI of the Act seeks to establish a regime to ensure that all network facilities providers, network service providers and applications service providers can gain access to the necessary facilities and services on reasonable terms and conditions in order to prevent the inhibition of downstream services.”

By regulating at the “upstream” or access level, regulation in “downstream” markets becomes less relevant. By being provided with access on non-discriminatory terms and conditions, all competitors will be competing on a level playing field in markets which use the access services as an essential input.

Figure 1 has previously been used to concisely explain the upstream (wholesale) and downstream (retail) markets, and where the access issues arise.

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Upstream

Vertically Integrated ACCESS WHOLESALE ONLY operator ACCESS (e.g. wholesale monopolist) WHOLESALE

COMPETITOR 1 COMPETITOR 2 COMPETITOR 3 COMPETITOR 4 COMPETITOR 5

RETAIL RETAIL RETAIL RETAIL RETAIL RETAIL COMPETITION COMPETITION COMPETITION COMPETITION COMPETITION

Downstream

END USERS

Figure 1: Upstream and downstream access concepts

3.3 Access in the Malaysian context

3.3.1 Scope of the access obligation

The Access List may comprise:

(a) network facilities;

(b) network services; and

(c) other facilities and/or services which facilitate the provision of network services or applications services, including content applications services.

Such facilities and services may be included on or removed from the Access List by the SKMM under sections 146 and 147 of the CMA.

All NFPs and NSPs have obligations to supply access to their facilities and services included on the Access List ( Access Providers ). Applications service providers ( ASPs ) and content applications service providers ( CASPs ) have no such obligation .

Seekers of access include NFPs, NSPs, ASPs and CASPs ( Access Seekers ).

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3.3.2 Other features of the access regime in Malaysia

In addition to the Access List and MS (Access), which are the outputs of this Public Inquiry, there are other features of the access regime in Malaysia. Figure 2 below illustrates the access regime:

MS (Access) Access SKMM accepts Undertaking or rejects

MS (Pricing)

Access Code SKMM Access List SAOs Access registration Agreement process

Guideline on Access Agreement Registration

Access SKMM resolves Guidelines on Dispute dispute ANE

Scope of Access Industry-wide Bilateral access SKMM role on Access Obligation access measures measures bilateral access

Figure 2: Overview of access regime in Malaysia

The inclusion of a facility or service in the Access List gives rise to the following components of the access regime, as noted in Figure 2 above:

(a) SAOs – the obligations to provide access to facilities or services on the Access List in accordance with section 149 of the CMA;

(b) access agreements – a written access agreement for the provision of the relevant facility or service must be registered with the SKMM in accordance with sections 150, 90 and 91 of the CMA. The SKMM has prepared a Guideline on Registration of Access Agreements (Guideline on Access Agreement Registration ). The SKMM may direct any party to an access agreement to comply with its terms;

(c) access code – the MAFB may prepare an Access Code that sets out the model terms and conditions for compliance with the SAOs. For this reason, the SKMM may not register an access code unless it is satisfied that it is consistent with the SAOs. To date, the SKMM has not registered an access code under section 154 of

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the CMA. In the event that an access code is developed by the MAFB, the SKMM will evaluate the access code for registration;

(d) access undertakings – a licensee has the option of giving an undertaking on the terms and conditions of access to a listed facility or service, in accordance with sections 110 and 155 of the CMA. Consistent with the criteria for registration of an access code, the SKMM must be satisfied that the undertaking is consistent with the SAOs;

(e) access disputes – disputes over compliance of SAOs may be notified to SKMM in accordance with section 151 and Chapter 7 of Part V of the CMA. Annexure A of MS (Access) also contains Dispute Resolution Procedures.

Once a facility or service is included on the Access List, the process and timelines specified under the MS (Access) such as the preparation of ARDs by the Access Providers, access request, forecasting obligation would need to be adhered to by the Access Providers and Access Seekers. In addition, once an access agreement is entered into by both parties, the agreement needs to be submitted by both parties for registration.

3.4 Implications and limitations of access

The process of including facilities or services on the Access List does not require the SKMM to inquire about or determine an access price. Hence, this Public Inquiry will not examine the quantum of prices or pricing principles for access to any existing or potential facility or service.

However, there are consequential implications when a facility or service is included on the Access List. As noted in section 2.3 above, the MS (Access) will need to be amended to include coverage of any new facilities or services.

It is also relevant from the outset to consider the limitations of the access regime. The methodology for determining the appropriateness of including a facility or service on the Access List is central to many of the SKMM’s overall powers and functions. However, access is not a “cure all” for every problem or concern that may be faced by licensees. For example, access itself cannot resolve all commercial problems. Similarly, it is not the role of access to facilitate the business decisions of individual licensees or favour specific forms of technologies over others.

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Importantly, access in this context is limited to access to services and facilities from other licensees. The SKMM in this Public Inquiry is NOT dealing with access to numbers, access to spectrum or access to content.

The SKMM will be mindful of the purpose of access throughout this Public Inquiry Process.

Finally, it should be noted that the inclusion of a facility or service on the Access List is the starting point in the SKMM’s framework to implement regulation in the long-term benefit of end users. The analytical process for amending the Access List is therefore central to this exercise.

3.5 Regulating for the long-term benefit of the end user (LTBE)

As noted above, the SKMM proposes to adopt the promotion of the LTBE as the primary reference point for guiding its assessment as to what facilities and services are to be included in or removed from the Access List. The SKMM considers that the other relevant NPOs are also generally consistent with the LTBE. Where particularly relevant, the SKMM may also refer to the other specific NPOs. The SKMM also considers that the LTBE is broadly consistent with similar constructions of this objective, such as the long- term interests of end users objective used in, for example, Australia.

The definition of “long-term” is not given a statutory definition in the CMA and has not been the subject of judicial interpretation by Malaysia’s courts. However, guidance is available from other regulators that apply a similar test. In Australia, the ACCC’s analysis of the meaning of long-term has been documented. 8 The ACCC does not provide a standard time frame in years that can be applied in all cases when the “long- term” is considered. Rather, the ACCC draws the distinction between (or comparison with) any particular short to medium-term consequences of an access mandate. The ACCC also considers there should be an economic perspective of what constitutes long- term.

Possibly the most relevant aspect of “long-term”, as interpreted and applied by the ACCC, is that it should be considered from the perspective of the time taken for the substantive consequences of an access mandate to manifest itself. In other words, this is the time for the effects of adding a facility or service to the Access List to become apparent. This interpretation becomes relevant for this current Public Inquiry, as it will

8 See ACCC, Telecommunications services – Declaration provisions, a guide to the declaration provisions of Part XIC of the Trade Practices Act , July 1999 at page 33.

Page 50 include examining the state of competition in Malaysia’s communications and multimedia markets since the time the 2005 Access List became effective.

The focus on “end users” is based on the rationale that the assessment of the benefits of regulation should be examined from an end user perspective. Analysis and decisions should bear in mind how consumers will ultimately benefit from the downstream effects of access regulation.

The SKMM applied the criteria of the long-term benefits of end users (LTIE) in its PI on Access List in 2005. There was broad support for this test from stakeholders, with the exception of TM and Celcom (Malaysia) Berhad (Celcom). TM proposed an alternative “LTBEU” test. TM considered that in contrast to the LTIE test, its LTBEU test was more appropriate because it would take into account potential end users and focus on the promotion of efficient competition rather than the promotion of competitors, and therefore is inherently light-handed in nature. 9

The SKMM evaluated TM’s alternative LTBEU test against the LTIE criteria. The SKMM concluded that LTIE test was appropriate in the Malaysian context and consistent with the NPOs. Furthermore, the components of the LTIE test did in fact take into account the impact on promotion of competition, the achievement of any-to-any connectivity and impact on infrastructure investment which is equally applicable to existing and future end users. 10

The SKMM believes that the LTIE test as applied in 2005 is similar to the LTBE test adopted in this PI Paper. The SKMM maintains that the LTBE test, which is based on one of the NPOs, essentially deploys the same rigour as applied in the PI on Access List in 2005. The LTBE test employed in this current review should not be confused with the alternative test proposed by TM in 2005 .

As in the PI on Access List in 2005, the SKMM’s deliberations will consider achieving tangible, positive results for consumers such as:

(a) pricing of communications services at competitive levels;

(b) innovation and development of communications services that is responsive to consumer demands;

9 See PI Report on Access List 2005 at page 20-24 10 See PI Report on Access List 2005 at page 20-24

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(c) being able to select from a range of service providers offering;

(d) end users enjoying a broad choice of suppliers of goods and services; and

(e) end users being better informed about their rights and have sufficient information to make choices about products and services.

The factors that the SKMM considers are relevant to a determination of whether the inclusion of a facility of service on the Access List is likely to promote the LTBE include:

(a) the objective of promoting competition in relevant markets;

(b) the objective of achieving any-to-any connectivity in relation to communications services;

(c) the objective of encouraging the economically efficient use of, and the economically efficient investment in communications infrastructure, including the legitimate commercial interests of the supplier or suppliers of the service, and the incentives for investment in communications infrastructure.

Each of the factors listed above is discussed in more detail below.

3.5.1 The objective of promoting competition in relevant markets

The interests of end users are typically promoted through competition. Therefore, where the inclusion of a facility or service on the Access List will provide the conditions in which competition may be promoted, this will generally be in the LTBE. In order to determine whether competition will be promoted, it is necessary to form a view on what the relevant markets are. This view does not need to be a definitive view requiring a conclusion on market definition that can be used for all purposes. This is because market definition is being used in the context of defining the field of rivalry or competition which is affected by the inclusion of the facility or service on the Access List.

The SKMM proposes to use the “with and without” test to assist it in determining whether the inclusion of a facility or service on the Access List would be likely to promote competition in relevant markets.

Existing market conditions and prices are expected to provide the best starting point for the specification of counterfactual outcomes. The expectation is that existing market conditions and prices reflect historical developments as well as anticipated developments

Page 52 in the market in the immediate short-term. They are also likely to include moderating effects on anti-competitive market behaviour by dominant firms. As a starting point, in the absence of any evidence to the contrary, the SKMM is of the view that it would be reasonable to assume that current conditions will continue to apply in the absence of change in the regulatory arrangements.

In addition to the current conditions, the specification of the counterfactual will need to take account of any projected or anticipated changes to current conditions (for example, announced price changes, new investment projected to come into service at a future date, etc). The likely impact of any such changes on the counterfactual outcomes needs to be considered and taken into account in estimates of costs and benefits. Likely trends in technology, informed by developments in other countries, will also be a consideration.

3.5.2 The objective of “any-to-any” connectivity

“Any-to-any connectivity” refers to the ability of an end user with a communication device to communicate with every other end user who has the same, or similar, device, regardless of the network to which the end user is connected. This is facilitated through the interconnection of the networks of different firms in a market.

The realisation of any-to-any connectivity will generally benefit end users through the following means:

(a) any-to-any connectivity enables communication between end users connected to different networks;

(b) any-to-any connectivity will facilitate competition by ensuring that end users migrating between service providers retain their ability to communicate with all other end users irrespective of the network to which they are connected; and

(c) it is a common feature of telecommunications networks that the value of the network to an end user depends on the number of other end users that network allows the end user to reach. In the absence of any-to-any connectivity, new smaller networks could only offer services to their own end users and would be at a distinct competitive disadvantage vis-à-vis established networks with a large customer base. This would mean that such networks would find it difficult to attract new users, regardless of their long-term efficiency, thereby diminishing the viability of such networks. Any-to-any connectivity mitigates this type of competitive disadvantage.

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3.5.3 The objective of encouraging the economically efficient use of, and the economically efficient investment in communications infrastructure

The efficient use of infrastructure benefits end users by reducing the costs of building and maintaining the network which is needed to provide services in a particular market. In a competitive environment, firms are encouraged to pass these reduced costs on to consumers through lower prices.

End users also benefit when firms have incentives to invest in the expansion and upgrade of their network infrastructure, as well as the development and provision of new services. This increases the scope for end users to use and enjoy the services supplied by the firm and leads to the development of new services which might otherwise not have been offered.

It may be inefficient for firms to invest in the duplication of infrastructure if this results in consumers under-utilising networks and excess capacity. This in turn leads to higher costs and prices, without any corresponding benefit for end users in terms of the range or Quality of Services (QoS ) offered.

In a fully competitive market underlying incentives typically ensure efficient investment decisions because operators would generally be able to choose between establishing their own infrastructure or buying access, at market prices, to already established infrastructure. Building of additional infrastructure would occur only if by doing so an operator gains greater benefits than buying access to existing infrastructure. In a non- competitive market, dominant operators can distort the underlying incentives to their advantage and this can lead to inefficient investment decisions.

Regulation which seeks to stimulate competitive-like behaviour, therefore, has an impact on whether firms invest in their own infrastructure or whether they effectively rent infrastructure (or the service provided by means of infrastructure) from another firm. This is known as the “build or buy” decision. The build or buy decision is informed by a number of factors. A firm may not have sufficient funds to make infrastructure investment in the short term. It is widely recognised by regulators around the world that by enabling operators to build up a customer base by imposing what is effectively a regulated rate on return (i.e. the amount of rent for infrastructure or the cost of purchasing services) then a competing operator can use this customer base to build up the potential for their own infrastructure investment.

The objectives of facilities and services-based competition are often conflicting. On one hand, regulation which allows a new entrant to buy services or infrastructure use from

Page 54 another operator can encourage new market entry. One of the reasons for this is because the barriers to entry, namely large sunk infrastructure costs, are lowered or negated. On the other hand, services-based competition is criticised for allowing operators to “free ride” off the infrastructure investment of other operators. In some cases, it is difficult to identify the value-adding role of regulation if an operator is permitted to purely resell the services of another.

The above factors must be assessed and balanced in any analysis of economically efficient use of an investment in infrastructure in Malaysia.

3.6 Interpretation of other criteria

In addition to the LTBE test, the NPOs applicable to regulation of the Malaysian communications and multimedia industry and the SKMM’s access task may be interpreted in terms of three themes:

(a) national development – the growth of the communications and multimedia sectors to establish Malaysia as a major global centre and hub with mechanisms to ensure information security (sections 3(2)(a), (i) and (j) of the CMA);

(b) equitable consumer interest – available, affordable and innovative information- based services that contribute to consumers’ quality of life and are utilised with confidence (sections 3(2)(e), (f), (g) and (h) of the CMA); and

(c) promotion of a civil society – in which the communications and multimedia industry contribute to the enhancement of quality of life through utilisation of dynamic services and applications (sections 3(2)(b) and (c) of the CMA).

The CMA does not confer precedence of any National Policy Objective over another. The methodology to determine whether facilities or services should be included in the Access List often requires some or all of these criteria to be applied and assessed against one another. As previously noted, many of these other objects, however, are relevant considerations in the assessment of the LTBE.

3.7 The bottleneck test

The sharing of “bottlenecks” (i.e. essential facilities) that cannot feasibly be duplicated is a well-established concept in economic regulation. The concept requires the existence of two markets, typically designated as an “upstream” and a “downstream” market, and the presence of one firm in both markets. Other firms that are (or seek to become)

Page 55 active in the downstream market require access to an input in the upstream market. That input is supplied only by the rival firm operating in both markets.

In United States antitrust law (where the concept of essential facilities originated) four elements are required to establish liability under the essential facility doctrine:

(a) the essential facility is controlled by a monopolistic firm;

(b) a competitor is unable to practically or reasonably duplicate the essential facility;

(c) denial of the use of the facility to a competitor; and

(d) feasibility of providing access to the facility.

These four elements provide a sound basis for determining the existence of a bottleneck or essential facility and assessing whether mandated access to the facility is justified. The implications of each of the four elements from a LTBE perspective are summarised below.

Figure 3: Bottleneck test

The elements of the bottleneck test was explained in detail and applied in the PI on Access List in 2005. 11

11 See PI Paper on Access List, pages 50-55

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3.7.1 Bottlenecks and the LTBE

A facility satisfying all four of the above elements would be justifiably classified as a bottleneck or essential facility. The provision of access to such a facility to actual or potential competitors of the facility owner in the relevant downstream market would have the effect of increasing the level of competition in the downstream market, with consequential downward effects on consumer prices in that market.

This benefits consumers in two ways. First, it transfers some of the consumer surplus from the owner of the facility to consumers. Second, it increases consumption of the final product by consumers thus increasing the aggregate level of benefits accruing to consumers. Although the consumer surplus is accorded relatively higher social value than the producer surplus, this is not intended to erode the legitimate interests of producers. 12

Accordingly, a presumption arises that the inclusion of bottleneck facilities and services on the Access List would be regulation in the LTBE. However, it does not mean that regulation follows automatically from the satisfaction of the bottleneck test. The Malaysia-specific considerations as based on the application of the LTBE test would still be relevant. 13

3.8 Conclusion

The SKMM therefore applies the following methodology in determining whether a facility or service should be included in the Access List:

(a) firstly, even if a facility or service has “bottleneck” characteristics, the facility or service will be assessed against the LTBE test; and

(b) alternatively, if a facility or service which is not characterised as a bottleneck will be assessed against the individual components or factors of the LTBE test.

Question 1 :

The SKMM seeks views on the methodology applied in determining whether a facility or service should be included in the Access List. Are there any other tests that could be considered by the SKMM?

12 See PI Paper on Access List, page 57.

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PART B: REVIEW OF EXISTING MARKETS

4 RELEVANT MARKETS AND STATE OF COMPETITION

4.1 Market definition

The process of market definition provides the product, geographic, and temporal dimensions within which competition can be measured. Market definition is therefore an important tool for drawing the boundaries within which the elements of the LTBE criteria set out in chapter 3.3 above can be applied and assessed.

For the purposes of this Public Inquiry, the SKMM proposes to start with the 7 markets that formed the basis of the PI on Access List in 2005, which are as follows:

(a) fixed telephony services;

(b) mobile telephony services;

(c) upstream network elements;

(d) interconnection (encompassing wholesale call termination and origination);

(e) leased line services;

(f) broadcasting transmission; and

(g) broadband services.

4.2 State of competition

The state of competition in each of the 7 relevant markets is a fundamental input into this review of the Access List. Where there is little or weak competition in a market, this would strongly suggest that some form of access regulation would remain appropriate. Where there is effective or strong competition in a market, this would suggest that more light-handed regulation may be appropriate or that consideration should be given to the removal of regulation in those markets. The various markets that will be considered as part of this review may fall anywhere along the spectrum from uncompetitive to effectively or workably competitive.

13 See PI Report on Access List, page 27-29.

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In its PI on Access List in 2005, a single national market approach was applied for the 7 relevant markets in Malaysia. The SKMM considered that licences are granted on a nationwide basis.

In this review, the SKMM is considering whether there have been changes in the state of competition in certain markets since 2005 that necessitate re-consideration of regulation on a geographic, rather than purely national, application.

There are a number of indicia of competition that can be used to guide an analysis as to the state of competition in a market, or changes in the competition, as set out below.

4.2.1 Number of competitors

The first and easy-to-measure indicator of competition is the number of competitors in the market. Where there are numerous suppliers of a service this is likely to indicate that there is competition in the relevant market. However, there is no “magic” number of competitors above which a market can be said to be competitive; or below which a market can be said to be uncompetitive. Each market must be assessed on a case-by- case basis. Additionally, the relative market shares of the market participants (market concentration) must be considered. There is a significant difference between a market with five participants with market shares of 20 per cent each; and a market with five participants with one participant having 60 per cent market share, and the other four with 10 per cent market share each.

The state of competition is also informed by whether or not access to an essential “bottleneck” facility is required in order to provide services to end users in downstream markets. The bottleneck concept only becomes relevant where, at the wholesale level, the facility is controlled by a firm with monopoly in that market. In addition, the bottleneck test will be satisfied if the facility cannot be practically duplicated by a competitor; if (in the absence of regulation) there is an incentive on the dominant firm to deny access to the facility; and if it is technically feasible for access to be provided.

4.2.2 Price competition

Price competition is also a useful measure of the nature of competition in a market. The ability of a market participant to price above a competitive level suggests that competition in the relevant market is not effective. Additionally, in most communications markets it would be expected that prices trend downwards as technology develops and as scale and / or scope efficiencies are realised over time. In markets where prices have remained stable over time or even increased, this may

Page 59 suggest that there is insufficient competition in the market to force market participants to price at the competitive level. That said, the movement of prices in a market is not a factor that should be looked at in isolation. For example, in light of increasing fixed telephony and mobile telephony substitution, it is possible that scale economies for fixed line telephony may decrease over the long term, potentially giving rise to stable or increasing costs for fixed line services.

4.2.3 Barriers to entry

The existence of barriers to entry is a further relevant consideration when assessing the competitiveness of a market. In many communications markets there are substantial barriers to entry which may limit the ability of new entrants and existing participants to deploy infrastructure and compete using their own infrastructure. Both economies of scale and scope are typically important in communications markets and building these economies can operate as a significant barrier to entry. Additionally, in relation to some services (for example, customer access services) it may not be efficient to duplicate existing infrastructure. In these circumstances it may be that the potential for infrastructure-based competition in these markets will be extremely limited.

4.2.4 Innovation

The dynamic nature of the market, that is, the speed with which new products and services are introduced, can also provide good information about the state of competition in that market. If market participants are slow to introduce new technology or offer customers (at the retail or wholesale level of the market) new services, this could suggest that the market is not effectively competitive. Innovation and product differentiation in a market indicates that market participants are competing vigorously and is, or is becoming, effectively competitive.

It is important to ensure that each market is assessed according to its appropriate functional level. A market may appear to be vigorously competitive at the retail level, but there may be less competitive discipline at the wholesale level. Mobile services, which are often very competitive at the retail level of the market but perhaps less so at the wholesale interconnection functional level, can often be a good example of the importance of looking at the right functional level of the market.

This review of the Access List will encompass enquiries as to the state of competition in each of the relevant markets. As noted above, this Public Inquiry will not just focus on one measure of competition. Rather, each market will be assessed on a case-by-case basis taking into account all relevant considerations.

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4.3 Steps in the SKMM’s assessment

In chapters 5 to 10 of this PI Paper, the SKMM has identified the existing and potential facilities and services for retention, amendment, removal or inclusion on the Access List that are supplied in each of the 7 markets above.

Accordingly, chapters 5 to 10 are structured as follows and apply the following 5-step analysis for the facilities and services for each of the relevant markets:

(a) market definition: a summary of the market as it was defined in the PI on Access List in 2005, and any relevant changes since that time which may suggest that an alternative market definition may be appropriate for this 2008 review;

(b) identification of the facilities and services : a brief description of the existing Access List facilities and services in that market. This will include the outcomes of the PI on Access List in 2005 in that market and state any items being considered by the SKMM for inclusion, removal, retention or amendment;

(c) state of competition: a summary of the state of competition in the relevant market since the PI on Access List in 2005. This includes views expressed by licensees during the pre-PI consultations with the SKMM in response to specific questions regarding developments in the state of competition for each of the facilities and services in that market since the 2004/05 Access List review.

The state of competition assessment applies the steps set out in section 4.2 above, namely:

(i) the number of competitors in the market;

(ii) price competition at the retail level. This is relevant to the assessment of how competition in the downstream market may impact on a decision to regulate at the upstream level;

(iii) barriers to entry; and

(iv) innovation.

This step will also examine whether those developments (if any) would justify the removal, addition or maintenance of those facilities and services in the Access List.

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In particular, regard has been given to any access issues or competition concerns that have been raised in the pre-PI process.

(d) LTBE criteria: following a description of the relevant facility or service, the LTBE criteria is applied. As set out in chapter 3 of this PI Paper, the SKMM’s primary test and analytical approach for this Access List review is the LTBE. The relevant objectives to be considered in determining whether the LTBE will be promoted are:

(i) promoting competition;

(ii) achieving any-to any connectivity;

(iii) encouraging economically efficient infrastructure use and investment; and

(iv) other criteria, informed by the NPOs including national development; equitable consumer interest; and the promotion of civil society.

The overall intention of the LTBE test is that regulation benefits end users only when it is targeted and proportionate to access issues that exist at any point in time. For this reason, one of the key approaches in the application of the LTBE criteria will be whether any access requests have been made for a particular facility or service. There may be reasons why demand has not been forthcoming for a service. For example, the price may be set at a level which is prohibitive to entry. Alternatively, lack of demand may mean that the service is no longer relevant for regulation. It will also be noted whether any access agreements have been made which either consistently include particular Access List services, or whether a facility or service features either marginally or not at all in Access Agreements overall that are registered with the SKMM.

(e) preliminary view: the SKMM’s preliminary view on whether the facility or service should be included or removed, or should remain in its existing or amended form, on the Access List.

Parties are invited to comment on the SKMM’s conclusions on the demand and utilisation of currently regulated services and to provide submissions on whether the LTBE will be served by maintaining it on the Access List.

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Define Identify Assess Apply Preliminary markets facilities & state of LTBE criteria view services competition

1 2 3 4 5

Figure 4: Methodology

4.4 Alternatives to market-based approach

The alternative approach to selecting particular markets in which to assess competition and, hence, access issues are to identify services based on licence classifications. This would mean that services would be identified by reference to the NFP, NSP, ASP and CASP licence classifications.

As was noted in the PI on Access List in 2005, such an approach would be consistent with the Part VI of the CMA which imposes obligations on NFPs and NSPs. The benefit of such an approach would be that services, described in the Access List on terms used in the CMA, could be closely linked with the obligations to provide those services.

Although the SKMM acknowledges the benefits of such a generic approach to access, it proposes to again refrain from a licence-based assessment. The SKMM remains mindful in this PI Paper of the licensing categories which are a fundamental feature of the CMA.

However, it is also apparent that stakeholders have developed an acceptance of the market-based approach, particularly in terms of identifying the state of competition within those markets. The SKMM has therefore decided to proceed on this basis.

Question 2 :

The SKMM seeks views on the proposed market based approach in considering facilities and services for inclusion/removal from the Access List.

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5 FIXED TELEPHONY

5.1 Market definition

The market for fixed telephony services is defined on a national basis, although there are some regional variations in relation to the availability of fixed telephony services provided using various technologies throughout Malaysia.

Fixed telephony services are distinguished by product and technology. Relevantly for this Public Inquiry, the SKMM categorises the following types of fixed line telephony technologies:

(a) direct exchange line ( DEL ) connections: these provide subscribers with narrowband access on a rental basis. DEL connections are mainly used on a residential and small business basis for voice and low bandwidth internet access;

(b) fixed wireless exchange lines: these are provided using wireless local loop ( WLL ) technology and are often provided where DEL connections are not available;

(c) Integrated Services Digital Network ( ISDN ) lines: narrowband services provided on basic rate interface ( BRI ) (used mainly by residential and small business customers) or primary rate interface ( PRI ) (used by larger businesses for higher bandwidth voice and data services, including PABXs); and

(d) VoIP services: provided using packet based and switching technology to enable the carriage of voice calls over private IP networks or the global Internet. These services are generally offered by broadband Internet providers (such as cable companies) and telephone companies as a usually cheaper flat-rate traditional phone service.

The newer technologies such as NGN and WiMAX would be discussed in Chapters 12 and 13 respectively.

5.2 Access List facilities and services

5.2.1 Existing Access List items

The Access List currently contains the following services which fall within the scope of the fixed telephony market:

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(a) paragraph 6(1) - Fixed Network Origination Service;

(b) paragraph 6(2) – Equal Access (PSTN) Service;

(c) paragraph 6(3) - Fixed Network Termination Service; and

(d) paragraph 6(9) - Internet Access Call Origination Service.

5.2.2 Potential Access List amendments

The SKMM has identified the following issues to consider in its assessment of the fixed telephony market:

(a) whether the Fixed Network Origination and Termination Services should be retained on the Access List, with the following amendments:

(i) to ensure that both services are applicable in an NGN environment;

(ii) to clarify the applicability of transit services; and

(iii) to clarify the applicability of the Fixed Network Origination to payphones;

(b) whether the Fixed Network Origination and Termination Services should be retained on the Access List and be rationalised into 2 new generic categories of Network Origination Services and Network Termination Services respectively. This issue is discussed in chapter 14 of this paper;

(c) whether the Equal Access (PSTN) Service should be removed from the Access List;

(d) whether the Internet Access Call Origination Service should be removed from the Access List;

(e) whether it would be appropriate to include a new VoIP PRI-ISDN Service using specified access numbers on the Access List; and

(f) whether it would appropriate to include a new Wholesale Line Rental Service on the Access List.

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5.3 State of competition

5.3.1 Number of competitors

There are 3 operators who are the primary providers of DEL services to business and residential customers in Malaysia, namely TM, Maxis Communications Berhad (Maxis ) and TIME. DiGi Telecommunications Sdn. Bhd. ( DiGi ) also operates a small number of DELs. No other alternative providers for the provision of DELs have emerged in the past 4 years. Any competition to TM amongst existing alternative DEL providers has tended to concentrate around new property developments.

The market for access to the PSTN via copper wires continues to be led by TM as the incumbent fixed line service provider, with nationwide coverage. The SKMM’s data indicates that as at the end of 2007, TM held a 97.9% share of all DEL connections:

Operator Number of DEL % share of DEL connections TM 4,219,500 97.9 Maxis 30,450 0.7 Time 56,550 1.3 DiGi 4,350 0.1 TOTAL 4,350,000 100

Table 3: Market share of DEL connections between operators for 2007 14

In many areas of Malaysia, TM is also the exclusive provider of access via ISDN links, although there are some competing operators providing ISDN services to business customers. Access to the PSTN via fixed wireless links is also led by TM.

It is important to note that some VoIP operators only hold ASP licences. The requirement for licensees to provide access to the facilities and services contained in the Access List apply only to NFPs and NSPs. As such, these ASPs have no equivalent access obligations in relation to providing origination and termination services in comparison to fixed line NFP and NSP licensees.

14 SKMM, Industry Performance Report 2007 , available at http://www.skmm.gov.my/Admin/WhatIsNew/CCD/IPR07.pdf accessed 9 April 2008, pages 51 & 52; and SKMM, Communications & Multimedia – Selected Facts & Figures Q4 2007 , page 4.

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5.3.2 Price competition

TM enjoys a monopoly within the residential market by virtue of being the main provider of access to ISDN services. There is, however, some competition at the business level for the provision of ISDN services as competitors TIME and DiGi also offer services to business customers. However, based on publicly available data, TM still offer the lowest prices for ISDN services to its business customers compared with the competing operators.

5.3.3 Barriers to entry

The prohibitively high and sunk cost of constructing DELs is regarded as an absolute barrier to new entry in Malaysia, as it is in all other countries where the incumbent operator has a legacy monopoly in the fixed line market.

5.3.4 Innovation

The decreasing rate of DEL connections at the residential level has been increasingly due to takeup of other service offerings, such as voice over broadband, Skype and particularly VoIP-related services. However, innovation plays a limited role in this market as Telekcom maintains its market share in the fixed line services market. Many services, such as VoIP continue to be dependent on PSTN technology and will continue to be so, and innovation is unlikely to impact on this dependence for some time.

5.3.5 Conclusion

The SKMM considers that although there have been developments in the uptake of VoIP services, the state of competition remains largely unchanged in the fixed line services market since 2005.

Question 3 :

The SKMM seeks comments on the state of competition in the fixed telephony service, particularly with respect to retail pricing and innovation.

The takeup of VoIP services and Internet telephony in general appears to be developing on a complementary basis to plain old telephony services (POTS ) provided over copper networks. VoIP/Internet telephony is also designated as one of the services forming part of the MyICMS 886 strategy, and the following was noted:

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(a) VoIP offers cheaper phone services over the Internet;

(b) it simplifies some applications that are cumbersome or impossible with traditional phone networks;

(c) VoIP phones can integrate with other services available over the Internet;

(d) Internet telephony will develop into a key voice service as the trend continues towards upgrading to all-IP networks; and

(e) VoIP services are expected to play a leading role in the new access environment that includes wireless broadband.

However, VoIP does not appear to be emerging as a direct substitute for traditional forms of fixed line services in Malaysia. This view was confirmed by nearly all licensees consulted during the pre-PI process, including the ASPs themselves.

In addition, retail provision of VoIP services are themselves dependent on connection to the PSTN. This interface means that while the increasing takeup of VoIP services is certain to continue (and is encouraged through MyICMS 886 strategy), VoIP is unlikely to develop as a complete replacement technology for PSTN applications.

Finally, VoIP services are only available for national and international calls. Hence, VoIP cannot be viewed as a substitute for local call services.

Question 4 :

Do you consider that there is evidence that VoIP services have become substitutes for more traditional fixed line telephony services?

5.4 Existing facilities and services on the Access List

5.4.1 Fixed Network Origination and Termination Services

(a) Service description

The Fixed Network Origination and Termination Services are technology/service neutral services for call (and message) communications.

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Fixed Network Origination Service is an Interconnection Service provided by means of a PSTN or IP network for the carriage of Call Communications over the voice bandwidth from customer equipment at an end user’s premises to a POI. This service is applicable for fixed-to-fixed, fixed-to-mobile and fixed-to-international outgoing calls insofar as they relate to freephone 1800 number services, toll free 1300 number services, and other similar services which require any-to-any connectivity. For clarity, if 7 or 8 digit numbers are used for originating a call, for example to access VoIP services, Fixed Network Origination Service is applicable.

Fixed Network Termination Service is an Interconnection Service provided by means of a PSTN or IP network for the carriage of Call Communications from a POI to customer equipment. This service comprises transmission and switching (whether packet or circuit) for Fixed Network-to-Fixed Network, Mobile Network-to-Fixed Network and incoming international-to-Fixed Network calls and messages.

Examples of technologies applicable for both Fixed Network Origination Service and Fixed Network Termination Services are ISDN and VoIP.

With the emergence of NGN, there will be a discussion on how it would affect both Fixed Network Origination Service and Fixed Network Termination Service. The discussion of NGN is in Chapter 12. However, the effect and any proposed changes to the Fixed Network Origination and Termination services to enable these services to be applicable in an NGN environment will be discussed in this section.

(b) Promotion of competition

The Fixed Network Origination and Termination Services are widely used. These services are utilised in nearly every Access Agreement registered with the SKMM to date. The services are inputs to many downstream services.

TM continues to have a virtual monopoly in the fixed line services market given its scale and scope, vertical integration, and limited prospects for further market evolution by competing operators.

Notwithstanding the potential for some competition to emerge over time, the origination and termination services continue to satisfy the test of a bottleneck. They are provided through an essential facility controlled by a monopolistic firm, which competitors are unable to practically or reasonably duplicate, and it is likely that access would be denied if the service was not regulated and the provision of access is feasible.

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(c) Any-to-any connectivity

The nature of Fixed Network Origination and Termination means that these services are essential for any-to-any connectivity, and as such are crucial elements of the interconnectivity of network services. Virtually all respondents in the pre-PI process confirmed this view.

During the pre-PI process, it was highlighted to the SKMM that the newer operators face difficulty in establishing reciprocal interconnection arrangements between their networks and the more established PSTN and mobile operators. The more established operators can decide not to seek access to the newer operator or Access Provider’s network. End users on the newer operator’s network may not be able to connect to any other user on any other network, against the objective of any-to-any connectivity. This issue is addressed in more detail in Chapter 13.

(d) Impact on infrastructure investment

The Fixed Network Origination and Termination Services are crucial elements of the interconnectivity of network services. Whilst it is highly unlikely that regulation will enhance investment in the construction of alternative fixed networks in Malaysia, investment in all other networks will be significantly undermined if access regulation does not continue. The importance of termination seems universally consistent across all liberalised telecommunications regimes.

In addition, it appears highly unlikely that significant investment in alternative DEL infrastructure will occur regardless of whether or not origination and termination continues to be regulated. The SKMM notes that while all competing licensees in the pre-PI process acknowledged that TM would continue to retain its high market share, it is clear that no significant investment would be undertaken to compete on an infrastructure basis in the fixed line market in Malaysia.

(e) Other issues

(i) Transit services

During the pre-PI process, there were comments raised in relation to whether the current service description of Fixed Network Termination Service includes transit services. The SKMM understands that the Fixed Network Termination Service is provided by Access Seekers to third parties in order to facilitate transit services, rather than as an input to end-user customer services at the retail level.

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At the moment, the service description describes it as “…the carriage of Call Communications from a point of interconnection ( POI ) to customer equipment”, where “customer” is defined “in relation to an Operator, a person having a contractual relationship with that Operator for the provision of communications by means of that Operator’s facilities and/or services”. It does seem that transit services may be covered, by virtue of the transit operator having a contractual relationship with the Operator.

Pure transit promotes arbitrage opportunities by services based operators who arbitrage rates offered by infrastructure providers. Often, providers of pure transit have limited infrastructure of their own (for example, by acquiring the transmission part of the network from a third party) and take advantage of price and cost differentials and distortions in the market.

In addition, the Fixed Network Termination Service is considered a bottleneck; however the transit service is not considered a bottleneck because there are multiple suppliers of this service. In this regard, the SKMM is hesitant to extend the application of the Fixed Network Termination Service to include transit services.

The SKMM wishes to consider views for and against an amendment of the service description for the Fixed Network Termination Service to restrict applicability to termination to end users only and to exclude transit.

Question 5 :

(a) The SKMM seeks views on whether there is a distortion in the current service description, and whether the fixed network termination service should be amended to restrict its applicability to termination to end users only and exclude transit.

(b) What would be the likely implications of such a limitation?

(ii) Access to public payphone

During the pre-PI process, clarification was sought on whether Fixed Network Origination Service is applicable for freephone 1800 that are made from payphones.

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The public payphone service is to allow the general public to make calls except for free calls or calls made with operator assistance.15 Currently, there are numerous providers who provide public payphone service to the general public.

It is undeniable that it would be in the LTBE to allow end users in underserved areas or those who otherwise have no access to other forms of communication, such as PSTN and mobile to be able to make such calls. Payphone service is also considered a bottleneck, and it has been raised that Access Seekers have had difficulty accessing the Fixed Network Origination Service from public payphones.

The SKMM is of the view that Fixed Network Origination Service is applicable to public payphones. Hence, freephone 1800, tollfree 1300 and other similar services which require any-to-any connectivity should be able to be made from public payphones.

Question 6:

Do you agree with the SKMM’s preliminary view that freephone 1800, tollfree 1300 and other similar services should be available from public payphones?

5.4.2 Preliminary View - Fixed Network Origination and Termination Services

The SKMM’s view is that it would continue to be in the LTBE for the Fixed Network Origination and Termination Services to remain on the Access List. Inclusion of the Fixed Network Origination and Termination Services on the Access List would ensure that these essential inputs are provided on non-discriminatory and reasonable terms and conditions.

Considering all the available data, particularly the sustained market share of TM in the fixed line services market, SKMM’s preliminary view is that it would be a significant and unjustified reversal of the application of access regulation in Malaysia to remove these services from the Access List.

The service description for both the Fixed Network Origination and Termination services were amended during the PI on Access List in 2005 to ensure technological/service neutrality. Nevertheless, during this Public Inquiry, the SKMM proposes further amendments to ensure that both services are applicable in an NGN environment. In particular, the SKMM proposes that the interpretation of “Call Communications” include “IP address”.

15 See Communications and Multimedia (Licensing) (Amendment) Regulations 2001 , Regulation 2(r)

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In addition, the service description for both the Fixed Network Origination Service and Fixed Network Termination Service would be amended to provide clarity that the calls originated using 7 or 8 digits to access VoIP services is part of the Fixed Network Origination Service, and not the Fixed Network Termination Service. The amended service descriptions are found in paragraphs 6(1) and 6(3) respectively under Annexure 2.

At the same time, the SKMM is also considering whether the Fixed Network Origination Service and Fixed Network Termination Service should be rationalised under generic descriptions such as Network Origination Service and Network Termination Service. The discussion on rationalisation is in Chapter 14.

Question 7:

The SKMM seeks views on whether the Fixed Network Origination Service and Fixed Network Termination Service, as amended should be retained on the Access List.

5.4.3 Equal Access (PSTN) Service

(a) Service description

Equal access is a service where a customer selects certain types of call communications of another carrier by dialling a carrier selection code, or automatic selection for all calls (pre-selection). In Malaysia, the scope of this service is limited to the choice of PSTN-to- PSTN long distance or international service provider on a call-by-call basis.

(b) Promotion of competition

The implementation of equal access by pre-selection has been under consideration in Malaysia for several years. It had a long-standing implementation date of 1 January 2001 in accordance with a Ministerial Direction, followed by deferral pending its review. In November 2004, the SKMM published its Public Consultation Report on Implementation of Pre-selection in which it concluded that the need for pre-selection was mitigated by factors such as:

(i) the expected growth of VoIP services;

(ii) the benefits of pre-selection being forgone over time – that is, it would have been beneficial if implemented in the early to mid 1990s when competition was developing; and

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(iii) the view that finite costs and other resources would be better utilised by implementing other competitive initiatives, such as Mobile Number Portability (MNP ).

Pursuant to the Ministerial Direction on Equal Access, Direction No. 3 of 2006 (Ministerial Direction on Equal Access ), it was confirmed that all requirements to implement equal access by pre-selection would be revoked. In light of this Ministerial Direction on Equal Access, which considered the outcomes of the SKMM’s previous consultation and endorsed its conclusion, it is timely to consider whether it is necessary to continue to regulate Equal Access in order to fulfil the objective relating to the promotion of competition.

Equal access is often mandated when full liberalisation of the telecommunications market in countries is in its infancy, the rationale being that consumers need a choice of provider. At this stage, equal access is often introduced because it is one method of stimulating infrastructure investment. Equal access is also seen as beneficial to consumers as increased competition provides for lower prices.

There appear to be relatively few countries that still regulate equal access on a call-by- call basis, for instance:

Country Mechanism Australia Call by call override has been retained, in addition to pre- selection. This enables users to override their pre-selected operator and therefore provides enhanced choice rather than an interim measure. Barbados Policy on indirect/equal access in Barbados. Policy in accordance with sections 4(2)(b) and 4(2)(f) of the Telecommunications Act 2001-36. Bosnia & Herzegovina Regulated in the licence for Public Fixed Telephony Operators Taiwan Regulations Governing the Equal Access Service (August 04, 2004)

Table 4: International examples of equal access utilisation

One of the fundamental questions for the SKMM in this Public Inquiry is whether Malaysia continues to require Equal Access to be offered and, if so, is it necessary to do so on a regulated basis through the Access List.

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(c) Any-to-any connectivity

As an input to the ability of end-user consumers to select an alternative long distance or international carrier, the removal of the Equal Access Service from the Access List could impact on the ability of those consumers to exercise that choice. This is assuming that the Access Provider decides to cease offering the service on a retail basis once access regulation is removed. It is possible that an Access Provider may still decide to offer the Equal Access Service if it is economically rational to do so.

However, there remain alternatives to the Equal Access Service that enable choice of operator on a call by call basis. These include VoIP and calling card services.

(d) Impact on infrastructure investment

Investment in the Equal Access Service is minimal and has already occurred. The SKMM does not consider that there will be any impact on investment decisions either way, regardless of whether or not the service continues to be regulated. However, it is open for a case to be made that its continued regulation is, in fact, a cost to economically- efficient investment. That is, its continued regulation is forcing an irrational decision to maintain investment in its obsolete infrastructure.

In relation to investment in infrastructure more generally, the Equal Access Service does not appear to be having the effect of encouraging investment in long distance or international infrastructure in Malaysia. Other services such as VoIP are having a far greater impact in that regard.

(e) Other criteria

Taking into account:

(i) the rationale for equal access as essentially a temporary measure, designed to operate on an interim basis in the lead up to carrier pre-selection; and

(ii) the Ministerial Direction on Equal Access which has determined that equal access by pre-selection no longer needs to be implemented in Malaysia, there may no longer be a reason to continue regulating the call-by-call service under the current Equal Access service.

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5.4.4 Preliminary view - Equal Access (PSTN) Service

Equal Access has featured as a significant issue among operators in the pre-PI process as a service that may no longer need to be included on the Access List. Several licensees commented that they no longer acquired or supplied the service, or that it was not applicable, or it was simply described by several respondents as “a failure”. Some respondents considered that VoIP had rendered the service redundant. As such, the SKMM’s preliminary view is to remove Equal Access from the Access List.

The SKMM considers that continued regulation of the Equal Access Service does not appear to be promoting the LTBE. Its limited use, likely minimal impact on the state of competition, the cost of regulation and the application of other criteria support a case for removing the Equal Access Service from the Access List.

The SKMM has been informed in its pre-PI process that there are at least a small number of Equal Access providers remaining, and that there are some end users who are using the services. The SKMM seeks views from stakeholders on the likely impact of the removal of the service from the Access List, and more importantly, the impact on end users.

As the SKMM’s preliminary view is to remove Equal Access (PSTN) Service from the Access List, this has been reflected with a strikethrough of paragraph 6(2) in Annexure 2.

Question 8:

What will be the likely impact, including to the end users, in the event that Equal Access (PSTN) Service is removed from the Access List?

5.4.5 Internet Access Call Origination Service

(a) Service description

The Internet Access Call Origination Service was the proposed means by which Internet Service Providers (ISP ) would originate calls over the PSTN in order for their subscribers using short codes and special service numbers to connect to an ISP’s internet service, illustrated in Figure 5 below:

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Figure 5: Internet Access Call Origination Service

(b) Promotion of competition

There appears to be limited continuing demand for the Internet Access Call Origination Service. The service is the subject of 5 access agreements registered with the SKMM. It is also apparent that the service is not provided by TM to TM Net Sdn. Bhd. ( TM Net ) within the TM group. That is, the Internet Access Call Origination Service does not appear to be used internally or externally by ISPs seeking access to the PSTN in Malaysia.

It is also important to note that of all licensees consulted in the pre-PI process, Jaring Communications Sdn. Bhd. ( Jaring ) appeared to have the most use and interest in this service. However, based on the understanding of the SKMM, Jaring has a commercial arrangement with service providers, for example, TM for the carriage of calls based on short codes.

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The service is not widely used by other licensees as a method of providing access for dial-up traffic in Malaysia and appears to be redundant.

(c) Impact on infrastructure investment

The pre-PI process discussions revealed little impact either way (positive or negative) on infrastructure investment. Inclusion on the Access List does not appear to have generated significant benefits to end users. Very little (if any) use of the regulatory provisions has been made since the service was included on the Access List.

Responses in the pre-PI process also indicated that there are significant alternatives to end user access and there is likely to be little investment in infrastructure to support the service by its continuing inclusion. In effect, some respondents indicated that alternative technologies, such as via 7 or 8 digit numbers are used.

(d) Other criteria

Removal of the Internet Access Call Origination Service from the Access List is unlikely to have any significant effects on the provision of related services or the remaining NPOs.

Some respondents in the pre-PI process even highlighted that Malaysia should be following its own policy objective of facilitating broadband takeup, and the retention of this service on the Access List would actually be contrary to that aim.

However, removal of the Internet Access Call Origination Service from the Access List could potentially be in conflict with the NPOs on grounds of equity. The SKMM notes from its own data that there remain a large number of subscribers who acquire dial-up Internet services:

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Figure 6: Comparison of dial-up internet rate and penetration rate 1997-2007 16

Whilst the SKMM also recognises that the MyICMS 886 strategy is targeted towards high speed broadband services, and that the Government’s announcement of the high speed broadband rollout is part of this strategy, it would be of concern if marginal subscribers failed to enjoy the benefits of the Internet if the service ceased to be on the Access List.

Nevertheless, the SKMM seeks views on whether this service would be offered commercially even in the event of removal from the Access List. Similarly, the SKMM seeks views on the impact of the service on marginal subscribers generally.

5.4.6 Preliminary view - Internet Access Call Origination Service

The SKMM’s preliminary view is that the Internet Access Call Origination Service may have become redundant and should be removed from the Access List. The service does not appear to be serving any useful purpose and alternative access techniques have been used by ISPs to access dial-up traffic.

However, the SKMM firstly wishes to consider comments on the potential impact on marginal subscribers before reaching a final view on whether or not to cease regulation of this service.

As the SKMM’s preliminary view is to remove Internet Access Call Origination Service from the Access List, this has been reflected by a strikethough of paragraph 6(9) in Annexure 2.

16 SKMM, Industry Performance Report 2007 at page 53.

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Question 9:

(a) What will be the likely impact of removal of the Internet Access Call Origination Service from the Access List?

(b) Specifically, what will be the impact on marginal subscribers in Malaysia?

5.5 Potential facilities and services on the Access List

5.5.1 VoIP PRI-ISDN Service

(a) Background

This service is used by VoIP operators, who are generally only ASPs, to provide multi- stage dial up VoIP services. VoIP operators acquire PRI ISDN lines in conjunction with the freephone 1800 service numbers from providers such as TM, TIME, DiGi, Maxis and Celcom. This freephone service enables end users or customers of the VoIP operators to dial-in to the VoIP service from any network. This is the first stage of the multi-stage call set-up. The call may be handed over from the PSTN operator to transit operators, such as TIME, DiGi, Maxis and Celcom and then to the VoIP operators before the call is terminated onto the PSTN. In accordance with the Guideline on the Provisioning of VoIP Services (Guideline on VoIP ), the charging principle is based on fixed origination, which allows the originating operator to collect payment from the terminating operator and the end user will not be charged for making the call.

The SKMM received complaints from VoIP operators particularly against TM on a range of issues regarding this service, including QoS and pricing. QoS issues have since been resolved with the intervention of the SKMM as the VoIP operators and the various providers have concluded and signed the service-level agreements. TM offers PRI ISDN packages either on a flat-rate or on per usage basis. It is the understanding of the SKMM that the complaints raised by the VoIP operators is due to their insistence that they should not pay the Fixed Network Origination Service charges for calls originating from the network of TM, to access their VoIP services. The SKMM considers below whether access regulation may be practical and desirable to resolve these issues.

(b) Service description

The VoIP PRI-ISDN service is an Interconnection service from a Fixed Network or Mobile Network which comprise of two components:

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(i) PRI-ISDN line and 1800 and/or 7 or 8 digit numbers; and

(ii) Fixed or Mobile Network Origination Service handed over at the POI interface which is the PRI-ISDN.

VoIP services in Malaysia are provided to end users by the VoIP operators using PRI ISDN, as illustrated in Figure 7 below:

PoI ISDN PRI

PSTN Telephone

Customer Access Provider network VoIP operator network

Fixed Network Origination Service PoI ISDN PRI

PLMN

Mobile phone

Customer Access Provider network VoIP operator network

Mobile Network Origination Service PoI ISDN PRI

PSTN Telephone

Customer Transit network VoIP operator network

Fixed Network Origination Service PoI ISDN PRI

PLMN

Mobile phone

Customer Transit network VoIP operator network

Mobile Network Origination Service

Figure 7: Use of ISDN PRI for VoIP Access

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In the first and second illustrations, there could be two possible scenarios for the VoIP operator. The VoIP operator can acquire VoIP PRI-ISDN Service and Fixed Network Origination Service or Mobile Network Origination Service from the same operator. Alternatively, the VoIP operator can acquire VoIP PRI-ISDN Service and Fixed Network Origination Service or Mobile Network Origination Service separately from different operators.

In the third and fourth illustrations, the VoIP operator does not deal directly with the originating fixed or mobile operator, but has an arrangement with the transit operator. In these two illustrations, the VoIP operator acquires the VoIP PRI-ISDN Service as well as service for carriage of calls from an operator such as the transit operator. In this event, the VoIP PRI-ISDN Service is regulated whereas the service for carriage of calls by transit operator will be commercially negotiated. The transit operator negotiates with the originating fixed or mobile operator for the Fixed Network Origination Service or Mobile Network Origination Service.

(c) State of competition

The VoIP PRI-ISDN Service can be viewed as an essential input to the services provided by VoIP operators. The VoIP providers have raised consistent complaints in the pre-PI process concerning delays in service provisioning, fault rectification, QoS and pricing. It is expected that these concerns may continue to be raised, even though there are several providers of the PRI ISDN services and the QoS parameters have been agreed upon.

Considering that the nature and incidence of these complaints has been ongoing prior to the pre-PI process, it is necessary to consider whether access regulation can resolve these issues. A mandated Access List service will enable price and non-price issues to be addressed through the MS (Pricing) and MS (Access) respectively.

Question 10 :

The SKMM seeks comments on the precise nature of any difficulties currently experienced in acquiring PRI ISDN service, and any proposed solution to resolve the difficulties.

This service if regulated may be able to promote competition only over the short term. This is because the SKMM notes that in light of NGN developments, access regulation of this service may become redundant. Regulation of the service may encourage use and

Page 82 investment in infrastructure which will become obsolete and hence it may not be desirable to do so.

The question therefore becomes whether it remains feasible and desirable to impose regulation. On the other hand, although NGN development may lead to a decline in demand for the service, it is apparent that these issues are a major concern to the relevant ASPs and it may be timely to address them in this review.

(d) Impact on infrastructure investment

The SKMM has received comments in its pre-PI process that this PRI ISDN service is being used by Access Seekers to provide transit services, rather than as an input to end- user customer services at the retail level.

For the reasons expressed above, pure transit may not encourage efficient investment in or use of infrastructure. In addition, ISDN services are connected to the legacy PSTN. It is arguable that in light of the rollout of NGN, the costs incurred as a result of a requirement that the ISDN is provided as a regulated service may outweigh any benefits of regulation.

(e) Other criteria

As set out above, the issue of PRI ISDN access has been long-running and several licensees have indicated in the pre-PI process that they do not consider a satisfactory conclusion has been reached.

However, the SKMM is open to views as to whether this service is of sufficient concern that it warrants inclusion on the Access List to satisfy the NPOs or other criteria.

5.5.2 Preliminary view – VoIP PRI-ISDN Service

The SKMM has to balance the different objectives of promoting competition on the one hand with the potential impact on infrastructure investment. The ISDN services are connected to the legacy PSTN. With the rollout of NGN, the services may diminish in importance in the future and render access regulation redundant within a short period of time.

Whilst in the short-term it is expected that the regulation of this service may promote competition in the fixed line market, the effect is not likely to translate into a long term benefit for end users. In the event that this service is regulated, it may be in the LTBE

Page 83 to have a sunset date for regulation of this service to minimise potential dampening of infrastructure investment and to avoid significant investment in obsolete infrastructure.

The SKMM would like to seek input from the industry on whether this service should be regulated.

The service description for VoIP PRI-ISDN Service is found in paragraph 6(24) in Annexure 2, in the event that the SKMM decides to regulate this service.

Question 11:

(a) The SKMM seeks comments on including a PRI ISDN service via freephone 1800 and 7 or 8 digit numbers on the Access List?

(b) The SKMM seeks comments on whether regulation via the Access List will resolve the problems arising from the operation of this service in its current form?

5.5.3 Wholesale Line Rental Service

(a) Service description

Wholesale Line Rental allows Access Seekers to rent access lines on wholesale terms from an Access Provider, and then resell the lines to its own retail customers. The Access Seeker takes control of all the calls made through a telephone line from the Access Provider and collects the subscription fee directly from its subscribers, thus enabling implementation of a “single bill” retail service offering:

Figure 8: Wholesale Line Rental

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(b) Promotion of competition

Many countries consider that the regulation of Wholesale Line Rental is necessary and essential for the promotion of competition in the fixed line market. For instance in Australia, Wholesale Line Rental is considered to be “a pre-requisite for competition in the provision of basic telephony services” 17 . The United Kingdom concurred with this analysis, its regulator noting that:

“Its [Wholesale Line Rental] introduction has been a significant stage in the development of competition in retail markets in the UK”. 18

Wholesale Line Rental is distinct from local loop unbundling ( LLU ) or ANE. Whilst LLU provides access to the local loop, Wholesale Line Rental only provides access to the PSTN line and calls on that line. For this reason, Wholesale Line Rental Service is often described as a billing mechanism by which the Access Seeker gains the ability to apply the monthly access charge to the end user.

An Access Seeker’s ability to have access to Wholesale Line Rental on reasonable terms and conditions may be unlikely in the absence of regulation. If there is no effective competition in the wholesale provision of fixed services and in the absence of regulation, competition in downstream markets is likely to be lessened. In the Australian decision to regulate Wholesale Line Rental, the ACCC stated:

“By enabling greater competition in downstream markets, declaration [of Wholesale Line Rental] would be expected to improve productive and dynamic efficiency in these markets by giving service providers the incentive to find lower cost means of producing goods and services in downstream markets”. 19

An Access Seeker’s competitiveness in the fixed line market may also give rise to benefits in other markets, including packaging different categories of calls (local, long distance, international and fixed-to-mobile).

Additionally, an Access Seeker’s ability to procure Wholesale Line Rental may also promote competition in broadband markets. This is especially the case with respect to xDSL services, or voice over broadband services. By purchasing a Wholesale Line Rental

17 ACCC, Local Services Review, Final Decision , July 2006, at page 49. 18 Ofcom, Wholesale Line Rental Reviewing and setting charge ceilings for WLR services , Consultation Paper 9 November 2005 at para 6. 19 ACCC, Local Services Review, Final Decision , July 2006, at page 50.

Page 85 product for a flat connection fee, an Access Seeker could then purchase a bitstream product to offer a retail voice over broadband service.

The following table provides a snapshot of countries where Wholesale Line Rental is regulated and the rationale for regulation.

Country Commentary

Australia Wholesale Line Rental is a declared service in Australia. It was declared as a separate service in 2006. Prior to this, Wholesale Line Rental was provided and priced through the supply of the local call service. The ACCC concluded that the wholesale market for the provision of line rental was not effectively competitive, as the retail market is heavily reliant on resale of Telstra’s line rental service. As such, Wholesale Line Rental was mandated as a declared service.

Belgium The Belgian Electronic Communications Act of 2005 introduced regulated Wholesale Line Rental (Article 61).

Denmark Denmark has had a regulated Wholesale Line Rental Service since 2000 and was the first European country to offer a Wholesale Line Rental Service. Prior to the introduction of the European Commission’s regulation of markets, Wholesale Line Rental was regulated in Denmark using the retail minus factor of -21%. It is now regulated as a remedy for significant market power in fixed line markets. New entrants such as Orange and Tiscali have taken advantage of the regulated service to enter fixed voice markets. Ireland Commission for Communications Regulation ( ComReg ) has regulated Wholesale Line Rental Service since 2004 as they saw it as vital to advancing competition. ComReg’s aim in regulating the service was to ensure that the product was accessible, affordable and had sufficient margin for telecommunications operators to stimulate and drive competition in this market. The WLR product that ComReg regulates is Single Billing- Wholesale Line Rental. It enables other authorised operators to offer narrowband access to both line rental and calls to customers over eircom’s local network. These operators pay eircom the line-rental for the customer’s line and in turn invoices the customer for this service so that the customer no longer has a contractual relationship with eircom. Those customers will receive a single bill for both calls and line rental from their Operator of choice. Malta Since 2007, Wholesale Line Rental has been regulated and Maltacom is required to offer a single billing Wholesale Line Rental Service similar to Ireland. Portugal In 2004, the Portuguese Regulator, Anacom, introduced a regulated Wholesale Line Rental Service as the state of competition in the fixed market was not sufficient.

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Country Commentary

Sweden Sweden introduced a regulated Wholesale Line Rental Service to enable competition against the retail subscription service of TeliaSonera. The service is regulated under a retail minus pricing scheme. United Kingdom In 2002, Office of Telecommunications ( Oftel ) (now known as Office of Communications or Ofcom) modified BT’s licence to make the provision of a Wholesale Line Rental product a regulatory obligation. Oftel also set the starting charges for the WLR product. BT launched a basic Wholesale Line Rental Service product (WLR1) in September 2002. Oftel considered that this basic product needed enhancing in order for it to be an effective mass-market product that was commercially attractive to service providers and to end users. Therefore, in March 2003, Oftel regulated an automated Wholesale Line Rental Service product suitable for mass-market use, i.e. WLR2. Prices for Wholesale Line Rental were last reviewed in 2005. Ofcom sets charge ceilings for Wholesale Line Rental Service . These ceilings are not fixed prices and thus provide BT with the flexibility to charge less than the ceiling. BT now provides residential analogue Wholesale Line Rental Service, business analogue Wholesale Line Rental Service and business ISDN2 Wholesale Line Rental Service.

Table 5: Comparative international WLR regulation

Considering these factors, the question then arises as to whether a regulated Wholesale Line Rental Service would have a positive impact on competition in the absence of a regulated local call service. In isolation, Wholesale Line Rental Service would provide an Access Seeker with connectivity to the access network. If combined with a regulated local call service, alternative service providers could offer consumers a downstream end- to-end service that could potentially compete with TM’s retail service. This was a critical factor in the SKMM’s preliminary view in favour of regulating a local call resale service in the PI on Access List in 2005. Ultimately, the SKMM refrained from regulation on the basis that there was limited identified demand from Access Seekers for such a service.

Furthermore, pricing will have an impact on the viability of a regulated Wholesale Line Rental Service. If Wholesale Line Rental Service in Malaysia is currently priced below cost, its pricing will need to be rebalanced or provided on a retail minus basis to Access Seekers. Provision of the service at cost will exceed the retail price and hence Access Seekers will not acquire this service.

It was also noted that even in the absence of regulation, it remained open for Access Seekers to attempt commercial negotiation with TM and other Access Providers to acquire a local call resale service that may include Wholesale Line Rental Service. The

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SKMM is not aware of any attempts by Access Seekers to obtain a local call resale or Wholesale Line Rental product from TM.

(c) Impact on infrastructure investment

A potential negative effect of regulating Wholesale Line Rental Service is that it may decrease incentives for Access Seekers to invest in their own networks. Proponents of this argument state that Access Seekers will not see the need to further build their own network thus reducing infrastructure competition in a country. Conversely, it is argued that providing an Access Seeker with Wholesale Line Rental Service allows them to establish a customer base before embarking on infrastructure investment (with its associated sunk costs), thereby reducing the investment risk.

However if it is considered that alternative infrastructure investment is unlikely to occur with or without the regulation of Wholesale Line Rental Service, the regulation of local loops may be an efficient means of using existing infrastructure. If an operator desired to provide a competing retail voice offering, the prohibitive cost of constructing alternative infrastructure means that a decision to compete on a service (rather than infrastructure) basis would be efficient.

(d) Other criteria

There is the potential for a regulated Wholesale Line Rental Service to lead to innovative retail service offerings, such as a packaged voice over broadband service. Wholesale Line Rental Service could also enable a competing operator to offer an “all in one” service that combines (for example) line rental and local calls from TM, and long distance and international calls from other operators. This is often an attractive option for consumers because it enables them to acquire individual services from a variety of operators under a single bill.

In addition, it is possible for a competing operator to acquire the Wholesale Line Rental Service and tailor its retail price to cater for the needs of particular categories of customers. For example, some retail customers may be willing to trade a high line rental price for low call charges. Service offerings could be designed to reflect such demand.

However, it is also noted that such packaging usually occurs by acquiring Wholesale Line Rental Service and by offering carrier pre-selection. A packaged alternative service offering with a single bill for calls and access would only be effective if alternative call offerings were available. In 2004, the SKMM concluded that it should not proceed with

Page 88 pre-selection. 20 In the absence of pre-selection and a regulated local call resale service, it is questionable whether there would be demand for Wholesale Line Rental Service in isolation and whether alternative service providers would be able to make a business case for its use.

As also noted above, VoIP features as one of the service strategy components of MyICMS 886 strategy. The growth of VoIP as a growing (if complementary, rather than substitutable) technology for PSTN voice services leads to the question of whether a regulated Wholesale Line Rental Service is necessary. If there is consumer demand for cheaper or innovative voice service offerings, it is arguable that those consumers would have already chosen to use a VoIP service.

5.5.4 Wholesale Line Rental Service – Preliminary View

The SKMM is open to submissions by stakeholders on whether a regulated Wholesale Line Rental Service is desirable in Malaysia. The SKMM is particularly interested in views concerning how licensees would propose to utilise such a service if it was regulated; and whether attempts have been made to acquire a Wholesale Line Rental Service or whether an alternative form of connection service on a commercial basis.

The service description for Wholesale Line Rental Service is found in paragraph 6(25) in Annexure 2, in the event that the SKMM decides to regulate this service.

Question 12:

(a) The SKMM seeks comments on whether wholesale line rental should be regulated in Malaysia.

(b) If so, would you acquire it and for what purpose?

(c) Have you attempted to commercially negotiate access to a wholesale line rental service?

(d) What are the factors that are considered a prerequisite in acquiring a wholesale line rental service?

20 SKMM, Public Consultation Report on Implementation of Pre-selection, 30 November 2004.

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6 MOBILE TELEPHONY

6.1 Market definition

The relevant market for mobile telephony is a national retail network for mobile services utilising both 2G and 3G network technologies. The range of services offered over mobile networks includes voice calls, video calls, sending and receiving text and voice messages, data services such as Wireless Application Protocol ( WAP ) over Global System for Mobile ( GSM ), General Packet Radio Service ( GPRS ), Enhanced Data-Rates for GSM Evolution ( EDGE ) and 3G, sending and receiving multimedia messages, and information services provided over Short Messaging Service ( SMS ) and Multimedia Messaging Service (MMS ).

Mobile services also offer functionality not otherwise available to fixed lines. However, it is unlikely that mobile services can currently be considered substitutes for fixed lines. The pricing of fixed and mobile services is not sufficiently similar for the SKMM to state with any confidence that an increase in the price of fixed services (for example) would lead to a substitution effect towards mobile services or that decreases in prices in the provision of mobile services is leading to a similar substitution effect.

The question of substitutability was posed to licensees in the pre-PI process, most of whom responded that fixed and mobile services were not substitutable, but rather should be viewed as complementary.

It is also noted that the ratio of prepaid to postpaid subscribers is around 80:20 respectively. This led to consideration in the pre-PI process as to whether separate markets would be appropriate within the product dimension of the mobile services market. Again, most means that there is likely to be a single national mobile market.

The SKMM’s technology neutral regulatory rationale also supports a single national respondents in the pre-PI process considered that this factor is a feature of consumer demand, but did not necessitate a further market delineation based on a substitutability analysis. For example, the SKMM considers that there is a close interaction between price and the subscription to prepaid and postpaid services. This market for mobile services, irrespective of type of network and services offered over the network (for example, voice or data).

The discussion on wireless broadband services including WiMAX would be covered in Chapter 13.

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6.2 Access List facilities and services

6.2.1 Existing Access List items

The Access List contains the following facilities and services relevant to the market for mobile telephony:

(a) paragraph 6(4) – Mobile Network Origination Service;

(b) paragraph 6(5) – Mobile Network Termination Service;

(c) paragraph 6(10) – 3G-2G Domestic Inter-Operator Roaming Service;

(d) paragraph 6(11) – Inter-Operator Mobile Number Portability Support Services; and

(e) paragraph 6(12) – Infrastructure Sharing.

6.2.2 Potential Access List amendments

The SKMM has identified the following issues to consider in its assessment of the mobile services market:

(a) whether the Mobile Network Origination Service and Mobile Network Termination Service should be retained with amendments in the Access List;

(b) whether the Mobile Network Origination Service and Mobile Network Termination Service could be usefully rationalised into generic categories of Network Origination Services and Termination Services respectively. This issue is discussed in chapter 13 of this paper;

(c) whether existing Access List regulation of 3G-2G Domestic Inter-Operator Roaming Service should be retained;

(d) whether to retain the inter-operator MNP support services on the Access List;

(e) several concerns arising from the current infrastructure sharing arrangements, namely:

(i) developments in cellular and universal service USP arrangements;

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(ii) whether access to in-building coverage should be considered for inclusion on the Access List;

(iii) the status of state-owned corporations and compliance with access obligations;

(f) whether 2G-2G roaming should be re-considered for inclusion on the Access List in specified areas of Malaysia;

(g) whether a new 3G-3G roaming service should be mandated; and

(h) whether developments in Mobile Virtual Network Operators (MVNO) in Malaysia necessitate a review of the SKMM’s previous decision to refrain from access regulation.

6.3 State of competition

6.3.1 Number of competitors

The rate of mobile subscriptions has nearly doubled in the past 3 years to 23.3 million by the end of 2007. Mobile services are enjoying strong growth and the number of subscribers surpassed the number of fixed line subscribers in 2000. In 2004, the mobile teledensity rate stood at 48.5 per 100 inhabitants, whereas in 2007 the figure was 85.1 per 100 inhabitants.

In early 2008, the number of mobile operators increased from 3 to 4 with the entry of a new 3G service provider, U Mobile Sdn. Bhd. ( U Mobile ).

The largest mobile operator is now Maxis, followed by Celcom. DiGi focuses mainly on prepaid services. U Mobile is currently the smallest operator, having only recently launched. Comparatively, with the exception of U Mobile, the relative gap in terms of subscriber numbers between the other 3 mobile operators has narrowed in recent years as evidenced in Table 6.

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Provider No of Domestic market Domestic market Subscribers share share (by subscribers) (by revenue) Maxis 9,712,352 41.6% 42% Celcom 7,190,876 30.8% 31% DiGi 6,420,425 27.5% 27%

Table 6: Comparative subscriber numbers and revenue for mobile operators in 2007 21

Consumers expect the various mobile services to be sold as a package, which means they cannot be treated in isolation. However, some mobile data services (such as WAP content and GPRS) may be sold separately, although typically by the same provider.

Year Number Mobile Number Fixed of teledensity of teledensity mobiles (penetration fixed lines (penetration rate) rate) 1998 2,150,000 9.7 4,370,000 19.7 1999 2,717,000 12 4,423,000 19.5 2000 5,122,000 21.8 4,628,000 19.7 2001 7,385,000 30.8 4,710,000 19.6 2002 9,053,000 36.9 4,670,000 18.8 2003 11,124,000 43.9 4,572,000 18.1 2004 12,398,000 48.8 4,547,000 17.9 2005 19,545,000 74.1 4,366,000 16.6 2006 19,464,000 72.3 4,342,000 16.1 2007 23,347,000 85.1 4,350,000 15.8

Table 7: Yearly growth in mobile subscribers and teledensity rates 22

Developments in the implementation of MNP, the rollout of WiMAX services and the introduction of services of U Mobile as a new 3G services entrant are expected to promote competition in this market.

21 SKMM, ‘Industry Performance Report 2007’, available at http://www.skmm.gov.my/Admin/WhatIsNew/CCD/IPR07.pdf accessed 9 April 2008, pages 8, 13, 16 & 33. 22 SKMM, Communications & Multimedia – Selected Facts & Figures Q4 2007 , pages 4, 11 & 12; SKMM, Communications & Multimedia – Selected Facts & Figures Q4 2006 , page 4.

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(a) 2G Services

Maxis, Celcom and DiGi operate 2G networks on both the GSM 900 and GSM 1800 bands. Celcom is the country’s most experienced mobile operator with 7.1 million customers, and holds the most extensive coverage reaching 96% of the population. Maxis has significantly expanded its coverage in recent years and has a 42% share in the market with 9.7 million customers.23 DiGi has the most limited network and remains focused on urban areas. 24

The 2G operators utilise the following spectrum and bandwidth to provide 2G services:

Operator Mobile network Bandwidth allocation (mhz) Celcom GSM900 2 x 15 GSM1800 2 x 25

TM NMT – 450 2 x 4 Maxis GSM900 2 x 10 GSM1800 2 x 25 E-GSM900 2 x 6 DiGi GSM1800 2 x 25 E-GSM900 2 x 2

Table 8: Spectrum allocation for mobiles

(b) 3G services

There are 4 operators holding 3G spectrum assignment: Celcom (spectrum assignment transferred from TM on 28 April 2008); UMTS (M) Sdn. Bhd. ( UMTS (M) ) (which has the largest share of 3G customers: 1.3 million); DiGi (spectrum assignment transferred from TIME on 7 May 2008); and U Mobile which is a purely 3G services provider. DiGi expects to commercially launch its 3G services in the second half of 2008.

23 Ericsson South East Asia Press Release, Ericsson signs HSDPA and Managed Services Extension Contract with Maxis , 9 September 2005. 24 Gartner, Mobile and Wireless Services and Service Providers in Malaysia , 10 December 2003.

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Operator Mobile network Bandwidth Frequency Band allocation (mhz) 1950MHz – 1965MHz Celcom 2140MHz – 2155MHz 2020MHz – 2025MHz 1935MHz – 1950MHz UMTS (M) 2125MHz – 2140MHz IMT 2000 2 x 15 2015MHz – 2020MHz 1 x 5 1965MHz – 1980MHz DiGi 2155MHz – 2170MHz 2010MHz – 2015MHz 1920MHz – 1935MHz U Mobile 2110MHz – 2125MHz 1915MHz – 1920MHz Table 9: 3G spectrum allocations

(c) Market assessment

As noted above as at the end of 2007, market shares of the operators were at 42:31:27 (Maxis, Celcom and DiGi) based on the number of subscribers for each operator. This compares to a 40:40:20 market share in 2004.

The potential for further increases in the mobile penetration rate through a further expansion of the mobile market is likely to lead to the potential for aggressive competition as existing operators seek to grow their subscriber base. Planned deployments of further mobile technologies, including 3G and 3.5G or HSDPA, also suggest the likelihood of continuing competition between the operators into the future.

6.3.2 Price competition

Mobile services are offered on both a prepaid and postpaid basis. Postpaid generally offers more services than prepaid and have lower per unit call charges. Prepaid and postpaid are regarded as substitutes by many consumers. The growth in prepaid services has been a major contributor to the overall increase in subscribers. As mentioned above, the ratio is approximately 80:20 prepaid to postpaid subscribers out of the 23.3 million mobile subscribers in 2007 (with 19.4 million and 3.9 million respectively).

With the growth of mobile services in Malaysia, all mobile operators provide highly competitive retail prices in both prepaid and postpaid mobile markets. The highest level

Page 95 of competition within the mobile market exists in the prepaid sub-market. Prepaid customers enjoy competitive mobile rates offered by Maxis and Celcom as well as DiGi, which has chosen to focus on offering prepaid services. Based on publicly available data, Maxis and Celcom are in close competition in respect of their rates offerings for voice, SMS and data, with Celcom offering more plan options to its prepaid customers based on their usage.

There are 4 operators competing for postpaid customers, with the three largest operators, Celcom, Maxis and DiGi offering the most competitive rates. These 3 mobile service operators offer postpaid customers more services, including the option of 3G services and lower per unit charges. Voice, SMS and data (MMS) services are offered almost at the same rates by all 3 operators, with the exception of Celcom not requiring a minimum usage commitment and offering customers the flexibility of “pay-per-use” rates at similar (cheaper for SMS) prices compared with the Maxis and Celcom.

The fourth operator in the market, U Mobile, provides purely 3G services. In the 3G market, Maxis has the largest customer share and offers the most competitive prices and plan choices for various data packages. Based on publicly available data, Maxis also offers cheaper rates to its postpaid customers for the use of video and voice call and mail services compared with rates offered to its prepaid customers.

6.3.3 Barriers to entry

The primary barrier to entry for potential infrastructure-based mobile operators is the scarcity of spectrum, which has been allocated for both 2G and 3G services and the sunk costs necessary to invest in such infrastructure

On the other hand, entry barriers into the market in order to provide mobile services could also be judged as having lessened since the introduction of MVNOs into the market in recent years who utilise the spectrum of existing operators.

6.3.4 Innovation

In 2004, TM and a consortium led by UMTS (M) were the only 2 mobile service operators that had been granted the necessary spectrum allocations to provide 3G services (the initial rollout occurred in Klang Valley). Today, U Mobile provides 3G services and soon DiGi will also commence their 3G services. The number of 3G subscribers totalled 1.56 million in 2007, a growth of 290% from 0.4 million 3G subscribers in 2006.

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U Mobile was launched in September 2007, previously known as MiTV Networks (its parent company which was issued with a 3G spectrum assignment). U Mobile’s market placement is focused on its intention of being a mobile TV service provider with its “Mobile Live TV” product offering via Digital Video Broadcasting – Handheld ( DVB-H) technology.

As at 2007, 3G subscribers accounted for approximately 14% of the total number of mobile subscribers. Going forward, Malaysia is expected to have more than 5 million 3G mobile subscribers by the end of a five-year forecast period from 2008 to 2012 (representing nearly one in five of all cellular subscribers at that time).25

In addition, the range of services for 3G subscribers has expanded to include broadband. Maxis wireless broadband started in 2006 offering speeds of up to 3.6Mbps using HSDPA, also known as 3.5G technology. Celcom similarly launched high-speed data connection services in August 2007.

3G subscribers are able to watch TV programmes from TV3, NTV7, 8TV and TV9 on their 3G mobile phones and real radio (see, for example, Maxis).

Evidence previously provided to the SKMM regarding the number of advertising promotions and pricing levels indicated that there is currently a strong level of competition between the current operators for new subscribers. However, the high economic barriers and spectrum scarcity mean that it is unlikely that any new operators will enter the market in the near future, other than on an MVNO basis. Despite this, U Mobile has recently entered the market. TIME would have also entered the market at this stage, however its spectrum assignment has been transferred to DiGi.

6.3.5 Conclusion

With the entry of new operators as well as MVNOs and increased service offerings, the SKMM concludes that the mobile services market continues to be competitive.

25 SKMM, Industry Performance Report 2007 , available at http://www.skmm.gov.my/Admin/WhatIsNew/CCD/IPR07.pdf accessed 9 April 2008, page 67.

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Question 13:

(a) What is your view of the state of competition at the retail level for mobile services in Malaysia?

(b) Has it become more or less competitive over time?

6.4 Existing facilities and services on the Access List

6.4.1 Mobile Network Origination Service and Mobile Network Termination Service

(a) Service description

Mobile Network Origination Service and Mobile Network Termination Service are technology/service neutral services for call (and message) communications.

Mobile Network Origination Service is an Interconnection Service for the carriage of Call Communications from a “A” party to a POI. This service supports Mobile Network-to- Mobile Network, Mobile Network-to- Fixed Network and Mobile Network-to-International outgoing calls insofar as they relate to 1800 number services, toll-free 1300 services and other similar services which require Any-to-Any Connectivity.

Mobile Network Termination Service is an Interconnection Service for the carriage of Call Communications from a POI to a “B” party. This service supports Mobile Network-to- Mobile Network, Fixed Network-to-Mobile Network, incoming international-to-Mobile Network calls and messages.

(b) Promotion of competition

The Mobile Network Termination Service continues to satisfy the bottleneck test, being an essential facility controlled by a monopolistic firm in the relevant interconnection market, which competitors are unable to practically or reasonably duplicate, where it is likely that access would be denied if the service was not regulated and where the provision of access is feasible. As each mobile network operator has a monopoly in respect of calls terminating on its own network, it is reasonable to conclude that each mobile provider is not constrained by the other when providing mobile termination services in Malaysia.

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The case of the Mobile Network Origination Service is more contestable. It provides access by mobile consumers to services such as freephone 1800 number services and toll free 1300 number services. However, a mobile subscriber may have several alternative methods (with usage based on a choice of convenience) to obtain the service offered on such a number, such as using a fixed phone.

Origination refers to the carriage of the call made by the calling party, and termination is the carriage of the receiving party. Where the calling and receiving party are on separate networks, a POI is established once a call is made. Under current commercial arrangements between network owners, the calling party’s network owner will purchase termination from the network owner that completes the call. The originating network owner will recover these in the retail price from the customer.

However, there are circumstances where the terminating network makes a payment to the originating network carrier. This is more likely to occur in circumstances where the originating network carrier is restricted with regard to the charge it can set for its directly-connected subscribers who initiate calls on its network and where the terminating network operator charges a fee to its subscribers for enabling the termination of calls made to the subscribers.

It should also be noted that the SKMM’s initial conclusion in the PI on Access List in 2005 was to remove the Mobile Network Origination Service from the Access List. Ultimately, this service was retained primarily because the choice of using a mobile device to access 1800 and 1300 numbers was considered to be sufficiently essential to warrant continuing regulation. The SKMM’s focus on this issue is now whether those previous arguments remain valid in 2008 and will continue to be a concern during at least the next 3 years.

(c) Any-to-any connectivity

The SKMM’s view of mobile termination as a bottleneck indicates its essential nature for achieving any-to-any connectivity. In terms of origination, it is unclear whether any-to- any connectivity will be compromised by the removal of Mobile Network Origination Service from the Access List, that is, whether it will continue to be offered regardless of regulation or otherwise.

(d) Impact on infrastructure investment

Mobile termination is a bottleneck and its removal would have a very damaging effect on infrastructure investment in Malaysia. It is not possible to duplicate the connection to an operators’ end users. Without this access, any-to-any connectivity would be

Page 99 compromised and investment in other fixed and mobile infrastructure which was dependent on such any-to-any connectivity would be severely undermined.

The impact of regulation or its removal in respect of mobile origination is less unclear. Access to VoIP and calling card services is an important element of mobile origination but it is not clear whether regulation is necessary to facilitate investment in VoIP and calling card infrastructure. The pre-PI process did not indicate a preference either way for its inclusion or removal.

6.4.2 Mobile Network Termination Service and Mobile Network Origination Service - Preliminary view

The SKMM holds a strong preliminary review that the Mobile Network Termination Service be retained on the Access List with amendments.

The SKMM’s preliminary view in 2005 was in favour of the removal of the Mobile Network Origination Service from the Access List, on the basis that this would be unlikely to have a major impact on end-users. In addition, the SKMM considered that the presence of alternative access methods, especially once MNP is implemented which will allow end users to have significant countervailing power to prevent mobile operators from raising prices for the Mobile Network Origination Service, suggests that the service should be removed from the Access List.

Nevertheless, access to VoIP services for mobile users may be affected, as well as other 1800 and premium services, if this service is removed from the Access List. The SKMM would stress that the removal of the service does not mean that this service would not be made available on a commercial basis. The SKMM seeks comments on any negative impacts that may arise in the event that Mobile Network Origination Service is not retained on the Access List.

The service description for both the Mobile Network Origination Service and Mobile Network Termination Service were amended during the PI on Access List in 2005 to ensure technological/service neutrality to facilitate new and emerging technologies. Nevertheless, during this Public Inquiry, based on the preliminary view, the SKMM proposes further amendments to ensure that both services are applicable in an NGN environment. In particular, the SKMM proposes that the interpretation of “Call Communications” include “IP address”. This would take into consideration any future development in 3G such as by the 3GPP where voice over 3G would be all IP. The service descriptions are found in paragraph 6(4) and 6(5) respectively in Annexure 2.

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At the same time as mentioned in the previous chapter, the SKMM is also considering whether Mobile Network Origination Service (if retained) and Mobile Network Termination Service should be rationalised under generic descriptions such as Network Origination Service and Network Termination Service. The discussion on rationalisation is contained in Chapter 14.

Question 14:

(a) Do you agree with that Mobile Network Termination Service should be retained on the Access List with amendments?

(b) Do you consider that there are any developments since 2005 including the implementation of MNP that may warrant the removal of the Mobile Network Origination Service from the Access List?

(c) What are the negative impacts that may arise, taking into consideration that Mobile Network Origination Service would still be available on a commercial basis?

6.4.3 3G-2G Domestic Inter-Operator Roaming Service

(a) Service description

3G-2G Domestic Inter-Operator Roaming Service is provided by 2G network operators to 3G network operators. Given the more limited functionality associated with the 2G network, this form of roaming does not support the full suite of 3G applications. Normally the roaming capability is limited to voice calls.

(b) Promotion of competition

The SKMM’s concern in the PI on Access List in 2005 was to ensure that an efficient market structure was implemented at the advent of 3G services in Malaysia. The SKMM concluded that mandating the 3G-2G Domestic Inter-Operator Roaming Service would significantly reduce the uncertainty faced by a new 3G spectrum assignment holder or 3G MVNO, and hence would potentially significantly reduce barriers to entry.

Since 2005, there are two new 3G spectrum assignment holders, namely U Mobile and DiGi. As these two spectrum assignees entered the 3G market later as compared with Celcom and UMTS (M), this service may still be important in the next three years as U Mobile and DiGi start to deploy their 3G networks.

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There have been some significant developments in roaming in a commercial and regulatory sense. In June 2007, U Mobile announced that it had concluded the first nationwide domestic roaming agreement with Celcom.26

The SKMM would be interested in views as to whether such domestic roaming arrangements could be concluded in the absence of Access List regulation, and whether the expansion of 3G infrastructure continues to warrant its regulation.

(c) Impact on infrastructure investment

One of the primary objections to roaming is the potential impact on infrastructure investment. On the one hand, roaming may reflect rational infrastructure investment decision making because it does not require all operators to construct nation-wide networks and facilitates the efficient use of existing infrastructure.

Conversely, the regulation of 3G-2G Domestic Inter-Operator Roaming Service arguably undermines incentives to invest because a 3G spectrum assignment holder could rely on 2G roaming for the provision of voice services instead of building out its own infrastructure.

Further, it may no longer be necessary because 3G spectrum assignment holders are required under the terms of their spectrum assignment to construct national networks.

(d) Other criteria

The SKMM notes that despite mandating the 3G-2G Domestic Inter-Operator Roaming Service on the Access List and the conclusion of a domestic roaming agreement between Celcom and U Mobile, SKMM has received differing views in the pre-PI process about whether the service should remain on the Access List. Views vary over whether there were commercial difficulties in concluding access arrangements between operators.

The SKMM is interested in further views from stakeholders as to whether the 3G-2G Domestic Inter-Operator Roaming Service should be retained or amended , including whether additional price and non-price terms and conditions for the service should be specified in the MS (Pricing) and/or MS (Access) respectively.

26 U Mobile media statement, http://corporate.u.com.my/sec_press/pdf/News%20-%20070626%20MiTV- Celcom_DRAgreement-vers-final%20260607%20(5%20pm).pdf

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6.4.4 3G-2G Domestic Inter-Operator Roaming – preliminary view

On a preliminary basis, the SKMM considers that it is probably appropriate to continue regulation of the 3G-2G Domestic Inter-Operator Roaming Service. However, the SKMM would be interested to understand whether the need for further regulation is obviated by factors such as the ability to enter into suitable commercial arrangements and/or the availability of suitable infrastructure sharing arrangements.

It was suggested during the pre-PI process that the scope of this service should be expanded to include initiation and reception of data sessions and connectivity. The SKMM’s preliminary view is to maintain this service in its current form, however the SKMM is open to comments regarding how such roaming capability could be technically facilitated and the benefits or costs of doing so. There are no proposed amendments to the service description of the 3G-2G Domestic Inter-Operator Roaming, and it is found in paragraph 6(10) in Annexure 2.

Question 15:

(a) Do you consider that 3G-2G Domestic Inter-Operator Roaming should continue to be retained on the Access List?

(b) Should the scope of the service be expanded to include initiation and reception of data services and connectivity?

6.4.5 Inter-Operator Mobile Number Portability Support Services

(a) Service description

MNP refers to the ability of subscribers to change operators whilst retaining their existing mobile service numbers. Inter-Operator MNP Support Services refer to the processes required to be carried out by operators to support the implementation and ongoing functionality of MNP. The SKMM has described these processes as including:

(i) upgrades of switching centres to support MNP, software and Intelligent Network (IN ) platform upgrades;

(ii) connections of databases, which need to be referenced by operators in order to correctly route calls to ported numbers and the conveyance of those calls; and

(iii) customer care and fault management.

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The access issues previously identified by the SKMM when mandating these services were, and continue to be, based on costs. These inter-operator services are essential, but the question of which party should bear these costs and on what terms has yet to be determined.

(b) Promotion of competition

MNP has an important role in promoting competition in retail mobile services by facilitating consumer choice of operator.

During the PI on Access List in 2005, the issue was not whether MNP should be mandated, as this was done by virtue of the Ministerial Direction on Number Portability, Direction No. 2 of 2004 (Ministerial Direction on Number Portability ) issued on 10 September 2004, but on the manner in which it will be implemented. The SKMM considered at that time that an instrument such as Numbering and Electronic Addressing Plan (NEAP ) would be more appropriate to deal with MNP issues, as MNP is not per se an access issue. However, recognising that inter-operator processes are critical to the success of MNP, the MNP inter-operator support services was included in the Access List to complement the more detailed processes that would be implemented subsequently.

Subsequently in September 2005, a PI on MNP was conducted. Amongst others,27 it was decided that a third party clearing house would be appointed, centralised database would be implemented and All Call Query approach would be used for call routing.

Since then, the SKMM and the industry have been working towards implementation of MNP such as the appointment of the consortium to operate and manage the “Mobile Number Portability Clearinghouse” in Malaysia and developing the inter-operator processes.

During the pre-PI consultations in April and May 2008, there were different views held by the stakeholders on regulation of MNP, such as whether it should be regulated through NEAP and at a later stage through Numbering Regulation vis-à-vis the role of access regulation. At that time, the MNP implementation was ongoing and has yet to be finalised.

At this juncture, the NEAP has been varied to include MNP 28 and MNP is expected to be launched nationwide in October 2008.29

27 See SKMM, A Report on a Public Inquiry under Section 55(2), 55(4) and 61 of the Communications and Multimedia Act 1998 on Implementation of Mobile Number Portability in Malaysia , 28 December 2005

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6.4.6 Inter-Operator Mobile Number Portability Support Services – Preliminary View

The SKMM seeks comments on any issues that have yet to be addressed in implementing MNP and that could be addressed via access regulation by retaining the Inter-Operator Mobile Number Portability Support Services on the Access List.

At this juncture, the service description of the inter-operator MNP support services (with minor editorial amendment) is found in paragraph 6(11) in Annexure 2, in the event the SKMM decides to retain the service on the Access List.

Question 16:

(a) Do you consider that there are any issues that have yet to be addressed during the implementation of MNP and that could be addressed via access regulation?

(b) If you are of the view that the service should be retained on the Access List, what aspects of the service should be regulated by the Access List?

6.4.7 Infrastructure Sharing

(a) Service description

In its simplest form, infrastructure sharing may be limited to sharing of space on towers and associated sites. Partners that share sites may share all site related facilities, including ownership or leasehold rights, tower or mast, power supply, cabling, antennas and transmission equipment. The greatest positive impact of infrastructure sharing is this ability to reduce the total cost to the industry of physical infrastructure expenditure for operators.

Infrastructure Sharing was added to the Access List following the PI on Access List in 2005 with a view to addressing specific access issues in both the Mobile Services Market and the Broadcasting Services Market.

28 Numbering and Electronic Addressing Plan Amendment Notice No. 2 of 2008 which came into effect on 22 August 2008 29 Press Statement by YB Dato’ Shaziman Abu Mansor, Minister of Energy, Water and Communications on Mobile Number Portability, 28 August 2008

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(b) Application of LTBE to infrastructure sharing

It is estimated by network component manufacturers at Ericsson and Siemens that facilities sharing can reduce the initial roll-out costs for 3G networks by up to 40 per cent. 30

Infrastructure sharing assists in reducing the financial burden on operators that own networks by enabling them to charge other telecommunications operators for access to their facility, while also facilitating market entry or expansion by allowing new operators to rapidly expand their network coverage beyond the footprint of their own infrastructure. 31

A NFP should be able to make a rational decision as to whether to invest in its own infrastructure or buy access to existing infrastructure. In circumstances where a new entrant commences its roll-out, it may not have sufficient funds to build new infrastructure in the short term. Efficiently priced infrastructure can facilitate an increase in coverage of wireless technology for the long term benefit of end users. In this context, the SKMM is in favour of infrastructure sharing where to do so would lower the barriers to entry.

There are 4 issues in relation to the state of competition for infrastructure sharing:

(i) Cellular and universal service developments

The Time 1 and Time 2 projects were initiated in 2004 to enhance mobile coverage on a nationwide basis. Both projects have now been completed with 210 and 1268 towers built under Time 1 and Time 2 respectively and most of the towers are shared. In addition, the Time 2 expansion project was initiated in 2007 which focused on enhancing the quality of cellular service in the Time 1 and Time 2 areas. Under this expansion project, 330 additional towers are required and 87% of the towers have been completed.

To date, under the USP, 89 identified universal service targets were designated to 6 service providers namely TM, TIME, DiGi, Maxis, Celcom and eB Technologies (M) Sdn. Bhd. A multitude of technologies were used to roll-out the USP obligations, and towers could also be constructed for wireless technologies. In addition, under the East West Highway USP project in 2007, TM was the designated universal service provider that was

30 ITU Forum of the Regional Working Group on Private Sector Issues – Asia Pacific Region, Background Paper on Infrastructure Sharing , 3 August 2005. 31 Commerce Commission of New Zealand, Schedule 3 Investigation into the Extension of Regulation of Designated and Specified Services, Final Report , 28 August 2006, available at http://www.comcom.govt.nz

Page 106 tasked with building 20 towers to facilitate the mobile service providers in providing mobile coverage along the highway.32

During the pre-PI process, it was understood that there may be some confusion in relation to the scope of infrastructure sharing, for example whether it applies to towers built under the USP projects. For the avoidance of any doubt, the SKMM affirms that the definition of infrastructure sharing includes all towers including towers built under the USP projects.

(ii) Status of State-backed companies ( SBC )

Since early 2005 in conjunction with the initiation of the Time 2 project, 13 SBCs were formed and licensed as NFPs. The presence of SBCs has changed the landscape of development and ownership of infrastructure in particular for the towers in Malaysia. Prior to this event, cellular operators only relied on their own infrastructure projects. A total of 910 under Time 2 project and 300 towers under Time 2 expansion project were built and owned by SBCs.

During the pre-PI process, a diverse range of views were given and numerous issues were raised in relation to infrastructure sharing. Some commented that the industry has a successful infrastructure sharing arrangement in place. It was also proposed that infrastructure sharing could be removed as section 228 of the CMA is adequate to deal with access issues, and that commercial negotiation is sufficient to enable Access Seekers to utilise existing infrastructure.

On the other hand, it was noted that although the infrastructure sharing arrangements between mobile operators appeared generally to be working well, there are other parties which own infrastructure such as SBCs. Comments were noted that obtaining infrastructure sharing from SBCs is a long and onerous process. Others commented that though access to infrastructure sharing in its simplest and basic form via site sharing is mandated via the Access List, new entrants face delay tactics in obtaining access. It was also mentioned that access to towers is limited and unpredictable.

In addition, state-appointed One Stop Agencies ( OSA ) were established to expedite approval processes to coordinate between service providers, SBCs and the local authorities for roll-out of Time 1, Time 2 and any other tower projects. 33 However, some licensees in the pre-PI process commented that the OSA arrangements have created

32 SKMM, ‘Industry Performance Report 2006’, pages 114, 154-155, ‘Industry Performance Report 2007’, page 117 33 SKMM, ‘Industry Performance Report 2007’, pages 70-71,‘Industry Performance Report 2005’, page 131

Page 107 more difficulties than they have resolved, and operate as an administrative burden rather than a solution.

Question 17:

(a) What has been the impact of access regulation on infrastructure sharing in Malaysia?

(b) What are the issues faced when sharing the infrastructure of SBCs and can these issues be addressed through access regulation?

(iii) Broadcasting issues

Broadcasting licensees have also raised issues in relation to infrastructure sharing, which are similar to the issues raised in 2005. Amongst the issues raised are as follows:

• there is limited access to strategic locations;

• tower access is often bundled with equipment and utilises technologies that are antiquated;

• charging for tower access is applied twice to broadcasters when the same co-located equipment is used for different stations;

• the differential costs for tower access are often unclear or unjustified; and

• the bundling of maintenance services with tower access, often when maintenance services can be provided from a third party at a lower cost, is highly detrimental to Access Seekers.

Some of the issues would be discussed further in Chapter 10.

Question 18:

Has the inclusion of a technology-neutral infrastructure sharing service assisted in respect of access for broadcasting services?

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(iv) In-building installation and coverage issues

The SKMM also received some comments that infrastructure sharing should be extended to cover indoor in-building coverage for commercial buildings. The issue regarding in- building coverage is primarily one of determining whether there is a problem that access regulation can resolve. The problem appears to be twofold: complaints raised by several operators that they have been denied entry to buildings to install facilities; and the use of existing common antenna system ( CAS ) in buildings.

During the pre-PI process, there have been comments raised that newer operators may not be able to gain entry to commercial buildings where mobile operators are currently present. This is due to the building owners who allow one or limited number of operators into their building. This Public Inquiry is not dealing with access to commercial buildings, which is beyond the scope of access under the CMA. However, where there are operators present, the new operators can seek access to network co-location services from these existing operators. The existing operators have an obligation under the MS (Access) subsection 5.19.1 to ensure that they do not enter into any arrangement which will prevent, hinder or restrict their fulfilment of this obligation.

The SKMM understands that currently the four mobile operators have a barter arrangement amongst themselves to provide in-building coverage of commercial buildings. In this, the mobile operators share the room in the commercial building where they place their network equipment. The SKMM has considered in-building CAS 34 for the mobile operators to enable them to provide better coverage of their services inside buildings, including in areas such as car parks and lifts. A single CAS consist of a central equipment room where the base transceiver station (BTS ) equipment of the different mobile operators are housed, a multi-band combiner to combine the radio frequency signals from the different BTS, and a multi-band distributed antenna system to distribute the combined radio frequency signal throughout the building. The CAS which provides for GSM and 3G coverage, is built and owned by one of the mobile operators, and shared by the other 3 operators. As barter trading is dependent on the number of buildings a mobile operator has, it has been raised to the SKMM that this is disadvantageous to a new mobile operator. The SKMM would also seek comments on whether there is any unreasonable refusal to the new operators that warrants it to be addressed under access. The SKMM would invite submissions on the commercial difficulties to resolve this issue. In addition, the SKMM requests feedback on whether it is technically feasible for other operators, such as WiMAX operators to share the antennas for GSM and 3G technologies.

34 See SKMM, Licence Mapping of “In-Building Common Antenna Systems for Mobile Network Operators”, pages 1-3

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If there is an access issue, a possible solution may be to share the CAS, which are the antennas distributed at various locations in the building and the cabling from the equipment room to the antennas. The CAS is considered part of network facilities, called “incidental network facilities”, 35 as defined in the Communications and Multimedia (Licensing) (Exemption) Order 2000 ( Licensing Exemption Order ). The SKMM can consider including the CAS in the Access List in accordance with section 145(1) of the CMA.

Question 19:

(a) The SKMM seeks comments on the commercial difficulties, if any, faced by new operators in relation to in-building coverage that warrants it to be addressed under access.

(b) Do you have any views on whether access regulation can be used to address the in-building coverage issues noted above? Is it technically feasible? In particular, the SKMM invites comments about appropriate access arrangements that could apply to CAS.

6.4.8 Preliminary view – Infrastructure Sharing

The mobile telephony market is a competitive market, with 4 mobile operators, where the fourth mobile operator is a new entrant offering purely 3G services. The SKMM notes that some have commented that infrastructure arrangements have been working well on a commercial basis.

However, the SKMM is concerned that new entrants in particular will need access to existing towers. Commercial negotiations can generally be concluded between two parties who negotiate on a broadly equal commercial footing, but this is likely to be more difficult for a smaller new entrant.

In addition, the broadcasters continue to raise the same issues that they raised during the PI on Access List in 2005, which indicates that competition has not been effective to constrain the behaviour of the main providers.

The SKMM’s preliminary view is that it would be in the LTBE to retain infrastructure sharing on the Access List, but to seek comments on how its arrangements may be improved through access regulation.

35 See SKMM, Licence Mapping of “In-Building Common Antenna Systems for Mobile Network Operators”, page 1

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Finally, the SKMM’s preliminary view in relation to the CAS is that access regulation can be applied to extend infrastructure sharing between mobile operators to in-building antenna. The SKMM seeks comments on the benefits or detriments of imposing such an access obligation.

Based on SKMM’s preliminary view, the amended service description for Infrastructure Sharing includes “Common Antenna System” and can be found in paragraph 6(12) in Annexure 2.

Question 20 :

(a) Do you agree that Infrastructure Sharing should be retained on the Access List?

(b) What further improvements can you propose to ensure that Infrastructure Sharing operates more effectively?

6.5 Potential facilities and services on the Access List

6.5.1 2G-2G Domestic Inter-Operator Roaming Service

(a) Service description

In the PI on Access List in 2005, SKMM considered the case for mandating a 2G-2G Domestic Inter-Operator Roaming Service. This form of roaming is limited to 2G services operating outside the coverage areas of their own networks. SKMM ultimately decided not to include the service on the Access List, primarily on the basis that Infrastructure Sharing is likely to be more effective in addressing coverage issues and that 2G roaming could significantly undermine incentives to invest in 2G infrastructure.

(b) Promotion of competition

Seamless, nationwide mobile network availability is a critical issue in promoting competition between operators. Consumers are less likely to select a mobile operator with limited coverage areas.

The three mobile operators have wide population coverage nationwide for 2G and though there may be areas of coverage that do not overlap, the incremental benefit to each of the mobile operators from regulation of this service is less apparent. In addition, generally roaming will not allow operators to differentiate themselves on QoS or value- added services between one and the other in the roamed areas, as it may only allow the

Page 111 more basic services to be offered. It has been SKMM’s understanding that domestic roaming arrangements have generally been concluded on an ad hoc “barter” basis between the operators.

However, there is less population coverage under the USP areas and the more basic services for the end users may be preferable than no coverage at all. For example, the East West Highway project was launched under the USP where 20 towers were erected by TM to facilitate the mobile operators in improving mobile coverage along the highway. The mobile operators had issues on domestic roaming rates which necessitated intervention from the SKMM. Subsequently, the commercial arrangement on domestic roaming for the East West Highway was concluded.

Internationally, the incidence of regulation of domestic roaming services is mixed. These range from forbearance on the basis of successful commercial alternatives in concluding roaming arrangements (for example, Australia) to what appears to be a rollback of former regulated requirements in response to changing market conditions (for example, the United States and India).

Although coverage remains a significant issue for consumers, there are mechanisms other than roaming which can potentially be used to alleviate coverage gaps. The most significant alternative is the availability of infrastructure, particularly in rural or remote geographic regions.

(c) Impact on infrastructure investment

As the SKMM indicated in the PI on Access List in 2005, domestic roaming can significantly undermine infrastructure investment. If a 2G operator can roam onto another 2G operator’s network, then it has no or limited incentive to invest in its own infrastructure.

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On the other hand, domestic roaming can avoid duplication of infrastructure in USP areas where it is uneconomic to invest in infrastructure. In addition, the criticism which is generally applicable to domestic roaming such as the disincentive for operators to invest in infrastructure in new coverage areas due to free riders may not exist or may exist to a smaller extent in USP areas. Hence, it might be a rational option in remote areas of Malaysia and the SKMM would be interested to understand the possible cost savings in regulating this service under the Access List.

(d) Other criteria

During the pre-PI process, the issue of 2G domestic roaming was not raised by stakeholders as an area of concern. However, SKMM considers it is timely to revisit this issue in recognition of the ongoing national importance of coverage of mobile services on an equitable basis throughout Malaysia. There are 3 aspects relevant to SKMM’s decision to re-open the potential for mandated domestic roaming.

Firstly, the expansion of the Time 2 program reflects a policy decision of the Government to continually ensure wider areas of coverage and quality. A new program is also underway which focuses on blind spots and call dropouts in areas targeted by suburb, rural communities/indigenous settlements, and tourist locations. In conjunction with the Ministry and the 2G operators, SKMM has advertised its Consumer Complaints Bureau to seek public input on specific incidences of dropouts and network failure. A public expectation has therefore been created that needs to be addressed in any way practicable, which may include mandating domestic roaming.

Secondly, there remains a discrepancy in cellular coverage availability between Peninsula Malaysia (95% coverage as at August 2007) and Sabah & Sarawak (77%) 36 . It would be consistent with the NPOs to examine all options to redress this inequity.

Thirdly, the Government’s commitment to widen broadband penetration includes a specific focus on Zone 3 areas where the digital divide needs to be addressed via USP. One of the most fundamental divides that currently exists is the discrepancy in cellular coverage availability noted above. It would be valid for SKMM to reconsider the potential role of access to improve service coverage in these presently under-served areas.

As there is currently a 92% of the population has access to mobile coverage nationwide, the intent of the PI Paper is to focus on the potential benefits of a mandated 2G Inter-

36 SKMM, Industry Performance Report 2007, page 73

Page 113 operator Domestic Roaming Service in Zone 3 areas. The form of existing commercial arrangements for domestic roaming services in these areas other than for the East West Highway project, is not known.

The SKMM considers it to be opportune to seek information and comments on this issue. The SKMM also invites comments on the potential to limit a mandated 2G roaming service to specific, undeserved geographic areas such as in Zone 3 areas. This would also be consistent with SKMM’s proportionate regulatory approach in other aspects of this Inquiry to exercise forbearance in areas where competition is present.

6.5.2 2G-2G Domestic Inter-Operator Roaming Service – preliminary view

The potential benefits of a mandated 2G domestic roaming service are primarily based on social policy objectives. The SKMM considers that the optimal solution to address the above issues is through commercial arrangements that complement the Time 2 program and projects under the USP and public involvement to identify specific areas of coverage concern.

It is difficult to assess whether roaming is occurring, or will occur, in the absence of regulatory measures. One of the key questions for the SKMM is to gain an updated understanding of the current level of any commercial arrangements, if any, that include underserved geographic areas, apart from the East-West Highway project in Malaysia.

Depending on the outcomes of that assessment, the SKMM’s preliminary view is that to the extent commercial domestic roaming arrangements do not exist in those under- served areas, with the exception of East West Highway, access regulation should be considered. This should ideally be limited to specified geographic areas, and it is proposed that the geographic boundary be limited to Zone 3 areas. The service description for 2G-2G Domestic Inter-Operator Roaming Service is found in paragraph 6(26) in Annexure 2, in the event that the SKMM decides to regulate this service.

Question 21:

(a) Do you have in place, or have you attempted to reach commercial arrangements for 2G inter-operator domestic roaming nationwide, other than East West Highway?

(b) Do you consider that the benefits of regulating domestic roaming in Zone 3 underserved areas of Malaysia would outweigh the costs, including technical costs?

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6.5.3 3G-3G Roaming Service

(a) Service description

The 3G-3G roaming service is a service that enables a customer of a 3G operator or a 3G Mobile Virtual Network Operator to initiate, receive or otherwise utilise applications on the 3G Mobile Network of another 3G Operator.

As noted above, 3G-3G roaming service enables a mobile customer to automatically make and receive voice calls, send and receive data or access other services when travelling outside the geographical coverage area of the home network. 3G to 3G roaming allows a 3G operator’s customers to roam onto another 3G operator’s network, as shown in Figure 9 below:

Figure 9: 3G-3G Roaming

(b) Promotion of competition

Roaming is generally considered positive in terms of the promotion of competition to the extent that consumers have an expectation of seamless, national service coverage.

Korea recently analysed the case for regulation of 3G to 3G roaming. It concluded that on an analysis of overseas examples, the policy reasons to regulate roaming differ between 2G to 2G roaming and 2G to 3G roaming on the one hand, and 3G to 3G roaming on the other. It concluded that the policy goal of 2G-2G and 2G-3G roaming is to reduce barriers to entry and to promote fair competition. In contrast, it concluded that

Page 115 the goal of 3G-3G roaming is to relieve operator financial burdens arising from facilities- based investment. 37 If this view is accepted, it does not appear to support regulation as being in the interests of promoting competition.

This is particularly relevant to Malaysia in light of the commitments of the 3G operators to construct their own national networks under the terms of their spectrum assignment, as discussed below.

(c) Impact on infrastructure investment

The SKMM has dealt with the impact of roaming on efficient investment in, and use of, infrastructure in Malaysia when examining the other forms of roaming above. These general considerations are equally applicable to 3G-3G roaming.

However, in addition to those general requirements, there are particular issues relevant to the expected investment by 3G operators arising from commitments made during the spectrum allocation phase.

In both Application Information Package No. 1 of 2002 and Applicant Information Package No. 1 of 2005 (AIP), the applicants were asked to demonstrate their commitment and capability to provide domestic roaming through the submission of a roaming plan. The roaming commitment specifically covered roaming between 3G networks. The commitment to roaming was given a 12.5% weighting in the criteria.

The other aspect of the AIP which has important implications for roaming was the service rollout and coverage component. This aspect was given a 35% weighting and the AIP strongly indicated a preference for spectrum assignment holders to rollout their own respective 3G networks. This may mean that Malaysia will have 4 nationwide 3G networks thus eliminating the need for 3G to 3G roaming and consequently eliminating any need to regulate this service.

There are limited examples of countries that regulate 3G to 3G roaming. Where regulation has occurred, it is not full-scale regulation of the service, but within limited parameters. For instance, in Denmark 3G to 3G roaming is regulated through a general obligation to negotiate requests for national roaming. Other European countries

37 Electronics and Telecommunications Research Institute, Mobile roaming policy in Korea, Focused on the roaming among 3G operators, at page 12.

Page 116 generally have not regulated this service at all and there are examples where 3G to 3G roaming has actually been prohibited (for example, Spain). 38

Generally in countries where 3G to 3G roaming is not regulated, it occurs as a result of commercial agreements independently established between operators. For instance the following table shows examples of countries that have made independent agreements regarding 3G to 3G roaming.

Country Operator 3G to 3G Roaming Policy UK T-Mobile, O2 Autonomously negotiated roaming agreements. Restrictions on time frame and geographical location. Germany T-Mobile, Viag Intercom Autonomously negotiated roaming agreements. Restrictions on time frame and geographical location. Sweden Tele2, TeliaSonera, Shared networks permitted in areas Europolitan, Hutchinson 3G excluded from 70% of population coverage.

Table 10: International comparisons of 3G-3G roaming regulations

(d) Other criteria

The SKMM also questions whether it is technically feasible to provide 3G-3G roaming. In addition, the NPOs do not appear to be facilitated by a mandate of this service.

6.5.4 3G-3G Roaming Service – preliminary view

Due to existing commitments made by 3G spectrum holders in relation to infrastructure investment, the SKMM’s preliminary view is to refrain from regulation of a 3G-3G roaming service, however comments are invited on the above issues.

Question 22:

38 European Commission, Comparative Assessment of the Licensing Regimes for 3G Mobile Communications in the European Union and their impact on the Mobile Communications Sector, 25 June 2002.

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(a) Do you have any views on whether a 3G-3G roaming service should be included on the Access List?

(b) Do you have any views on the technical feasibility of such regulation?

6.5.5 Mobile Virtual Network Operator Service

(a) Service description

One of the most difficult aspects of MVNO is in defining a suitable service description. This is because MVNOs are essentially business models based on the concept that the operator offers mobile services to end users, but does not use its own radio frequency to deliver those services.

The International Telecommunications Union ( ITU ) defines MVNO as "an operator who provides mobile communications services to users without its own airtime and government-issued licenses" 39 . Oftel (now known as Ofcom) in the UK, defined it slightly differently as "an organization providing customers with mobile phone services without owning any airtime". There are many other alternative definitions. The common element is that MVNOs do not have a right to radio spectrum but have access to one or more elements of a mobile network operator’s network.

Essentially, an MVNO is a business model which depends on their variations of a pure reseller (“thin” MVNOs) to more than a branded reseller, with value-added services and even ownership of some facilities (more “thick” MVNOs). Depending on the mix of network facilities and services that the MVNO uses, and the degree to which it “value adds” under its business model or acts as a pure reseller of “vanilla” airtime services, the MVNO may be described as “thick” or “thin” in nature.

(b) Promotion of competition

Under the AIP for the award of 3G spectrum assignment by the SKMM, each operator was required to set out its plans for access to infrastructure and airtime capacity. As a result, those responses were included in the Detailed Business Plan of all the 3G spectrum assignment holders and each committed to sharing of airtime or wholesale capacity with MVNOs.

39 ITU News, No. 8, April-May 2001

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Access to services to support MVNO services may involve a complex mix of network facilities, network services and services and facilities which support these network facilities and network services. Access issues are difficult to define, primarily because there is no fixed business model for MVNOs with models ranging from “thick” MVNOs to “thin” MVNOs.

Now that MVNOs have emerged in Malaysia, it is opportune to examine whether MVNOs have been successful in commercially negotiating arrangements with mobile operators or whether any access issues may have arisen during these commercial negotiations which need to be addressed.

The comments from existing and new MVNOs during the pre-PI process indicated that there were interests expressed by the mobile operators and MVNOs to work on mutually beneficial arrangements. This view is supported by a clear indication and action from at least one mobile operator to actively seek out potential MVNOs to target specific customer segments, including targeting migrant workers and other specific demographic groups. It also became clear that at least one mobile operator is actively pursuing future opportunities with other MVNOs.

(c) Impact on infrastructure investment

The primary reason for the SKMM’s decision to refrain from MVNO regulation in 2005 was based on the high degree of competition in the mobile services market; and the difficulties of defining the scope of an MVNO service. The range and mix of network facilities, network services and services and facilities which support these network facilities and network services mean that access issues are difficult – if not impossible – to define with clarity.

The impact on infrastructure investment by regulating MVNOs is more difficult to quantify. In general terms, if competition can deliver appropriate outcomes, then it would be inappropriate to regulate in this sector because regulation can only second- guess the most appropriate outcomes. Hence, regulation of MVNOs may have the effect of stimulating too much demand from MVNO services and thus undermining incentives to invest in infrastructure by the mobile operators. On the other hand, regulation may have the effect of not stimulating enough demand from MVNOs, thus limiting investment by MVNOs in platforms and other infrastructure used by MVNOs. The impact on infrastructure will depend on the level of regulation and in particular the determined price.

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(d) Other criteria

International best practice is one way of considering the appropriateness of MVNO regulation. Regulators around the world have generally decided against the regulation of MVNOs. In a competitive mobile market, MVNOs should be able to commercially negotiate appropriate arrangements with the mobile operators.

However, it is timely to re-consider whether regulation is appropriate in Malaysia due to global trends such as:

(i) Mobile operators significant interest in the prepaid market; and

(ii) MVNOs dependence on mobile operator networks.

Generally, there are 2 main reasons for regulation of a service:

(i) The presence of market power in a segment; and

(ii) Access to essential facilities.

The need to regulate MVNOs will depend on whether any mobile operators exercise market power and prevent the normal operation of competitive markets from which consumers can benefit. If the mobile market is competitive, it necessarily follows that no mobile operators have market power and the reasons to regulate MVNOs will not be present. The general competitiveness of the mobile sector thus eliminates the market power justification for regulatory intervention. In the USA and most member states of the European Union ( EU ), the mobile market is competitive and MVNOs have not been regulated.

The second justification for regulation of a service is, that without regulation, an essential facility cannot be duplicated and access is not readily available. In the mobile market, mobile facilities (except termination) are not considered to be bottlenecks because there are multiple networks and competition between the networks will ensure reasonable access to those networks. On the other hand, bottlenecks exist in fixed markets where the local loop cannot be duplicated and access needs to be regulated because it is not competitively supplied.

A comprehensive paper on MVNOs stated:

“In the fixed sector, network facilities deemed to be essential facilities have historically been subject to mandatory unbundling and cost-based pricing. However, mobile networks of MNOs [mobile network operators] do not qualify as

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essential facilities because competition for mobile services has traditionally been strong”. 40

There are also additional economic and financial reasons not to regulate MVNOs. There is evidence in Malaysia, for instance, that MVNOs are able to negotiate suitable commercial arrangements with mobile operators without the need for regulating.

The US has decided not to regulate MVNOs. Generally, US regulators have taken a market-oriented approach to the mobile sector because competition in the US mobile industry is strong. The Federal Communications Commission ( FCC ) has noted:

“If… enough consumers are sufficiently well-informed to take prices and other non-price factors into account when choosing their service provider, and likewise, if enough consumers have the ability and propensity to switch service providers in response to an increase in price or other harmful conduct, then the carriers will have an incentive to compete on price and non-price factors”. 41

In Europe, most regulators consider the mobile markets to be competitive and not regulated MVNOs (for instance the UK). In France, the regulator initially decided that the mobile market was not sufficiently competitive and made a draft decision mandating that mobile operators provide MVNOs with mobile wholesale access. The European Commission ( EC ), however, vetoed this decision stating that as French mobile operators had voluntarily entered into relationships with at least 4 MVNOs, regulation was unnecessary. 42

A similar situation occurred in Finland where the Finnish regulator made a draft decision for proposed legislation to require the mobile operator TeliaSonera to relinquish access rights to its mobile network, interconnect with MVNOs, provide non-discriminatory pricing and negotiate a national roaming arrangement with any mobile operator that had a licence for a 3G network. Again, the EC vetoed this draft decision as they did not believe that the Finnish mobile operator had significant market power. Additionally, the

40 NERA Economic Consulting, Mobile Virtual Network Operators: Blessing or Curse? An Economic Evaluation of the MVNO Relationship with Mobile Network Operators, 2006, at page 32. 41 Before the Federal Communications Commission. In the Matter of Implementation of Section 6002(b) of the Omnibus Budget Reconciliation Act of 1993, Annual Report and Analysis of Competitive Market Conditions with Respect to Commercial Mobile Services, Ninth Report, 19 FCC Rcd 20597, 2004. 42 NERA Economic Consulting, Mobile Virtual Network Operators: Blessing or Curse? An Economic Evaluation of the MVNO Relationship with Mobile Network Operators, 2006, at page 46.

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EC stated that the existence of several voluntary mobile operator–MVNOs relationships indicated that regulation was not necessary. 43

6.5.6 MVNO – preliminary view

Given the developments in the growth of MVNO activity in Malaysia and international practice and the competitiveness of the Malaysian mobile market, the SKMM has not been presented with a compelling case to re-open consideration to include MVNO on the Access List in this current review.

Question 23:

What do you consider will be the impact on the mobile services market if MVNO regulation is not imposed through the Access List?

43 European Commission, Case FI/2004/0082: Access and Call Origination on Public Mobile Telephone Networks in Finland, Commission Decision of 5 October 2004, Pursuant to Article 7(4) of Directive 2002/21/EC.

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7 UPSTREAM NETWORK ELEMENTS

7.1 Market definition

Upstream infrastructure refers to the infrastructure chain along which a communication takes place. The SKMM has distinguished this market on the basis of the following components in an ascending network hierarchy:

(a) the access network or local loop, which consists of the network of lines (for example, copper pair or optical fibre) that run from subscribers’ premises to the local exchange;

(b) the core network which consists of the switches in the local exchange, the network trunk cables (or microwave links) that connect local exchanges to each other (or to higher level exchanges known as tandem exchanges), the tandem exchanges themselves and the equipment that connects the tandem exchanges to each other. Either multi-circuit coaxial copper cables or optical fibres are used for connectivity; and

(c) the international network. This is the “top tier” of the network hierarchy. comprising trunk cables and/or satellites and related switching equipment which leads traffic from the international gateway (switch), via “backhaul” transmission to the international cable head or landing point, and hence out of Malaysia.

The access network will be discussed under the broadband market in chapter 11 whilst the core network will be discussed under the leased lines market in chapter 9, hence the rest of this chapter will be focussed on the international network.

7.2 Access List facilities and services

7.2.1 Existing Access List items

The Access List identified the following item as relevant to the market for Upstream Network Elements:

(a) paragraph 6(13) – Domestic Connectivity to International Services, which comprises a facility and/or service which comprises (each individually) a backhaul transmission service, and connection services between equipment co-located at a submarine cable landing station and the submarine cable system.

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7.2.2 Potential Access List amendments

The SKMM has identified the following issues for consideration as potential amendments to the Access List:

(a) point of access ( POA ) appears in some cases to be occurring outside the cable landing station, which may necessitate a review of the scope of the service and whether it is operating as intended;

(b) whether a route-by-route analysis should be applied to determine where domestic connectivity to international services or backhaul is competitively supplied and therefore SKMM is not required to regulate those routes; and

(c) whether the backhaul portion of the Domestic Connectivity to International Services should be rationalised into a generic description of Transmission Service. This would be discussed in Chapter 14.

7.3 State of competition

7.3.1 Number of competitors

In the PI Report for Dominance in 2004, it was stated that the state of competition in the upstream network facility market is difficult to assess. The state of competition would have to be assessed in relation to each particular market defined elsewhere. In terms of the “international network”, it is considered that the relevant market is defined as an individual network element on a point-to-point route.

During the PI on Access List in 2005, two aspects of access to international services were discussed:

(a) International capacity. Such capacity may be acquired in the form of an indefeasible right of use ( IRU ) or ownership right in a cable system. Capacity may also be acquired on a commercial basis from a network facilities provider, such as in the form of an international private leased circuit ( IPLC ). International capacity may be provided over satellite or submarine cable; and

(b) Domestic connection to international capacity. In order to access international capacity, domestic connectivity is required.

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In the PI on Access List in 2005, the SKMM concluded that there was no need to regulate access to international capacity due to their competitive nature of its supply. However, in terms of domestic connectivity to international services, bottlenecks were identified in three points of domestic connectivity to international capacity: the backhaul, co-location at international cable landing stations and the connection service component. As access issues had been identified and the competitive benefits of access to international capacity were being undermined, the SKMM considered it appropriate to include all three aspects of the domestic connectivity to international services on the Access List.

Since 2005, the operators’ views on the state of competition in the international network have not changed. Some licensees stated in the pre-PI process that they view the international component of the international services as competitive. However, the domestic component of the international service is not competitively supplied and there remains only one provider of domestic connectivity to international service, namely TM:

(a) TM delivers international connectivity and offers bandwidth services over the international and domestic network infrastructure with a combination of satellite, terrestrial and submarine fibre optic cable systems;

(b) TM also provides international connectivity, transit, interconnection and IRU, using One Stop Shopping and Full Channel Service to provide connectivity between Malaysia and international destinations;

(c) TM provides backhaul services with speeds of 64 kbps to 155 Mbps; and

(d) TM has satellite earth stations.

In terms of the landing rights for submarine cable within Malaysia, there are 4 international cable landing stations located at Mersing, Cherating, Melaka and Kuala Muda which are are wholly owned and maintained by TM as a member of the consortium that built the original cables. Within these stations, TM has access to different cable systems such as FLAG, SEA-ME-WE3, SAT-3/WASC/SAFE, MT, APC, APCN2, APCN, SEA- ME-WE4 and DMCS.44

In addition, TM is also one of the 17 consortia members that is responsible for the construction of the Asia-America Gateway ( AAG ). The cable at about 20,000 km in

44 TM, Annual Report 2007, pages 202-203

Page 125 length is capable of providing bandwidth capacity of up to 1.92 Terabits per second. It is expected that the AAG will carry commercial traffic by December 2008. 45

However, in terms of the international calls in the retail dimension, there are numerous providers. All the major telcos offer international services, and many other ASPs also offer calling cards for international destinations. The retail market for international services is vibrant.

7.3.2 Price competition

In terms of competition at the retail level, there are numerous providers. Competition has led to a lowering of IDD rates to many destinations. There are calling cards and packages that are specifically targeted to different destinations, and based on this information, we can conclude that competition is strong in the market for international data services, namely, through a variety of competing international calling cards.

Price competition in the provision of backhaul services is low and the SKMM has received many comments that the wholesale process have not significantly changed over recent years.

7.3.3 Barriers to entry

As the capital investment required to provide the network facilities is significant, there are few operators providing international facilities, either in the domestic or the international segments. Therefore, the barriers to entry to provide infrastructure in the international segment is high. However, there are more providers who provide retail services to end users.

7.3.4 Innovation

In terms of the retail level, it continues to be vibrant and there are many attractive packages offered. There are some providers who specifically target specific migrant workers with attractive rates to those destinations.

However, there is little or no innovation displayed in the provision of infrastructure which serves as an input in to the provision of international services in Malaysia.

45 TM, “TM leads 17-member consortium of telcos to establish Asia-America Gateway (AAG) –The First Submarine Cable System linking South East Asia directly to USA”, 27 April 2007http://www.tm.com.my/about-tm/newsroom/2007/070427.asp

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7.3.5 Conclusion

The SKMM’s conclusion is that the state of competition in upstream network elements is largely unchanged since 2005.

Question 24:

What is your view on the state of competition in the domestic segment of the international service, including the backhaul element?

7.4 Application of LTBE criteria

(a) Service description

The Domestic Connectivity to International Services comprises the following:

(i) a backhaul service from a central location (usually a major urban centre) to the submarine cable landing station;

(ii) co-location at the submarine cable landing station; and

(iii) a connection service to connect the domestic link to the international capacity.

Figure 10: Domestic connectivity to international services

(b) Promotion of competition

During the pre-PI process, the SKMM has received similar views as to those received in 2005. Most comments were that access to submarine cable landing station is solely offered by one provider and that there is a monopoly situation. Further, it was stated

Page 127 that the POA arrangement, which is on a commercial basis, is exorbitant and there is no breakdown of the individual components. There was a proposal received that the mandated prices of the backhaul component of the Domestic Connectivity to International Services be based on international benchmarks.

Some respondents stated that other measures were needed (other than price) to ensure greater competition in this segment. These included:

(i) a policy of issuing international licences to other operators to construct their own cable landing stations;

(ii) new access obligations that permit multiple connections and physical co- location by new entrants at any technically-feasible point;

(iii) the scope of the Access List obligation to be extended to include provisioning and maintenance; and

(iv) simplified processes for provisioning that ensures there is not an overload of “procedural” requirements to enable access, possibly capable of being addressed through the MS (Access).

Whilst the SKMM appreciates the highlighting of numerous issues related to Domestic Connectivity to International Services, it is not in a position to deal with licensing or pricing issues during this Public Inquiry process. The comments in relation to the provisioning and maintenance of Domestic Connectivity to International Services is more appropriately considered in relation to MS (Access) and would be discussed in Chapter 15.

Regulators in many countries recognise submarine cable landing station as an essential facility where the owner of the cable landing station may have the potential to deny access to cable landing stations and thereby restrict competition in downstream markets from new entrants. In order to prevent the misuse of dominant power by the incumbent operator, various countries have stipulated obligations on the incumbents owning submarine cable landing stations. National Regulatory Authorities ( NRA ) in EU countries have applied the general interconnect agreement/directives to cover this segment.

As there is only one provider who provides access to cable landing station and there is little choice in the provision of backhaul services to the cable landing, there is no competitive restraint on the prices, in the event that this service is not regulated. In this

Page 128 context, the SKMM considers it to be relevant and necessary to continue to regulate this service for the benefit of the end users.

(c) Impact on infrastructure investment

As the state of competition in this market has not changed since 2005, the SKMM is unconvinced that commercial negotiations could produce efficient infrastructure results. The bottleneck nature of the three points of this service which indicates a general lack of alternatives available, would mean that the prices would not be constrained as in a competitive market. Hence, the efficient use of international capacity and facilities to supply international services would be undermined if left unregulated.

Question 25:

The SKMM would like to seek feedback on the pervasiveness of the POA arrangements, and whether the issues raised under POA arrangements can be addressed through Domestic Connectivity to International Services.

(d) Other criteria

There was a strong view expressed by several licensees that this service is critical in order to enable Malaysia to position itself as a “global hub” for international traffic.

7.4.2 Preliminary view – Domestic Connectivity to International Services

The SKMM considers that bottlenecks still exist in both the backhaul and connection services segment for Domestic Connectivity to International Services.

However, the SKMM also wishes to consider the removal of regulation where competition has emerged. In this regard, the SKMM would like to seek feedback on whether there are any backhaul routes provided on a competitive basis to the submarine cable landing station.

There are no amendments to the service description for Domestic Connectivity to International Services and is found in paragraph 6(13) in Annexure 2.

At the same time, the SKMM is also considering whether the backhaul portion of the Domestic Connectivity to International Services should be rationalised under a generic description of Transmission Service. The discussion on rationalisation is in Chapter 14.

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Question 26:

(a) Do you agree that Domestic Connectivity to International Services should continue to be retained on the Access List?

(b) Do you consider that any specific backhaul routes to the cable landing station are competitive, and why?

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8 INTERCONNECTION

8.1 Market definition

Interconnection is not an end product in itself, but is a process designed to link networks together. Interconnection refers to the arrangements under which service providers connect their equipment, networks and services to each other. It is located between the upstream telecommunications infrastructure necessary to establish connectivity and bandwidth (as set out in chapter 7) and the downstream retail products of voice and data communications.

It is useful to revisit the fundamentals of interconnection in order to understand its relationship with access regulation.

International bodies such as the ITU and the World Bank generally describe interconnection in terms of a set of legal rules, physical linkages and operational arrangements between network operators that enable customers connected to one network to communicate with customers of other networks.

Operators interconnect networks for a variety of important reasons including:

(a) no single operator can own or lease all the network required to switch calls to and from all possible locations;

(b) it can serve to increase profitability by providing a service that is not economically feasible without interconnection; and

(c) the expansion or improvement of services that are valuable to customers.

Technology changes and increasing competition have led to the development of many different forms of interconnection.

In cases where an operator has market power there is little incentive to interconnect and regulatory intervention is necessary to promote the long term benefits of end users. In the EU, NRAs are directed by the EU to impose interconnection on carriers that have significant market power where the NRA considers that no interconnection or interconnection on unreasonable terms might hinder the emergence of a sustainable competitive market.

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The development of a robust and workable interconnection framework is critical for the long term success of a country’s telecommunications sector. Interconnection also encompasses a variety of other services such as wholesale call termination and origination and transit services. The SKMM has dealt with call origination and termination under fixed telephony and mobile telephony in Chapter 5 and 6 respectively.

8.2 Access List facilities and services

8.2.1 Existing Access List items

There are presently 3 Access List items relevant to this market:

(a) paragraph 6(6) – Interconnect Link Service;

(b) paragraph 6(14) – Network Co-Location Service; and

(c) paragraph 6(15) – Network Signalling Service.

8.2.2 Potential Access List amendments

The SKMM is not proposing to add any new items to the Access List. The SKMM has identified some possible amendments to address issues with each item as described below.

8.3 State of competition

Interconnection regulation is fundamental to the success of competition. There are often significant differences between incumbents and new entrants and interconnection can be a stumbling block to effective competition.

Regulation of interconnection must be done in a manner that promotes competition and encourages the efficient use of, and investment in, telecommunications networks whilst also preserving the financial viability of universal service mechanisms and treating technologies and competitors as neutral.

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8.3.1 Number of competitors

The SKMM considers that all operators are the exclusive supplier in the interconnection market in respect of origination and termination in their own networks. Accordingly, due to the nature and size of the market itself, there is none or limited competition in relation to interconnection. 46

8.3.2 Price competition

The pricing of interconnection services is a very important component of a successful telecommunications market. On this issue the Organisation for Economic Co-operation and Development ( OECD ) has noted:

“The level of interconnection charges determines the structure of the telecommunications market. If interconnection charges are too high, it will discourage companies to enter into the telecommunications market. On the contrary, if interconnection charges are too low and below real cost, the incumbent cannot recover its investment in networks and both the incumbent and new entrants will be discouraged to make future investments in infrastructure. Therefore it is critical to ensure cost-orientated interconnection charges in order to ensure effective competition”. 47

As such, whilst the addition of new facilities and services to the Access List has decreased the barriers, and accompanying technological developments have increased opportunities for new entrants, it remains important that the price of interconnection be cost-oriented.

8.3.3 Innovation

Interconnection is key to developing effective competition which drives growth and innovation in a telecommunications market. Any regulation of interconnection needs to respect technology/service neutrality in order to encourage innovation. Effective and efficient interconnection arrangements can promote efficient and innovative infrastructure development.

46 See SKMM, PI Paper on Dominance, section 8. 47 OECD, Working Party on Telecommunications and Information Services Policies, Interconnection and Local Competition, DSTI/ICCP/TISP(2003)/Final, 07-Feb-2001, at page 4.

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8.3.4 Conclusion

The SKMM concludes that there has been no change in the state of competition for interconnection services.

8.4 Application of LTBE criteria

8.4.1 Interconnect Link Service

(a) Service description

The Interconnect Link Service is a service which enables a physical connection via a transmission link between two interconnected networks. It enables the connection of an Access Provider’s network to an Access Seeker’s network for the purpose of providing an interconnection service such as Fixed Network Termination Service and Fixed Network Origination Service, Mobile Network Termination Service and Mobile Network Origination Service, Equal Access (PSTN) Service, Private Circuit Completion Service. This service is expected to facilitate competition in the respective downstream markets.

Figure 11: Interconnect Link Service

As a result of PI on Access List in 2005, the SKMM amended this service by removing the co-location component and identifying it as a separate item on the Access List. This served to remove any confusion about the service and allowed greater focus to be placed on the importance of the Interconnect Link Service as a fundamental service to the achievement of interconnection. This is confirmed by the fact that it is the subject of 52 access agreements, which is the vast majority of access agreements registered with the SKMM.

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(b) Promotion of competition

It is through the Interconnect Link Service that interconnection between networks is facilitated. As such, this service plays a clear role in the enhancement and importance of competition in the market.

Operators have agreed with the view that this is an important access issue that should be addressed on the Access List. However, operators have also identified several issues with the service which may prevent the service from realising its full benefits to promote competition.

For instance, operators have proposed a tightening of the service by placing greater emphasis on service quality of the Interconnect Link Service. Recommendations in this area included aspects around service availability, fault management and restoration time. These recommendations will be considered in Chapter 15 as they are more appropriately addressed under MS (Access).

In addition, it was also raised that the Interconnect Link Service is provided based on the transmission path taken to connect two locations. This is generally longer than the radial distance between the two locations. The SKMM notes the issue, however, encourages that this pricing-related issue be raised during the review on MS (Pricing).

There have also been complaints from new entrants regarding the charging mechanism applicable to the Interconnect Link Service. For example, when an Access Provider builds an Interconnect Link Service to a new entrant’s premises, the new entrant cannot charge for co-location. Conversely, when the new entrant builds to the Access Provider, the Access Provider does charge for the service.

It is important that this service is being provided symmetrically between and amongst all the operators. The SKMM would like to gauge the prevalence of this activity to understand whether a clarification needs to be made to the service description to ensure its symmetrical application.

Question 27:

(a) The SKMM seeks comments on issues of QoS of the Interconnect Link Service.

(b) The SKMM seeks comments on the implementation of Interconnect Link Service with Network Co-Location Service, and the prevalence of one-way charging by Access Providers.

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(c) Any-to-any connectivity

Any-to-any connectivity is not relevant to the question of Interconnect Link Service.

(d) Impact on Infrastructure investment

The Interconnect Link Service is a vital component of interconnection. It provides the links to allow the physical interconnection. Interconnection between networks is a critical requirement to promote competition in a market and consequently the investment in, and growth of, networks and infrastructure.

The provision of interconnection links also serves to enhance the efficient use of current infrastructure, thus facilitates innovation in new infrastructure investment.

(e) Other criteria

The SKMM does not view any other criteria as relevant to the importance of the Interconnect Link Service on the Access List.

8.4.2 Preliminary view – Interconnect Link Service

The Interconnect Link Service is a vital component to the interconnection market. The SKMM proposes to retain the service on the Access List. The SKMM will consider whether there is a need to amend the service description upon receiving the submissions on the above issues. At this juncture, there are no amendments to the service description of Interconnect Link Service, and is found in paragraph 6(6) in Annexure 2.

Question 28:

Do you agree that Interconnect Link Service should be retained on the Access List?

8.4.3 Network Co-Location Service

(a) Service description

The Network Co-Location Service is a service that provides interconnecting carriers with access to, and use of, each others’ premises in order to locate interconnection transmission equipment and fibre facilities.

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The Access List details the 3 types of Network Co-Location:

(i) Physical co-location. This refers to provision of space at an Access Provider’s premises to enable the Access Seeker to install and maintain its own equipment necessary for the provision of the Access Seeker’s services through the Facilities and/or Services of any Operator. Physical co-location includes the provision of actual space at the premises including physical space, power, environment services (such as heat, light, ventilation), security, site maintenance and access for personnel.

(ii) Virtual co-location. This is the provision of facilities or services at an Access Provider’s premises to enable the acquisition by the Access Seeker of facilities and services on the Access List, where equipment is owned and maintained by the owner of the premises, which is the Access Provider.

(iii) In-span interconnection. In-span interconnection is the provision of a POI at an agreed point on a physical cable linking an Access Provider’s network facilities to an Access Seeker’s network facilities. For example, it occurs when the POI is located in an optical fibre within a cable duct or cable chamber located between the respective operators premises. That is, in-span is when two communications providers build out their own networks to a handover point located between the switches. This can be contrasted with Full Span interconnection which occurs at an optical interface between two network elements within one operator’s premises.

(b) Promotion of competition

As mentioned above, Network Co-Location was separated from the Interconnect Link Service. It is now a separate and independent service on the Access List. It is the subject of 36 access agreements registered with the SKMM.

Since Network Co-Location was separated from Interconnect Link Service, operators have been increasingly co-locating equipment and in general this has been done without impediment or restriction.

This increased uptake in the service is evidence that the identification of the service as a separate item on the Access List is important to the Access Seekers.

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However, as with the Interconnect Link Service, operators have identified several issues with the service which may prevent the service from realising its full benefits to promote competition.

Some operators have highlighted a consistent issue of building owners and developers denying operators access to co-location services. The situations that have been described to the SKMM during the pre-PI process include existing as well as new residential or commercial developments, where a building owner or operator enters into an exclusive arrangement with a single operator. This is the basis used to deny access to co-location in those development premises.

The SKMM understands that this is frustrating for operators and the SKMM would like to gain a greater understanding of the prevalence of this activity and the resulting effect on operators. Whilst recognising the importance of this issue, this Public Inquiry is not dealing with access to commercial or residential buildings, which is beyond the scope of access under the CMA. However, where there are operators present, the new operators can seek access to network co-location services from these existing operators. The existing operators have an obligation under the MS (Access) subsection 5.19.1 to ensure that they do not enter into any arrangement which will prevent, hinder or restrict their fulfilment of this obligation.

Question 29:

(a) The SKMM seeks comments on the prevalence of access issues to co-location services within buildings and the resulting effect on operators.

(b) The SKMM is also interested in comments on whether the access regime is the appropriate place to address this issue.

The SKMM has also received feedback from operators regarding a practice of requesting Network Co-Location for non-interconnection purposes. An example may be for the storage of equipment (for example, mobile base station equipment).

The SKMM would like to receive operators’ views on this use of Network Co-Location space. Currently, Network Co-Location applies to co-location for the purpose of access to the facilities or services on the Access List at specified network premises. Examples where Network Co-Location would apply is where Interconnect Link Service which facilitates interconnection service, any of the ANE services or connection services at the cable landing station is requested. Access for purposes not related to any facilities or services on the Access List is often referred to as “facilities management” and is

Page 138 generally competitively supplied. Depending on the feedback received, the SKMM may consider an amendment to the definition of the Network Co-location service for clarity.

Question 30 :

The SKMM seeks comments on the use of the Network Co-location service for purposes not related to facilities or services on the Access List. The SKMM would like to understand the prevalence of this activity currently and the views of operators on this issue.

Finally, the SKMM has also received comments regarding charging for in-span interconnection. The basis of in-span interconnection is that each operator builds their own interconnection link to meet at the POI. The usual practice is that no inter-operator charging is incurred for that construction, ie each operator meets their own costs. The comments from some operators appear to suggest that charges are being levied for in- span interconnection. The SKMM notes this comment, and as it is related to pricing, the SKMM encourages that this be raised during the review on MS (Pricing).

(c) Any-to-any connectivity

Any-to-any connectivity is not relevant to network co-location.

(d) Impact on Infrastructure investment

The provision of a mandated and regulated co-location right for operators can substantially accelerate infrastructure investment by providing certainty for the investment.

(e) Other criteria

The SKMM does not view any other criteria as relevant to the importance of the Network Co-location Service on the Access List.

8.4.4 Preliminary view – Network Co-Location Service

The separation of the Network Co-Location Service from the Interconnect Link Service has successfully alleviated several access issues regarding this service. As such, the SKMM plans to retain this service on the Access List.

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At this juncture, the service description for Network Co-Location Service, with a minor editorial amendment is found in paragraph 6(14) in Annexure 2. The definition of “Customer Access Module” in the service description has been amended and would be explained in Chapter 12.

Question 31 :

Do you agree that Network Co-Location Service be retained on the Access List?

8.4.5 Network Signalling Service

(a) Service description

A Network Signalling Service is standardised by organisations such as the ITU as a set of telephony signalling protocols which are used to set up PSTN telephone calls. An example is Signalling System Number 7 (SS7 ), a standard developed by the ITU.

In this context the term signalling refers to the exchange of control information associated with the establishment of a telephone call on a telecommunications circuit. An example of this control information is the digits dialled by the caller, the caller's billing number, or other call-related information.

(b) Promotion of competition

The SKMM added the Network Signalling Service to the Access List subsequent to the PI on Access List in 2005. At that time, the SKMM considered that this service was a bottleneck and a potential barrier to competition in other relevant markets.

Specifically, there was an issue that a certain amount of the network signalling information could be masked from the 2 networks that it interconnects. The SKMM considered this to be an access issue warranting the inclusion of Network Signalling Services on the Access List.

Since that time, the SKMM has not received much indication about the take up and effectiveness of the Network Signalling Service on the Access List. Whilst there is some indication that operators intend to take up the service at some future point in time, there is not strong evidence of its need or take-up.

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The SKMM is considering whether it is necessary to retain Network Signalling as a separate service, or whether the regulation of Interconnect Link Service is sufficient to address any associated signalling issues.

The regulation of the Network Signalling Service in Malaysia is broadly consistent with international best practice. The EC mandates the use of specified network signalling services. In its decision to mandate, the EC considered that specified standards were very important and that any mandate should include standards: 48

(i) for interconnection of, or access to, electronic communications networks and/or interoperability of electronic communications services, to the extent strictly necessary to ensure end-to-end user interoperability and freedom of choice for users;

(ii) whose implementation does not represent an undue expense as compared with the expected benefits;

(iii) that are relevant in today’s market place which are still evolving and have some future life span; and

(iv) that operators do not have a commercial incentive to implement.

The EC also lists situations in which it does not believe that standards should be mandated. This list states that standards should not be mandated for:

(i) well established networks and services that are no longer subject to evolution; or

(ii) for networks that are currently in an early phase of development.

The issue is addressed through regulation in other countries. A non-exhaustive list is contained in Table 11 below.

48 European Commission, Commission Decision of 11 December 2006, establishing a list of standards and/or specifications for electronic communications networks, services and associated facilities and services and replacing all previous versions, 2007/176/EC.

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Country Regulation Australia Mandated under law in case of calling line identification. Also mandated under industry codes Finland Regulation on interconnectivity, interoperability and signalling in communications networks Singapore Reference specification for B-ISDN User-Network Interface (UNI)- Signalling for Basic call/Connection Control

Table 11: International comparisons of network signalling regulation

The above considerations are all important issues for the SKMM to consider in any decision to remove or retain the Network Signalling Service on the Access List.

(c) Any-to-any connectivity

Any-to-any connectivity is not relevant to Network Signalling Service.

(d) Impact on Infrastructure investment

Effective network signalling should lead to efficient use of infrastructure and lead to enhanced infrastructure investment.

(e) Other criteria

The SKMM does not view any other criteria as relevant to the maintenance of the Network Signalling Service on the Access List.

8.4.6 Preliminary view – Network Signalling Service

The maintenance of the Network Signalling Service as a separate service on the Access List may no longer be required. The SKMM is considering whether the access issues associated with network signalling can be addressed under Interconnect Link Service and hence Network Signalling Service can be removed from the Access List. The SKMM seeks comments on its proposals. At this juncture, this has been reflected by a strikethrough of paragraph 6(15) in Annexure 2.

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Question 32:

(a) The SKMM seeks comments on whether the Network Signalling Service should remain as a separate service on the Access List.

(b) The SKMM also seeks comments on whether the current Interconnect Link Service is sufficient to address any access issues associated with Network Signalling.

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9 LEASED LINES

9.1 Market definition

Leased line services refer to dedicated point-to-point communications links for the exclusive use of the acquirer for voice and data purposes. Leased lines services are distinguishable based on product characteristics, including:

(a) whether the leased line is analogue (voice only) or digital (voice, data, or voice/data);

(b) bandwidth (e.g. 64 Kbps, 2 Mbps, 155 Mbps); and

(c) the purpose for which they are used (for example, connectivity between transmission points, connectivity between a POI and an end-user’s premises).

It became apparent during the pre-PI process that there was some lack of clarity amongst some Access Seekers as to which products fell within the leased line market. Relevantly for this Public Inquiry, the SKMM categorises the following types of services as falling within the leased lines market:

(a) domestic network transmission services, which provide for the carriage of communications between (non-customer) transmission points at a variety of different bandwidths; and

(b) private circuit completion services, which provide for the completion of connections by way of a private circuit between a POI and an end-user.

The SKMM notes that the Interconnect Link Service and the backhaul portion of the Domestic Connectivity to International Services also utilise leased line infrastructure, and have been discussed in Chapter 8 and 7 respectively. Further consideration of the issue of rationalisation these services under the generic service category of Transmission Service is considered in Chapter 14.

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9.2 Access List Facilities and Services

9.2.1 Existing Access List items

There are 2 existing Access List services that are relevant to the market for leased lines:

(a) paragraph 6(7) - Private Circuit Completion Service; and

(b) paragraph 6(8) - Domestic Network Transmission Service.

9.2.2 Potential Access List amendments

The SKMM has identified 5 issues to consider in its assessment of the leased lines market:

(a) whether some leased line services should be removed from the Access List, for example, specific bandwidth digital leased line circuits;

(b) whether higher bandwidths of leased lines should made available to Access Seekers on a regulated basis;

(c) whether IP based services, such as IP-VPN and Metro-Ethernet, are reasonable substitutes for leased lines and should also be included within the definition of the leased line market;

(d) whether there is scope to remove regulation in some competitive areas or routes for the Domestic Network Transmission Service where there is duplication of leased line infrastructure and higher corresponding levels of competitive pressure and, if so, the criteria to be applied to determine whether a particular area or route is sufficiently competitive to justify the removal of regulation; and

(e) whether any confusion in the types of leased line services on the Access List could be addressed by providing some clarification, or rationalising the services into a generic category of Transmission Service. This issue of rationalisation is discussed in Chapter 14. However, there also appears to be confusion regarding the scope and description of the existing Access List services for leased lines, particularly for the Private Circuit Completion Service. This is discussed below.

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9.3 State of competition

9.3.1 Number of competitors

TM provides a significantly greater number of leased lines than all other operators. The PI Paper on Dominance concluded that the “provision of leased line services may not be as effective as it might” and this appears to remain the case. It appears that TM continues to face few constraints in the provision of leased line services over a number of routes and enjoys a number of competitive advantages over other providers of leased lines.

TM currently offers a comprehensive suite of leased line products, comprising: 49

(a) Domestic Network Transmission Service for the carriage of communications between transmission points (i.e. not customer sites) in bandwidths of 2 Mbps, 34 Mbps and 155 Mbps; and

(b) Private Circuit Completion Service for the completion connection of a service by way of a private circuit between a POI and an end-user, available only at one end of a private circuit, available in bandwidths of 64 Kbps, 2 Mbps, 45 Mbps and 155 Mbps.

In some business districts, SKMM understands that TM also offers speeds of 4, 6 and 8 Mbps. Charges for TM’s leased line service typically involve a one off charge for installation, relocation, cancellation and termination at each end of the leased line, plus recurring charges.

TM remains the monopoly provider of analogue leased line services because the ability to provide such services is dependent on access to the copper wire of which TM is the main provider in Malaysia. There remain high barriers to entry in analogue leased lines due to the high cost of deployment and the lack of viable substitute services for analogue lines.

Fiberail Sdn. Bhd. ( Fiberail ), a TM subsidiary, also offers leased lines services in bandwidths of 2 Mbps, 34 Mbps to 155 Mbps. It owns three fibre optic cable networks along the railway and gas pipeline corridors from Padang Besar in Perlis to Johor Bahru and branches out from Gemas in Negeri Sembilan to Tumpat and Rantau Panjang in Kelantan. The network passes through almost all major and rural towns in Peninsular

49 See, http://www.tm.com.my/business/tm-wholesale/bandwidth-services/interconnect-bandwidth/

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Malaysia and is suitable for the conveyance of voice, data and video along the railway and gas pipeline corridors connecting urban and rural towns in Peninsular Malaysia.

Fibrecomm Network (M) Sdn. Bhd. ( Fibrecomm) is another provider of leased lines services in Malaysia, providing bandwidths between 2 Mbps and 10 Gbps using its fibre optic network.

TIME and Maxis also provide digital leased line services in parts of Malaysia.

For digital leased lines, the state of competition is dependent on a case-by-case analysis of the levels of competition in different geographic areas/routes and in respect of each product offering.

While it is clear that some duplication of leased line infrastructure has already occurred in at least Peninsular Malaysia, it is not currently possible for SKMM to comprehensively assess the level of competition within specific geographic areas or on specific routes, due to the lack of disaggregated information about the level of infrastructure deployments within these areas. However, even in the absence of specific information to this effect, it is clear that TM continues to hold a strong position in the leased line market, arising from the following:

(a) the limited nature of alternative leased line infrastructure throughout Malaysia, particularly outside Peninsular Malaysia;

(b) the geographic reach of TM’s fixed network, meaning that it is not reliant on other Access Providers to establish connectivity between regions, and between networks points and end user premises;

(c) TM’s control over the ducting systems that form part of its fixed network, and the trenching and duct costs that would be incurred by other Access Providers contemplating alternative investment in leased line infrastructure; and

(d) the lack of reasonable substitutes to leased line services.

During the pre-PI process, some Access Providers expressed the view that newer IP based services, such as IP-VPN and Metro-Ethernet, could be considered to be reasonable substitutes for leased line services.

While it is clear that IP-VPN and Metro-Ethernet services have increased in prominence over recent years and that this trend is likely to continue with the move towards IP

Page 147 based networks, the SKMM does not consider that such services represent a reasonable substitute for leased lines. This view is consistent with that adopted by other regulators, including Ofcom in the United Kingdom 50 and the Infocomm Development Authority (IDA ) in Singapore. 51

The take-up of IP based data services in general appears to be developing on a complementary basis to leased lines services.

9.3.2 Price competition

As the number of competitors is relatively few and the barriers to entry high, there is little price competition in the provision of leased lines by TM.

At the retail level, leased line rental prices remain high in Malaysia, with the second highest rental prices for leased circuit lines in the Asia Pacific market, behind Indonesia. Lower speed circuits are significantly expensive, for example, for lower speed circuits of 64 kbp/s or 2 Mbp/s, the monthly rental costs, including installation charges were estimated at $378 USD (an estimated 41% increase since 2003). 52

9.3.3 Barriers to entry

The high cost of constructing leased line infrastructure is regarded as a continuing barrier to entry in Malaysia. This largely stems from the prohibitive cost of constructing alternative leased line infrastructure and the fact that TM continues to retain the competitive advantage associated with its ownership of ducts throughout Malaysia.

While it is clear that some duplication of leased line infrastructure has occurred in Malaysia, particularly on trunk routes in Peninsular Malaysia, it would appear that barriers to a more widespread deployment continue to persist and that this situation is unlikely to ameliorate with the passage of time.

50 Ofcom, Review of the retail leased lines, symmetric broadband origination and wholesale trunk segments markets, Final Statement and Notification. 51 IDA, Explanatory Memorandum issued by the Info-communications Development Authority of Singapore: Designation of Singapore Telecommunications Limited’s Local Leased Circuits as a Mandated Wholesale Service, 16 December 2003, paragraph 6. 52 This information is based on 2006 data. Source: Access Price Benchmarking, A study produced for the Asia Pacific Carriers’ Coalition (APCC) by Teligen (2006).

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9.3.4 Innovation

Newer IP based services have increased in prominence over recent years, including IP- VPN and Metro-Ethernet services.

While the take up of these services is notable, the SKMM does not consider that these services represent a direct substitute for leased lines services in Malaysia. This view was confirmed by a significant proportion of Access Seekers in the pre-PI process.

9.3.5 Conclusion

The SKMM concludes that there have been some enhancements in the state of competition since 2005, particularly in terms of the number of competitors offering leased line services. However, it is not possible to adequately estimate the degree of competition for particular trunk routes, although these do have some features of enhanced competitiveness through choice of multiple providers.

Question 33:

How would you describe the state of competition in leased lines at the retail and wholesale level?

9.4 Application of LTBE criteria

9.4.1 Private Circuit Completion Service

(a) Service description

During the SKMM’s discussions with licensees in the pre-PI process, it appeared that there was some confusion in relation to the Private Circuit Completion Service. As such, the SKMM considered the provision of the service in other jurisdictions.

The Private Circuit Completion Service is a service that establishes connectivity at the network access level by way of a private circuit between a POI and the end user. It comprises the following components:

(i) a tail segment, comprising the portion between the Access Provider’s POP and the end user customer’s premises; and

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(ii) a trunk segment, comprising the portion between the Access Provider’s POP and the POI with the Access Seeker’s network.

The Private Circuit Completion Service establishes connectivity from the POI to an end user’s premises. The length of the trunk segment and the charges payable for this segment will depend on the distance from the POI to the POP from which the Access Provider serves the end user acquiring the leased line.

Figure 12: Private Circuit Completion Service

The important point to note is that the Private Circuit Completion Service is a service between the Access Seeker’s POI and the end user’s premises – ie it is a “local leased circuit”. There are two possible scenarios where Private Circuit Completion Service may be used. In the first scenario, an Access Seeker may require two components, i.e. the tail segment and trunk segment. This could be used where the Access Seeker does not have a local POP in all areas in Malaysia, and Private Circuit Completion Service could be acquired in order to connect the Access Seeker’s customer premises with the Access Seeker’s switching location or aggregation point in a distant location.

The second scenario is where the Access Seekers have already deployed infrastructure to the Access Provider’s POP that serves the end user’s premises, and has co-located its own equipment within this facility. The Access Seeker would therefore only be acquiring the tail segment of the Private Circuit Completion Service.

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(b) Promotion of competition

The Private Circuit Completion Service provides an essential “building blocks” for many Access Seekers and is not readily capable of economic duplication. Access Seekers acquire, or have the ability to acquire, this service as an input into the provision of an end-to-end circuit between any customer locations in Malaysia. The Private Circuit Completion Service is also an important input into services such as IPLC which terminate at a local presence in Malaysia.

During the pre-PI process, there were comments received suggesting that demand for the Private Circuit Completion Service was not as high as expected. However, Access Seekers have explained that existing levels of demand are not necessarily reflective of the lack of genuine demand for Private Circuit Completion Services, but that there are other factors that affect the viability of Access Seeker take up of service. For instance, it is expensive for the Access Seeker to connect from the POI. Secondly, it was commented that there are more regulated components specified for Private Circuit Completion Service as compared to that of Domestic Network Transmission Service, and hence the service is seen as more expensive.

The SKMM notes the comments on pricing, and would encourage that the issue be raised during the review on MS (Pricing).

(c) Impact on infrastructure investment

SKMM considers that there is a strong possibility of further infrastructure investment flowing from the continued regulation of the Private Circuit Completion Service. Operators which deploy their own fibre backbone networks will require the Private Circuit Completion Service to complete their connections to customer premises. Failure to provide the Private Circuit Completion Service on reasonable terms and conditions is likely to undermine incentives to invest in fibre backbone infrastructure.

As described above, Private Circuit Completion Service is also an important “building block” in the provision of IPLC. Again, failure to provide the Private Circuit Completion Service on reasonable terms and conditions could undermine incentives to invest in international infrastructure if an investor in this infrastructure cannot connect to customers in the domestic market in Malaysia.

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9.4.2 Preliminary view – Private Circuit Completion Service

The SKMM’s view is that it would continue to promote the LTBE for the Private Circuit Completion Service to remain on the Access List. Considering the available data, particularly TM’s continuing market share in the access network generally and in the provision of Private Circuit Completion Service specifically, the SKMM considers that it is likely that TM continues to have strong market share in the provision of leased lines in Malaysia.

The service description for Private Circuit Completion Service is amended to clarify that this service is applicable in the NGN environment, and is found in paragraph 6(7) in Annexure 2.

Question 34:

(a) Do you consider that the Private Circuit Completion Service as amended should be retained on the Access List?

(b) Are there any other outstanding issues that could be addressed by amending the current service description?

9.4.3 Domestic Network Transmission Service

(a) Service description

The Domestic Network Transmission Service is widely used in Malaysia and, like the Private Circuit Completion Service, it provides a “building block” for many telecommunications services. Whilst Private Circuit Completion Service allows the operation of private networks, Domestic Network Transmission Service allows competing operators to develop their own public networks.

Figure 13: Domestic Network Transmission Service

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During the PI on Access List in 2005, its service description was amended to enable the provision of service between any technically feasible network transmission points. 53 In addition, this service also covers the submarine cable and satellite links between a transmission point in Sabah and Sarawak with the transmission point in Peninsula Malaysia.

(b) Promotion of competition

Despite the existence of alternative leased line infrastructure and the availability of leased lines in certain areas from entities such as Fiberail and Fibrecomm, TM is likely to continue to have strong market presence in the overall leased line market given its scale and scope, the lack of any real substitutes and limited prospects for the deployment of alternative leased line infrastructure on a more widespread basis throughout Malaysia. However as discussed below, the SKMM considers that in order to determine whether the Domestic Network Transmission Service should remain on the Access List, the state of competition needs to be properly assessed in respect of the service on a route-by-route basis.

The SKMM considers that where there are multiple infrastructure providers on particular routes or in particular areas in Malaysia and hence where competition exists or is likely to exist in respect of the provision of the Domestic Network Transmission Service, then the SKMM could consider the removal of regulation on those routes or in those areas. The SKMM considers this approach to be consistent with the principle of proportionate regulation and the removal of regulation.

In addition, a proposal was received that terms and conditions such as service provision time, fault management, restoration time should be regulated to prevent any potential abuse by a provider with a strong market presence. This proposal will be considered in Chapter 15 as it is more appropriately addressed under MS (Access).

(c) Impact on infrastructure investment

Regulation of the Domestic Network Transmission Service is likely to have an impact on the investment in the same infrastructure used to provide the Domestic Network Transmission Service, as well as incentives to invest in other infrastructure which is dependent on the use of Domestic Network Transmission Service.

53 See SKMM, PI Paper on Access List, page 155.

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Regulation of the Domestic Network Transmission Service on routes and/or in areas where there are multiple infrastructure providers may undermine investment and stifle competition as a result.

On the other hand, the Domestic Network Transmission Service is critical input to the provision of many services and to many service providers. This service continues to be an important input into the construction of mobile and wireless (for example, WiMAX) networks. It will be an extremely important input into the provision of broadband services by the last mile broadband providers as well. In addition, with the deployment of fibre to the node ( FTTN ) or fibre to the premises ( FTTP ) as part of the NGN, the transmission network becomes more important and may be considered as a bottleneck. This is discussed further in Chapter 12.

Therefore, it is critical that Domestic Network Transmission Service be provided on reasonable terms and conditions especially on routes or in areas where there is only one provider of this service, failing which, investment in a wide range of infrastructure would be undermined.

(d) Other criteria

(i) Application of the criteria to route by route deregulation

One of the underpinnings of the NPOs is that the SKMM undertakes regulation in a proportionate manner that responds to changes in the state of competition. It is apparent that some alternative infrastructure deployment may have occurred in the backbone network. As noted above, the SKMM does not at this stage have sufficient evidence regarding:

(A) the appropriate methodology to assess whether a particular geographic route is sufficiently competitive to justify the removal of regulation in respect of the Domestic Network Transmission Service; or

(B) the specific routes to which this methodology should be applied.

However, a geographically-based assessment of competition as applied to domestic transmission services is not novel.

In Australia, such competitive differences were recognised and led to amendments in the declaration (regulation) of transmission services on specific routes. Over time, the ACCC has determined that competition in respect of certain inter-capital city transmission

Page 154 routes has increased to the point where de-regulation has been warranted. Inter-capital routes refer to those transmission services supplied between Adelaide, Brisbane, Canberra, Melbourne, Perth or Sydney. A staged approach to this de-regulation was conducted over several years and various reviews, including:

• initial declaration of transmission capacity services, excluding the routes between the cities of Brisbane, Sydney, Canberra, Melbourne, Adelaide and Perth in 1997;

• a variation in 1998 to also exclude from regulation the major inter-capital routes, with the exception of those between Melbourne, Canberra and Sydney. A monitoring program was also established in 1999 to assess aspects of market structure and market conduct on all the intercapital routes;

• following a public inquiry in May 2001, the ACCC varied the declaration to remove the remaining intercapital routes, on the basis that increasing or impending entry was stimulating competition on these routes. The monitoring program was extended to monitor whether competition developed as expected on these intercapital routes by including the new carriers providing those transmission services; and

• following another inquiry in 2004, the ACCC reached a final view that there was sufficient competition on all ‘intercapital’ routes, such that they should remain outside the scope of declaration. The ACCC also decided to discontinue its monitoring program. In addition, the ACCC decided that changing the scope of the transmission capacity service declaration to exclude a nominated list of capital-regional routes would satisfy its criteria for regulation. However, the ACCC ultimately decided not to exclude CBD inter-exchange or CBD tail-end transmission from declaration. 54

The ACCC’s final report in 2004 set out the criteria by which it made its determination, which included:

• collection of pricing information through the monitoring program;

• whether the routes under consideration were conducive to entry of major alternative infrastructure suppliers; and

54 See ACCC, Review of the declaration for the domestic transmission capacity service, Final Report, April 2004.

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• the effect and extent of competition on the subject routes based on the following criteria:

o concentration levels;

o barriers to entry;

o prices and costs;

o disputes brought before the ACCC; and

o competition in downstream markets.

Some overseas regulators, such as the ACCC and Ofcom, have recently removed regulation of transmission services where there are at least 3 fibre networks (including the incumbent operator’s network) in close proximity in a pre-defined area. In the case of Australia, the ACCC has withdrawn regulation in circumstances where there are 3 competing networks within 1 km of a specified point in a city centre. Ofcom has similarly proposed the removal of regulation where there are 3 fibre-based networks offering transmission services to third parties. This form of analysis seeks to identify geographic areas in which the competitive constraints on the incumbent operator are homogenous, and provides for the removal of regulation in these geographic areas. 55

The IDA has recognised this same distinction between competitive and uncompetitive areas when applied to the regulation of local leased circuits in Singapore. In this case, the IDA recognised a distinction between the level of competition between CBD and non- CBD areas:

“IDA recognises the different availability of competing access infrastructure throughout Singapore, particularly between CBD and non-CBD areas. SingTel is the only operator with a ubiquitous nation-wide network coverage, while the other competing operators’ networks are geographically limited, focusing mainly in the CBD areas. IDA also notes that SingTel’s retail prices for LLCs and in the CBD areas are lower by up to 35% compared with prices in the non-CBD areas, thus suggesting a different degree of competitive pressure between the two geographic

55 See Ofcom, Business Connectivity market Review: Consultation ,17 July 2008; and ACCC, Draft Decision: Telstra’s Domestic Transmission Capacity Service Exemption Application, Public Version, September 2008

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areas. However, today, these differences are not sufficient to justify a different regulatory approach between CBD and non-CBD areas” 56

The SKMM considers that there is a reasonable likelihood, given the presence of a number of competitors in the provision of long distance transmission services in Malaysia, that there are likely to be routes on which there are several infrastructure providers.

During the pre-PI process, though the topic was discussed with the stakeholders, there was no concrete proposal received on possible routes for de-regulation. Therefore, the SKMM would like to seek input on whether de-regulation of particular routes is appropriate to be considered at this juncture, and the possible routes where this could be applied.

Question 35:

The SKMM seeks detailed proposals on the criteria to be applied to specific routes that may be competitive in the Domestic Network Transmission Services, and evidence to demonstrate that competitiveness.

(ii) Radial pricing

As mentioned in section 8.4.1, some submissions in the pre-PI process noted that Domestic Network Transmission Service is priced based per kilometre between the trenching and road patterns between two locations rather than on a radial distance basis. The issue is noted, however, the SKMM encourages that it be raised during the review on MS (Pricing).

(iii) Ethernet and Transmission Services

Like leased lines, Ethernet offers similar internet transmission services over the NGN. It provides the same level of reserved capacity and high levels of QoS comparable to those available via leased lines.

However, the general view is that Ethernet is not a substitute for leased lines, as transmission service is done by way of sending packets over fibre, therefore, increasing the chances of delay and lost packets. Further, all aspects of service must be purchased

56 IDA, Explanatory Memorandum, Designation of Singapore Telecommunications Limited's Local Leased Circuits as a Mandated Wholesale Service, 16 December 2003 at para 7.

Page 157 from the incumbent telecommunications provider by an Access Seeker, whereas in the case of leased lines, there are certain aspects of infrastructure, including the back-end infrastructure which the Access Seeker does not need to purchase.

9.4.4 Preliminary view – Domestic Network Transmission Service

The SKMM’s view is that it would continue to be in the LTBE for the Domestic Network Transmission Service to remain on the Access List. At this juncture, the service description for Domestic Network Transmission Service has been amended to be applicable to the IP environment by specifying that the transmission may be at a “virtual” basis. The service description is found in paragraph 6(8) in Annexure 2.

At the same time, the SKMM is also considering whether the Domestic Network Transmission Service should be rationalised under a generic description of Transmission Service. The discussion on rationalisation will be discussed in Chapter 14.

Question 36:

(a) Do you agree that Domestic Network Transmission Service should be retained on the Access List?

(b) The SKMM seeks views on whether the service description, as amended, for Domestic Network Transmission Service is appropriate in an NGN environment where Ethernet services are critical.

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10 BROADCASTING TRANSMISSION

10.1 Market definition

The market for broadcasting transmission comprises the broadcasting transmission services that are used to deliver broadcast content to end users. As such, the market includes both analogue and digital sectors, television and radio sectors.

Analogue terrestrial television broadcasting transmission services involves the point to multi-point transmission of broadcasting material using analogue terrestrial facilities.

Digital Terrestrial Television Broadcasting ( DTTB ) is a transmission technology that can be used for broadcasting television programs and other content. DTTB is transmitted on radio frequencies through the airwaves in a similar manner to analogue terrestrial television with the main difference being the use of multiplex transmitters to allow reception of multiple channels on a single frequency range.

DTTB is not yet available in Malaysia. It is through analogue terrestrial television that the majority of Malaysian households receive a television signal via a conventional analogue television set and an aerial.

In relation to radio, similarly to television, only analogue services are currently available.

10.2 Access List facilities and services

10.2.1 Existing Access List items

There are 3 existing Access List items that are relevant to this market:

(a) paragraph 6(22) - Broadcasting Transmission Service;

(b) paragraph 6(12) - Infrastructure Sharing which was discussed in Chapter 6; and

(c) paragraph 6(23) – Digital Terrestrial Broadcasting Multiplexing Service.

10.2.2 Potential Access List amendments

The SKMM is not proposing to add any new items to the Access List. The SKMM plans to retain the current facilities and services in this market whilst also assessing the effectiveness of the current regulation. The SKMM is also considering amendments to

Page 159 update certain facilities and service from a technological perspective, as described in this chapter.

10.3 State of Competition

TM is the main supplier to radio and television broadcasters in the broadcasting transmission market of these services. These circumstances have not materially altered since the PI on Access List in 2005.

In relation to DTTB, there are currently no service providers in Malaysia and therefore, the current state of competition is not relevant.

10.3.1 Number of competitors

The focus on the state of competition is on the competition for the provision of inputs to facilitate the provision of broadcasting services. There are only a limited number of competitors in this market. As mentioned above, TM is the main supplier of this service to the broadcasters. There is no evidence of significant competition from any other provider.

The degree of competition in the provision of inputs to facilitate the provision of broadcasting services directly affects the downstream competition for broadcasting services.

There are 3 main types of television broadcasting in Malaysia:

(a) Free-To-Air (FTA ) Television. The penetration of Malaysian access to free-to-air TV stood at 95.2% in 2004. The main operators of Free-To-Air television are Radio Television Malaysia and Media Prima.

(b) Satellite Pay-TV or Direct-To-Home (DTH). The satellite operator, ASTRO, has commenced its operation in 1996. Approximately 37% of households are subscribers to DTH.

(c) Terrestrial Pay-TV (service temporarily suspended in April 2007 for re- engineering).

There are currently no providers of DTTB in Malaysia, however, operators are trialling DTTB and it is expected to be rolled out in 2008 with a digital switchover planned for 2015.

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There are approximately 20 radio stations in Malaysia. AMP of ASTRO operates 8 of these and is Malaysia’s largest radio broadcaster.

10.3.2 Price competition

There is no equivalent retail level which can be used for this market as an indicia of the state of competition.

Question 37:

(a) What is your view of the state of competition at the retail level for broadcasting services in Malaysia?

(b) Has it become more or less competitive over time?

In the PI on Access List in 2005, regulation was seen as a potential method of regulating prices in the absence of effective competition. Comments from licensees in the pre-PI process have not provided sufficient indication of the effect that access regulation has had in this area.

10.3.3 Innovation

There is little of or no innovation in the provision of the upstream transmission services which are used as an input into the distribution of broadcasting services by the broadcasters themselves. This lack of innovation contrasts with the developments in the broadcasting sector itself and suggests a lack of competition in the provision of upstream transmission services.

10.3.4 Conclusion

In conclusion, the SKMM considers that the state of competition has not changed since 2005 and TM continues to remain as the main provider in the provision of upstream transmission services to television and radio broadcasters in Malaysia.

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10.4 Application of LTBE criteria

10.4.1 Broadcasting Transmission Service

(a) Service description

Transmission services connect transmission sites to the broadcast centre. TM provides a transmission service which involves content being sent from broadcaster’s studios to mast sites, and the broadcasters arrange for it to be transmitted from those mast sites to viewers and listeners.

In addition to the provision of the transmission service by TM, a transmission centre generally carries out the following tasks:

(i) remote monitoring of transmitters to check for faults and, in some cases, the remote control and resetting of equipment;

(ii) coordination of maintenance teams to carry out repair or replacement of faulty equipment; and

(iii) off-air monitoring of broadcast programmes to monitor audio and visual quality.

As a result of the PI on Access List in 2005, the Broadcasting Transmission Service was added to the Access List as a separate service.

(b) Promotion of competition

For the reasons expressed above, the SKMM considers that TM continues to be the main provider in the provision of the Broadcasting Transmissions Service. Barriers to entry into this service are high and include physical constraints (such as topography and scarcity of radio spectrum) and technical barriers (such as the presence of high fixed and sunk costs).

Ofcom states that for this service the main barriers to entry include the sunk costs of installed equipment, and economies of scale in operating a large transmission network.57

As mentioned above, the SKMM added this service to the Access List in 2005 as there was a concern that prices for the Broadcasting Transmission Services was too high.

57 Oftel, Competition issues in Terrestrial Broadcast Transmission, 1995-1998, at Chapter 2.

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Additionally, these services were often bundled with unnecessary service such as the provision of tower access or maintenance, where maintenance can be provided by a third party at a lower cost. This can be highly detrimental to Access Seekers.

In the course of the pre-PI process, the SKMM has not received sufficient comments to determine whether the regulation of the Broadcasting Transmission Service has been effective. However, the reiteration of similar issues as that raised in 2005 seems to indicate that adding the service on the Access List and subsequently regulating the prices has not been as effective. Hence, the SKMM would like to seek comments on whether non-price terms and conditions should be considered in the MS (Access) to address some of the issues highlighted by the broadcasters. This would also be considered in Chapter 15.

Question 38:

What effect has the regulation of the Broadcasting Transmission Service had on price, quality and other terms of the service?

(c) Any-to-any connectivity

Any-to-any connectivity is not relevant to this service.

(d) Impact on Infrastructure investment

The regulation of the Broadcasting Transmission Service affects the investment incentives by broadcasters in broadcasting infrastructure. If the Broadcasting Transmission Service is provided at uncompetitive and uncommercial rates, broadcasters will limit their acquisition of this service and hence their investment in broadcast infrastructure.

This SKMM would be interested in whether the price of the Broadcasting Transmission Service had had the effect of undermining investment incentives by broadcasters in broadcasting infrastructure.

Question 39:

What effect has the regulation of the Broadcasting Transmission Service had on infrastructure investment by broadcasters?

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(e) Other criteria

Consistent with the previous discussion on Domestic Network Transmission Service and the backhaul portion of the Domestic Connectivity to International Services in Chapter 9 and 7 respectively, the SKMM wishes to understand whether there are any routes for the provision of Broadcasting Transmission Service where there are multiple providers that the SKMM can consider for de-regulation.

Question 40 :

(a) Do you agree that Broadcasting Transmission Service should be retained on the Access List?

(b) Do you have any comments on whether any particular trunk routes used in respect of the Broadcasting Transmission Service are sufficiently competitive to warrant a relaxation of regulation on those specific routes?

10.4.2 Preliminary view – Broadcasting Transmission Service

The Broadcasting Transmission Service is an important service because it is a critical input into the provision of television and radio broadcasting services in Malaysia. As TM is the main provider of this service within Malaysia there is not sufficient competition to remove this service from the Access List. The SKMM proposes to retain the service on the Access List. There is a minor editorial amendment to the service description of Broadcasting Transmission Service, and it can be found in paragraph 6(22) in Annexure 2.

At the same time, the SKMM is also considering whether the Broadcasting Transmission Service should be rationalised under a generic description of Transmission Service. The discussion on rationalisation will be discussed in Chapter 14.

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10.4.3 Digital Terrestrial Broadcasting Multiplexing Service

(a) Service description

Digital Terrestrial Television Broadcasting ( DTTB ) is a transmission technology that can be used for broadcasting television programs, radio and other content. Since the PI on Access List in 2005, there have been significant developments in the progress to implement DTTB, including:

(i) key DTTB policies have now been established;

(ii) a Standard Radio System Plan (SRSP) for the new digital band plan;

(iii) spectrum planning is in an advanced stage;

(iv) ongoing evaluation of assumptions in capacity and interference issues.

The focus of the analysis when applied to the Digital Terrestrial Broadcasting Multiplexing Service is whether the same access issues exist when the service was first placed on the Access List, or whether new access issues have arisen as a result of this progress to implement DTTB.

(b) Promotion of competition

The first trial for FTA Digital Terrestrial Television (also referred to as DTTB) took place since the PI on Access List in 2005, from June 2006 to March 2007. The second phase of the trial started in April 2007 and will end in 2009. The trials are being run by public broadcaster, which is Radio Television Malaysia. The rollout for commercial digital television is expected by the end of 2008 with a digital switchover planned for 2015.

On 9 November 2006, the SKMM released the Commission Determination on the Mandatory Standard for Free to Air Transmission of Digital Terrestrial Television Service, Determination No. 2 of 2006 (MS (DTT)). The MS (DTT) set the standard for digital television and in particular set Digital Video Broadcasting – Terrestrial ( DVB-T) for Malaysia. In addition, the SRSP on requirements for Digital Terrestrial Television (including digital terrestrial sound) (DTT) service operating in the frequency bands 174 MHz to 230 MHz and 470 MHz to 742 MHz ( SRSP-521 DTT ) dated 25 September 2007 was also published.

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The new services which will be facilitated by DTTB are significant. Distinguishing features from analogue include:

(i) mobile television reception to vehicles and handheld devices;

(ii) higher definition television ( HDTV );

(iii) interactive and data services;

(iv) multi-channel standard digital television ( SDTV );

(v) broadband high speed date;

(vi) multi-media services;

(vii) terrestrial sound broadcasting services; and

(viii) spectrum efficiencies. One layer multiplexer has capacity for several channels and hence multi-channelling. In theory, 1 radiofrequency channel is all that will be required for nation wide coverage (Single Frequency Network).

Since 2005, regulators in a number of jurisdictions have revised or amended the regulatory approach taken to multiplexing services (with or without associated transmitter services). Work by Ofcom in the UK and the Australian Communications and Media Authority ( ACMA ) in Australia have provided examples of successful regulatory oversight of digital broadcasting services. As a result, combined with the significant and successful developments in the Malaysian market, the SKMM is in a position to re-assess the appropriate regulation of multiplexing services.

The relevant DTTB access issues identified during the PI on Access List in 2005 by the SKMM included:

(i) access to multiplexers;

(ii) access to transmission sites and towers;

(iii) access to reception equipment; and

(iv) access to conditional access systems and electronic program guides.

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In the SRSP-521 DTT 58 , the SKMM has discussed the concept of implementing Digital Terrestrial Television and the respective roles of the NFP, NSP, ASP and CASP. Due to economies of scale, it was envisaged that the NFP and NSP may be one Common Integrated Infrastructure Provider ( CIIP ). The CIIP will have the dual purpose of:

(i) providing access to the multiplexer for content aggregation; and

(ii) providing a network of transmitters throughout Malaysia.

The SKMM recognises that there will be a need to ensure both equity and equivalence of access to CIIP infrastructure by licensees, specifically for the CASPs. As a result, it is SKMM’s preliminary view that the services will need to be regulated to ensure that the benefits expected from the transition to DTTB would be in the interests of the end users.

Based on the above, this would be achieved through the Digital Terrestrial Broadcasting Multiplexing Service and Broadcasting Transmission Service (which was explained in the previous section). The provider of the Digital Terrestrial Broadcasting Multiplexing Service is also obliged to follow the terms and conditions specified in the MS (Access). There are some proposed amendments in relation to this service in the MS (Access) and would be discussed further in the chapter 15.

Question 41:

The SKMM seeks comments on whether any access issues may be addressed through Digital Terrestrial Broadcasting Multiplexing Service and Broadcasting Transmission Service.

(c) Impact on Infrastructure investment

The introduction of the DTTB service will involve substantial infrastructure investment on behalf of operators. Additionally, the setting of a date for the digital switchover is providing increased incentives for investment in infrastructure. Hence, the provision of the Digital Terrestrial Broadcasting Multiplexing Service on reasonable terms and conditions is likely to have a significant impact on investment in DTTB infrastructure.

58 See page 12 of the SRSP.

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(d) Other criteria

Digital media broadcasting is part of the MyICMS 886 strategy. The assessment of the service on the Access List is consistent with Malaysia’s overall goal and strategy for communications. It is expected that the introduction of digital multimedia broadcasting will set the initiatives for the growth of the local content industry and local production of set top boxes and digital multimedia receivers. Ultimately, the SKMM aims that digital multimedia broadcasting will provide coverage to 95% of households.

DTTB will also provide benefits to consumers, industry and government, including:

(i) better viewing experience;

(ii) more channels and therefore increased opportunities for content to be broadcasted;

(iii) enhanced services, including captioning, program guides, choice of viewing angles;

(iv) new services and growth markets, such as internet, interactive home shopping, mobile TV/data;

(v) promotion of convergence; and

(vi) efficient use of spectrum.

10.4.4 Preliminary view – Digital Terrestrial Broadcasting Multiplexing Service

It is the SKMM’s preliminary view to retain the service on the Access List and the service description is found in paragraph 6(23) in Annexure 2.

Question 42:

The SKMM seeks comments on its preliminary view to retain the Digital Terrestrial Broadcasting Multiplexing Service on the Access List and its proposed service description.

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11 EXISTING BROADBAND SERVICES

This chapter considers the broadband services market and the existing facilities and services on the Access List which support the provision of these broadband services. We consider whether the existing facilities and services on the Access List which support the provision of broadband services should remain on the Access List.

However, there is a strong interaction between the continued regulation of these existing facilities and services and the types of new high speed broadband services. The high speed broadband services and wireless broadband would be discussed further in Chapter 12 and 13 respectively.

Accordingly, while there is a complete discussion of some of the existing facilities and services on the Access List (for example, Internet Interconnection Service) in this Chapter, the discussion about whether certain other existing facilities and services should remain on the Access List (for example, Full Access Service, Line Sharing Service etc) is deferred until Chapter 12 in the context of whether continued regulation is required in a high speed broadband network environment. This chapter is structured to best complement both these interactions and distinctions in the access regulation analysis.

11.1 Market Definition

Broadband services involve the provision of sufficient bandwidth to facilitate the transfer of data at high speeds. As of 2007, the main technologies used to provide broadband services in Malaysia are Asymmetric Digital Subscriber Lines ( ADSL ) and Wireless LAN. Wireless technologies are also used in some areas, whilst some providers provide broadband via fibre optic cables as well as satellite, and a small proportion of customers have basic and primary ISDN lines and leased lines.

On the basis of the analysis undertaken by the SKMM in relation to the PI on Dominance in 2004, the relevant product market for analysis is the national market for the supply of broadband retail services. There is no evidence for further segmentation into alternative broadband technologies. The SKMM has considered relevant wholesale broadband services in this section and have therefore expanded the analysis beyond retail to include wholesale services.

Broadband penetration in Malaysia is low compared with other Asian countries, with broadband penetration currently at 18% of households or 5% of the population. In

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South Korea, 93% of households are connected to broadband. In Hong Kong, the household penetration rate is 80% and in Singapore it is 78%.

Notwithstanding Malaysia’s low Internet penetration rate, it has risen since 2004 and 2005 where there were 252,500 and 501,700 subscribers respectively. There were 1,368,900 broadband subscribers in 2007, which is an increase of 54%. Most of the broadband subscribers access the Internet via ADSL.

Many different services are provided over broadband-enabled links (ie the Internet). There is some, or likely to be some, competition from wireless broadband mobile operators using High Speed Downlink Packet Access (HSPDA ), commonly referred to as 3.5G technology, as well as WiMAX operators in the future.

The Internet arrangements between domestic operators are also critical to the good functioning and operation of the broadband services market. Internet interconnection is the process by which ISPs connect to one another’s networks and transfer domestic Internet traffic and this process and the arrangements supporting internet interconnection in Malaysia are considered in this chapter.

11.2 Access List Facilities and Services

11.2.1 Existing Access List Facilities and Services

The PI on Access List in 2005 included the following facilities and services which are relevant to competition in the provision of broadband services in Malaysia:

(a) paragraph 6(16) - Full Access Service;

(b) paragraph 6(17) - Line Sharing Service;

(c) paragraph 6(18) - Bitstream Services (with and without Network Service);

(d) paragraph 6(19) - Sub-loop Service;

(e) paragraph 6(20) - Digital Subscriber Line Resale Service; and

(f) paragraph 6(21) - Internet Interconnection Service.

The Bitstream Services, Digital Subscriber Line Resale Service and the Internet Interconnection Service are currently available. The obligation to provide Full Access

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Service, the Line Sharing Service and the Sub-loop Service has yet to come into force although the three services are on the Access List.

11.2.2 Potential Access List amendments

The SKMM has identified the following issues to consider in its assessment of the broadband services market:

(a) whether the Internet Interconnection Service should remain on the Access List;

(b) whether MyIX is providing an effective method of domestic interconnection between ISPs in Malaysia;

(c) whether regulation required to ensure that Naked DSL is available in Malaysia; and

(d) whether the SKMM should regulate the provision of wholesale services over WiMAX, wireless fidelity ( WiFi ) and HSDPA services.

11.3 State of competition

11.3.1 Number of competitors

The number of ISPs providing broadband services has grown substantially in Malaysia since 2005 and now includes Airzed, Arcnet, Biz Surf, Celcom, DiGi, , iZZi, Jaring, Maxis Net, Metro FON, Penang FON, Putra Net, Time Net and TM Net 59 - all of whom provide high speed internet access.

TM, Jaring, Time Broadband and Maxis Broadband are still the larger providers. Broadband is also now available in all states of Malaysia. The most prevalent technology for the provision of broadband Internet services is ADSL, accounting for 73.2% of broadband subscriptions. Other forms of broadband Internet access include Wireless LAN (21.1%), Wireless (0.6%), HSDPA (4.4%), symmetric digital subscriber line ( SDSL ) (0.5%) and Satellite (0.1%).

59 TM Net has transferred its Internet and broadband business to Telekom Malaysia since 1 January 2007. See explanation below.

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Year ADSL SDSL HSDPA Wireless Wireless LAN Satellite TOTAL 2002 18,500 500 NA NA 249 19,300 2003 108,200 1,900 NA NA 302 110,400 2004 247,800 2,800 NA NA 1,865 252,500 2005 477,700 3,700 NA 5,900 14,400 501,700 2006 735,900 4,800 4,500 8,600 141,400 1,900 897,100 2007 1,002,400 6,500 60,300 8,400 289,300 2,000 1,368,900 Table 12: Yearly number of broadband subscriptions 60

As noted above, TM Net was the most significant provider of broadband services by an overwhelming margin, however since 1 January 2007, TM Net has transferred its Internet and broadband business to TM.61 To date, as stated in TM’s Annual Report of 2007,62 TM holds 96% market share in broadband services.

There are also a number of wireless broadband providers. Maxis has started offering its HSDPA services, whilst Celcom also began offering high speed internet though its HSDPA service in conjunction with Vodafone. 63 However, although wireless broadband technologies may pose a viable alternative to fixed broadband access, large scale general deployment is still currently limited in 2007 to discrete geographic areas in Malaysia. The number of wireless and HSDPA subscribers, for example, totals 68,700 as compared to 1,002,400 for ADSL as at the end of 2007.

11.3.2 Price competition

The market for broadband services is led by TM, and as a result there is no strong competition in this market. TM offers DSL services to residential and business customers. TM recently launched its Streamyx 4.0 Mbps package, as well as extending the areas of coverage for Streamyx 2.0 Mbps, making it one of the faster broadband services for residential customers in Malaysia. Streamyx Basic 4.0M is a package with 4.0Mbps download speed and 512Kbps upload speed. The monthly fee for Streamyx Basic 4.0M is at RM268 (with modem), whilst Streamyx 2.0 package is offered at RM188 per month.

60 SKMM, ‘Communications & Multimedia – Selected Facts & Figures Q4 2007’, page 19; SKMM, ‘Industry Performance Report 2007’, available at http://www.skmm.gov.my/Admin/WhatIsNew/CCD/IPR07.pdf accessed 9 April 2008, page 55. 61 TM, Annual Report 2007, page 253 62 See page 19. 63 Following the recent demerger within Telekom, Celcom is now a separate business entity under the TM International arm of Telekom, which houses other TM regional mobile units.

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In comparison, there are a variety of other providers who provide broadband services to residential customers. For example, Maxis offers mobile broadband at 1 Mbps for RM138 per month as compared with U Mobile that is offering its broadband package at RM78 per month at around 1.8 Mbps. In terms of wireless broadband, Izzinet offers their package at RM82 per month for 1 Mbps whilst TIME Broadband Webbit is at RM89 per month for 448/256 Kbps. Jaring is currently offering wired broadband for a 1Mbps at RM69 a month.

11.3.3 Barriers to entry

TM has 96% market share in the broadband market and a 97.9% market share in DEL connections nationally giving them a strong competitive edge over any competitors offering broadband via other technologies or who wish to offer broadband services on a national level.

There are many newer providers in the market who are offering broadband via other technologies such as wireless, optical fibre, satellite; however, most of them are only starting to deploy their networks. Though facilities-based competition is envisioned, the high costs to deploy the networks across the country, contribute to high barriers to entry.

Therefore, the SKMM considers that in the absence of an effective access regime, there is very limited ability for new entrants or competitors to deploy the necessary infrastructure to offer a retail broadband service to end users.

11.3.4 Innovation

The retail broadband services market is often characterised by innovative product offerings, especially with many broadband providers in the market. For example, some providers offer broadband services along with value-added services to their customers.

First mover advantage is a real concern in Malaysia if a forward looking view is not taken of the potential issues that could arise in connection with the provision of high speed networks. The SKMM considers that regulation will be required where there is a reasonable prospect that competition issues will arise in the future.

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11.3.5 Conclusion

The SKMM concludes that although there has been some competition in the provision of broadband services, TM maintains its market share of 96% in the broadband services market on a national basis.

Question 43:

The SKMM invites comments on the competitiveness of the retail broadband services market.

11.4 Current developments

11.4.1 Wholesale provision of broadband services

At the wholesale level, there are four ANE services and Digital Subscriber Line Resale Service included on the Access List. Though Full Access Service, Line Sharing Service and Sub-loop Service are on the Access List, there is no current obligation to provide them. TM is the main operator offering Bitstream Services and Digital Subscriber Line Resale Service as it is the main provider of DEL connections. Currently, there are four access agreements for the provision of Bitstream Services that have been registered with the SKMM. There are also two registered access agreements for Digital Subscriber Line Resale Service.

In addition to the regulated services as mentioned above, TM also offers wholesale digital subscriber line services on commercially negotiated terms. There have been a number of operators who currently subscribe to this wholesale product.

The SKMM has received feedback during the pre-PI process that there have been delays in the provisioning by TM of the wholesale digital subscriber line services to particular operators and delays in rectifying faults. The SKMM is unaware of the reason for the delay, however, the SKMM would be concerned if these delays are the result of TM’s strong presence in the market and its ability to act in the provision of wholesale services independently of its competitors. In addition, some conveyed that currently there is only one bandwidth that is offered for the wholesale product, and therefore it is inflexible and does not allow the competing operators to compete with the retail arm of TM in providing up to 4 Mbps to end users.

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During the pre-PI process, the SKMM has received feedback that TM is offering the wholesale digital subscriber line service on possibly more favourable terms than the Bitstream Service (with or without Network Service). Some of the differences include:

(a) service provisioning and service activation timeframes are longer for the Bitstream Services than for the wholesale digital subscriber line service. This may be due in part that the wholesale product is already on offer, whilst Bitstream Service has not been provisioned to any other operator yet;

(b) the term commitment is longer for the Bitstream Services (3 years) than the wholesale Digital subscriber line service (2 years); and

(c) the price for the Bitstream Services taking into account all the individual components is higher than the price for the commercial wholesale service.

Having regard to the above, the lack of demand for Bitstream Services does not suggest that regulation should be removed. Instead, lack of demand for Bitstream Services suggests that other wholesale products are provided on more favourable terms. The SKMM seeks further input on whether some of the terms and conditions available for the wholesale product in its current form or in more favourable form could be considered for Bitstream Services. Secondly, the SKMM also understands that TM does not offer a wholesale service which supports the provision of a Naked DSL service in Malaysia.

A wholesale service which supports Naked DSL service would be distinguishable from the bitstream service (for example) as follows:

(a) with the bitstream service, the customer or the Access Seeker is required to pay for the line rental of the copper line into the premises and the payment of line rental is a pre-condition to obtaining the bitstream service; and

(b) with a Naked DSL service at the retail level, the customer is not required to pay for the line rental of the copper line into the premises. Rather, the Access Seeker can acquire a wholesale broadband service provided by TM utilising the high frequencies over the copper required to support broadband services and TM’s Digital Subscriber Line Access Multiplexers ( DSLAM ) and packages a retail broadband service such that the customer is not required to purchase a line rental service. The Access Seeker may therefore absorb the cost of line rental itself.

Finally, TIME, Maxis and DiGi also have some DEL connections and have the obligation to provide Bitstream Services and Digital Subscriber Line Resale Service but, as far as the

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SKMM is aware, there have not been access requests for these services. Further, the SKMM is not aware that these alternative operators offer any other wholesale products to the other operators.

Question 44:

(a) The SKMM invites comments on the competitiveness of the wholesale broadband services market.

(b) The SKMM seeks comments on the issues pertaining to the wholesale digital subscriber line service, and whether some of the terms and conditions for the wholesale digital subscriber line product could be considered for the Bitstream Services.

(c) The SKMM seeks comments on the demand for Naked DSL service with justifications, and whether parties are able to commercially negotiate for the service.

11.4.2 Internet interconnection

During the PI on Access List in 2005, one of the issues examined was on the Malaysian Internet Exchange ( MIX ). MIX was established between Jaring and TM Net in 2003. However, it became apparent that the arrangements between those two ISPs led to problems for other ISPs, including:

(a) TM Net does not interconnect with many ISPs, other than Jaring. This affected the ability of the ISPs to obtain network connectivity;

(b) TM Net and Jaring agree on the prices for connectivity to their respective networks; and

(c) non-transparent peering criteria were imposed by TM Net on Jaring. This led to significant capacity restraints resulting in lower speeds for Internet access due to inefficient routing arrangements.

As a result, smaller ISPs resorted to connecting to other ISPs outside of Malaysia with more favourable rates for their peering arrangements. Therefore, during the PI on Access List in 2005 the SKMM determined that Internet Interconnection Service should be included on the Access List.

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However, since then, Malaysian Internet Exchange ( MyIX ) was envisioned to support the government’s initiatives such as the National Broadband Plan and the MyICMS strategy. MyIX was intended to enhance the existing MIX but with an emphasis on being the nation’s first neutral internet exchange. 64

The industry was involved in the discussion on the issues and challenges to establish the National Internet Peering Initiatives ( NIPI ). The first phase of NIPI was to identify three sites to house the connection points of the MyIX infrastructure. The three sites are TM’s Fiberail National Control Centre, Jaring’s data centre at Technology Park Malaysia and AIM’s data centre at Menara Aik Hua, which are interconnected by a Metro Ethernet fibre ring. In later phases, MyIX is envisaged to expand to strategic locations across the country to allow a ubiquitous structure to be established. 65

MyIX was launched on 15 December 2006. There are 20 founding members of the MyIX, and currently they have peering arrangements with one another. 66

One of the key principles of the MyIX was consistency with the MyICMS 886 strategy, which includes strategies to increase broadband penetration, to boost local content services and VoIP services through improved services and architecture. 67 The implementation criteria for MyIX are as follows:

(a) an operator-neutral exchange (ie not owned by any specific service provider), whereby ownership of MyIX is through an industry consortium;

(b) ISPs to be given equal and fair access;

(c) competitive prices for the service provided at the internet exchange; and

(d) options to connect are not limited to specific sites.

One of the key remaining issues with MyIX, however, is that the process for the finalisation of the consortium constitution is taking a long time to establish and has resulted in delays with entry. Some ISPs reported during the pre-PI process that the timeframe for joining MyIX was lengthy, membership status was uncertain, and all consortium members need to agree before a new member is permitted to join. This is

64 SKMM, Annual Report 2006, page 24 65 SKMM, Annual Report 2006, pages 24 - 25 66 Available at http://www.myix.gov.my/peering-status.html 67 SKMM, Annual Report 2006, pages 24 - 25

Page 177 despite the information on MyIX’s website 68 stating that MyIX membership is generally open to all entities fulfilling the published criteria and subject to the approval of a simple majority of its council members.

Furthermore, during the pre-PI process, some licensees also raised complaints regarding delays in activating their connection to MyIX, even after they had been accepted as members.

The SKMM notes that there are some issues raised on the operational aspects of the MyIX. In spite of the operational issues, the MyIX has facilitated peering arrangements between ISPs and the exchange of domestic Internet traffic. Some of the issues that were identified during 2005 appears to have been alleviated to a certain extent.

In addition, the SKMM would be interested to know parties views about new entrants’ ability to become members of MyIX and to connect to the domestic peering system.

Question 45:

(a) The SKMM invites views on the membership process and on ways that delays to join MyIX can be addressed.

(b) The SKMM invites views on whether other than those noted, there are issues faced by new ISPs which prohibit them from benefiting from the services of MyIX, which is the ability to exchange domestic Internet traffic efficiently.

11.5 Existing facilities and services on the Access List

11.5.1 Internet interconnection services

The Internet Interconnection Service was included on the Access List with effect from 1 July 2005. The Internet Interconnection Service is a Facility or Service for the carriage of digital data between one or more points of interconnection at a border gateway router (BGR ) of an Access Provider’s network and the IP addresses directly connected to the Access Provider’s network. To date, the Internet Interconnection Service is not featured in the registered access agreements.

The Internet Interconnection Service was included on the Access List in 2005 due to the difficulty that ISPs had when obtaining access to domestic internet arrangements

68 See http://www.myix.gov.my/?page_id=6

Page 178 through TM Net and Jaring. MyIX, which is a consensus-oriented, industry initiative, has since been established. MyIX provides a central point where all ISPs can connect to exchange domestic Internet traffic. MyIX is purely a commercial arrangement between the ISPs.

As noted above, despite the operational issues raised, MyIX has facilitated peering arrangements between ISPs and the exchange of domestic Internet traffic, and alleviated some of the issues identified in 2005. Therefore, in this Public Inquiry, the SKMM would consider whether the Internet Interconnection Service should continue to remain on the Access List.

Having regard to the nascent development of the MyIX, as it is currently only implemented in three sites with plans for future expansion and that there are some operational issues still to be resolved, it may be a little premature for the SKMM to consider removing the Internet Interconnection Service from the Access List. In the interim, it is the SKMM’s preliminary view that there is still merit for the Internet Interconnection Service to remain on the Access List to allow interconnection at the BGR at other POIs in the country on reasonable terms and conditions.

There have not been any amendments proposed to the service description of the Internet Interconnection Service, and it can be found in paragraph 6(21) in Annexure 2.

Question 46:

The SKMM invites comments on whether the Internet Interconnection Service should continue to remain on the Access List given that the MyIX now provides ISPs the ability to exchange domestic Internet traffic.

11.5.2 ANE services and Digital Subscriber Line Resale Service

Each of the Full Access Service, the Line Sharing Service, the Sub-Loop Service, the Bitstream Services (with and without Network Service) and the Digital Subscriber Line Resale Service supports the provision of broadband services to end users in some way. The SKMM needs to consider whether each of these services is retained or removed from the Access List.

However, the continued relevance of each of these facilities and services must be considered in the context of the high speed broadband network. Therefore, the SKMM defers discussion of the continued relevance of these facilities and services and whether they should remain on the Access List or be removed until the next Chapter.

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11.5.3 Naked DSL

As discussed above, Naked DSL is the provision of a broadband service at retail over a copper line to a customer without the need for a customer to acquire the line rental service.

It is important to note that Naked DSL is a retail product offering and not a wholesale offering , therefore the issue facing SKMM is one of ensuring that the services on the Access List are not characterised in a way which would prevent Access Seekers from creating a Naked DSL retail product from the facilities and services on the Access List. Access seekers should have the ability to acquire Access List facilities and services and combine them in such a way as to create a viable retail offering.

The functional characteristic of the facility or service that supports Naked DSL is the same as that which is used to provide ANE. Those functional characteristics are the provision of a copper line or the spectrum over a copper line necessary for the provision of a broadband service.

It needs to be remembered, however, that although Naked DSL is a retail product offering, in practice the ability for providers to offer this service is dependent on the wholesale services available. The SKMM understands that TM currently offers the Streamyx Combo package which has the retail appearance of Naked DSL in that voice is an optional extra to this service. However, a number of submissions received by the SKMM indicate that it is not possible for other operators to offer a Naked DSL service at comparable retail prices to those offered by TM for Streamyx Combo as the appropriate wholesale products are not available as supply of the copper line is dependent on a customer acquiring a line rental service.

Operators such as AT&T, Verizon, Qwest in the USA, Bell Canada, France Telecom, Telecom Italia, Telenor in Norway offer retail Naked DSL to their end users. Others such as Belgacom in Belgium also offer Naked DSL at the wholesale level. 69 The Austrian regulator, RTR required Telekom Austria to provide the wholesale naked DSL to the competitors. This allows the alternative operators to resell Telekom Austria’s DSL services without the accompanying PSTN service. 70 The Swedish regulator, PTS also required TeliaSonera Sweden to offer Naked DSL services. 71

69 Network Strategies, Naked DSL: the potential impact in New Zealand , April 2006, pages 4 -6 70 Analysys Mason, Naked DSL – Telekom Austria takes the plunge, 20 June 2006, http://www.analysysmason.com/About- Us/News/Insight/Naked-DSL---Telekom-Austria-takes-the-plunge/

71 Network Strategies, Naked DSL: the potential impact in New Zealand , April 2006, page 6

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In Australia, iiNet creates a Naked DSL retail product by acquiring the equivalent of a line sharing service and wholesale line rental service. It then offers a package of broadband and voice over broadband for a capped monthly charge. iiNet calls this service “Naked DSL”, as there is no obligation on the end user to acquire a line rental service from the incumbent operator, Telstra. In practice, Optus also offers a Naked DSL service, but prices it as a traditional PSTN service. Optus acquires ANE and deploys DSLAMs with line cards in Telstra exchange buildings and offers a bundle of voice and broadband. However, Optus elects to bill the customer on the basis of a line rental plus usage charges for both broadband and voice services. Optus could bill the same services as Naked DSL, but chooses not to do so.

These examples provide an indication of the way that Naked DSL (as a retail service) can be constructed from services used as inputs on an Access List, particularly the Line Sharing Service, but which may be presented as Naked DSL or as a bundle of traditional PSTN and broadband.

An Access Seeker may construct a Naked DSL service using the Full Access Service but would need to absorb the full cost of the line and may pass this cost on to the customer in the form of broadband charges. There should be no impediment to the Access Seeker providing Naked DSL in these circumstances if the Full Access Service is available.

The main issue arises if the Access Seeker wishes to construct a Naked DSL service using the Line Sharing Service. In this case, the question arises whether the Access Provider can place a condition on the supply of the Line Sharing Service that the customer acquires the line rental service from the Access Provider. It is the imposition of this condition that prevents the provision of Naked DSL using the Line Sharing Service.

The SKMM is interested in parties’ views about whether it is reasonable for an Access Provider to impose a condition on the provision of the Line Sharing Service that the customer must have acquired a line rental service. Only if the customer has acquired a line rental service will the line qualify as one that an Access Seeker can acquire the Line Sharing Service from the Access Provider in order for the Access Seeker to provide a broadband service to the customer.

The SKMM wishes to consider in this Public Inquiry whether a service which would support the provision of Naked DSL may be required to be provided in Malaysia and included on the Access List.

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Clearly, the future of Naked DSL is also dependent on whether the Full Access Service, the Sub-Loop Service, the Line Sharing Service or the Bitstream Service (with or without Network Service) should remain on the Access List. This issue is also considered in the following chapter 12.

Question 47:

(a) The SKMM invites comments on the means by which regulation could be applied under the Access List to ensure the provision of a Naked DSL service.

(b) Is it reasonable that an Access Seeker can only offer a Naked DSL service through acquisition of the Line Sharing Service on the condition that the customer pays line rental to TM?

11.6 Potential facilities and services on the Access List

11.6.1 Regulation of wholesale services over the WiMAX, WiFi and HSDPA services

In chapter 13, the SKMM considers the application of the relevant originating and terminating services to WiMAX networks. The SKMM does not propose to further consider that issue here.

The question in this section relates to the promotion of competition in relation to broadband services. Prima facie, as TM with its 96% market share in the broadband services market and given that TM does not operate WiMAX or HSDPA enabled networks, there are no immediate grounds for regulating access to these networks.

The SKMM expects that WiMAX and HSPDA enabled network operators will compete vigorously in the provision of broadband services. As discussed further below in relation to high speed broadband services, competition between WiMAX and HSDPA services may not occur directly with the providers of high speed services offered over the HSBB network due to limitations in the speeds and functionality that the wireless networks will be capable of supporting.

Nevertheless, these operators will be important competitors in the provision of basic access to broadband services to end users in Malaysia.

Except in relation to originating and terminating access over WiMAX and HSDPA networks, the SKMM considers that it is likely that each of the WiMAX and mobile

Page 182 operators are likely to compete in the provision of wholesale access over their networks. So, in the same way that the SKMM has declined to regulate services such as domestic roaming and MVNO, the SKMM similarly considers that the market will deliver the most appropriate outcomes through competition between these WiMAX and HSDPA network operators.

Question 48:

The SKMM seeks comments on whether wholesale broadband services provided over WiMAX and mobile networks are likely to be competitively provided and whether regulation is required of these wholesale broadband services.

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PART C: REGULATION OF HIGH SPEED BROADBAND SERVICES

12 REGULATION OF HIGH SPEED BROADBAND SERVICES

12.1 Introduction

Having considered market definition, the state of competitiveness and some of the existing network facilities and services which support the provision of broadband services in the previous Chapter, the SKMM considers in this Chapter the issue of regulation of high speed services over high speed broadband networks.

In the recent Ministerial Direction on HSBB and Access List dated 16 September 2008, the SKMM has been directed to defer the implementation of 3 services, that is Full Access Service, Line Sharing Service and Sub-loop Service, provided over the HSBB network for 7 years. It is important to note that this deferment is limited to those three facilities and services over the HSBB network. Further, the deferment does not affect the implementation of those three facilities and services over the PSTN network. This means there is a distinction between the regulatory environment that will potentially apply within areas where the HSBB network is located (HSBB areas) and outside the HSBB areas.

The SKMM would like to emphasise that the other regulatory provisions in the CMA continues to apply. In addition, the SKMM will continue to monitor compliance with the regulatory provisions as well as any issues that may arise. In this regard, the SKMM will undertake the necessary measures to address those issues should they arise.

In addition, the SKMM is also directed to review the HSBB network relative to other networks and to take into account the following non-exhaustive list of factors:

(i) the long-term benefit of end users;

(ii) the effect on infrastructure investment;

(iii) the effect on competition, including any anti-competitive practices; and

(iv) the promotion of the NPOs.

The deployment of fibre technologies in the access network and/or in the core network is inevitable to enable increased broadband penetration. The Government has entered into an agreement with TM for the deployment of the HSBB network. These deployments are

Page 184 generally on a large scale and are high risk in terms of investment and sunk costs. In this light, the SKMM considers that it is in the interests of end users, TM and other service providers to conduct a Public Inquiry, drawing on relevant international experience, on access issues pertaining to the HSBB network, the access regulation necessary (if any) and the costs and benefits of any such regulation.

The Ministerial Direction on HSBB and Access List also specifies 3 HSBB services – High- Speed Broadband Access Services, High-Speed Connection Services and High-Speed Transmission Services – which TM intends to make available to Access Seekers on a commercially-negotiated basis. The SKMM has separately considered a range of services that should be considered for regulation over the TM HSBB network. There could be an overlap between the TM proposed services and the services considered by the SKMM in this Public Inquiry. However, it is premature at this juncture to consider this issue until the 3 services have been offered by TM. The SKMM will continue to monitor and address any issues at an appropriate time.

This Chapter is structured differently to the previous Chapters. Given that there is no high speed broadband network in Malaysia at present and there are no existing services or facilities on the Access List which will be used to support high speed broadband services, the SKMM does not consider that it is relevant to consider the existing state of competition. Instead, the SKMM has focussed on what level of access regulation would be appropriate over high speed broadband networks in order to promote the LTBE in the context of the competitive provision of high speed broadband services in Malaysia. For the avoidance of doubt, in this Public Inquiry the SKMM is considering the regulation of high speed broadband services as applicable to all operators.

This Chapter will consider whether some of the existing services on the Access List (namely the Full Access Service, the Sub-loop Service, the Line Sharing Service or the Bitstream Services (with or without Network Service) and the Digital Subscribe Line Resale Service) should remain on the Access List.

The SKMM has structured this Chapter dealing with the regulation of high speed broadband services as follows:

(a) NGN technology overview;

(b) Initiatives to rollout high speed broadband services;

(c) Importance of broadband;

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(d) Access Issues;

(e) Regulation of high speed broadband services;

(f) Elements and definition of regulated high speed broadband services; and

(g) Regulation of ANE for the copper-based PSTN in a high speed broadband environment.

12.2 NGN technology overview

12.2.1 NGN Core Network

In the current generation of communications networks, there are separate core networks associated with a small number of access networks. For example, there is a single PSTN which has an access network characterised by fixed metallic lines to the premises and a combination of metallic lines and optical fibre between the premises and a local switch. The PSTN has a core network which interconnects local switches with transit switches and within the core network is the signalling system for circuit switching (typically, an SS7 network).

Similarly, a GSM mobile network has a wireless access network between handsets and base stations with a combination of fibre and microwave backhaul from the base station to the core network. The core network provides circuit switching, packet switching and signalling for the mobile network and interconnects with both the PSTN and, where appropriate, the Internet. There are also a number of dedicated business access networks using fibre technology and transport systems such as asynchronous transfer mode ( ATM ) or frame relay.

As telecommunications systems expanded using current technologies, each new technology architecture required its own access network and a separate and distinct core network. One of the key elements of NGN is that a common core network can be used with a variety of packet-switched based access networks as well as the legacy networks which are currently deployed. In order for the NGN to exhibit the flexibility that is required to operate with multiple access networks, the core network has to follow a relatively simple IP approach and adopt some of the architecture used in 3G, particularly the Internet Protocol Multimedia Subsystem ( IMS ).

The transport network of the NGN is IP-based and has two planes above the transport plane. The first of these is the control plane which has similarities to the signalling

Page 186 network in a circuit-switched network such as the PSTN. The control plane provides control of routers in the transport plane and, most importantly, at the edges of the transport plane. These edges represent the border between the transport plane and the access plane (which is the access network). Above the control plane is the services plane. The services plane provides a series of discrete applications. These include applications such as location and authentication. An NGN telecommunications product is constructed from these applications and their use across the NGN. Set out in Figure 14 is a diagram of the planes within an NGN.

Service Customer Secure QoS Location Au Filtering Set up Plane ID Tunnel Tunnel

Control Plane

Transport IMS Plane Core

Fixed Mobile Mobile PSTN Packet Packet CS core core

Access Plane Wireless Wireline Wireline Wireless circuit switched circuit switched packet switched packet switched

Figure 14: Planes within the NGN

It is important to note from Figure 14 that the NGN supports legacy networks during a transition phase to an all IP network. However, most of the products which can be built using an NGN network have their value proposition based on a broadband access network.

12.2.2 Broadband access networks

As set out above, many of the products which use an NGN rely on the existence of a broadband access network. This broadband access network can be implemented using wireless or fixed line but this section focuses on the use of fixed line broadband access networks.

In order to deliver broadband services to the premises, the customer premises equipment needs to be IP based and must be able to interpret and respect packet labelling. The issue of packet labelling is one of QoS. The NGN permits products to use a number of QoS classes but this only works when the customer premises equipment

Page 187 can interpret and respect the labels which establish the QoS class which is required for a particular application or a particular session of a specific application.

The most efficient and widely deployed IP-based standards which meet this gateway customer premises equipment requirement is Ethernet. There are a variety of QoS implementations using Ethernet and currently deployed ADSL2+ modems and all very high bit-rate digital subscriber line ( VDSL2 ) modems are capable of acting as a gateway for QoS based sessions and applications.

This establishes Ethernet as the standard that will be appropriately used as the demarcation between the access network and the customer. The choice of delivery mechanism which provides an Ethernet access point to the customer premises will depend on a mixture of geography, economics and existing network infrastructure. Broadly, the alternatives are FTTN architecture or FTTP architecture. The FTTN architecture runs the optical fibre deep into the access network and then relies on existing and new copper pairs from a node to the customer premises.

The FTTP architecture is where the access network is all optical (likely with a node and passive optical network (PON ) from the node to the premises) and there is an optical to Ethernet conversion at the premises. There is an alternative FTTP architecture which runs the fibre from the optical line termination equipment ( OLTE ) directly to the premises. However, the cost of this approach is higher than for example, using Gigabit Ethernet PON ( GPON ) and is not currently used for new build in new networks. For example, in the United States, Verizon’s FiOS uses GPON, and France Telecom also chose GPON for their deployment. BT in the United Kingdom also considered a GPON variant which backhauls from the passive splitter to a more remote OLTE.

One of the drivers which leads to the choice between FTTN and FTTP is cost. Broadly, FTTP is cost effective in greenfield sites or in areas where there is high population density. On the other hand, FTTN can use existing copper connections to the premises to deliver high speed broadband services. In either case, the access network and the interface to the customer will appear as an Ethernet interface.

FTTN can use two alternative technologies, ADSL2+ or VDSL2 and the major difference between the two is the length of the copper from the node. ADSL2+ can deliver broadband at line rates of up to 24 Mbps downstream and 1 Mbps upstream and VDSL2 can deliver up to 50 Mbps downstream and 4 Mbps upstream. The decision between ADSL2+ and VDSL2 depends on the forecast broadband requirements for the customer and the existing average sub-loop lengths in the existing PSTN network. As a practical matter, most countries are considering only services which can deliver Ethernet to the

Page 188 premises (for commercial premises) along with FTTN based on VDSL2 and FTTP. The balance of the access network will, in most cases, be associated with a metro Ethernet service which interfaces to the IP core network.

12.2.3 IP-based Services

The key residential services which can be delivered over a broadband access network and which rely on an IP core are:

(a) residential voice service;

(b) high speed internet access; and

(c) video using Internet Protocol television ( IPTV ).

One of the most important issues for consumers is that the customer premises equipment that they already own (such as telephone handsets and fax machines) should be able to work with the new POTS service. This is a default outcome in the case of FTTN where the DSLAMs in the node typically supports a voice card. This leads to an alternative description of a node as a multi-service access node ( MSAN ) and this term is used widely in Europe. However, the termination of fibre in an FTTP network at the customer premises is likely to have to support an Ethernet port and a POTS port, at least in the initial deployment. In the longer run, the conversion from analogue to digital for voice services could occur in the home rather than at a network terminating unit.

One area that arises from the high speed internet is that the services delivered over the high speed internet connection should not be artificially limited. As there is only one pipe into the premises there will need to be minimum amounts of bandwidth reserved for each of the triple-play services. However, this capacity reservation should not be used to limit the enjoyment of internet services such as file sharing. There are alternative network based solutions which can be adopted to ensure that file sharing does not place unreasonable burdens on services providers. A good example of this is the Verizon “P4P” system which reduces the network burden of P2P by efficient routing of P2P traffic and the establishment of P2P “supernodes” at locations in the network where there is high available bandwidth.

12.2.4 Advantages of NGN

NGNs have two sets of advantages over the legacy circuit-switched and packet-switched networks. The first set of advantages benefit operators:

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(a) common packet based technology, common access and transport network reducing operational costs;

(b) standardised network elements, used for all applications and services network reducing capital and operational costs;

(c) easy and fast creation and deployment of new services and applications;

(d) vendor independence - the open interfaces allow the best equipment to be chosen for each layer reducing capital and operational costs;

(e) flexible dimensioning, eliminating the necessity to fix bandwidth for voice trunks, due to the common packet based transport reducing capital and operational costs;

(f) more flexibility increasing market penetration by offering personal service customization and management; and

(g) powerful equipment for network control and management:

(i) easier and more effective software upgrade

(ii) web-based technologies for network and services management

(iii) management (and provisioning) from the customer site.

The second set of advantages benefit end users:

(a) reduced call charges;

(b) innovative services;

(c) single connection and bill for triple play services;

(d) better and appropriate QoS; and

(e) faster speed.

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The key issue is to ensure that both the operator which deploys the network and its competitors are able to take advantage of the benefits of NGN deployment in order to ensure that end-users gain the benefits that are available to them.

Question 49:

The SKMM invites comments on NGNs generally and, in particular, the advantages likely to accrue to suppliers and end users from NGN.

12.3 Initiatives to rollout high speed broadband services

As noted previously in section 1.11, the Government will be collaborating with TM in an arrangement to deploy the HSBB network in Zone 1 or high impact areas. The HSBB project requires large scale infrastructure rollout involving last mile access, core and the international network, and as TM owns 95% of the existing fixed line infrastructure, it was a natural choice to upgrade the existing network to enable high speed broadband services to be provided 72 .

The agreement between the Government and TM pertains to Phase 1 of the HSBB project. This phase amounts to RM11.3 billion to be spent over a period of 10 years covering 1.3 million premises, of which the Government will co-invest RM2.4 billion. Under Phase 1, the HSBB network which will provide bandwidth of at least 10Mbps will be deployed to the end-users in inner Klang Valley, the identified greenfield areas of Iskandar Malaysia (previously known as Iskandar Development Region) and key industry areas.73

BBGP implementation will be deployed in Zone 1 and Zone 2 areas and will generally be based on facilities based competition through ADSL, WiMAX, WiFi and HSDPA. In Zone 3 areas, service provision will occur through the USP arrangements administered by the SKMM. In the context of this Chapter, HSBB areas will specifically refer to the implementation of the HSBB network by TM in Phase 1 of Zone 1.

Importantly, the Minister’s statement of 15 May 2008 included:

“To ensure TM’s network openness, the regulatory framework will be developed on an open network concept to ensure that other industry players will have an

72 Press Statement: Implementation Strategies to Widen Broadband Penetration in Malaysia , Minister for Energy, Water and Communications, Ministry for Energy, Water and Communication, 15 May 2008 73 See The Edge Daily, TM’s HSBB project top priority for now, says Najib , http://www.theedgedaily.com/cms/content.jsp?id=com.tms.cms.article.Article_6e06267a-cb73c03a-1f195fc0-abcba59e

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opportunity to access the HSBB Network at the application and network service levels.”

Also, as noted in section 1.11 above, there are other planned high speed broadband deployments.

It would therefore follow that any regulation that the SKMM considers applying to high speed broadband would be applicable to all similar deployments.

12.4 Importance of Broadband

12.4.1 National Broadband Plan

Broadband services enable the delivery of a broad range of services over nation-wide or wide-area broadband networks. There is increasing emphasis in the region on the development of broadband networks to enable the development of an advanced, information based society. South Korea has long been regarded as a leader in investment in and provision of broadband services, as a means of creating an information society.

In Malaysia, the importance of broadband and the planning of the nation’s infrastructure has long been recognised by the Government. The National Broadband Plan which took two years to finalise was approved by the Government in October 2004 74 . The MyICMS 886 strategy also placed an emphasis on broadband and in particular on high speed broadband services which will spur high speed Internet connectivity whilst a user is stationary or on the move.

It was further emphasised in the Government’s announcement of 15 May 2008:

“The implementation of nationwide broadband services will significantly contribute to the development of the country’s social-economic development. In the past, water supply and electricity were important factors in attracting foreign investment and today, broadband connectivity has become a basic necessity.

…

74 Ministry of Energy, Water and Communication and SKMM, The National Broadband Plan: Enabling High Speed Broadband

Under MyICMS 886 , pages 3 – 6.

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The country, the Government, industries and the people will benefit from broadband services. We can look forward to a new lifestyle with services such as e-Government, e-Education, e-Commerce, e-Health, IPTV, teleworking and e- Payment.”

The Government expectation is that achieving 50% household broadband penetration in 2010 can result in tangible contribution of 1% to the country’s GDP and create 135,000 jobs by 2010.

The benefits of access to broadband is also reflected in the WSIS Declaration of Principles, which highlights the social, economic and overall well-being of communities and individuals that can be derived from broadband availability:

“A well-developed information and communication network infrastructure and applications, adapted to regional, national and local conditions, easily-accessible and affordable, and making greater use of broadband and other innovative technologies where possible, can accelerate the social and economic progress of countries, and the well-being of all individuals, communities and peoples.” 75

For emerging economies, and those countries with a disparity of broadband accessibility between communities or regions, the importance of broadband extends to the ability to realise national benefits on economic, social and individual levels. Whereas the “digital divide” is commonly used to characterise the increasing gap between those with access to information and communication technologies and those without, this is now widely understood to be the subset of an even greater concern about the absence of equivalent levels of broadband access between the geographic areas of a country.

Taking these observations into account, the benefits of broadband services may be described as follows:

12.4.2 Positive externalities for society

In health, education and commerce in particular, broadband has the potential to support and accelerate development.

In healthcare, broadband can have significant benefits on the cost of health care and access to general and specialist services particularly for citizens in remote areas. There

75 World Summit on the Information Society, Declaration of Principles Building the Information Society: a global challenge in the new Millennium , 12 December 2003 at para 22.

Page 193 is the capacity for general practitioners to determine whether a patient should consult with a specialist in person or by videoconference over the Internet. Patients could avoid the costs and inconvenience of travelling to urban centres for routine medical consultations. Data such as x-rays and diagnostics services can be made available remotely.

In the education sector, broadband allows teachers to capitalise on the accessibility to information on the Internet as an educational resource. Broadband also enables teachers to bring real-time audio and video into their classrooms and allows educational institutions to reach students well beyond local classrooms. By establishing broadband distance learning networks, schools, colleges and universities can bring in experts to teach remote students online. This practice levels the educational playing field and cuts costs at the same time.

United Nations Conference on Trade and Development (UNCTAD ) notes these direct benefits of access to health and education services through broadband to society as a whole, in that broadband:

“…provides increased opportunities to access health and education services and are reducing vulnerabilities to sickness and unemployment of people living in poverty”. 76

12.4.3 Innovations in agribusiness

The farm and food sectors of a country, particularly in rural areas, have the capacity to greatly benefit from access to broadband services. The eChoupal case in India is an example of a project where broadband provided the opportunity for agricultural workers to decrease costs, improve efficiencies (including by eliminating intermediaries) and enhance their customer base.

This initiative worked by firstly giving farmers a portal where they could access information that was previously unavailable (such as rainfall and weather forecasts, sowing techniques, crop price lists in nearby markets); and then giving them direct access to one of India’s largest agricultural exporters. UNCTAD notes that none of this would have been possible without access to broadband. 77

76 UNCTAD, The Information Economy Report, 2006 (UNCTAD/SDTE/ECB/2006/1) at page 169. 77 UNCTAD, The Information Economy Report , 2006 (UNCTAD/SDTE/ECB/2006/1) at page 14.

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12.4.4 Increased productivity

It is a well-studied benefit that enterprises that use ICTs and broadband have higher productivity than those which do not. 78 The reasons for including increased productivity include the ability of enterprises to access better quality information (ie no need to reinvent the wheel), less need to travel from one location to another to access information and services (for example, government services or health services etc) and more generally efficiencies in the distribution of goods, services and information. 79

12.4.5 Globalisation and international trade

It is notable that global economic process, including international trade, are critically influenced by the ability to create, accumulate and disseminate information at the speed and sophistication of broadband. Without this, national policies in trade and commerce are unlikely to be realised.

12.4.6 Conclusion on importance of broadband

The importance of broadband as expressed by the Malaysian Government and as recognised internationally and economically (as described above) is relevant to the SKMM because the SKMM must regulate having regard to the LTBE. End users will significantly benefit from broadband services and it follows that the optimal manner of delivering broadband services in Malaysia is in a competitive context. Hence, it is a critical task for the SKMM in this Public Inquiry to determine the scope and level of regulation necessary to promote the competitive provision of broadband services in Malaysia.

Question 50 :

The SKMM invites comments on the importance of broadband and the competitive supply of broadband services in Malaysia.

12.5 Access Issues

Due to the complex nature of the issues that arise in the dynamic Broadband Services market, for the purposes of this Public Inquiry it is convenient to separately consider the

78 See for example Information and Communicatons for Development – Global Trends and Policies , The World Bank, 2006 at page 62. 79 Economic and Social Benefits of Broadband, ITU SPU Broadband Workshop, 2003

Page 195 following issues in relation to access to network facilities and network services which support the provision of Broadband Services in Malaysia:

(a) whether access to the HSBB network and other high speed broadband networks needs to be regulated and, if so, in what form should this regulation take; and

(b) whether continued regulation of ANE and services provided using the PSTN network (through the Full Access Service, the Line Sharing Service, Sub-loop Service, the Bitstream Services (with or without Network Service) and the Digital Subscriber Line Resale Service) is necessary.

12.6 Regulation of high speed broadband services

12.6.1 Scope of access issues to relevant high speed broadband networks

The SKMM has been given the role under the CMA to determine the scope of network facilities and network services to be included in an Access List in respect of which the SAOs apply. The SKMM needs to determine a range of issues when applying the LTBE analytical framework to high speed broadband network facilities and services.

The SKMM is considering the question of access to high speed broadband network facilities and services generally. However, inevitably the focus turns to the HSBB network to be constructed by TM.

Given that public funding is required to establish the HSBB network, the public value of such a network is likely to exceed the likely returns that a private investor would obtain from purely-privately funded networks.

It follows that the SKMM considers it is unlikely that a similarly extensive high speed broadband network will be rolled out by a private investor without Government funding support in Malaysia. Hence, the focus is on access to the TM HSBB network which is likely to be the most important high speed broadband network in Malaysia.

Nevertheless, while access to network facilities and services is considered in the context of TM’s HSBB network, SKMM reiterates that the SAOs under the CMA apply to all Access Providers who own high speed networks, including more niche or smaller broadband networks (for example, those serving business customers). Therefore, any services considered for regulation in this Chapter are equally applicable to all owners of high speed broadband networks.

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Question 51 :

Do you think another high speed wireline-based broadband network as extensive as TM’s HSBB network is likely to be deployed in Malaysia?

12.6.2 Access networks likely to exhibit bottleneck characteristics

The SKMM considers that the access part of the high speed broadband network is likely to exhibit the same bottleneck characteristics as traditional fixed networks and hence it is likely to be in the LTBE to include a service provided over the access part of the high speed broadband network.

The access network in this case is the connection from the end user premises through a node or street based electronic device to an aggregation point as shown in Figure 15 below:

Figure 15: Basic architecture of high speed broadband access network

These bottleneck characteristics include:

(a) high barriers to entry due to sunk costs, economies of scope and scale;

(b) the lack of availability of an alternative migration path for existing providers of broadband services;

(c) the lack of available close substitutes for the provision of high speed broadband services.

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While wireless technologies will play a role in the provision of broadband services, wireless technologies are unlikely to play the same significant role that wireline technologies will play in the provision of high speed broadband services on a ubiquitous or a semi-ubiquitous basis. The major factor which would limit the use of wireless is the requirement for a substantially larger number of wireless base stations than currently exist, and the requirement for each of those base stations to be fed by optical fibre in order to provide the throughput per end user that is required to compete with the wireline high speed broadband network.

Hence, there is considerable doubt that wireless technologies will provide a suitable alternative to broadband over wireline/cable networks at this stage and constrain the behaviour of a single broadband provider using a wireline network.

The European Regulators Group ( ERG ) expresses the view:

“With the exception of cable infrastructure, alternative technologies (eg wireless) may not provide an adequate competitive alternative to wireline deployments of NGA networks yet.” 80

Similarly, the Commerce Commission in New Zealand states:

“The Commission considers that the functionality and cost limitations of FWA (fixed wireless access) technology will confine its role as a competitive platform for broadband internet access for the foreseeable future. Although FWA is currently deployed in New Zealand, the advances in services being delivered over higher capacity fixed broadband infrastructure suggest that FWA is limited in its ability to act as a widespread constraint.” 81

The SKMM has been pro-active in assigning spectrum with wireless broadband capability, such as 3G and WiMAX technologies. However, the SKMM is of the view that while these technologies will play an important role in the provision of internet-based broadband services, they are likely to play a more limited role when compared with the speeds capable over the HSBB network as well as the penetration targets set for the HSBB network of 50% household penetration by 2010.

80 ERG Opinion on Regulatory Principles of NGA , ERG (07) 16 rev2 at page 15/66. Available at http://www.erg.eu.int/doc/publications/erg07_16rev2_opinion_on_nga.pdf 81 Commerce Commission of New Zealand, Determination on the application for determination for access to and interconnection with Telecom’s fixed PDN service ‘Bitstream Access’, Decision 568, 20 December 2005 at paragraph 145. Available at http://www.comcom.govt.nz//IndustryRegulation/Telecommunications/Wholesale/WholesaleDeterminatons/ContentFiles/Docu ments/Bitstream%20Determination%20Decision%20568.pdf

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Further and as discussed above, the fact that the HSBB network needs to be co-funded necessarily means that the cost of investment exceeds its private value and hence the need for Government support (albeit with a possible commercial return). The SKMM considers that alternative unfunded (by Government) networks are very unlikely to be built in Malaysia on a widespread basis.

This view that fixed broadband networks exhibit bottleneck characteristics is well supported by overseas regulators and commentators.

Ofcom in the UK decided to establish regulatory remedies, “in the event that there are enduring economic bottlenecks in the provision of next generation access (NGA ) services.” 82

Other commentators refer to the ability of technology to create new possibilities, but take a realistic view of the likelihood that these new technologies will break down bottleneck power:

“New technologies are creating new possibilities for last mile competition, but the last mile continues to represent a market segment with high initial cost and low marginal cost, where typically only one company will find it cost-effective to create and maintain telecommunications infrastructure in most geographical areas. Countries that are fortunate enough to have ubiquitous cable television deployments can hope to have a second wired alternative. So far, powerline solutions have failed to materialise to any great degree, and while wireless solutions are often touted they have so far failed to provide a meaningful alternative to last mile broadband access.” 83

Malaysia does not have the benefit of a second cable television deployment and hence a second wired alternative is highly unlikely to materialise in Malaysia.

Similarly, in New Zealand, the Commerce Commission relied on a traditional analysis of market power to determine whether the incumbent, Telecom New Zealand had market power (ie faced limited competition) in the supply of broadband access in the national wholesale market. The Commission relied on the high barriers to entry including economies of density, high level of fixed and sunk costs, economies of scale etc to make the finding. It concluded:

82 Ofcom, Future broadband - Policy approach to next generation access , 26 September 2007 at para 6.3. 83 J Scott Marcus and Dieter Elixmann, Regulatory Approaches to Next Generation Networks (NGNs): An International Comparison , at page 7. Available at http://web.si.umich.edu/tprc/papers/2007/800/Regulatory%20Approaches%20to%20NGNs%20v1.2%20FINAL.pdf

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“Given the barriers to entry and expansion that remain for fixed network operators, and the limitations of FWA technology, and the limited capacity and significantly higher pricing of satellite, the Commission concludes that Telecom faces limited competition in this market.” 84

In circumstances where economic bottlenecks persist or are likely to be created through the co-funded HSBB network in Malaysia, there are likely to be grounds for regulating access to the access part of the HSBB network.

Question 52:

(a) The SKMM invites comments on its proposal that the access network component of the HSBB network is likely to constitute a bottleneck and that there are grounds for regulating the provision of services over the access network.

(b) The SKMM also invites comments on the level of likely competitive constraint that wireless broadband providers will place on the HSBB network, particularly for advanced services such as IPTV.

12.6.3 Whether the transmission part of the high speed broadband network constitutes a bottleneck

Traditionally, the access network has been considered the principal bottleneck and bottleneck analysis has focused on “the last mile”. However, the development of NGA/NGNs challenges this perspective because the bottleneck may also apply in the transmission network.

In an NGN environment, many of the bottleneck characteristics are also apparent in the transmission network. The fundamental reason for this is that the total capacity of the transmission network is less than the aggregate capacity of all of the lines connected to access network combined. Therefore, some form of aggregation or contention is required when connecting the comparatively larger access networks to the smaller transmission network. How this aggregation or contention is performed creates the bottleneck issues and, if performed ineffectively, can operate as a significant constraint to competition.

84 Commerce Commission of New Zealand, Determination on the application for determination for access to and interconnection with Telecom’s fixed PDN service ‘Bitstream Access’, Decision 568, 20 December 2005 at paragraph 187.

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In the UK, Ofcom concluded, after noting that backhaul should be available to acquire or to be built by a competitor, as follows:

“the availability of appropriate backhaul services is fundamental to the effective support of competition based on both passive and active access products. Where economics of backhaul infrastructure deployment are similar to those of the access network, there is a risk that this will also constitute an enduring economic bottleneck. Where this is the case, it may be necessary to mandate access to some form of backhaul service from network operators with significant market power.” 85

The SKMM considers that based on the limited information currently available, the same issues are likely to arise in relation to TM’s HSBB network. The HSBB network is intended to support services with speeds of 10 Mbps and above. Contention between the access and transmission networks in order to support these services is likely to become an issue in Malaysia, in a similar way to the way Ofcom describes it above. Mandating access to the transmission components of the high speed broadband network therefore warrants consideration for inclusion on the Access List.

Question 53:

The SKMM invites comments on whether the transmission component of the high speed broadband network is also likely to constitute a bottleneck.

12.6.4 Considering investment risk

While there are likely to be good grounds for regulating access to the access and transmission parts of a high speed broadband network in Malaysia, the SKMM also needs to consider the likely impact of any proposed regulatory intervention on investment and the risk associated with that investment. As discussed above, a key consideration of the LTBE is the impact of regulation on investment and use of infrastructure.

A critical issue is whether services over the high speed broadband network should be regulated in circumstances where there is significant demand risk. Demand uncertainty arises, for example:

(a) if subscribers do not subscribe to the high speed broadband network in the forecast numbers;

85 Ofcom, Future broadband - Policy approach to next generation access , 26 September 2007 at para 6.45.

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(b) if subscribers are not prepared to pay the forecast amount of money for their high speed broadband service;

(c) if subscribers delay their subscription to their high speed broadband service for a considerable period of time; or

(d) risk of deployment of competitive broadband platforms (albeit this factor may be a low risk due to the limited scope of competition from wireless platforms and the high unlikelihood of alternative wireline fixed network deployment).

Other regulators have alluded to this risk in the following terms:

“The move to next generation access networks is one of the largest changes facing the UK communications sector and Ofcom, yet significant uncertainty remains around the timing and manner in which next generation access deployments will be made. …

In terms of challenges, the first is to ensure that investment in these networks occurs in the first place and this is about setting the right conditions for timely and efficient investment to be undertaken. …

Next generation access poses a new set of questions. While these new investments may also constitute an enduring economic bottleneck, there is significant risk involved in their deployment, including demand side uncertainty. In this environment, it may not be appropriate to simply roll-over our existing regulatory approach to these new networks.” 86

The issue of demand uncertainty and the risk associated with demand uncertainty also arises in Malaysia. While the HSBB network in Malaysia is being partially funded by the Government, TM is also funding a considerable portion of the network cost and hence is likely to be bearing potentially significant risk associated with its investment.

The SKMM considers that this demand side risk should be taken into account when it considers regulation of services over the TM HSBB network and, in particular, the extent of regulation.

86 Ofcom, Future broadband - Policy approach to next generation access, 26 September 2007 at paras 4.1, 4.2, 4.9. Consultation paper available at http://www.ofcom.org.uk/consult/condocs/nga/future_broadband_nga.pdf.

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Question 54:

The SKMM invites comments on whether there is likely to be significant demand side and other risks associated with the HSBB network investment which is not otherwise offset by the Government’s funding contribution.

12.6.5 Regulatory forbearance – when is it appropriate?

Given the prominence of demand-side risk when considering regulation of NGN, the SKMM must consider how to best regulate for this risk, taking into account other factors, principally regulating for the LTBE.

The central question is whether regulatory forbearance (that is, no regulation) is the best response to the demand-side risk discussed above or whether some other more targeted form of regulation would be better, having regard to the LTBE and the other NPOs. If there was no regulation, the SKMM would have to be satisfied that there was sufficient commercial incentive or other safeguards in place for TM to offer access to HSBB services on a non-discriminatory basis and on reasonable terms and conditions (including price).

When considering whether to regulate services over the HSBB network or not, it is relevant to refer to other jurisdictions which have chosen to forbear from access regulation in the area of broadband or NGN, in order to test whether those jurisdictions have similar investment environments to Malaysia.

The main jurisdictions where regulators have chosen not to regulate or have removed regulation of access to broadband and NGN are:

(a) in the United States, the FCC has chosen not to regulate broadband services. This is principally because of the existence of two or more networks serving most residential premises in the United States (ie a telecommunications network and a cable network), both of which are capable of supplying broadband services. 87 The

87 A significant FCC resource in this respect is the Report and Order and Notice of Proposed Rulemaking released 23 September 2005 (FCC 05-150) in matters that included “ Appropriate Framework for Broadband Access to the Internet over Wireline Facilities ” (CC Docket No. 02-33), available at http://hraunfoss.fcc.gov/edocs_public/attachmatch/FCC-05-150A1.pdf. The accompanying FCC media release noted: “ The Report and Order adopted by the Commission puts wireline broadband Internet access service, commonly delivered by digital subscriber line (DSL) technology, on an equal regulatory footing with cable modem service, currently the market leader. This approach is consistent with a recent US Supreme Court decision upholding the Commission’s light regulatory treatment of cable modem service. Consistent regulatory treatment of competing broadband platforms will enable potential investors in broadband network platforms to make market-based, rather than regulation- driven, investment and deployment decisions .” (http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-260433A1.pdf)

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FCC has also taken some initial steps to withdraw unbundled access services in areas with significant cable and copper competition, withdrawing access in two cities, Anchorage, Alaska and Omaha, Nebraska. 88

(b) in Hong Kong, Office of the Telecommunications Authority ( OFTA ) has removed regulation of LLU (which is similar to the ANE in Malaysia), which is the principal means of delivering competitive broadband services in Hong Kong, to buildings where there are two or more infrastructure providers; 89

(c) in Canada, the Canadian Radio-television and Telecommunications Commission (CRTC ) recommended the withdrawal of ex-ante retail regulation including LLU. Canada’s Competition Bureau recommended that the CRTC go further and comprehensively withdraw wholesale regulation. However, in a recent decision, the CRTC took a more conservative approach and has decided to withdraw some access services, but not LLU, over the next 3 to 5 years;

(d) in Australia, the ACCC has foreshadowed that it will move to sub-national markets as the basis for the withdrawal of some access services in recognition that competition is more developed in some areas than others.

In Hong Kong, OFTA also justified its decision to withdraw regulation by reference to the policy intention of promoting investment in competitive broadband infrastructure. There is some evidence that this has succeeded. Following the announcement of the withdrawal of regulated access, the SKMM understands that the number of buildings connected by two or more networks has doubled.

12.6.6 Is regulatory forbearance the appropriate response in Malaysia?

The SKMM considers that the jurisdictions and the reasons applied by the regulators in the jurisdictions which have chosen to forbear or to consider forbearance do not usefully apply to the Malaysian infrastructure situation.

88 However, the FCC refused to do so in East Coast cities because it was concerned that the cable networks in those markets did not yet provide adequate competitive constraints on the incumbents, citing the relatively low share of cable telephony and the limited impact of cable operators in business markets. 89 Local loop unbundling was effectively withdrawn in Hong Kong when it was announced that the Type II interconnection policy (applicable to telephone exchanges for individual buildings covered by such exchanges) was made in the Government’s Decision on Type II Interconnection Policy , subject to the conditions documented by OFTA in the Review of Type II Interconnection Policy, Statement of the Telecommunications Authority 6 July 2004. Available at http://www.ofta.gov.hk/en/tas/interconnect/ta20040706.pdf

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There are no multiple fixed networks nor are there cable networks deployed to provide pay television in Malaysia. Satellite is the principal pay television distribution technology in Malaysia. Furthermore, it seems very unlikely that infrastructure investment will be encouraged by forbearing from regulation in the way envisaged in Hong Kong for example.

The SKMM is currently of the view that there do not appear to be any significant parallels between the jurisdictions where regulators have forborne from or withdrawn access regulation of broadband networks and the Malaysian situation.

The SKMM would also be concerned with the potential long-term consequences if it decided not to regulate access to the HSBB network. Very significant advantages could potentially accrue to TM or a party in TM’s position if there was a small delay in providing commercial access or if the access offered did not meet Access Seeker’s needs to compete for end users who wish to acquire high speed broadband services. The SKMM has discussed its concerns about “first mover advantage” above in section 11.3.4.

Hence, while the SKMM is mindful that there is demand-side uncertainty associated with the HSBB investment by TM in terms of the proportion of end users that will subscribe to HSBB services, nevertheless, the SKMM does not consider that totally forbearing from regulation would be in the LTBE or otherwise assist to achieve the NPOs. The question then is what level of regulation should apply.

Question 55:

(a) The SKMM invites comments on whether regulatory forbearance is an appropriate response when considering whether to regulate high speed broadband services over the HSBB network.

(b) The SKMM also invites comments on whether there are other countries not considered above where regulatory forbearance has been considered, with particular emphasis on those countries which are likely to have application to Malaysia.

(c) The SKMM also invites comments on the risks if the SKMM decided not to impose regulation on high speed broadband network owners.

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12.6.7 Non-discrimination regulation is a proportionate regulatory response

Any regulatory response to a particular economic issue must be proportionate. The SKMM has previously emphasised the importance of a proportional regulatory response.

This approach is supported as regulatory best practice around the world, and is emphasised by the ERG in the context of NGNs:

“When imposing specific obligations, NRAs must assess their proportionality. Also, remedies must be appropriate and must relate to the nature of the problem. Thus, in the case of imposing obligations on a SMP operator rolling-out NGA, the overall ‘package’ of existing and additional (or amended) remedies must be borne in mind in order to avoid overregulation.” 90

In relation to the form of the proportional response, equivalence or non-discrimination is generally seen as the appropriate minimum response by regulatory authorities.

After emphasising a proportional response referred to above, the ERG went on to say:

“Where remedies are to be imposed to overcome the lack of competition, NRAs will want to consider generic obligations, such as non-discrimination in relation to the provision, upon reasonable requests, of access and associated facilities in general terms (self supply), not restricting competitors to offer identical products to those of the dominant player, but allowing innovation.” 91

Similarly, Ofcom has emphasised the importance of equivalence. Equivalence is one of the central principles of Ofcom’s regulatory approach generally and is applied to NGAs specifically.

In Japan, openness between, and equivalent access at each of, the technology layers is seen to be essential to the promotion of competition over broadband networks. The consequence of requiring openness is summarised as follows:

“To put it another way, by ensuring true openness in the interface between layers, equal access to networks in the IP-based network can be ensured.” 92

90 ERG Opinion on Regulatory Principles of NGA , ERG (07) 16 rev2 at page 27/66. 91 ERG Opinion on Regulatory Principles of NGA , ERG (07) 16 rev2 at page 27/66. 92 Yasu Taiwaki Director of Tariff (Competition Policy) Division, Telecommunications Bureau, Ministry of Internal Affairs and Communications (MIC) Japan, Broadband Competition Policy to Address the Transition to IP-based Networks - Experiences

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In Malaysia, equivalence or openness, is imposed through the SAOs in section 149(2) of the CMA. The SAOs apply to network facilities and network services on the Access List. The SAOs require NFPs and NSPs to provide access on equivalent, non-discriminatory terms and conditions. This would appear to be the minimum, regulatory position to apply to the services to be provided over the HSBB network.

In relation to its application to high speed broadband networks, non-discrimination would require the owner of those networks to offer any facility or service listed on the Access List in a way which provides the same level of control over the owner’s network as it provides to itself. In practical terms, this means providing access to any facility or service on the Access List to Access Seekers which enables the Access Seekers to determine the QoS, service speed and service features in the same way as the network owner is able to determine these parameters for its own retail service. Access Seekers should clearly be able to make this decision independently of the network owner.

Furthermore, openness is a key requirement which will facilitate competition, including in Malaysia where services based competition is likely to be the source of consumer gain in broadband markets for a considerable period. Again, as the ERG has stated, a proportionate response would include the following:

“Also, specific measures will need to be considered, such as a detailed description of the key products (and associated facilities) to be provided, with specific pricing conditions, term and conditions. ”93

The non-discriminatory requirement under the SAOs is currently achieved through the MS (Access) and MS (Pricing). A discussion about the MS (Access) is contained in Chapter 15.

Question 56:

The SKMM invites comments on whether the imposition of a non-discrimination and openness requirement on the provision of high speed broadband services over the HSBB network is a proportionate regulatory response.

and Challenges in Japan , IFIT Discussion Paper: DP-2006-001-E, October 2006 at page 30. Available at http://www.ifit.or.jp/project/DP2006-001-E.pdf 93 ERG Opinion on Regulatory Principles of NGA , ERG (07) 16 rev2 at page 27/66.

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12.6.8 Cost based pricing in a high speed broadband environment

Importantly however, a proportionate regulatory response does not necessarily mean cost-based pricing. The SKMM considers that there are significant dangers associated with cost based pricing in an NGN/NGA environment which need to be considered before their application and which require regulators in the SKMM’s position to explore potential alternatives. In particular, cost based pricing may not adequately address the demand side risk faced by an investor in a high speed broadband network.

Few regulators around the world have had to consider the regulation of services over high speed broadband networks and consequently have not yet considered appropriate pricing principles applicable to such networks.

Ofcom is one regulator that has begun to consider these issues. Ofcom considered cost based pricing and was concerned that such a pricing methodology was likely to result in lower incentives to invest:

“The imposition of regulatory remedies that mandate access at a specific price may result in asymmetric risk borne by investors and a change to the prospective returns available for an investing firm. When a firm makes an investment in a situation when demand may be highly uncertain, the firm’s actual achieved returns may vary significantly depending on whether demand for the services in question turn out to be high or low. Absent regulation, a firm would invest and bear the full risks of favourable or unfavourable demand outcomes, resulting in expectations of a specific return.” 94

The SKMM is also concerned about the risks associated with implementing cost based pricing. Traditional costing models depend on a very wide range of variables. Ultimately, a price is derived as a function of two variables – the cost and the volume of traffic. If one of these factors is wrong, then the cost model will derive incorrect results. In particular, cost models are highly sensitive to the forecast traffic which is being priced by the cost model. Differences between forecast traffic and actual traffic levels will significantly affect an investor’s return on its investment and the prospect of the investment failing altogether.

The purpose of this Public Inquiry is not to consider or determine the appropriate pricing principle or price to apply to particular network facilities or services to be included on the Access List. Nevertheless, the SKMM considers it important to emphasise as part of this

94 Ofcom, Future broadband - Policy approach to next generation access , 26 September 2007 at para 5.14.

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Public Inquiry that regulation of a network facility or service on the Access List does not necessarily mean cost based pricing will be applied to that network facility or service. The SKMM will extensively consider and consult in relation to this issue at a later Public Inquiry on access pricing.

Question 57:

The SKMM invites preliminary comments on the effect of cost-based regulation on incentives to invest and risk of investment in high speed broadband networks.

12.6.9 Conclusion

The SKMM therefore is considering including access and transmission services to be provided over high speed broadband networks (including the HSBB network) on the Access List. If included on the Access List, access to those services must be provided on a non-discriminatory basis in accordance with Section 149 of the CMA. The specific services are considered in the following section.

12.7 Elements and definition of regulated high speed broadband services

The scope of the services to be regulated over the high speed broadband networks (including the HSBB network) can be classified into three general categories:

(a) access network services over high speed broadband network;

(b) transmission network services over high speed broadband network; and

(c) equivalent legacy services in an high speed broadband environment (such as Fixed Network Origination Service, Fixed Network Termination Service and Private Circuit Completion Service).

In the sections below, the SKMM considers important elements which are common to each of these service components. In addition, the SKMM also consider some particular issues relevant to each of these services.

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12.7.1 Access Network Services

Due to the significant economies of scale associated with the deployment of FTTP networks, facilities-based competition would generally not be sustainable 95 . This means that it is highly unlikely that a similarly extensive network would be deployed by different providers without similar funding from the Government. This places a great emphasis on services-based competition. As mentioned in the previous section 11.2.1, there are four ANE services that are currently on the Access List, namely, Full Access Service, Line Sharing Service, Sub-loop Service and Bitstream Service.

12.7.2 Unbundling of fibre networks

In relation to the ANE services which is mandated in the PSTN environment, the SKMM needs to consider whether ANE services is feasible in the fibre environment, i.e. whether to unbundle the fibre network at the Layer 1. In effect, these fibre based products require unbundling of the fibre to the extent it forms part of the high speed broadband network.

As noted in 12.2.2, the two general approaches in fibre deployment is the FTTN architecture or the FTTP. Depending on the architecture deployed by the network owner, it may affect the technical feasibility of fibre unbundling.

Fibre unbundling of an FTTP network requires the unbundling of the PON. As noted above, the SKMM has stated that it would also consider technical feasibility of the provision of network facilities and services prior to considering them for inclusion on the Access List.

The SKMM has not conducted a detailed technical feasibility study regarding the feasibility of unbundling fibre networks. However, the SKMM notes that it is the current prevailing view of regulators and commentators that the PON cannot be easily unbundled. Ofcom reaches this view. 96 In its examination of the technical aspects of fibre unbundling at the cabinet level, Ofcom concluded that physical fibre unbundling is only viable with point-to-point single fibre architecture. PON consists of a single fibre between the exchange and a device called a “splitter”, which then divides the signal on the fibre between a number of customers. A separate fibre then connects the splitter to each end user. While theoretically, it is possible to divide the fibre at the splitter level, the low number of customers at each splitter (because of competing operators), would

95 See Sirbu, Marvin A., FTTP Networks: Topology and Competitio n, page 2, available at

www.oecd.org/dataoecd/36/27/40460656.pdf 96 Ofcom, Future broadband - Policy approach to next generation access , 26 September 2007 at para 6.56.

Page 210 make it an unviable solution. Secondly, Ofcom regarded space and planning constraints of sharing cabinets as significant hurdles to fibre unbundling, in particular when there are smaller and more numerous splitter locations. Ofcom also considered the technical feasibility of unbundling at the exchange, and concluded that this would not be possible for PON based deployments. 97

Also, the ERG reaches this view and questions whether the unbundling of the PON would be a proportionate regulatory approach. 98 As with Ofcom, the ERG found that the feasibility of fibre unbundling relies heavily on the architecture that has been used by the incumbent operators. In light of the technical complications involved with PON infrastructure, the ERG goes on to address regulatory challenges involved with unbundling of PON. As Ofcom addresses (above), only the last point of PON, from the splitter to the end user can be unbundled. The ERG comments that there is “no technical feasibility to retrieve the traffic of one single end user at the level of the feeder” .99 This would mean that new entrants wouldn’t have access to the splitter level, but at the feeder level, and would therefore necessitate a solution to enable a new entrant to bring its traffic from the splitter to the feeder.

As both Ofcom and the ERG acknowledge, therein lies the regulatory challenge, where the provision of splitters and dark fibres on the feeder segment by the incumbent would need to be mandated. This would assume that the new entrant would have to use the same PON technology as the incumbent, while at the same time committing to roll out its own network. Regulators would then be caught between a “rock and a hard place”; faced with the challenge of balancing interference in the commercial business of an incumbent against the objectives of intervention to promote competition, they would be forced to intervene to assuage the risk of ‘re-monopolisation’. 100

Full access service may not be particularly relevant in the fibre environment. By definition, the FTTN and FTTP (and hence the VDSL2 service) will bypass the existing exchanges (or effectively bypass them by being transit points only). The fibre will then be connected to the node or the home as the network design provides. The local exchange will in many cases be shut down or used for alternative purposes. It becomes redundant as an access point.

The line sharing service may be not particularly relevant to a fibre network because it generally depends on the sharing of spectrum provided over the copper network. It may

97 Ofcom, Future broadband - Policy approach to next generation access , 26 September 2007 at para A 8.27-A8.31. 98 ERG Opinion on Regulatory Principles of NGA , ERG (07) 16 rev2 at page 43/66. 99 ERG Opinion on Regulatory Principles of NGA , ERG (07) 16 rev2 at page 43. 100 ERG Opinion on Regulatory Principles of NGA , ERG (07) 16 rev2 at page 43.

Page 211 be possible to share the fibre (or colours/wavelengths of light) using technologies such as dense wavelength division multiplexing ( DWDM ), however it is highly unlikely that it will be economically feasible to deploy DWDM in the access network.101

As fibre is increasingly deployed closer to the end user and thereby bypassing the exchanges, such as via FTTN, sub-loop service has gained more importance. Sub-loop unbundling (as is referred to in some other jurisdictions) is considered by other regulators, and some have carried out detailed cost-benefit analysis. Though it was acknowledged by them to be technically feasible, there are economic considerations that might constrain the deployment for the alternative operators, such as co-location costs at the cabinet and the backhaul costs to connect to the alternative operators’ point of presence. Hence, it may not be as economically viable for alternative operators. 102

The feasibility of bitstream service in the fibre network would be discussed in the next section. The cost-benefit of each of these ANE services would also be discussed in section 12.8 of this PI Paper.

Based on these views, the SKMM is concerned about whether adding an unbundled fibre network facility or service to the Access List, would be technically feasible. The SKMM invites comments on this issue.

Question 58:

The SKMM invites comments on the feasibility of unbundling fibre networks and whether there would be demand for unbundled fibre network elements.

12.7.3 Common elements

There are certain elements that are important for the discussion of bitstream service and the domestic network transmission service in the fibre environment which are as follows:

(a) Network layer;

(b) Best efforts and QoS parameters;

(c) Speed of regulated network service; and

101 ERG Opinion on Regulatory Principles of NGA , ERG (07) 16 rev2 at page 12/66, 13/66. 102 See ERG Opinion on Regulatory Principles of NRA , ERG (07) 16 rev2 ; Analysys, The Business Case for Sub-loop unbundling

in the Netherlands – Report for OPTA, 26 January 2007; Analysys, The Business Case for Sub-loop unbundling in Dublin – Report for ComReg, 20 December 2007.

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(d) POIs.

12.7.4 Network Layer

In the Minister’s media release of 15 May 2008, it was noted that industry players will have an opportunity to access the HSBB network at the “application and network service levels”. It is the SKMM’s role to determine service descriptions which are a functional description of the network service or network facility to be provided in accordance with Section 149 of the CMA. Therefore, the SKMM needs to determine how the “application and network service levels” may be described in more functional terms.

The functional description of the network service to be provided over high speed broadband networks can be illustrated in accordance with either the OSI 7 layer interconnection model or the mapping of that model into IP.

Figure 16: Mapping of OSI model to IP

A critical issue on which the SKMM seeks comments is whether network owners should provide a Layer 2 or Layer 3 service over high speed broadband networks. The major difference between the carriage of IP data at Layer 3 rather than Layer 2 is that a Layer 3 carriage service permits the Access Provider or network owner to have access to the content of packets rather than simply using addressing information carried on the

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“outside” of a packet. Although this may appear to raise security concerns, the issue relates more to the loss of control of QoS by Access Seekers when services are provided at Layer 3.

There is a travel analogy which may be helpful to understand the difference between Layer 2 and Layer 3. A Layer 3 carriage service can be compared with a package holiday. In a package holiday, the travel agent arranges all of the elements of the holiday including the flights, ground transportation, hotels and optional excursions. If the package holiday offered by the travel agent meets the needs of the customer then this is an ideal offering. However, there are likely to be some travellers who would like to arrange their own hotels and ground transportation and for whom the package holiday represents an expensive version of air travel. The independent traveller can decide whether to stay at a four star hotel or at a youth hostel and whether to travel from the airport by taxi or by bus. From the traveller’s perspective, being able to buy only the flight and arranging accommodation independently of the flight, is an appropriate outcome. Nevertheless, the travel agent may find some commercial customers who are willing to acquire a package deal.

Historically, there have been regulatory disputes on the applicable Layer of the carriage of a bitstream service to be provided by the network owner. In Europe, Australia, New Zealand and Singapore access is provided on a regulated basis at Layer 2 and there is no regulatory requirement to provide a service at Layer 3. To some extent this outcome arises from the fact that the Layer 3 provider is responsible for QoS of the carriage service. Hence, in Europe for example, both the incumbent and new entrants have preferred access to be provided at Layer 2 on the basis that the new entrants can control QoS of the Layer 2 service provided. A Layer 2 service can be “labelled” to permit QoS parameters to be exchanged based on the application or session which is using the carriage service. There are a number of technical standards which permit this and the network owner does not need to be aware of the labelling system in order to be able to provide a Layer 2 network service. In this case, the new entrants that acquire Layer 2 network services are required to make a level of investment in infrastructure such as routers and it is responsible for IP addressing.

Hence, the SKMM is currently of the view that, most importantly, the access service provided over the high speed broadband network and also the transmission service, is provided at Layer 2.

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Question 59:

The SKMM invites comments on whether regulation should be applied to a Layer 2 or Layer 3 network service.

12.7.5 Best efforts and QoS parameters

In addition to the requirement that a network service is provided at the Layer 2 level, another functional description issue arises in relation to the quality considerations relevant to the network service to be provided both in the access and the transmission network.

For ISPs to continue to provide internet services, the quality of the network service to be provided over the high speed broadband network could be limited to a “best efforts” service with a defined contention ratio. As compared with a voice or video service (which requires a higher QoS), “best efforts” may be sufficient for Internet access. Therefore, in order to supply for internet access services, these ISPs would not require a higher QoS or traffic class. The SKMM considers that a “best efforts” service should therefore be considered for regulation.

However, the high speed broadband network is clearly not intended to be limited to the provision of Internet services. Other important applications such as voice and IPTV would require a higher traffic class or QoS than “best efforts” in order to be appropriate for use by Access Seekers wishing to provide these applications.

Within all traffic classes, there are obviously a range of services that may be carried over the high speed broadband network. Not all of these services require dedicated bandwidth to be available. For example, web browsing can be delivered with a high level of “contention” where a number of consumers share the available bandwidth. In web surfing and email access, contention ratios of 20:1 are quite common. On the other hand, a voice service requires dedicated bandwidth at a high traffic class to be available whenever a call is to be initiated or received. In this case, the contention ratio is 1:1.

So, in addition to the traffic class, the contention ratio should also be defined as part of the QoS parameters for a network service to be provided to Access Seekers over the high speed broadband network.

For the purposes of describing the functional nature of the relevant network service for inclusion on the Access List, the range of traffic classes and applicable contention ratios for QoS purposes could be described as follows:

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Service name Traffic Downstream Upstream Examples of class+ contention contention applications ratio ratio HSBB Network Service 1 1:1 1:1 Voice with QoS (access and transmission network)* HSBB Network Service 2 1:1 or 10:1 1:1 or 10:1 IPTV (eg 1:1 with QoS (access and downstream transmission network)* contention; 10:1 upstream contention) HSBB Network Service 3 10:1 or 20:1 10:1 or 20:1 Business data with QoS (access and services transmission network)* HSBB Network Service 4 20:1 20:1 “Best efforts” without QoS (access internet access network only) Table 13: HSBB Network Services with or without QoS – traffic class and contention ratios

* The HSBB Network Service with QoS bundles both the access and transmission network because QoS is only meaningful on an end-to-end basis. If an Access Seeker such as an ISP requires only a “best efforts” service, then this service could be delivered over the access network only and the Access Seeker could separately acquire a transmission service (such as Domestic Network Transmission Service as proposed for amendment in the discussion in section 9.4.3 so that it is also applicable in a high speed broadband environment).

There are a number of international standards which set QoS parameters for IP networks. These include:

(a) ITU-T recommendation Y.1541 which establishes eight IP network QoS classes;

(b) the Internet Engineering Task Force (IETF ) RFC 4594 which defines twelve generic IP network service classes and describes recommended per-hop behaviours, queuing algorithms and other packet treatments for each;

(c) 3GPP which defines four Universal Mobile Telecommunications System ( UMTS ) QoS classes in ETSI TS 123 107; and

(d) WiMAX where IEEE 802.16E establishes five QoS classes for the delivery of IP services.

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Additional traffic classes and contention ratios could be requested by Access Seekers and the network owner would be required to provide these additional classes based on an agreed or determined price.

The SKMM considers that it would be appropriate to include a range of traffic classes at various contention ratios in the description of the relevant Network Service (with or without QoS) for consideration for inclusion on the Access List. SKMM welcomes comments on which QoS regime is most appropriate for the HSBB Network Service.

Question 60 :

The SKMM invites comments on the proposed QoS regime described in Table 13.

12.7.6 Speed of regulated network service to be provided over high speed broadband networks

It is intended that the HSBB network will provide a premium broadband service with speeds of 10 Mbps and above for high economic impact areas.

In general, the SKMM considers that it will be important to promote competition of services over the high speed broadband network. In order to do so, Access Seekers must have the ability to provide speeds of service to retail users on the same basis as the network owner provides to itself. This would also be required to fulfil the LTBE objective and would be consistent with the non-discrimination obligation in section 149 of the CMA.

In respect of determining the speed of the network service to be provided over the high speed broadband network, the SKMM considers that there are essentially two choices:

(a) controlled by the network owner – In this case, the network owner would control the speed of the network service but the network owner would be required to provide a pre-defined range of speeds (together with such other speeds on request and on a non-discriminatory basis). Non-discrimination in this case would at least require the network owner to provide speeds to Access Seekers of no less than the highest speed offered by the network owner to its retail customers. This choice is most relevant to the HSBB Network Service with QoS because this allows the network owner to control the end-to-end quality of this service;

(b) controlled by the Access Seeker – In this case, the network owner would not constrain the speed of the service itself but would provide a “raw” network service

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which the Access Seeker would then rate shape (ie determine the speed). This choice is most relevant to the HSBB Network Service without QoS where the network owner is only required to provide a “best efforts” service.

The SKMM is currently of the view that both choices should be available to Access Seekers for the relevant HSBB Network Service (with or without QoS) for inclusion on the Access List.

Question 61 :

The SKMM invites comments on how different speeds should be offered to customers of high speed broadband services and whether the network owner should pre-define these speeds and/or whether the Access Seeker should control these speeds (or both).

12.7.7 POIs

When defining POIs, the SKMM is mindful to ensure that such points are provided at all technically feasible points and in a manner that will promote efficient investment in infrastructure.

For the HSBB Network Service with QoS (described below) provided on an end-to-end basis (which includes access and transmission), it is likely that the connection points would be in major urban and industrial areas, for example those that are located in HSBB areas. The SKMM will consider network owners, including TM and Access Seekers’ proposed locations as part of this Public Inquiry. However, any pre-defined connection point locations will not hinder an Access Seeker from requesting alternative or additional connection points from time to time.

Figure 17: Alternative POIs

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Regardless of the technology used for the access part of the HSBB Network, there will be the potential to interconnect at either the aggregation points or the Metro Ethernet network which is likely to form part of the HSBB Network.

For the HSBB Network Service without QoS (described below), it is likely that the service will be delivered at access network locations which are the network aggregation points. These interconnection points will not be defined by reference to a geographic location but can be described in functional terms. The SKMM considers that interconnection points for the purposes of the HSBB Network Service could be described as locations of all aggregation routers or other aggregation devices. The SKMM could require TM to provide a list of the locations and welcomes comments on the location of appropriate POIs to the HSBB Network. This would also be discussed in Chapter 15.

Question 62:

The SKMM invites comments on the POIs to high speed broadband networks.

12.7.8 SKMM preliminary views on high speed broadband network services to be regulated

Based on the above discussion, the SKMM invites comments in relation to the inclusion of two HSBB services on the Access List. It is to be noted that these two proposed services refer generically to all high speed broadband networks and is not limited to the network to be constructed by TM:

(a) a HSBB Network Service with QoS – which is an end-to-end high speed network service provided over the HSBB access and transmission networks and delivered to pre-defined connection points (or such other connection points reasonably requested by an Access Seeker from to time). QoS parameters are to be defined by reference to Table 13 above (or such other traffic classes and contention ratios as may be reasonably requested by an Access Seeker). Speeds of the HSBB Network Service would be pre-defined and specified in the service description (as determined on a non-discriminatory basis) (or as reasonably requested by an Access Seeker).

(b) a HSBB Network Service without QoS – which is a high speed network service provided over the HSBB access network on a best efforts basis with a defined contention ratio and delivered at all aggregation routers or other aggregation devices, where the speed of the network service is controlled by the Access Seeker.

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The SKMM also notes that Access Seekers should have the ability to acquire a service which is functionally equivalent to the Domestic Network Transmission Service over high speed (for example, Ethernet) broadband networks. That is, an unbundled transmission service should be provided over a high speed broadband network and is separate from the access network service. The SKMM has considered this issue when discussing a technology neutral form of Domestic Network Transmission Service in section 9.4.3.

Question 63:

The SKMM invites comments on this proposal to consider two services for inclusion on the Access List:

(a) an HSBB Network Service with QoS; and

(b) an HSBB Network Service without QoS.

12.7.9 Legacy services over HSBB

The SKMM notes that the continued provision of the Fixed Network Origination Service, the Fixed Network Termination Service and the Private Circuit Completion Service will be extremely important in a high speed broadband network environment. For example, the migration of customers to a high speed broadband network must not compromise their ability to receive calls from alternative networks. Similarly, local leased circuits (or Private Circuit Completion Service) must also be available over the high speed broadband network.

In the interests of ensuring a technology neutral approach to describing services on the Access List, the SKMM has altered the description of the Fixed Network Origination Service, the Fixed Network Termination Service and the Private Circuit Completion Service to ensure that they are equally applicable in a high speed broadband environment.

Question 64:

(a) The SKMM invites comments about whether there are any other services or amendments to existing services required to ensure the origination and termination of telephony services over the HSBB network.

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(b) Should the proposed services over the HSBB/NGN network by the SKMM in this PI Paper co-exist with TM’s commercially negotiated services over the HSBB network, or do TM’s services render redundant the need to regulate services over the HSBB network?

12.8 Regulation of ANE and existing broadband services in a high speed broadband environment

12.8.1 Introduction

In addition to the high speed broadband services described above, the SKMM must also consider in this Public Inquiry the ANE services provided using TM’s PSTN network (through the Full Access Service, Line Sharing Service, Sub-loop Service, Bitstream Services (with or without Network Service) and Digital Subscriber Line Resale Service) which are also capable of supporting broadband services.

As noted from the outset of this Chapter, the recent Ministerial Direction on HSBB and Access List has determined that implementation of the Full Access Service, Line Sharing Service and Sub-loop Service provided over the HSBB network will be deferred for 7 years from 16 September 2008 to 15 September 2015. Even prior to this Ministerial Direction, although the Full Access Service, the Line Sharing Service and the Sub-loop Service were included in the Access List, the obligation to provide is not presently available. This was because an effective date for the relevant paragraphs of the Access List dealing with these facilities and services had not been specified.

The purpose of the discussion in this section 12.8 is to consider the regulation of all of the ANE services outside the HSBB areas and also to consider the continued regulation of those ANE services (ie Bitstream Services) not covered by the Ministerial Direction on HSBB and Access List.

The SKMM notes that in contrast to Full Access Service, Line Sharing Service and Sub- loop Service, other broadband services, namely the Bitstream Services (with and without Network Service) and the Digital Subscriber Line Resale Service, have been available and subject to the Access List since 1 July 2005. Therefore, it is relevant for the SKMM to re- consider the continued regulation of these services in this Public Inquiry.

Finally, as noted in section 12.3, BBGP which is defined as a service with speed of up to 2 Mbps will be provided in non-HSBB areas, namely in Zone 1 and Zone 2 areas. BBGP will be provided on a mixed technology basis including ADSL, WiMAX, WiFi and HSDPA, and competition will be based on a facilities based approach. Accordingly, the SKMM

Page 221 needs to consider the regulatory approach required to support facilities based competition particularly in the delivery of ADSL services. ADSL services are provided over the access network of TM’s copper based PSTN.

12.8.2 Ladder of investment

Before considering the scope of a new Access List, it is worth reflecting on the reasons why each of the Full Access Service, the Line Sharing Service, Sub-loop Service, the Bitstream Services (with or without Network Service) and the Digital Subscriber Line Resale Service were included on the Access List.

The Full Access Service, Line Sharing Service, Sub-loop Service and Bitstream with/without Network Service were included on the Access List to enable Access Seekers to move up the value chain on a gradual basis. This theory is also called the stepping stone theory or the ladder of investment.

New entrants make progressive investments in infrastructure and the other assets (including marketing and sales assets) in order to compete with infrastructure owners. New entrants may first acquire fully managed services from the infrastructure owner. This enables them to acquire customers and generate revenues with little or no capital investment required.

As the new entrant reaches critical mass, it may acquire a complementary product higher up the ladder which enables it to add more functionality through some modest infrastructure investment of its own. This process continues. As the new entrant adds more of its own functionality and invests more in its own infrastructure, the new entrant becomes less dependent on the original infrastructure owner.

As the new entrant climbs the ladder of investment, it becomes less dependent on the functionality provided by the infrastructure owner and acquires less managed and more basic services and infrastructure. Ultimately, the new entrant may no longer acquire services from the infrastructure owner because it uses its own network to provide end- to-end broadband services to its customers.

The ERG illustrates the ladder of investment and the services on each rung of the ladder as follows:

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Figure 18: The ladder of investment

In an NGN/NGA environment, the SKMM considers that the steps on the ladder of investment may be different. This is because some of the traditional rungs on the ladder may no longer be feasible in an NGN/NGA environment (whether technically feasible or commercially feasible). The effect of the Ministerial Direction on HSBB and Access List is that the Full Access Service, the Line Sharing Service and the Sub-loop Service will effectively not be available in HSBB areas and is discussed in the following sections.

The SKMM considers that a brief cost/benefit analysis applied to each of the Full Access Service, the Line Sharing Service, Sub-loop Service, the Bitstream Services (with or without Network Service) and the Digital Subscriber Line Resale Service may reveal whether some or all of these services should remain on the Access List.

The approach the SKMM proposes to undertake in this Public Inquiry is to examine the different circumstances in which these services might be available in areas where the HSBB network is not located, or non-HSBB areas.

12.8.3 Full Access Service

Pursuant to the Ministerial Direction on HSBB and Access List, the implementation of Full Access Service on the HSBB network has been deferred for 7 years.

For the purposes of this Public Inquiry, the SKMM presents the following discussion which applies the analytical approach set out in this PI Paper to determine whether this service would otherwise be available based on the analytical approach taken in this paper – that is, whether it would be in the LTBE or for the promotion of the NPOs for this service to become available.

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The Full Access Service is a network facility and/or network service provided between an end user premises and a customer access module. While there are a range of customer access modules defined, in the case of the Full Access Service the customer access module is most likely to be located at the local switch.

(a) Full Access Service in areas where the HSBB network is located ( HSBB areas)

In areas where the HSBB is located, the SKMM notes that fibre may bypass copper on:

(i) part of the route between the local switch (exchange) and the end user premises in the case that TM deploys VDSL2 or ETTH; or

(ii) all of the route between the local switch (exchange) and the end user premises in the case that TM deploys FTTP.

The SKMM notes that there are a number of issues that would otherwise need to be considered if it were to determine whether the Full Access Service should be available in areas where the HSBB is located:

(i) TM has 96% market share of the broadband market. In addition, TM also has 97.9% market share of all DEL connections;

(ii) there would be significant costs associated with TM being required to maintain the copper loops which are bypassed for the purpose of offering the Full Access Service and which TM is not using itself to provide PSTN services. These costs would need to be recovered from Access Seekers if the Full Access Service were to be retained. Such cost recovery is likely to be difficult if TM is no longer using the copper which it has bypassed. Cost recovery would involve passing on all of the cost of maintaining all of the bypassed loops to Access Seekers (irrespective of how many loops are actually acquired by Access Seekers). Accordingly, unless a very substantial proportion of copper pairs are used for the Full Access Service, then the costs of maintaining the copper network will be borne by only a small proportion of lines for which the Full Access Service is provided. This because the maintenance costs could only be recovered to the extent that the loops are acquired as part of the Full Access Service. Alternatively, if the Access Seekers only bore the costs of maintaining the lines that they were acquiring the Full Access Service over, there would be significant stranded costs associated with copper that had to be available but which was not utilised;

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(iii) to the extent that TM is deploying an FTTN network, the output power of each node would need to be reduced to allow an Access Seeker to use the Full Access Service for the delivery of DSL-based services. The effect of this would be to reduce the distance from the node to the end user premises capable of delivering 10Mbps by a factor of 30% in the case of VDSL2 and 50% in the case of ADSL2+ (using the power spectral densities in the Guidelines on ANE). This could potentially substantially increase the cost of deployment of the HSBB network;

(iv) TM would lose the benefit of re-using or disposing the by-passed copper which is no longer used for voice telephony if it is required to continue to offer the Full Access Service in HSBB areas;

(v) the direct costs to Access Seekers of removing the Full Access Service from the Access List would currently be minimal because the Full Access Service is not available and hence there is no stranding of Access Seekers’ DSLAMs at the local switch;

(vi) the benefits to Access Seekers of continuing to list the Full Access Service would be limited to the difference between the benefits of acquiring the HSBB Network Services described above and the benefits of acquiring the Full Access Service. Only if the latter exceeded the former would there be an incremental benefit to Access Seekers to continue to list the Full Access Service in HSBB areas;

(vii) a potential benefit of continuing to list the Full Access Service is that this service encourages facilities based competition. However, investment in infrastructure must be efficient when considering whether it is in the LTBE. It appears to the SKMM that in areas where the HSBB network is available and copper is likely to be bypassed and replaced over time in these areas, that future investment in DSL infrastructure may not be efficient.

The SKMM does not need to further consider these issues at this juncture due to the Ministerial Direction on HSBB and Access List.

The SKMM does however need to consider the timing of the phase out of the Full Access Service. It is possible that the copper based Full Access Service could be included on the Access List until the HSBB network passes the area in which the Full Access Service is located. If the SKMM adopted this course, the SKMM would want to ensure that it would be commercially viable for Access Seekers to acquire the Full Access Service for a period of up to 3 years and potentially significantly shorter than this period. This would require Access Seekers to recover their investment in infrastructure such as DSLAMS over a 3

Page 225 year period or less because this infrastructure would be stranded once the HSBB network is rolled out in that area.

The SKMM also needs to consider the costs of introducing regulation of the Full Access Service in circumstances where it will be phased out in a relatively short period of time afterwards.

The SKMM invites comments on the issue of phase out and the costs/benefits of adopting this strategy.

One final aspect of the deployment of the HSBB concerns the copper pairs which currently run between the exchange buildings and existing pillars, which will not form part of the HSBB service and will effectively become redundant. As each node is deployed in the FTTN network which forms the HSBB, that exchange to pillar copper will be replaced with fibre to the node. In some jurisdictions, some access seekers have argued that there could still be a Full Access Service from the exchange to the end user premises using the copper that would otherwise be made redundant by the deployment of the HSBB. The SKMM has considered this position and takes the view that there are technical risks which mean that there should be no obligation on TM to retain these copper pairs. If there is an exchange fed DSL service, then either:

(i) this service will be interfered with by the HSBB to the extent that there can be no assumption as to QoS; or

(ii) the power spectral density of the HSBB will need to be reduced to such an extent that the cost of deployment of the HSBB will rise unacceptably.

As a result, the SKMM’s preliminary view is that it will not require the copper between the exchange and the node to be retained in service by TM. If TM decides to retain that copper, the SKMM does not propose to subject it to Full Access Service regulation.

Question 65:

(a) The SKMM invites comments about whether the copper based Full Access Service should be available on a transitional basis until the HSBB network is available in an area.

(b) The SKMM also invites comments about whether TM should continue to make available “redundant” copper between the exchanges and the node when it is replaced with fibre in the HSBB network.

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(b) Full Access Service in areas where the HSBB network is not located (non-HSBB areas)

In areas where the HSBB network is not located, the Ministerial Direction on HSBB and Access List does not impact on the regulation of the Full Access Service. This remains unaffected by the Ministerial Direction.

One of the technologies contemplated under BBGP to facilitate facilities-based competition is ADSL.

The SKMM considers that there are a number of issues that should be considered as part of a cost-benefit analysis to assist in determining whether the Full Access Service should be regulated in areas where the HSBB is not located:

(i) TM has 96% market share of the broadband market. In addition, TM also has 97.9% market share of all DEL connections;

(ii) the SKMM assumes, but would need to verify, that the number of TM copper loops available for use by acquiring the Full Access Service in Non-HSBB areas is relatively small compared with other more urbanised locations. Nevertheless, as ADSL competition is specifically identified under BBGP and unless the number of access lines in Non-HSBB areas is de-minimis, the ability to compete in the broadband market using existing lines in these areas may be considered to be important the Government’s objectives;

(iii) the commercial viability for an Access Seeker to offer services using the Full Access Service in Non-HSBB areas may only be moderate when compared with the commercial viability of using the Full Access Service in more urbanised locations. At some point, the economies of density would be quite low and may not be sufficient to justify entry through acquisition of the Full Access Service and the deployment of DSLAMs. Nevertheless, decisions about commercial viability are best left to operators in the market;

(iv) alternative technologies such as WiMAX, WiFi and HSDPA may be available in these areas which will be capable of providing equivalent speed and functionality compared with ADSL. If available, end users would benefit from facilities based competition between TM as the ADSL provider and providers of wireless based services. However, at this stage, it is difficult to assess the extent to which these technologies will be available in Non-HSBB areas in the next 3 years;

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(v) the benefits to Access Seekers of continuing to list the Full Access Service would be limited to the difference between the benefits of acquiring, say, the Bitstream Services (with or without Network Service) (assuming it would remain on the Access List) and the benefits of acquiring the Full Access Service. Only if the latter exceeded the former would there be an incremental benefit to Access Seekers to continue to list the Full Access Service; and

(vi) a potential benefit of continuing the Full Access Service is that it may encourage facilities based competition. In some areas, the economies of density in non- HSBB areas may not be sufficient for Access Seekers to efficiently invest in infrastructure required to acquire the Full Access Service and offer a retail broadband service. However, it may be commercially viable in other non-HSBB areas to use the Full Access Service as a means of providing competitive ADSL services.

It is the SKMM’s initial assessment that if the Bitstream Services (with or without Network Service) continues to be listed on the Access List, then in areas where the HSBB network is not located, the costs of mandating the Full Access Service are likely to exceed the benefits of doing so. The SKMM believes that the major competitors to TM’s ADSL service are likely to be the operators that acquire the Bitstream Services and wireless based operators.

However, in these areas where HSBB is not deployed, the SKMM considers that the issue is finely balanced. The SKMM also must bear in mind the Government’s objective of having BBGP implementation based on facilities-based competition. One means of achieving this objective would be through the regulation of the Full Access Service. The SKMM would also see the benefits of facilities based competition based on the acquisition of the Full Access Service in Non-HSBB areas (and peripheral HSBB areas) areas. Therefore, the SKMM invites views about whether the Full Access Service should remain on the Access List, particularly in non-HSBB areas.

The service description for Full Access Service to be applicable in non-HSBB areas is found in paragraph 6(16) in Annexure 2. In addition, the definition of “Customer Access Module” has been amended to be technology neutral and applicable in the future. For example, “remote terminals of a digital line carrier system” covers the previous examples as well as any other similar active devices which may be used in the future.

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Question 66:

The SKMM invites comments on whether the Full Access Service should be regulated in areas where the HSBB network will not be located.

12.8.4 Sub-loop Service

Pursuant to the Ministerial Direction on HSBB and Access List, the implementation of Sub-loop Service on the HSBB network is deferred for 7 years.

For the purposes of this Public Inquiry, the SKMM presents the following discussion which applies the analytical approach set out in the PI Paper to determine whether the Sub- loop Service would otherwise be available based on the analytical approach taken in this paper – that is, whether it would be in the LTBE or consistent with the promotion of the NPOs for this service to become available.

The Sub-loop Service is a network facility and/or network service provided between an end user premises and a customer access module housed in a roadside cabinet.

There is considerable international regulatory debate about the continued feasibility of sub-loop unbundling, particularly in the context of NGN/NGAs. In the United Kingdom, for example, Ofcom has recommended that sub-loop unbundling of unbundled copper be offered at street cabinets. 103 However, Ofcom also recognises that it is unlikely there will be significant utilisation of sub-loop unbundling given the added costs which Access Seekers will face in deploying backhaul facilities beyond the local exchanges to serve remote nodes which they will need to install adjacent to the incumbent’s FTTN nodes. Ofcom sees retention of sub-loop unbundling as providing a competitive discipline on BT’s FTTN bitstream and other wholesale services.

In the Netherlands, OPTA has reached a less regulatory interventionist view. It is reported that OPTA found that:

“the threshold for economic viability for an alternative operator using sub-loop unbundling from street cabinets is unlikely to be achieved by any alternative operator unless it reaches an enormous market share” 104

103 Ofcom, Future broadband - Policy approach to next generation access , 26 September 2007 at para 6.5.2. 104 J Scott Marcus and Dieter Elixmann, Regulatory Approaches to Next Generation Networks (NGNs): An International Comparison , at page 18.

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OPTA has recently accepted an agreement reached between KPN and the main Access Seekers which will see withdrawal of local loop and sub-loop unbundling in many parts of the Netherlands and replacement by an advanced bitstream service, while retaining sub- loop unbundling in the few more densely populated areas where its use might be feasible.

When applied in Malaysia based on both Ofcom and OPTA’s view, sub loop unbundling is unlikely to play a role in promoting competition or encouraging efficient investment in infrastructure except in areas of very high population density. These areas include high density commercial areas. In those areas of very high population density, the HSBB network may be rolled out. It is also in these areas where alternative wireless and fibre networks are most likely to be deployed in Malaysia.

The SKMM does not need to further consider the issue of whether the Sub-loop service should be available in HSBB areas due to the Ministerial Direction on HSBB and Access List. However, the SKMM does invite comment on the commercial feasibility of making available the Sub-loop Service in non-HSBB areas.

The SKMM also invites comments about the commercial feasibility and cost/benefit of requiring the supply of the copper based Sub-loop Service until the HSBB network is rolled out (as per the discussion in section 12.8.3 in relation to the Full Access Service).

The service description for Sub-loop Service to be applicable in non-HSBB areas is found in paragraph 6(19) in Annexure 2. The definition of “Customer Access Module” has been amended as above.

Question 67:

(a) The SKMM invites comments on whether it would be commercially feasible for the Sub-loop Service to be made available outside the HSBB areas.

(b) The SKMM also invites comments about the commercial feasibility and cost/benefit of requiring the supply of the copper based Sub-loop Service until the HSBB network is rolled out.

12.8.5 Line Sharing Service

Pursuant to the Ministerial Direction on HSBB and Access List, the implementation of Line Sharing Service on the HSBB network is deferred for 7 years.

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For the purposes of this Public Inquiry, the SKMM presents the following discussion which applies the analytical approach set out in the PI Paper to determine whether the Line Sharing Service would otherwise be available based on the analytical approach taken in this paper – that is, whether it would be in the LTBE or consistent with the promotion of the NPOs for this service to become available.

The Line Sharing Service is a network facility and/or network service for the use of the non-voiceband frequency spectrum of Unconditioned Communications Wire between the end user premises and a customer access module. While there are a range of customer access modules defined, in the case of the Line Sharing Service the customer access module is most likely to be located at the local switch.

It is relevant to compare the Line Sharing Service with the Full Access Service because the Access Seeker needs to deploy the same infrastructure to use each of the services. In the case of the Full Access Service, the Access Seeker is likely to equip its DSLAM with line cards which support voice services. In the case of the Line Sharing Service, the DSLAM is solely used for the provision of broadband access. The choice of Full Access Service or Line Sharing Service is made by the Access Seeker depending on the nature of the relationship it wishes to establish with end users and, to some extent, the relative cost of the two services.

Due to the similarity of an Access Seeker’s investment required to deploy services using the Line Sharing Service and the Full Access Service, the SKMM considers that the analysis described in section 12.8.3 in relation to the Full Access Service is relevant to the Line Sharing Service.

One possible difference in the analysis is that the cost to an Access Seeker of deploying broadband services only using the Line Sharing Service are likely to be lower than the costs of deploying both voice and broadband services using the Full Access Service. This difference in cost is only relevant in non-HSBB areas (and peripheral HSBB areas) areas where there is no alternative HSBB Network Service. The SKMM does not consider this cost difference to materially impact on the LTBE assessment because the cost savings achieved by only deploying broadband services using the Line Sharing Service are unlikely to be sufficient for an Access Seeker to use this service when compared with the advantages of using the Bitstream Service (with or without Network Service).

Due to the Ministerial Direction on HSBB and Access List, implementation of the Line Sharing Service in HSBB areas is to be deferred for 7 years. The SKMM does invite comment again on the possible introduction of the Line Sharing Service with a phase out in HSBB areas as the HSBB network is rolled out.

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However in non-HSBB areas, the inclusion or removal of the Line Sharing Service is more finely balanced and the SKMM invites comments about the comparative merits of including this service on the Access List and the alternatives that might be available to providers of broadband services in non-HSBB areas (and peripheral HSBB areas).

The service description for Line Sharing Service to be applicable in non-HSBB areas is found in paragraph 6(17) in Annexure 2. The definition of “Customer Access Module” has been amended as above.

Question 68:

(a) The SKMM invites comments on whether the Line Sharing Service should be regulated in areas where the HSBB network is not located.

(b) The SKMM also invites comments on whether a phase-out of the copper based Line Sharing Service in HSBB areas should be considered, having regard to the fact that the service would only be available for a short period of time while the HSBB network is being rolled out.

12.8.6 Bitstream Services

The Ministerial Direction on HSBB and Access List does not defer implementation of Bitstream Services on the Access List, and therefore has no impact on the regulation of Bitstream Services.

The Bitstream Service is a Network Service for the provision of Layer 2 connectivity between an end user premises and a POI. If this service is provided “with Network Service”, the POI is located at the Access Seeker’s premises. If the service is provided “without Network Service”, the POI is located at the Access Provider’s premises.

As noted above, the Bitstream with and without Network Service have been available since 1 July 2005. However, the SKMM understands that these services have not been widely utilised (if at all). The SKMM has received comments from industry players that this principally relates to the additional elements of the service that must be acquired which are outside the service description in the MS (Access) and the corresponding pricing for those elements, which are not specified in the MS (Pricing).

Further, there appears to be some confusion about the technical characteristics of the Bitstream Service (with and without Network Service). In order to address this issue, the SKMM provides the following diagram for clarity:

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Figure 19: Bitstream Services and Digital Subscriber Line Resale Service

(a) Bitstream Service in areas where the HSBB network is located (HSBB areas)

In areas where the HSBB network is to be located, the SKMM is proposing to include on the Access List the HSBB Network Service with QoS and the HSBB Network Service without QoS, which was described in sections 12.7.3 to 12.7.8.

The HSBB Network Service without QoS is functionally equivalent to the Bitstream Service without Network Service.

The HSBB Network Service with QoS is similar to, but has a greater degree of functionality than the Bitstream Service with Network Service. The SKMM also wishes to make clear that the HSBB Network Service without QoS can be acquired together with the Domestic Network Transmission Service in order for Access Seekers to acquire a functionally similar service to the Bitstream Service with Network Service.

Due to the functionally equivalent nature of the HSBB Network Services with the Bitstream Services, SKMM proposes that the Bitstream Service should not be required in areas where the HSBB network is located.

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Question 69:

The SKMM invites comments on whether the Bitstream Services in HSBB areas is effectively replaced by the HSBB services (with or without QoS).

(b) Bitstream Service in areas where the HSBB network is not located (non-HSBB areas)

As noted above, the Bitstream Service has been available on the Access List since 2005. The SKMM considered that the inclusion of the Bitstream Service on the Access List would be in the LTBE and would promote the NPOs.

While demand has not been seen for this service to date, the SKMM does not consider this to be determinative of whether the service should remain on the Access List or not. This is particularly the case when broadband will have greater focus in the next few years while the HSBB network is being constructed.

In areas outside the HSBB network footprint, where the emphasis is on facilities-based competition approach, the SKMM considers that Bitstream Service is an important input into the provision of competitive broadband services in non-HSBB areas (and peripheral HSBB areas) areas for the following reasons:

(i) TM has 96% market share of the broadband market. In addition, TM also has 97.9% market share of all DEL connections;

(ii) the SKMM remains concerned that even if the Full Access Service and the Line Sharing Service remain on the Access List and are made available, it is not likely to be economically viable for Access Seekers to invest in the necessary infrastructure required to acquire these services and offer a broadband service in all non-HSBB areas (and peripheral HSBB areas) areas;

(iii) a national provider of broadband services which acquires the HSBB Network Services which is proposed for inclusion on the Access List in section 12.7.8 will also need a complementary product to provide broadband services outside the HSBB network footprint. The Bitstream Service is the functionally equivalent service as described above;

(iv) it remains unclear to the SKMM whether WiMAX, WiFi and other similar wireless services will offer broadband services or the extent of their network coverage in non-HSBB areas during the same timeframe that the HSBB network is proposed

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to be rolled out. In the event that there is minimal coverage of the wireless services in non-HSBB areas, this could be addressed to some extent through the availability of Bitstream Service;

(v) in the case of HSDPA, mobile operators may rollout this service on an incremental basis targeted at high density or usage areas where there is a high proportion of high value and business customers, instead of rolling out HSDPA on a national basis. In the areas where there is no coverage of HSDPA, this could be addressed by competitors through the acquisition of the Bitstream Service;

(vi) as fixed and wireless substitution accelerates, Bitstream services over wireline networks are likely to offer complementary access to broadband services to those provided by wireless operators. Wireless operators will not be able to offer ubiquitous coverage in some areas due to terrain and other factors where wireline may be present and these operators may choose to use Bitstream Services as complementary to their wireless service to “in-fill” coverage holes.

The SKMM accepts that there may be less fixed lines in non-HSBB areas (and peripheral HSBB areas) areas. However, the SKMM also considers that the costs of continuing to offer the Bitstream Services are likely to be relatively small compared with the potential benefits of continuing to have the service available particularly in the context of the possible lack of alternative technologies to support the provision of broadband services as described above.

The SKMM considers that the Bitstream Services with and without Network Service should be maintained on the Access List in those areas outside the HSBB network footprint (ie non-HSBB areas).

Based on SKMM’s preliminary view, the service description for high speed broadband with QoS and without QoS would be applicable in HSBB areas, and is found in paragraph 6(27) and 6(28) in Annexure 2. For the non-HSBB areas, Bitstream would be applicable and its service description is found in paragraph 6(18) in Annexure 2.

Question 70 :

The SKMM invites comments on whether the Bitstream Services should be retained on the Access List in areas outside the HSBB areas.

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12.8.7 Digital Subscriber Line Resale Service

The Ministerial Direction on HSBB and Access List does not defer implementation of the Digital Subscriber Line Resale Service on the Access List, and therefore has no impact on its regulation.

The Digital Subscriber Line Resale Service has been available since 1 July 2005. However, the SKMM understands that this service has not been widely utilised as it only appears in two access agreements registered by the SKMM. There was no price determined for the Digital Subscriber Line Resale Service in the MS (Pricing) and the SKMM has received comments that the lack of pricing and some confusion with TM’s existing wholesale product lines has led to the lack of utilisation of this service.

The Digital Subscriber Line Resale Service is a Network Service for provision of connectivity for the carriage of digital communications conforming to Internet protocols between an end user premises and the customer access module of the Access Provider’s network.

Importantly, the service is limited to the wholesale provision of the DSL service provided to end users. This is the main difference between this Digital Subscriber Line Resale Service and the Bitstream without Network Service. The other major difference is that with the Digital Subscriber Line Resale Service, the IP addresses are assigned by the Access Provider.

The main difference between the Digital Subscriber Line Resale Service and the Wholesale Digital Subscriber Line Service offered by TM (described in section 11.4.1) on a commercial basis is that the Digital Subscriber Line Resale Service includes Internet connectivity whereas the Wholesale Digital Subscriber Line Service does not.

This Digital Subscriber Line Resale Service is a service which enables the delivery of broadband services which is on the lowest rung of the “ladder of investment”. The infrastructure required to be invested by an acquirer of this service to provide a broadband service is relatively small and would principally be limited to “back-end” internet access. Even that “back-end” internet access is likely to be acquired from a facilities based provider.

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(a) Digital Subscriber Line Resale Service in areas where the HSBB network is located (HSBB areas)

In HSBB network areas, the current digital subscriber line services will be phased out and hence these services will no longer be relevant. Furthermore, the HSBB Service with and without QoS is proposed to be regulated as stated in section 12.7.8 and is likely to be effective substitutes for Digital Subscriber Line Resale Service in the HSBB areas. Therefore, the SKMM does not consider that the Digital Subscriber Line Resale Service will be as relevant in areas where the HSBB network is located.

Question 71 :

The SKMM invites comments on whether the Digital Subscriber Line Resale Service should be removed from the Access List in HSBB areas.

(b) Digital Subscriber Line Resale Service in areas where the HSBB network is not located (non-HSBB areas)

In areas where the HSBB network is not located, DSL services will be one of the principal means of delivering broadband services to end users. However, it is not clear to the SKMM whether the Digital Subscriber Line Resale Service has or will play a role as a “stepping stone” or rung on the ladder of investment.

The SKMM would be interested in receiving comments on this issue. Alternatively, the SKMM would also be interested in receiving comments on whether the current service should be replaced with a service which is more similar to the current DSL wholesale service offered by TM under the Streamyx brand name.

Based on SKMM’s preliminary view, the service description for Digital Subscriber Line Resale Service to be applicable in non-HSBB areas is found in paragraph 6(20) in Annexure 2. The definition of “Customer Access Module” has been amended as above.

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Question 72 :

(a) The SKMM invites comments on whether the Digital Subscriber Line Resale Service should be retained on the Access List outside the HSBB areas.

(b) The SKMM also invites comments on whether the Digital Subscriber Line Resale Service should be replaced with a service which is more similar to the TM Streamyx service outside HSBB areas.

12.8.8 Conclusions

Pursuant to the Ministerial Direction on HSBB and Access List, the implementation of Full Access Service, the Sub-loop Service and Line Sharing Service on the HSBB network is deferred for 7 years. The SKMM therefore does not offer a conclusion in relation to these services in HSBB areas.

However for services which are not impacted by the Ministerial Direction on HSBB and Access List (i.e. the Bitstream Services and Digital Subscriber Line Resale Service), the SKMM offers the following conclusions based on its analysis in this Chapter.

The SKMM considers that in areas where the HSBB network is to be located, the Bitstream Service (with or without Network Service) and the Digital Subscriber Line Resale Service may no longer need to be included on the Access List. This is because these services are either redundant, unnecessary or proposed to be replaced by an HSBB service.

In the transitional period whilst the HSBB network is deployed, the SKMM has sought comments on whether the copper-based Full Access Service, the Sub-loop Service and Line Sharing Service should be considered for regulation.

In areas outside the HSBB areas or in non-HSBB areas, the issue is more finely balanced. The Ministerial Direction on HSBB and Access List does not relate to those areas. The SKMM considers that the Bitstream Services should continue to be available in these areas. The retention of the Full Access Service and the Line Sharing Service in non-HSBB areas (that is, where those services are not subject to the Ministerial Direction on HSBB and Access List) is more finely balanced. The SKMM seeks comments on whether Sub-loop Service should also be retained on the Access List in these areas. The SKMM invites comments on the ongoing application of the Digital Subscriber Line Resale Service in these areas too.

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PART D: REGULATION OF WIRELESS BROADBAND SERVICES

13 REGULATION OF WIRELESS BROADBAND SERVICES

13.1 Introduction

The purpose of this chapter is to examine the potential access issues associated with wireless broadband technologies. In particular, the SKMM has focused on the following issues:

(a) how to properly categorise the markets for various forms of wireless broadband technologies;

(b) the application of the relevant originating and terminating services to those technologies;

(c) access issues that may potentially arise in respect of services provided using these technologies; and

(d) the appropriate form of access regulation, if any, that should be applied.

The issue of wireless broadband technologies has particular relevance in the context of the Government’s national broadband strategy. In its delineation of specific geographic zones, the Government has determined that Zones 1 and 2 will be covered by BBGP and/or High Speed Broadband.

One of the tasks of this Public Inquiry is therefore to determine the regulatory regime that will be applied to the facilities and services in the Non-HSBB areas component of the national broadband strategy.

This chapter is structured as follows:

(a) a description of the various forms of wireless broadband technologies available;

(b) an outline of the current WiMAX assignments in Malaysia;

(c) defining the relevant markets for the services provided using those technologies;

(d) potential access issues in wholesale WiMAX services;

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(e) international developments in WiMAX rollout and regulatory arrangements;

(f) regulatory options to address potential access issues; and

(g) the SKMM’s preliminary view on access regulation of WiMAX services.

13.2 Forms of wireless broadband technologies

As a general observation, the forms of wireless broadband services that are available (or will soon become available) in Malaysia are provided using 2G, 3G and WiMAX technologies. Each of these is described below.

(a) 2G services

EDGE technology (Enhanced Data rates for GSM Evolution) is commonly referred to as a “bolt-on” enhancement for 2G/2.5G GSM networks and GPRS networks, which enables increased data transmission rates and improved data transmission reliability. EDGE enables delivery of advanced mobile data and content services such as video and music clip downloads, full multimedia messaging, Internet access and mobile email.

As noted by the GSM Association, EDGE networks are widely favoured for their capability to provide such services with a minimal incremental cost and are capable of providing up to 3 times the data capacity of GPRS. Virtually all new GSM infrastructure deployments are also EDGE capable and nearly all new mid- to high-level GSM devices also include EDGE radio technology.

EDGE technology is used by all 3 GSM network operators in Malaysia.

(b) 3G/HSDPA services

Like 2G services, 3G technology is well-understood in Malaysia. It enables the provision of mobile multimedia services such as music, TV and video, rich entertainment content and Internet access.

With the launch of U Mobile, Malaysia now has 4 3G network operators, although DiGi has yet to launch its 3G services and expects to do so in the second half of 2008.

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(c) WiMAX

WiMAX technology enables the provision of wireless data. WiMAX networks based on the IEEE 802.16 standard defines the technical features that enable both high-speed voice and data services, as well as an alternative “last mile” broadband access technology to cable and DSL.

WiMAX is an area of significant focus for the SKMM, considering its anticipated role in the national broadband network and in the context of the MyICMS 886 strategy of a 50% household broadband penetration target by 2010. This is particularly important considering its capability to provide broadband coverage to non-urban and currently underserved areas.

The decision to issue new apparatus assignments for the use of spectrum in the Broadband Wireless Access 2.3 GHz band was largely driven by the desire to enable greater competition in wireless broadband services. As the 2G and 3G services in Malaysia are well-understood, the following section is limited to WiMAX services.

13.3 WiMAX assignments

WiMAX assignments are held by the following 4 operators:

(a) REDtone–CNX Broadband Sdn. Bhd., that is designated to deploy its WiMAX service in Sabah and Sarawak;

(b) Packet One Networks (M) Sdn. Bhd. (previously known as MIB Comm Sdn. Bhd.);

(c) YMax Networks Sdn. Bhd. (previously known as Bizsurf (M) Sdn. Bhd.); and

(d) Asiaspace Sdn Bhd (previously known as Asiaspace Dotcom Sdn. Bhd.)

Packet One, YMax and Asiaspace have been assigned Peninsula Malaysia as their area of operation. All the WiMAX operators have launched their services commercially.

13.4 Market definition

Market definition remains the SKMM’s first step in its consideration of access regulation. The development of wireless broadband technologies leads to a significant question of market definition not contemplated at the time of the PI on Dominance in 2004 –

Page 241 namely, whether the services provided by these technologies form part of an additional market for “wireless broadband services”.

There are several factors to consider when determining the appropriate market definition to be applied. These include:

(a) whether to define a new market for wireless broadband services, separate from the existing broadband services market. One of the immediate disadvantages of this approach is that it would appear contrary to the SKMM’s regulatory position of technology-neutral regulation;

(b) to examine whether the services provided using the 3 broad forms of wireless broadband technologies are competing or substitutable; or

(c) to consider whether the services provided using their respective technologies fit into any of other identified markets in Malaysia.

Each of these approaches requires a measure of substitutability to be examined. In relation to the substitutability between fixed and wireless broadband services, the QoS parameters of fixed and wireless broadband services are a distinguishing factor. Competition between WiMAX and HSDPA services may not occur directly with the providers of high speed services offered over the HSBB network, due to limitations in the speeds and functionality that the wireless networks will be capable of supporting.

Secondly, in relation to the competitiveness of each of the wireless operators using different technologies, the SKMM considers that it is likely that each of the WiMAX and mobile operators are likely to compete in the provision of wholesale access over their networks and the provision of high speed broadband services. Therefore, these wireless broadband technologies are likely to be in the same market.

Finally, it is in the area of originating and terminating access over WiMAX that the most interesting market definition issues arise. In particular, the issue is whether WiMAX is a substitute for fixed or mobile voice services. There are basically 2 competing views concerning the appropriate market definition for WiMAX:

(a) WiMAX as a fixed voice service: the first view is that WiMAX is competing with fixed wireline (like a “home zone” service) and should be treated as such for interconnection purposes. This “fixed WiMAX” standard 802.16d has no support for mobility; and

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(b) WiMAX as a mobile voice service: the alternative view is that the 802.16e standard of WiMAX has mobile functionality embedded in it and so it is more akin to a mobile service, hence it is commonly referred to as “mobile WiMAX”.

Thus while 2G and 3G services may be determined as falling within the market for mobile services for interconnection purposes, the appropriate market for WiMAX is unclear. There is also the view that WiMAX offers nomadicity rather than mobility, hence even the mobile WiMAX option may not necessarily fall neatly into the mobile services market.

The relevance of these issues lie in the interconnection charging models that will apply, and whether the fixed or mobile termination rates will differ. Clearly, the charging model which applies will determine whether WiMAX operators should receive a termination rate which is at the rate determined for the Fixed Network Termination Service or at the rate determined for the Mobile Network Termination Service. Given the difference in these rates, there could be significant impact on consumers and operators depending on this decision.

Again, the SKMM has identified 2 alternative options to address this issue:

(a) to structure a general category of “termination” services, the access charges for which will differ according to technology. This is discussed in the next chapter; or

(b) to make a decision about whether to determine WiMAX as a fixed or mobile service, to which the relevant category of terminating access charge will apply.

If the SKMM were required at this stage to choose the appropriate market for WiMAX services, it is minded to categorise WiMAX as a mobile service. This approach could be considered to be forward-looking in the sense that it is consistent with the concept of Long Term Evolution ( LTE ) – the concept of compatible future mobile technology solutions. This approach would assume that WiMAX is on the same LTE path as 3G/HSDPA technologies.

The SKMM does not consider it necessary to take a definitive view on market definition in this Public Inquiry. Nevertheless, the SKMM notes the following preliminary conclusions:

(a) while wireline and wireless broadband services are likely to offer different levels of quality and speed of broadband services, the SKMM does not consider that these differences would justify a separate wireless broadband services market;

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(b) the SKMM considers that all of the wireless broadband providers will compete with each other vigorously; and

(c) the SKMM considers that termination of services over WiMAX networks is more akin to mobile termination (and not fixed termination).

In chapter 14, the SKMM further considers the issue of termination services and whether a generic category of service ie a Network Termination Service should be considered, within which all fixed, mobile, wireless and broadband services would fall for the termination of voice calls (and certain data services such as SMS).

Question 73:

(a) The SKMM invites comments on whether wireless broadband and fixed broadband services should be included in the broader broadband market or whether the SKMM should consider them to be in separate markets.

(b) The SKMM also invites comments on whether WiMAX termination should be considered to be most similar to mobile termination or fixed termination services.

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13.5 International developments in WiMAX access regulation

There has been considerable development in WiMAX rollout in several jurisdictions, as seen in Figure 20 below: 105

Figure 20: WiMAX operators by network, selected countries

However, the SKMM is not aware of any jurisdiction that has determined the question of whether WiMAX operators should be paid fixed or mobile termination rates in a calling party pays environment, such as Malaysia.

13.6 Potential access issues

The SKMM is also concerned that any-to-any connectivity may be hampered in relation to WiMAX termination of voice services.

105 SKMM, Industry Performance Report 2007 , page 60.

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The access regime in the CMA is predicated on an Access Seeker making a request to an Access Provider, with the Access Seeker then being provided with access in accordance with the SAOs. Importantly, there is no obligation on a licensee to make a request for access. Several licensees in the pre-PI process raised this as an issue of concern.

There is a risk that the fixed and mobile operators may not desire interconnection with WiMAX networks. This becomes relevant in the case where an incumbent operator chooses not to request interconnection with the network of another operator. This has occurred in Australia, where the legislative structure of the access regime is very similar to that in Malaysia. The incumbent fixed line operator, Telstra, declined to seek terminating access with the network of a cable operator which was rolling out infrastructure in new estates. This situation was described in the following terms:

“There is currently no requirement on carriers who own, or supply carriage services over, large telecommunications networks to acquire declared services (in particular, terminating access services) from carriage service providers who supply carriage services over smaller networks, for the purpose of ensuring any-to-any connectivity for the end-users connected to those smaller networks. The practical effect of this is that it is possible for the carrier to deny any-to-any connectivity to end-users on a smaller network (such as a new fibre customer access network installed in new housing estates).” 106

The result was that any-to-any connectivity was compromised. This would be inconsistent with the LTBE if a similar situation were to occur in Malaysia. While it is arguable that such situation could be dealt with under the competition provisions, the SKMM regards that there could be consequences that affects the end users, this issue would be considered in this Public Inquiry.

Question 74:

(a) The SKMM invites comments on any potential issues between WiMAX operators and the fixed line and/or mobile operators that affect any-to-any connectivity.

(b) The SKMM also invites comments on whether there are any other issues concerning interconnection by the WiMAX operators.

106 Telecommunications Legislation Amendment (Competition and Consumer Issues) Bill 2005 , Explanatory Memorandum, at page 68.

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13.7 Regulatory options

To address the above access issues that may arise, the SKMM considers that there are several options that can be explored. The SKMM recognises that the options may include:

(a) an amendment to be made to the description of facilities or services on the Access List;

(b) the inclusion of new facilities or services on the Access List; or

(c) other regulatory options.

Bearing in mind that this Public Inquiry is for the review the Access List and the MS (Access), the SKMM’s approach is to first consider whether the issues can be addressed through the amendment of facilities or services on the Access List. Significantly, the SKMM is interested to hear if all the issues can be addressed with the proposed amendments as set out below.

As there were some preliminary views that one of the issues of concern is with the reluctance, delay or refusal in seeking access rather than the reluctance, delay or refusal in providing access, the SKMM has also included some preliminary discussions on mandating any-to-any connectivity through means other than amendments to the Access List. For clarity, the discussion is intended to be on a preliminary basis and the SKMM would be pleased to receive views to enable it to undertake further steps, including consultation where necessary.

13.7.1 Amendment to the Access List

In interconnecting networks, especially between networks having many points of presence and networks having fewer points of presence, the location of the POI for physical interconnection may be an issue. To alleviate this potential issue and to facilitate interconnection between such networks, an option is to encourage voice as well as broadband interconnection through MyIX. The option of voice interconnection with MyIX was also proposed during the pre-PI process to address interconnection issues.

MyIX could be specified as one of the potential POIs. POI is a term currently defined in the Access List that refers to any technically feasible point which demarcates the networks of an Access Provider and Access Seeker. MyIX could be such a technically feasible point.

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In this way, MyIX could become one of the potential POIs between the operators, regardless of their platform. The non-IP based operators could build a media gateway to MyIX to send and receive traffic from IP based operators.

13.7.2 New facilities or services on the Access List

Another option is to specify the provision of any-to-any connectivity as a specific Access List service, which is likely to also include elements of facilities (as defined in the CMA) to enable it to function. Any-to-any connectivity is recognised as fundamental to liberalised communications sectors. As defined in the Access List, it is a state which is achieved when end users are able to communicate with one another, irrespective of the network to which they are directly or indirectly connected.

This service could include a requirement based on a technical feasibility test, the threshold of which could justifiably be low. This is because the interconnection of networks already exists as a fundamental feature of the Malaysian communications and multimedia sector. As can be seen from the discussion of each of the identified markets in Malaysia throughout this PI Paper, any-to-any connectivity often does not appear as a relevant criterion in the application of the LTBE criteria. It only becomes relevant in instances which concern communications between end-users.

In one sense, a standalone any-to-any connectivity service may appear unnecessary, considering that it is normally used to describe an element of a facility or service. However, the SKMM considers that is possible to define an “Any-to-Any Connectivity Service” in terms of the provision (by the Access Provider) of a service (which may include facilities, or components of facilities) to enable an end-user to communicate with other end-users (of the Access Seeker) who use similar services. The notion of “similar services” as a criterion has been long-established, including by the ACCC in Australia:

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“The Act provides a definition as to how this objective is achieved. Subsection 152AB(8) states:

... the objective of any-to-any connectivity is achieved if, and only if, each end- user who is supplied with a carriage service that involves communication between end-users is able to communicate, by means of that service, with each other end- user who is supplied with the same service or a similar service, whether or not the end users are connected to the same telecommunications network.

The explanatory memorandum for this provision adds:

“... Reference to similar services is intended to enable consideration of the need for any-to-any connectivity between end-users of services which have similar, but not identical, functional characteristics, such as end-users of a fixed voice telephony service and end-users or a mobile voice telephony service, or end- users of internet services which have differing characteristics.”107

The ACCC further notes the key elements that the SKMM anticipates will need to be considered in its own LTIE assessment, including the costs and benefits of mandating such as service. These include:

(a) the additional investment (if any) required to enable the connection of calls to and from other networks;

(b) any potential risks to network integrity;

(c) whether regulation would provide the efficient use of infrastructure; and

(d) overall, whether regulation would be in the promotion of the long-term interests of end-users.

The SKMM’s initial view favours a position that there would be no additional investment required to support the mandate of any-to-any connectivity for wireless broadband networks. Furthermore, any risks to network integrity would need to be specified and quantified before the SKMM would consider them a barrier to including such a service on the Access List.

107 ACCC, Telecommunications Services, Declaration Provisions, July 1999 at page 53.

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13.7.3 Other regulatory option

This option is similar to that of mandating a new “Any-to-Any Connectivity Service” as described above, but achieved through means other than through the Access List.

In Australia, the standard carrier licence conditions in Schedule 1 of the Telecommunications Act 1997 were recently amended . This now imposes – as a licence condition – an obligation on a carrier to acquire certain services from a carriage service provider, where this is necessary to enable end users connected to the carrier’s network to make calls to end users connected to the network over which a carriage service provider provides carriage services to those end users. That is, the amendment was introduced to facilitate any-to-any connectivity.

In Malaysia, the NFP(Individual) and NSP(Individual) licences contain a condition on the obligation to interconnect. The condition is or contains similar wordings as follows:

“Obligation To Interconnect

The Licensee shall permit interconnection with the licensee’s network facilities and/or network services under terms and conditions which may be determined and/or approved by the Commission.”

Interconnection would allow two separate networks to be connected, and end users to communicate with each other irrespective of the network they are connected to, that is to enable any-to-any connectivity to be achieved. Failure to permit interconnection would lead to the inability of an end user of a network to communicate with an end user in another network. In addition, the benefit of each end user joining a new network is not realised due to lack of interconnection with other networks. This does not contribute to positive network externalities which benefits the industry as a whole.

Based on the licence condition, NFP(Individual) or NSP(Individual) licensee is under an obligation to provide interconnection to their Network Facilities and/or Network Services. A failure by the licensee to permit interconnection would constitute a breach of that licence condition.

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13.8 SKMM preliminary view

The SKMM noted that there are potential access issues that may arise in relation to wireless broadband services and that these should be addressed in this Public Inquiry. The SKMM seeks comments on the regulatory options discussed above.

Question 75:

SKMM seeks views on the regulatory options discussed in section 13.7 to address any- to-any connectivity with, say, WiMAX networks.

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PART E: ACCESS LIST RATIONALISATION

14 ACCESS LIST RATIONALISATION

The SKMM has considered whether it would be practical to rationalise the facilities and services on the Access List so as to reduce the number of services and facilities based on broader categories of access services.

One of the key issues for the SKMM is that with a large number of facilities and services now on the Access List, it became apparent during the pre-PI process that several licensees had difficulty in understanding the types of services that were on the Access List. The SKMM’s concern is to ensure that both Access Providers and Access Seekers are aware of their rights and obligations in relation to the specific regulated services and facilities.

Further, the SKMM was concerned that new technologies such as WiMAX and NGN could lead to the addition of further facilities and services on the Access List, for example a WiMAX termination service, an NGN termination service and an NGN transmission service. The SKMM’s difficulty with this approach is twofold: (a) it leads to a technologically specific approach to specifying facilities and services on the Access List; and (b) it will lead to an unwieldy and lengthy Access List.

The SKMM has therefore considered a proposed rationalised system which would collapse many existing facilities and services and new facilities and services proposed in the preceding Chapters into generic categories of services as follows:

Generic Category Existing and proposed facilities and services on the Access List

Network Origination Existing facilities and services include Fixed Network Origination Service Service and Mobile Network Origination Service.

Origination on WiMAX networks would be included in this category. Origination on NGN would also be included in this category.

Network Termination Existing facilities and services include Fixed Network Service Termination Service and Mobile Network Termination Service.

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Generic Category Existing and proposed facilities and services on the Access List

Termination onto WiMAX networks would be included in this category. Termination onto NGN would also be included in this category.

Transmission Service Existing services include Domestic Network Transmission Service, the Broadcasting Transmission Service and the backhaul portion of the Domestic Connectivity to International Services.

The Unbundled Transmission Service in an NGN environment would also be included.

Leased lines Private Circuit Completion Service in a NGN and non-NGN environment.

In the PI on Access List in 2005, the SKMM was not inclined to consider a generic approach to regulate access for several reasons. 108 This approach was generally supported by all the respondents then.

However, given the technological development since then and the additional technologies over which termination services and transmission services are capable of being provided, the SKMM considers that this is a more appropriate time to revisit this question and requests comments on whether there is support for the collapsing of the existing services noted above into these generic categories.

At this juncture, Leased Lines is covered by Private Circuit Completion Service. The SKMM seek comments in the event that there are any other services in the similar category as Private Circuit Completion Service.

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Question 76:

The SKMM invites comments on the proposed rationalisation of certain services into generic categories, with justifications.

14.1 Network Origination Service and Network Termination Service

In considering the different technologies, such as PSTN, IP, mobile and WiMAX in these two generic service categories, it lends support to a technological/service neutrality approach. This is a progression from the PI on Access List in 2005, wherein PSTN and IP were considered as technologies offering functionally equivalent services based on the regulatory concept of technological/service neutrality for Fixed Network Origination Service and Fixed Network Termination Service, for example. In addition, any-to-any connectivity would be enhanced and achieved, allowing an end user from any network to contact another user on another network, without any differentiation of the underlying technology.

The SKMM is cognisant of views expressed by some of the licensees’ view that certain services are not substitutable, for example, between fixed and mobile. However, the categorisation does not necessarily conclude that the services are substitutable. In addition, the generic categories would not necessarily lead to a single price for the Network Origination Service or Network Termination Service. The SKMM will separately consider pricing issues in its inquiry in the MS (Pricing). The SKMM notes that there is scope to have different prices for different technologies (for example, fixed and mobile) within a single service.

The preliminary view is that a rationalised Network Origination Service and Network Termination Service could be included in the Access List. The SKMM seeks views on the implications, if any, for this proposal.

Based on the preliminary view, the service descriptions of Network Origination Service and Network Termination Service is found in paragraphs 6(29) and 6(30) in Annexure 2. The Network Origination Service and Network Termination Service would be applicable for fixed network, mobile network, IP based network and WiMAX network.

108 See PI Paper on Access List, pages 64 – 66.

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Question 77:

The SKMM invites comments on the implications of rationalising Network Origination Service and Network Termination Service, including the ability to differentiate between different technologies (for example, fixed and mobile) for the purposes of determining pricing.

14.2 Transmission Service

In terms of functionalities of the various transmission services, such as the backhaul portion of the Domestic Connectivity to International Services, Domestic Network Transmission Service and Broadcasting Transmission Service, Unbundled Transmission Service in an NGN environment, they appear similar. These are generally high bandwidth transmission services provided between two technically feasible network transmission points over the trunk or core network. In addition, these services can be provided by any feasible transmission technologies. Therefore, it seems logical that these services may be rationalised.

The rationalised Transmission Service would include connectivity to submarine cable landing stations (whether domestic or international), earth stations and carriage of content applications service. The service description for Transmission Service is found in paragraph 6(31) in Annexure 2.

Question 78:

The SKMM invites comments on the implications of rationalising Transmission Service.

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PART F: MANDATORY STANDARD ON ACCESS

15 MANDATORY STANDARD ON ACCESS

15.1 Amendments to the Mandatory Standard

The SKMM may determine a modification or variation of a MS (Access) under section 106 of the CMA if it is satisfied that the mandatory standard is no longer consistent with:

(a) the objects of the CMA; or

(b) any relevant instrument under the CMA; or

(c) any relevant provisions of the CMA or its subsidiary legislation.

In circumstances where the Access List has facilities or services included, removed, varied or amended, it is likely that modifications to the MS (Access) would be required, and the SKMM may determine its modification or variation accordingly. The SKMM would also consider modification or variation to the MS (Access) in order to address matters arising from its operation and implementation to date.

15.2 Overview of Mandatory Standard (Access)

(a) Regulatory balance in MS (Access)

The PI on Access List in 2005 included a discussion of the need for a regulatory balance, i.e. whether the function of the MS (Access) should be to provide guidance for formulating access agreements; or whether a default set of terms and conditions should be mandated. It is this area that has generated some of the most substantive discussion in the pre-PI process for this current Public Inquiry.

The MS (Access) imposes obligations on Access Providers and Access Seekers in relation to facilities and services contained on the Access List. It does not extend regulation beyond the Access List. The MS (Access) principally imposes obligations to facilitate the negotiation of Access Agreements between an Access Provider and an Access Seeker.

The SKMM is required to balance the benefits and detriments of specifying detailed terms and conditions in the MS (Access). The benefits include that Access Providers and Access Seekers would be provided with absolute certainty about the terms and

Page 256 conditions of access. Accordingly, the cost of lack of transparency and negotiation (eg time delay) would be virtually eliminated.

The detriments include that Access Providers and Access Seekers have no or limited ability to contract outside the scope of the terms and conditions specified in the MS (Access). This could have the effect of standardising the service that Access Seekers may acquire, thus standardising the service that may be provided downstream and potentially reducing competition between providers.

Allowing Access Seekers to negotiate terms and conditions above the scope of a minimum set of terms and conditions would allow facilitate downstream differentiation and thus potentially promote competition and investment. There would however be some cost (for example, delay) to Access Seekers of not providing absolute certainty about the terms and conditions of access.

The MS (Access) does not specify the actual terms and conditions that are required to be included in an access agreement. It instead targets specific areas for regulation and requires Access Providers and Access Seekers to reach agreement in relation to those requirements.

(b) Obligations in MS (Access)

The MS (Access) contains 3 substantive sections imposing obligations on Access Providers and Access Seekers:

(i) Disclosure Obligations

Under the Disclosure Obligations in the MS (Access), Access Providers must make available certain information to Access Seekers during negotiation of an Access Agreement. In particular, an Access Provider must prepare an ARD which principally contains the terms and conditions of access. Not all of these terms and conditions are specified in the MS (Access) as discussed above.

(ii) Negotiation Obligations

Under the Negotiation Obligations in the MS (Access), Access Providers must negotiate with Access Seekers in accordance with certain requirements concerning timeframes and process. Such obligations are necessary because the MS (Access) does not specify the actual terms and conditions on which access is

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to be provided. Therefore, the ability of Access Providers to misuse a dominant position during negotiation needs to be regulated.

Again, the Negotiation Obligations in the MS (Access) were originally drafted to be sufficiently general to apply to a wider range of facilities and services than those included on the Access List at the time the MS (Access) was made.

(iii) Content Obligations

Under the Content Obligations in the MS (Access), Access Providers must include terms and conditions in their Access Reference Documents and Access Agreements which are consistent with certain principles and terms specified in this part of the MS (Access). These content obligations target a wide ranging number of areas where Access Providers may undermine the intent of access.

15.3 Previous amendments to MS (Access)

In the SKMM’s 2005 review, the MS (Access) was amended in response to comments received from stakeholders in the past, or based on additional obligations arising from the proposed inclusion of new services and facilities on the Access List arising from that previous review.

In summary, the changes to the MS (Access) in 2005 related to:

(a) a “fast track” process for applications and agreements, specifically applicable for Access Seekers whose requirements for access and interconnection are relatively simple;

(b) a streamlining of the application and negotiation process for negotiation of an Access Request;

(c) clarification regarding the binding nature of forecasts, confirmed by Access Seekers, on those Access Seekers;

(d) clarification regarding the provision of co-location by deemed Access Providers;

(e) obligations concerning the (then) inter-operator MNP support service;

(f) obligations concerning proposed domestic connectivity to international services;

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(g) obligations concerning the (then) proposed internet interconnection service;

(h) obligations concerning the (then) proposed DTTB multiplexing service; and

(i) obligations concerning the (then) proposed inclusion of Access to Network Elements.

15.4 General comments on MS (Access)

During the pre-PI discussions, a diverse range of comments were received. Some comments were generic in nature and the rest were specific to particular subsections of the MS (Access). There were views expressed that the MS (Access) is overly detailed and prescriptive which leaves little scope for negotiation between the parties. In their view, the MS (Access) is intended only to provide meaningful guidance to parties in negotiating access agreements and should contain key principles. The MS (Access) is not meant to have detailed rules in each area of access as the negotiating parties with their commercial objectives would be in a better position to decide on the detailed operational procedures.

There are others who view that MS (Access) is meant to facilitate the negotiation and conclusion of access agreements with little intervention from the SKMM. However, many face difficulties in negotiation due to the processes and obligations which are either incomplete, unclear or used against new entrants or smaller operators. Some claimed they faced delay tactics from Access Providers. There was a comment received that asymmetric obligations were generally placed on Access Providers to provide access to Access Seekers. However, for voice services, the new entrant could be the Access Provider and the Access Seeker could refuse to seek access from the new entrant Access Provider, and hence the calls cannot be terminated onto the new entrant’s network. Another commented that certain clauses in the MS (Access) such as the delivery period were used strategically against the Access Seeker. Some commented that the timeline in the MS (Access) should be more realistic. Generally, there was support that the MS (Access) should be reviewed, and some proposed that further terms and conditions for some Access List services be considered.

The difficulties faced in negotiating access agreements have been elaborated as follows:

(a) the MS (Access) is too general and the convoluted processes have been used against new entrants. Therefore, it was proposed that the processes be simplified, such as deadlines be shortened, access requests be made simpler and

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speedier, with provisions provided in the MS (Access) for expeditious intervention by the SKMM;

(b) the 120 days to conclude the access agreement should be strictly adhered to, with penalty such as fines and reprimands to be imposed on the party who failed to adhere to the timeline. Another comment added that two years were lost when the termination rate for 0154 services were not regulated; and

(c) there is no negotiation as the MS (Pricing) ceiling price is imposed without any prospect for negotiating downward.

There were comments provided that the MS (Access) should be reviewed as there are processes and obligations which are incomplete and unclear which makes the negotiations difficult. Some provided further details as follows:

(a) the ARDs are not detailed enough, therefore it increases the time for negotiation. Fast track process should also be covered in the ARDs. It was also proposed that ARDs be produced only by dominant providers;

(b) the fast track process is also not exercisable by all the service providers;

(c) there are difficulties to negotiate infrastructure sharing as the MS (Access) has not covered those details. For example, the MS (Access) did not cover liability of third party causing damage to property, landowner consent, local authority permission, vacating the property due to non-approval of sites or maintenance services;

(d) that specific processes related to the provision of Interconnect Link Service such as service levels, service availability, fault management and restoration time be considered. This was raised in Chapter 8;

(e) proposed terms such as service provision time, fault management, restoration time for leased lines. This was raised in Chapter 9;

(f) terms and conditions set out for Domestic Connectivity to International Services. This was raised in Chapter 7;

(g) currently there are unfair commercial terms and conditions imposed on Bitstream Services and Digital Subscriber Line Resale Service;

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(h) proposal to consider operations and maintenance of transmitter equipment. This was raised in Chapter 6 and 10; and

(i) relevant terms and conditions in relation to high speed broadband network or NGN services, which includes migration related issues, POI, QoS and interconnect pricing.

15.4.1 Preliminary view

Whilst the SKMM agrees that the MS (Access) is meant to facilitate negotiations between operators in the industry and hence should not be overly prescriptive, the SKMM is of the opinion negotiations are only likely to lead to reasonable outcomes where both parties have equal or nearly equal bargaining power. The SKMM is of the view that this is not the situation in the industry, and this is widely supported by many comments received that highlight numerous difficulties in negotiation and further proposals for additional terms and conditions. Therefore a hands-off approach is not appropriate in this circumstance.

Having acknowledged that there may be serious issues facing both the Access Providers and the Access Seekers and with the insufficient detailed information provided to the SKMM at this juncture, the SKMM is concerned that any proposed solution may not adequately resolve the issues faced by both parties, particularly by Access Seekers. However, the SKMM is cognisant that these issues would need to be discussed and resolved in a timely manner so as to provide certainty for the parties to conclude the access agreements.

Some of the issues relating to high speed broadband network or NGN services were also discussed in Chapter 12. However, most of the issues such as migration involve additional work, and is not part of this review, and would be carried out separately.

At this juncture, the SKMM does not have any preliminary view on whether the MS (Access) would need to be amended to take into account the entire consolidated list of Access List facilities and services, or whether only some of the items would be incorporated. The SKMM would also seek feedback (with justification) on the list of Access List facilities and services that require additional terms and conditions, or whether there are any other facilities and services that should also be considered.

In addressing some or all of the concerns raised regarding the Access List facilities and services, the SKMM would also seek feedback on the way forward. As the amendments may potentially be substantial, the SKMM is considering whether it is appropriate to

Page 261 conduct a separate public inquiry on the MS (Access). As an alternative, the SKMM also considers that it may be appropriate for the MAFB to consider to develop access codes for some of the facilities and services highlighted during the pre-PI process.

The SKMM would be interested if there are any who support this approach, and to provide some comments on the way forward. On the other hand, the SKMM would also be interested whether there is a contrary view to this proposal, and for them to provide an alternative way forward. In the meantime, the SKMM would urge those who have highlighted various operational and procedural issues to different Access List facilities or services to provide a more detailed response.

Question 79:

(a) The SKMM seeks feedback, with justification on the enumerated list of facilities and services that require additional terms and conditions, including whether there are any other that could be considered.

(b) The SKMM seeks feedback on the proposed way forward by holding a separate public inquiry on the MS (Access).

(c) Do you consider that there could be a role for the MAFB such as developing some of the areas as access codes?

15.5 General comments on access agreements

There were comments received that due to an absence of a common format in the industry, there was difficulty faced in drafting access agreements. Further, it was suggested that a template or common format be provided in the MS (Access) as a guideline for services such as fixed and mobile origination and termination services. This template could include the main general principles of the MS (Access) and provide guidance to the industry. It was further supported that there should be standard pre- approved access agreements and that only the annexes be specific for the respective operator, and therefore negotiation should be focused on implementation issues which are time bound.

Some pointed out that the parties find the access agreements are too bulky and detailed in operational matters.

There were comments that access agreements were a slow process and can take more than 6 months to conclude.

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There were concerns raised in relation to short timelines set to renegotiate access agreements once the SKMM has determined that the access agreements are inconsistent with the regulatory regime.

There were views expressed by some on the time taken to register the executed access agreements. This affects the access to facilities and services of the Access Provider. In addition, there was confusion expressed as to the effective date of the Access Agreement. There was a proposal that the services can be commenced subsequent to signing by the parties, even before the registration of the access agreements.

15.5.1 Preliminary view

In its initial drafting of the MS (Access), it was the intention of the SKMM not to include a precedent access agreement as it was concerned about an overly prescriptive approach. However, the SKMM appreciates the operational and implementation issues faced by the Access Providers and Access Seekers.

Based on international experience, there are some jurisdictions where a form of model access agreement has been used. For example:

In Australia the (now disbanded) Telecommunications Access Forum (TAF ), devised a Telecommunications Access Code pursuant to a statutory obligation. As stated in the Code, the intention was to encourage industry self-regulation.

The New Zealand Telecommunications Act includes provision for the development of “standard terms”. The rationale is for the Commerce Commission to (in lieu of making bilateral access determinations) make a determination on the terms on which a regulated service must be provided to all Access Seekers. Standard terms have since been issued on backhaul services that support the unbundled local loop and unbundled Bitstream Services.

The SKMM took note of the comments that access agreements take time to conclude or that access agreements could be bulky, and may consider them as part of the review described in the paragraph before. In terms of the access agreements, as per section 92(1) and 150(1), access agreements are only enforceable once they have been registered. However, there has not been a provision in the MS (Access) that specifies the “effective date” for the access agreement, and since this is an issue that the industry is concerned, it can also be considered as part of the review of the MS (Access).

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Question 80 :

Do you consider that the MS (Access) should be replaced by, or supplemented with, a model set of non-price access terms and conditions?

15.6 Disclosure obligations (subsection 5.3)

The comments received for this subsection are as follows:

(a) the ARD should only be published by dominant operators;

(b) to include rates as part of the ARD under subsection 5.3.4; and

(c) clarity was sought regarding subsection 5.3.9 on insurance requirements. The comment was whether the Access Provider can impose any other insurance other than comprehensive general liability insurance on the Access Seeker, and whether it is possible for the quantum of comprehensive general liability insurance to be lowered to lessen the burden on the Access Seeker.

15.6.1 Preliminary view

In relation to the proposal that the requirements of the ARD should be targeted only at dominant operators, this general issue was discussed in the PI Report on MS (Access) in 2003. In that report, the SKMM considered the general legislative scheme of the CMA and that the access regime was intended to be of a general application, and decided that there would not be “targeted regulation” of dominant operators. In addition, the SKMM had also considered and felt that it would not impose an unreasonable regulatory burden on smaller Access Providers by requiring them to make ARDs. As such, the SKMM would reiterate its earlier decision and clarify that ARDs are applicable generally to all Network Facilities Providers and Network Service Providers.

The SKMM clarifies that the insurance requirements is meant to protect the rights of the Access Provider however, it is not meant to pose a burden on the Access Seeker. In that, section 5.3.9 has been drafted to not allow the Access Provider to request any insurance in addition to those necessarily required, and only specified the necessary insurance for the employees of the Access Seeker as required under the laws of Malaysia and the comprehensive general liability insurance.

In terms of the quantum of the comprehensive general liability insurance, the RM20 million is the maximum amount, and the actual amount is dependent on the reasonable

Page 264 insurable interest that the circumstances of the access agreement require. SKMM seeks further views from the industry on the quantum of comprehensive general liability insurance and whether it needs to be revised.

In relation to the necessary amendments to ensure that it has an explicit requirement to include the rates for the individual facilities and services, as set out below. Accordingly, the proposed change to paragraph 5.3.4(d) is found in paragraph 3(c) in Annexure 3.

Question 81 :

The SKMM seeks further views from the industry on the quantum of comprehensive general liability insurance in subsection 5.3.9 of the MS (Access).

15.7 Negotiation obligations (subsection 5.4)

There was a comment that fast track was not able to be exercised by all parties.

15.7.1 Preliminary view

The fast track process was designed to shorten the negotiation process of certain facilities and services on the Access List. However, further input would be required to revise the fast track process as appropriate.

Question 82 :

The SKMM seeks further views about the fast track mechanism in subsection 5.4 of the MS (Access), particularly ways in which it may be improved to encourage use by parties.

15.8 Forecasting obligations (subsection 5.6)

The comments received for this subsection are as follows:

(a) the Access Seekers do not agree to provide forecasts to Access Providers and do not agree to the requirement;

(b) the entire forecasting obligations section can be removed as it is not followed in practice. In practice, the industry follows the technical and implementation manual. It was suggested that the industry should be allowed to decide based on current arrangements which are working well; and

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(c) an editorial comment that the cross-referencing in paragraph 5.6.10(d) is inaccurate.

15.8.1 Preliminary view

The SKMM seeks input from the industry before reaching a preliminary view on whether this subsection should be revised or removed in its entirety. The SKMM remains concerned whether the industry would be able to agree amongst itself on forecasting procedures should this section be removed, and would seek input.

The other proposed change in paragraph 5.6.10(d) is found in paragraph 3(f) in Annexure 3.

Question 83 :

The SKMM seeks input on the prevailing industry practice in relation to forecasting procedures, and whether there are any difficulties faced by new operators in this respect.

15.9 Ordering and provisioning obligations (subsection 5.7)

The comments received for this subsection are as follows:

(a) there are two comments on delivery time. Firstly, the delivery time of between two to eight months was too long for an existing service as specified under subsection 5.7.14. Secondly, some comments queried whether the indicative delivery timeframe is sufficient to include government approvals;

(b) a comment was received that this subsection which is confined to capacity request can be removed from the MS (Access), as there are industry arrangements that are working well;

(c) an editorial comment that the cross-referencing in paragraph 5.7.16(d), paragraph 5.7.17(a) and (b) and subsection 5.7.19 are inaccurate.

15.9.1 Preliminary view

During the PI on Access List in 2005, a similar comment was posed to extend the timeframe for the indicative delivery to take into consideration wayleaves and government approvals. At that time, the SKMM considered that there should not be

Page 266 further delay based on the practice that work commences work while wayleaves and government approvals are being obtained. Nevertheless, the SKMM would seek feedback (with justification) on the current practice in the industry, and whether the timeframe indicated under subsection 5.7.14 should be revised, (for example, to be shortened). Further, the SKMM would seek to understand whether the timeframe would differ based on the different network facilities or network services.

The proposed changes for paragraph 5.7.16(d), paragraph 5.7.17(a) and (b) and subsection 5.7.19 are found in paragraph 3(g), (h) and (i) in Annexure 3.

In relation to the proposal to remove the entire subsection, the SKMM remains concerned whether the industry would be able to agree amongst itself on ordering and provisioning procedures should this section be removed, and seeks input accordingly.

Question 84:

(a) The SKMM seeks feedback, with justification in relation to the comments received on the indicative timeframe for delivery.

(b) The SKMM seeks feedback on the prevailing industry practice in relation to ordering procedures, and any difficulties faced by the newer operators.

15.10 Point of interface procedures (subsection 5.9)

There was an editorial comment found in subsection 5.9.5.

15.10.1 Preliminary view

The proposed change for subsection 5.9.5 is found in paragraph 3(j) in Annexure 3.

15.11 Network facilities access and co-location (subsection 5.13)

There are two comments in this subsection which are as follows:

(a) There is an editorial comment found in subsection 5.13.5; and

(b) Currently, there is no provision in this subsection in the event that the Access Provider faces space constraints.

15.11.1 Preliminary view

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The proposed change to subsection 5.13.5 is found in paragraph 3(l) in Annexure 3.

There is a provision in subsection 5.13 that deals with the Access Provider’s obligation in relation to space constraints (see subsection 5.13.11). Further, the SKMM is of the view that space constraints faced by Access Providers in providing network facilities access and co-location can also be addressed under Grounds of refusal, specifically under paragraph 5.4.11(d). The proposed change is found in paragraph 3(d) in Annexure 3.

15.12 Billing and settlement obligations (subsection 5.14)

There were comments received in relation to this subsection:

(a) subsection 5.14.5 is not required by the operators;

(b) in relation to subsection 5.14.11, there was a suggestion to differentiate between voice and other services. It was commented that it is difficult to withhold payment in relation to voice services.

(c) in relation to subsection 5.14.16 on backbilling, there was a comment received to restrict the backbilling to the immediate next invoice; and

(d) in relation to subsection 5.14.17, clarity was sought on what happens where the provisional Invoice was not adjusted within 60 days. The current industry practice is that the provisional Invoice will be deemed accepted after 60 days, hence it was proposed that the subsection be amended to reflect the current practice.

(e) there are two editorial changes proposed. Firstly, it is in relation to subsection 5.14.6. Secondly, there is an editorial change proposed in subsection 5.14.13 to ensure consistency with Annexure A, section 6.4;

15.12.1 Preliminary view

As most of the proposed changes in this subsection are operational in nature which may affect the operations of other operators, the SKMM seeks input with justification on the comments received above.

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The proposed change on subsection 5.14.6 and 5.14.13 are found in paragraph 3(m) and (n) in Annexure 3.

Question 85:

(a) The SKMM seeks feedback with justification on the proposal received to remove subsection 5.14.5 of the MS (Access) and the impact of its removal on the inter- operator billing arrangements.

(b) The SKMM seeks feedback with justification on whether there is merit to consider the proposal that the withholding of disputed amounts provided under subsection 5.14.11 should exclude voice services.

(c) The SKMM seeks feedback with justification on the impact if backbilling in subsection 5.14.16 of the MS (Access) is restricted to the immediate next invoice.

(d) The SKMM seeks feedback on the treatment of provisional Invoices after 60 days under subsection 5.14.17 of the MS (Access).

15.13 Technical obligations (subsection 5.16)

There was a comment that the QoS provided in subsection 5.16.9 is only applicable to voice services, and that QoS for transmission services would be useful. The SKMM notes that there are operations and maintenance obligations in subsection 5.15 that apply to transmission services, specifically as listed in subsection 5.15.13 for target times for fault rectification.

15.13.1 Preliminary view

The SKMM seeks submissions on the appropriate QoS parameters that could be applied to transmission services, based on the proposed draft service description for this generic category of services.

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Question 86 :

The SKMM seeks feedback on the adequacy of current technical obligations specified in subsection 5.16.9 of the MS (Access), including any proposals for suitable QoS parameters that could be included for transmission services.

15.14 Term, suspension and termination obligations (subsection 5.17)

The comments received in this subsection are as follows:

(a) there is a comment received to provide clarity to subsection 5.17.1;

(b) there are two comments received for paragraph 5.17.3(b). The first is to clarify other circumstances where the Access Seeker may be in distress, such as where the Access Seeker has become subject to a court order under section 176 of the Companies Act [Act 125] . The second comment is in relation to the notice period for paragraph 5.17.3(b). These are not new comments and the SKMM has received the same comments during the PI on Access List in 2005;

(c) there were several comments received in relation to subsections 5.17.5 and 5.17.6 on provision of notice prior to suspension as well as on the approval to be sought from SKMM prior to termination or suspension, indicating that existing protections afforded by the Companies Act [Act 125] is sufficient to protect the Access Seekers. Further, there was another comment that proposed a timeframe for the SKMM to grant the approval for termination, suspension or material variation in relation to subsection 5.17.6. These are also not new comments and the SKMM has received the same comments during the PI on Access List in 2005.

15.14.1 Preliminary view

In relation to the repeated comments received on paragraph 5.17.3 (b), subsection 5.17.5 and subsection 5.17.6, the SKMM reiterates its previous position.

The SKMM has not altered those provisions. The SKMM recognises that the interest of all parties – Access Providers, Access Seekers and consumers included, ought to be balanced when considering the question of termination or suspension of facilities and services. The SKMM would not broaden the categories of termination circumstances but have taken note that all relevant circumstances, including any other court orders that the Access Seeker may be subject to, ought to be considered.

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The SKMM reiterates that under subsection 5.17.3(b), there are no changes to be made, but the termination is still subject to SKMM’s approval.

The SKMM regards subsection 5.17.6 as important protection for Access Seekers who are necessarily dependent on the provision of facilities and services on the Access List and for consumers. Termination or suspension of such facilities and services would not only seriously detriment an Access Seeker’s business but would also cause disruption to consumers. Also, the appropriate timeframe necessary to consider and deal with the issues will be different from a case to case basis, depending on the circumstances and complexity of each case. As such, termination or suspension, in the SKMM’s view, should only be exercised with due notice and after the SKMM has been assured that all necessary actions (including consumer protection) have been taken.

The proposed change for subsection 5.17.1 is found in paragraph 3(o) in Annexure 3.

15.15 Churn obligations (subsection 5.18)

There was a view provided that this subsection should be reviewed as it appeared to relate to equal access and not to all services. Further it was suggested that it may be service-specific.

15.15.1 Preliminary view

The SKMM is of the view that churn obligations would be applicable to certain facilities and services on the Access List such as Equal Access (PSTN) Service, Inter-Operator Mobile Number Portability Support Services, and potentially to the Access to Network Elements Services such as Full Access Service, Sub-loop Service. The comment can be considered further should there be a subsequent review of the MS (Access) to be carried out.

15.16 Legal boilerplate obligations (subsection 5.19)

There was an editorial comment on paragraph 5.19.10(e) for clarity.

15.16.1 Preliminary view

The proposed change to paragraph 5.19.10(e) is found in paragraph 3(q) in Annexure 3.

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15.17 Digital Terrestrial Broadcasting (DTB) Multiplexing Service (subsection 5.23)

The obligations under this subsection was inserted during the PI on Access List in 2005. Subsequently, the MS (DTT) mandated MPEG-4 audio-visual coding for both SDTV and HDTV. Accordingly, the obligations under this subsection would need to be amended accordingly, in particular subsection 5.23.2.

Under subsection 5.23.2, the standard bitrate allocation specified for the SDTV broadcasting service “shall be no less than 4.5 Mbps” was based on MPEG-2. It is the understanding of the SKMM that under MPEG-4, the standard bitrate allocation could be lower, for example, at 1.5 to 2 Mbps. The SKMM seek comments with justifications on the appropriate standard bitrate allocation for SDTV under MPEG-4.

In addition, the standard bitrate allocation has not been specified for HDTV, and the SKMM would be keen to receive feedback on whether it is necessary to specify it in the MS (Access) and the appropriate bitrate under MPEG-4.

15.17.1 Preliminary view

The SKMM propose to insert a new subsection 5.23.6 which refers to the MS (DTT), and this is found in paragraph 3(r) in Annexure 3.

Question 87:

(a) The SKMM seeks views on the standard bitrate allocation for SDTV, as applicable under MPEG-4.

(b) The SKMM also seeks views on whether standard bitrate allocation is necessary for HDTV, and the appropriate bitrate.

15.18 Access to Network Elements (subsection 5.24)

There was an editorial comment received that the cross-referencing in paragraph 5.24.2(g) is inaccurate.

15.18.1 Preliminary view

The proposed change is found in paragraph 3(s) in Annexure 3.

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15.19 Implementation of the Standard (subsection 6.2)

There was a comment received that there should be a timeline for registration of access agreements under subsection 6.2.5.

15.19.1 Preliminary view

The SKMM would like to highlight that the Guideline on Access Agreement Registration provides the timeline for registration. The SKMM appreciates the comments received however, some of the access agreements lodged with the SKMM may be complex and may require time for SKMM to consider. Nevertheless, the SKMM would also consider ways to improve this implementation area in the proposed subsequent review of the MS (Access).

15.20 Annexure A: Dispute Resolution Procedures

There was an editorial comment received on sections 6.5 and 6.6, which can be cross- referenced to the comments under subsection 5.14.15.

15.20.1 Preliminary view

The proposed changes to sections 6.5 and 6.6 are found in paragraph 3(x) and (y) in Annexure 3.

15.21 Consequential amendments to MS (Access) as a result of amendments to the Access List

There are two categories of amendments to the MS (Access) arising from the amendments to the Access List, which is in the event that certain facilities and services are removed from the Access List or included in the Access List. This has been noted in sections 2.3 and 15.1 above. Therefore, the facilities and services that is in the SKMM’s preliminary view would be included or removed would be highlighted. This affects the High Speed Broadband Services and Equal Access (PSTN) Service.

In addition, a third category of facilities and services where the SKMM has not reached a view is also noted in this section. This affects facilities and services such as Wholesale Line Rental Service and the rationalised services, namely Network Origination Service and Network Termination Service.

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In summary, the proposed changes to the MS (Access) as a result of amendments to the Access List are as follows:

(a) obligations concerning Equal Access (PSTN) Service to be removed. This is found in paragraph 2(a), (b), (c), (d) and paragraph 3(a), (b), (e), (k) in Annexure 3;

(b) obligations concerning Wholesale Line Rental Service to be included. This is found in paragraph 3(t) in Annexure 3. Further, subsection 5.18.7 has also been amended to be consistent with the obligations on Wholesale Line Rental Service, and is found in paragraph 3(p) in Annexure 3;

(c) obligations concerning High Speed Broadband services to be included. This is found in paragraph 3(u) in Annexure 3.

(d) interpretation of “O&T Service” is amended to reflect the rationalised services, Network Origination Service and Network Termination Service. This is found in paragraph 2(e) in Annexure 3.

The amendments to the MS (Access) are reflected in the Variation to Commission Determination on the Mandatory Standard on Access (Determination No. 2 of 2005) and attached as Annexure 3, and is summarised in Table 14.

References in the References in MS (Access) Variation to MS (Access) in Annexure 3 Incidental Changes paragraph 3; paragraph 2(f), (g) paragraph 6: paragraph 3(c), (d), (f), (g), subsections 5.3.4, 5.4.11, (h), (i), (j), (l), (m), (n), (o), paragraph 5.6.10(d), paragraph (p), (q), (r), (s), (v), (w), 5.7.16(d), subsection 5.7.17, (x), (y) subsection 5.7.19, subsection 5.9.5, subsection 5.13.5, subsection 5.14.6, 5.13.23, subsection 5.14.6, subsection 5.14.13, subsection 5.17.1, subsection 5.18.7, subsection 5.19.10, subsection 5.23, paragraph 5.24.2(g), subsection 6.2.4, subsection 6.2.6, Annexure A subsection 6.5, Annexure A subsection 6.6

Variations to reflect Equal Access (PSTN) Service: paragraph 2(a), (b), (c), (d), removal of facilities paragraph 3; paragraph 3(a), (b), (e), (k) from the Access List paragraph 6: paragraphs 1.2.5(c)(viii), 5.2.1(c)(vii),

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5.5.1(h) and subsection 5.12

Variations to reflect paragraph 2(e) the addition of paragraph 3(t) facilities and services paragraph 3(u) on the Access List

Table 14: Summary of changes to MS (Access)

Question 88:

The SKMM seeks views and comments on the proposed amendments to the MS (Access).

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ANNEXURE 1: PRE-PI CONSULTATIONS AND RESPONSES RECEIVED

A. Individual, confidential discussions during pre-PI process were held with the following stakeholders:

Malaysian Access Forum Berhad (MAFB)
Telekom Malaysia Berhad
Celcom (Malaysia) Berhad
Maxis Communications Berhad
DiGi Telecommunications Sdn. Bhd.
U Mobile Sdn. Bhd.
TIME dotCom Sdn. Bhd.
Jaring Communications Sdn. Bhd.
REDtone International Berhad
PacketOne Networks (M) Sdn. Bhd.
Y-Max Networks Sdn. Bhd.
Asiaspace Sdn. Bhd.
Media Prima Berhad
Members of Malaysian Association of Commercial Radio Operators (MACRO)
Fiberail Sdn. Bhd.
Fibrecomm Network (M) Sdn. Bhd.
Sacofa Sdn. Bhd.
XOX Com Sdn. Bhd.
Merchantrade Asia Sdn. Bhd.

B: Responses to the questionnaires during the pre-PI process were received from the following stakeholders:

Telekom Malaysia Berhad
Celcom (Malaysia) Berhad
Maxis Communications Berhad
DiGi Telecommunications Sdn. Bhd.
U Mobile Sdn. Bhd.
U Telecom Sdn. Bhd. (previously known as U Television Sdn. Bhd.)
TIME dotCom Sdn. Bhd.
Jaring Communications Sdn. Bhd.
REDtone International Berhad
PacketOne Networks (M) Sdn. Bhd.
Y-Max Networks Sdn. Bhd.
Asiaspace Sdn. Bhd.
Media Prima Berhad
Measat Broadcast Network Systems Sdn. Bhd.
Fiberail Sdn. Bhd.
Fibrecomm Network (M) Sdn. Bhd.
Sacofa Sdn. Bhd.
Equant Services Malaysia Sdn. Bhd.

Annexure 1, Page 1

ANNEXURE 2: DRAFT ACCESS LIST DETERMINATION

This Annexure 2 sets out proposed amendments to the current Access List Determination, arising as a result of its preliminary views set out in this PI Paper. Those proposed amendments are shown as revisions, with notes in [brackets] where necessary to explain the proposed edits.

Comments received on this drafting will assist the SKMM in formulating a new Access List Determination.

Question 89:

The SKMM seeks comments on the proposed new facilities and services and other amendments to the Access List, including the rationalisation of services into generic categories.

Interpretation

2. In this Determination, unless the context otherwise requires:

“Access Provider” means a network facilities provider who owns or provides Facilities and/or a network service provider who provides Services, listed in this Determination, and includes a holder of a registered licence under section 278 of the Act;

“Access Seeker” means a network facilities provider, a network service provider, an applications service provider, or a content applications service provider who makes a written request for access to Facilities or Services, listed in this Determination, and includes a holder of a registered licence under section 278 of the Act;

“Any-to-Any Connectivity” means a connection which is achieved when an end user is able to communicate with another end user, whether or not the end users are connected to the same network;

“ ‘A’ party” means, in the context of communications between end users, the end user from whom the communication originates;

“ ‘B’ party” means, in the context of communications between end users, the end user to whom the communication terminates;

“BGR” or “Border Gateway Router” means a router designed for the interconnection of two autonomous systems;

“Call Communications” means communications involving (in whole or in part) a number or IP address used in the operation of each Operator’s network including Message Communications;

Annexure 2, Page 1

“Common Antenna System” means a system of Facilities comprising antennas and cabling to the antennas inside a building, which is owned or operated by one or more Mobile Network Operators in association with in-building coverage;

“Centrex services” means a service offering the type of functionality associated with a PBX (Private Branch Exchange) from a central switch in the Public Switched Telephone Network, in which every extension is a d irect line but intelligent functions are managed at the exchange;

“Communications Wire” means a copper or aluminium based wire forming part of a Public Switched Telephone Network;

“Contention Ratio” means the notional bit rate expressed as a proportion of the per user bit rate;

“Customer” means, in relation to an Operator, a person having a contractual relationship with that Operator for the provision of communications by means of that Operator’s Facilities and/or Services;

“Customer Access Module” means a device that provides a connection (including ring tone and ring current) to customer equipment. Examples of Customer Access Modules include Remote Subscriber Stages, Remote Subscriber Units, Integrated Remote Integrated Multiplexers, Non -integrated Re mote Integrated Multiplexers and the customer line module of a local switch; Examples include a customer line module of a local switch, remote terminals of a digital line carrier system, a digital subscriber line access multiplexer, a node in a fibre to the node network, and an optical line terminating equipment in a fibre to the premises network ;

“Facilities” means network facilities and/or other facilities which facilitate the provision of network services or applications services, including content applications services;

“Fixed Network” means network facilities and/or network services comprising the Public Switched Telephone Network and/or networks based on Internet Protocols for the provision of communications by guided electromagnetic energy or by point-to-point unguided electromagnetic energy;

“Interconnection Service” means Facilities or Services (including the physical connection between separate networks) to facilitate Any-to-Any Connectivity provided by an Access Provider to an Access Seeker which involves or facilitates the carriage of communications between an end user connected to the network of the Access Provider and a Point of Interconnection;

“Intermediate Point” means any technically feasible point between the network side of the Network Boundary and a Point of Interconnection;

“IP” or “Internet Protocols” means network-layer (Layer 23) protocol, as defined by the Internet Engineering Task Force, that contains addressing information and some control information that enables packets to be routed;

“Jitter” means the difference between the actual Latency of a packet and a reference Latency for a packet population of interest. The reference Latency of a population of packets is the minimum Latency for the packets within the population of interest. Jitter is a statistical sample, measured over a packet population of interest;

Annexure 2, Page 2

“Latency” means the one-way time interval between the moment the first bit of a IP packet crosses an entry point of a network and the moment the last bit of the same packet crosses an exit point of the network (dimensioned in time);

“Message Communications” means communications that provide only text with or without associated images, audio clips and video clips. Examples of Message Communications include Short Message Service and Multimedia Message Service;

“Mobile Network” means network facilities and/or network services comprising the public cellular mobile network and/or the public mobile radio network, for the provision of communications;

“MyIX” means the Malaysia Internet Exchange;

“Mobile Virtual Network Operator” means an Operator that is not a holder of a 3G spectrum assignment or an apparatus assignment under Chapter 1 of Part VII section 159 of the Act but is capable of providing public cellular services to end users;

“Network Boundary” has the meaning given to that term in section 128 of the Act;

“Operator” means a network facilities provider, a network service provider, an applications service provider or a content application service provider (as the context requires) who is an Access Provider or an Access Seeker (as the context requires);

“Packet Loss” means the ratio of total lost IP packets to total transmitted packets in a population of interest. Total lost packets includes any delivered with errors or Latency greater than 3 seconds;

“POI” or “Point of Interconnection” means any technically feasible point which demarcates the network of an Access Provider and the network of an Access Seeker (collectively referred to as the ‘Interconnecting Networks’) and is the point at which communication is transferred between the Interconnecting Networks. An example of a POI is MyIX ;

“POP” or “Point of Presence” means a point at which an Access Seeker has established itself for the purpose of obtaining access to Facilities and/or Services;

“PSTN” or “Public Switched Telephone Network” means a telephone network accessible by the public providing circuit switching and transmission facilities utilising analogue and/or digital technologies;

“QoS Class” means a set of quality of service parameters (defined in terms of Latency, Jitter and Packet Loss) associated with Layer 2 connectivity;

“Services” means network services and/or other services which facilitate the provision of network services or applications services, including content applications services;

“Transport Stream” means a packet based method of multiplexing one or more digital video and audio streams having one or more independent time bases into a single stream;

Annexure 2, Page 3

“Unconditioned Communications Wire” means Communications Wire which is not conditioned for voice services only, for example by means of loading coils, taps, bridges or pair gain systems;

”Universal Service Targets” means the underserved areas and/or underserved groups within the community specified in a notification that may be published by the Commission from time to time in accordance with regulation 4 of the Communications and Multimedia (Universal Service Provision) Regulations 2002 [P.U(A) 419/2002 ].

3. Any term used in this Determination shall, unless expressly defined or if the context otherwise requires, have the same meaning as in the Act or the regulations made under it.

4. Unless the context otherwise requires, words in the singular include the plural and vice versa.

Implementation Application of services under paragraphs 6(16), 6(17), 6(18), and 6(19) and 6(26)

5. (1) Paragraph 6(26) shall have application only in Universal Service Targets.

(2) Paragraphs 6(16), 6(17) and 6(19) shall have application except where subject to deferment by the Ministerial Direction on High-Speed Broadband and Access List, Direction No. 1 of 2008.

(3) Paragraph 6(18) shall have application except in locations where paragraphs 6(27) and 6(28) are implemented by the Access Provider .

(1) Paragraphs 6(16), 6(17), 6(18) and 6(19) will be carried out in phases to ensure effective and sustainable implementation. Paragraph 6(18) shall come into force on 1 July 2005, but paragraphs 6(16), 6(17) and 6(19) shall come into force on a later date to be decided by the Commission.

(2) In deciding the date of coming into force of paragraphs 6(16), 6(17) and 6(19), the Commission may take into account factors including but not limited to, market response to the implementation of paragraph 6(18) and requ irements of Access Seekers and Access Providers.

(3) The Commission shall notify the date on which any or all of paragraphs 6(16), 6(17) and 6(19) shall come into force by way of notification in writing.

Access List

6. (1) Fixed Network Origination Service

(a) A Fixed Network Origination Service is an Interconnection Service provided by means of a Fixed Network for the carriage of Call Communications from an ‘A’ party customer equipment to a POI. The Fixed Network Origination Service comprises transmission and switching (whether packet or circuit) for Fixed Network-to-Fixed Network, Fixed Network-to-Mobile Network and Fixed Network-to-international outgoing calls insofar as they relate to freephone 1800 number services, toll free

Annexure 2, Page 4

1300 number services, and other similar services which require Any-to- Any Connectivity.

(b) The functionalities of the Fixed Network Origination Service include:

(i) transmission and switching (whether packet or circuit); and

(ii) the signalling required to support the Interconnection Service.

(c) Examples of technologies used in the provision of the Fixed Network Origination Service include would be PSTN, Integrated Services Digital Network (ISDN) and Voice over Internet Protocol (VoIP) networks and other IP based networks .

[Note: The alternative rationalised Network Origination Service is found in paragraph 6(29)]

(2) Equal Access (PSTN) Service

(a) The Equal Access (PSTN) Service is an Interconnection Service provided by means of a PSTN for the carriage of Call Communications from customer equipment to a POI which allows an end user to select and use the services of the Access Seeker. The Equal Access (PSTN) Service is only required to be provided on a call -by -call basis (for instance, through dialling of an equ al access prefix code).

(b) The Equal Access (PSTN) Service comprises transmission and switching for PSTN -to -PSTN network calls (including Centrex services) and PSTN -to -international outgoing calls only.

(c) The functionalities of the Equal Access (PSTN) Service include:

(i) circuit switching; and (ii) the signalling required to support the Interconnection Service.

(d) An example of a technology used in the Equal Access (PSTN) Service would be Integrated Services Digital Network (ISDN).

(3) Fixed Network Termination Service

(a) A Fixed Network Termination Service is an Interconnection Service provided by means of a Fixed Network for the carriage of Call Communications from a POI to a ‘B’ party customer equipment . The Fixed Network Termination Service comprises transmission and switching (whether packet or circuit) for Fixed Network-to-Fixed Network, Mobile Network-to-Fixed Network and incoming international-to-Fixed Network calls and messages which require Any-to-Any Connectivity .

(b) The functionalities of the Fixed Network Termination Service include:

Annexure 2, Page 5

(i) transmission and switching (whether packet or circuit); and (ii) the signalling required to support the Interconnection Service.

(c) Examples of technologies used in the provision of the Fixed Network Termination Service include PSTN, would be Integrated Services Digital Network (ISDN), and other IP based Voice over Internet Protocol (VoIP) networks.

[Note: The alternative rationalised Network Termination Service is found in paragraph 6(30)]

(4) Mobile Network Origination Service

(a) A Mobile Network Origination Service is an Interconnection Service for the carriage of Call Communications from a ‘A’ party to a POI. The Mobile Network Origination Service supports Mobile Network-to-Mobile Network, Mobile Network-to-Fixed Network and Mobile Network-to- international outgoing calls in so far as they relate to freephone 1800 number services, toll free 1300 number services, and other similar services which require Any-to-Any Connectivity.

(b) The functionalities of the Mobile Network Origination Service include:

(i) transmission and switching (whether packet or circuit); and (ii) the signalling required to support the Interconnection Service.

(c) Examples of technologies used in the Mobile Network Origination Service would be:

(i) Global System for Mobile Communications (GSM); and (ii) International Mobile Telecommunications 2000 (IMT-2000); and (iii) Worldwide Interoperability for Microwave Access (WiMAX).

[Note: The alternative rationalised Network Origination Service is found in paragraph 6(29)]

(5) Mobile Network Termination Service

(a) A Mobile Network Termination Service is an Interconnection Service for the carriage of Call Communications from a POI to a ‘B’ party. The Mobile Network Termination Service supports Mobile Network-to- Mobile Network, Fixed Network-to-Mobile Network, incoming international- to-Mobile Network calls and messages which require Any-to-Any Connectivity.

(b) The functionalities of the Mobile Network Termination Service include:

(i) transmission and switching (whether packet or circuit); and

Annexure 2, Page 6

(ii) the signalling required to support the Interconnection Service.

(c) Examples of technologies used in the Mobile Network Termination Service would be:

(i) Global System for Mobile Communications (GSM); and (ii) International Mobile Telecommunications 2000 (IMT-2000); (iii) Worldwide Interoperability for Microwave Access (WiMAX).

[Note: The alternative rationalised Network Termination Service is found in paragraph 6(30)]

(6) Interconnect Link Service

An Interconnect Link Service is a Facility and/or Service which enables the physical connection between the network of an Access Provider and the network of an Access Seeker for the purpose of providing an Interconnection Service.

(7) Private Circuit Completion Service

(a) A Private Circuit Completion Service is an Interconnection Service for the carriage of communications by way of a private circuit between a POI and an end user, available only at one end of a private circuit. The Private Circuit Completion Service comprises transmission and switching (whether packet or circuit) at such transmission rates as may be agreed between the Access Provider and the Access Seeker on a permanent or virtual basis.

(b) The functionalities of the Private Circuit Completion Service include:

(i) transmission and switching (whether packet or circuit); and (ii) the signalling required to support the Interconnection Service; and (iii) a digital protocol (including Internet Protocols).

(c) An example of a technology used in the Private Circuit Completion Service would be Integrated Services Digital Network (ISDN) and IP based networks.

(d) An end user includes a wholesale or retail customer and includes an Operator and the final recipient of the service.

(8) Domestic Network Transmission Service

(a) A Domestic Network Transmission Service is a Facility and/or Service for the carriage of communications between any two technically feasible network transmission points (not being Customer transmission points) via network interfaces at such transmission rates as may be agreed between the Access Provider and the Access Seeker on a permanent or virtual basis.

Annexure 2, Page 7

(b) The Domestic Network Transmission Service transmission p oints are:

(i) any technically feasible network transmission points; (ii) submarine cable and satellite links between a transmission point in Sabah and Sarawak, and a transmission point in Peninsular Malaysia. A technically feasible network transmission point in paragraph (a) includes submarine cable and satellite link between Sabah and Sarawak and Peninsular Malaysia, submarine cable landing centre and an earth station.

(c) The functionalities of the Domestic Network Transmission Service include:

(i) transmission and switching (whether packet or circuit); (ii) the signalling required to support the technology or to provide a service; (iii) termination at either end by a port, router, network termination unit, switch, submarine cable landing centre or earth station; (iv) a digital protocol (including Internet Protocols) .

(d) Network interfaces referred to in paragraph (a) above include elements such as copper wire, microwave, laser, fibre optic, satellite or other wireless technologies. Network interfaces may use any technology as may be agreed between the Access Provider and the Access Seeker.

(e) An Access Seeker for the Domestic Network Transmission Service includes (but is not limited to) a network facilities provider or network services provider which is only authorised to provide limited (e.g. in the last mile) network facilities or network services, but wishes to acquire the Domestic Network Transmission Service in order to connect its limited network facilities or network services.

[Note: The alternative rationalised Transmission Service is found in paragraph 6(31)]

(9) Internet Access Call Origination Service

(a) An Internet Access Call Origination Service is an Interconnection Service provided by means of a PSTN for the carriage of Cal l Communications over the voice bandwidth from customer equipment to a POP being:

(i) a POI; (ii) at an agreed point of input to the Access Seeker’s modem bank or router; or (iii) at an agreed point of output from the Access Provider’s modem bank or route r.

(b) The functionalities of the Internet Access Call Origination Service are:

(i) circuit switching; (ii) the signalling required to support the network service; and

Annexure 2, Page 8

(iii) dial -up to short codes and special services numbers.

(10) 3G-2G Domestic Inter-Operator Roaming Service

(a) The 3G-2G Inter-Operator Roaming Service is a Service that enables a Customer of a 3G Operator or a 3G Mobile Virtual Network Operator to initiate, receive or otherwise utilise applications on the 2G Mobile Network of the 2G Operator, where:

(i) the Access Provider is the relevant 2G Operator; and (ii) the Access Seeker is the relevant 3G Operator or a 3G Mobile Virtual Network Operator.

(b) The functionalities of the 3G-2G Inter-Operator Roaming Service include the ability of the 3G Customer to initiate and receive voice calls, but are otherwise limited to the applications that the Access Provider provides to its own Customers on its 2G Mobile Network which supports Any-to-Any Connectivity.

(11) Inter-Operator Mobile Number Portability Support Services

(a) The Inter-Operator Mobile Number Portability Support Services comprise the Facilities and/or Services which support mobile number portability for public cellular services, where:

(i) the Access Provider is the provider of the Inter-Operator Mobile Number Portability Support Services, and is the losing provider of the end user service; and (ii) the Access Seeker is the acquirer of the Inter-Operator Mobile Number Portability Support Services, and is the gaining provider of the end user service.

(b) The Facilities and/or Services that support Mobile Number Portability referred to above include:

(i) the Iinter -Ooperato r processes to support the implementation of a port; (ii) technological solutions to support the ongoing porting obligation; and (iii) routing and signalling with respect to ported calls.

(12) Infrastructure Sharing

(a) Infrastructure Sharing is a Facility and/or Service which comprises the following:

(i) provision of physical access, which refers to the provision of space at specified network facilities to enable an Access Seeker to install and maintain its own equipment; or (ii) provision of access to in-building Common Antenna Systems and physical access to central equipment room .

Annexure 2, Page 9

(b) Specified network facilities include towers and associated tower sites.

(c) Physical access includes power, environmental services (such as heat, light, ventilation and air-conditioning), security, site maintenance and access for the personnel of the Access Seeker.

(13) Domestic Connectivity to International Services

Domestic Connectivity to International Services is a Facility and/or Service which comprises, each individually:

(i) a backhaul transmission service between a network transmission point and a submarine cable landing centre or an earth station; (ii) connection services between equipment co-located at the submarine cable landing centre and the submarine cable system

[Note: The alternative to backhaul transmission in paragraph (i) above is the Transmission Service found in paragraph 6(31)]

(14) Network Co-Location Service

(a) The Network Co-Location Service is a Facility and/or Service which comprises:

(i) physical co-location, which refers to the provision of space at an Access Provider’s premises to enable the Access Seeker to install and maintain it’s own equipment necessary for the provision of the Access Seeker’s services through the Facilities and/or Services of any Operator. Physical co- location includes physical space, power, environmental services (such as heat, light, ventilation and air- conditioning), security, site maintenance and access for the personnel of the Access Seeker; (ii) virtual co-location, which refers to the provision of facilities or services at an Access Provider’s premises to enable the acquisition by the Access Seeker of Facilities and Services on the Access List, where equipment is owned and maintained by the Access Provider; or (iii) in-span interconnection, which is the provision of a POI at an agreed point on a physical cable linking an Access Provider’s network facilities to an Access Seeker’s network facilities.

(b) Network premises at which co-location is to be provided includes switching sites, submarine cable landing centres, earth stations, exchange buildings, other Customer Access Modules (including roadside cabinets) and such other network facilities locations associated with the provision of a Facility or Service on the Access List, and includes co-location provided at any location where main distribution frame is housed.

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(15) Network Signalling Service

The Network Signalling Service is a Facility and/or Service for the interconnection of the Signalling System Number Seven ( SS7 ) network of an Access Provider to the SS7 network of an Access Seeker at the signal transfer points. The information exchanged on signal transfer points of the interconnected SS7 networks include but is not limited to:

(i) Integrated Services Digital Network User Part ( ISUP ) information; (ii) Transaction Capability Application Part ( TCAP ) information; and (iii) TCAP/SCCP (Signalling Connection Control Part) services information.

(16) Full Access Service

(a) The Full Access Service is a Facility and/or Service for the use of Unconditioned Communications Wire between the Network Boundary at an end user's premises and a point on a network that is a potential POI located at or associated with a Customer Access Module and located on the end user side of the Customer Access Module.

(b) The Full Access Service includes the use of optical fibre cable and associated transmission services between an Intermediate Point and the POI, associated tie cable services, shared splitting services, interfaces to operational support systems and network information.

(17) Line Sharing Service

(a) The Line Sharing Service is a Facility and/or Service for the use of the non-voiceband frequency spectrum of Unconditioned Communications Wire (over which wire an underlying voiceband PSTN service is operating) between the Network Boundary at an end user’s premises and a point on a network that is a potential POI located at, or associated with, a Customer Access Module and located on the end user side of the Customer Access Module.

(b) The Line Sharing Service includes the use of optical fibre cable and associated transmission services between an Intermediate Point and the POI, associated tie cable services, shared splitting services, interfaces to operational support systems and network information.

(18) Bitstream Services

(a) Bitstream with Network Service

The Bitstream with Network Service is a Facility and/or Service for the provision of Layer 2 connectivity for the carriage of certain communications (being data in digital form and conforming to

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Internet Protocols) between customer equipment at an end user’s premises and a POI at the Access Seeker’s premises, where:

(i) the Customer’s equipment is directly connected to an Access Provider's network; and (ii) the Access Seeker, but not the Access Provider, assigns the Customer with an IP address.

Bitstream with Network Service includes shared splitting services, interfaces to operational support systems and network information.

(b) Bitstream without Network Service

The Bitstream without Network Service is a Facility and/or Service for the provision of Layer 2 connectivity for the carriage of certain communications (being data in digital form and conforming to Internet Protocols) between customer equipment at an end user's premises and a POI at the Access Provider’s premises, where:

(i) the Customer’s equipment is directly connected to an Access Provider's network; and (ii) the Access Seeker, but not the Access Provider, assigns the Customer with an IP address.

Bitstream without Network Service includes shared splitting services, interfaces to operational support systems and network information.

(19) Sub-loop Service

(a) The Sub-loop Service is a Facility and/or Service for the use of Unconditioned Communications Wire between the Network Boundary at an end user's premises and a point on a network that is a potential POI located at or associated with a Customer Access Module and located on the end user side of the Customer Access Module. For Sub-loop Service, the Customer Access Module is housed in a roadside cabinet.

(b) The Sub-loop Service includes the use of optical fibre cable and associated transmission services between an Intermediate Point and the POI, associated tie cable services, shared splitting services, interfaces to operational support systems and network information.

(20) Digital Subscriber Line Resale Service

(a) The Digital Subscriber Line Resale Service is a Service for the provision of connectivity for the carriage of certain communications (being data in digital form and conforming to Internet Protocols) to customer equipment insofar as it relates to IP addresses directly and indirectly connected to the Access Provider’s network. The Digital Subscriber Line Resale Service uses Digital Subscriber Line technology for carriage over the Communications Wire between the Network Boundary at an end user’s premises and the Customer Access Module of the Access Provider’s network.

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(b) The Digital Subscriber Line Resale Service is limited to the wholesale provision of the digital subscriber line service ordinarily provided by the Access Provider to end users.

(21) Internet Interconnection Service

The Internet Interconnection Service is a Facility and/or Service for the carriage of data in digital form between one or more POI at a BGR of an Access Provider’s network and the IP addresses directly connected to the Access Provider’s network.

(22) Broadcasting Transmission Service

(a) The Broadcasting Transmission Service is a Facility and/or Service for the carriage of communications which comprise a content applications service between transmission points via network interfaces at such transmission rates as may be agreed between the Access Provider and the Access Seeker on a permanent basis.

(b) Transmission points are any technically feasible network transmission points.

[Note: The alternative rationalised Transmission Service is found in paragraph 6(31)]

(23) Digital Terrestrial Broadcasting Multiplexing Service

The Digital Terrestrial Broadcasting Multiplexing Service is a Facility and/or Service for the combining of multiple content applications service Transport Streams into a single Transport Stream with or without the addition of conditional access information.

(24) VoIP PRI-ISDN Service

(a) The VoIP PRI-ISDN Service is an Interconnection Service that enables the Customer of the Access Seeker to utilise its IP telephony by initiating a call from Fixed Network or Mobile Network of another Operator. The VoIP PRI-ISDN Service is the carriage of Call Communications from a ‘A’ party to POI and comprises, each individually:

(i) PRI-ISDN access and numbers; (ii) Fixed Network Origination Service or Mobile Network Origination Service.

(b) The Access Provider -

(i) in relation to PRI-ISDN access and numbers, is the relevant Operator of the Fixed or Mobile Network that the Customer is connected to, or another Operator with whom an arrangement was entered into;

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(ii) in relation to Fixed Network Origination Service or Mobile Network Origination Service, is the relevant Operator of the Fixed or Mobile Network that the Customer is connected to.

(c) The functionalities of VoIP PRI-ISDN Service include :

(i) carriage of Call Communications by the Access Seeker as data in digital form and conforming to Internet Protocols; (ii) the POI interface is Integrated Services Digital Network (ISDN) at primary rate (PRI-ISDN); (iii) transmission and switching (whether circuit or packet); and (iv) the signalling required .

(25) Wholesale Line Rental Service

The Wholesale Line Rental Service is a Service which allows an Access Seeker’s Customer to connect to an Access Provider’s Public Switched Telephone Network, and provides the Access Seeker’s Customer with an ability to make and receive Call Communications.

(26) 2G-2G Domestic Inter-Operator Roaming Service

(a) The 2G-2G Inter-Operator Roaming Service is a Service that enables a Customer of a 2G Operator or a 2G Mobile Virtual Network Operator to initiate, receive or otherwise utilise applications on the 2G Mobile Network of another 2G Operator, where:

(i) the Access Seeker is the relevant 2G Operator or a 2G Mobile Virtual Network Operator that the Customer is directly connected to; and (ii) the Access Provider is the other 2G Operator having the presence of 2G Mobile Network.

(b) The functionalities of the 2G-2G Inter-Operator Roaming Service include the ability of the Access Seeker’s 2G Customer to initiate and receive voice calls, but are otherwise limited to the applications that the Access Provider provides to its own Customers on its 2G Mobile Network which supports Any-to-Any Connectivity.

(27) HSBB Service with QoS

(a) The HSBB Service with QoS is an access and transmission Facility and/or Service for the provision of Layer 2 connectivity for the carriage of certain communications (being data in digital form and conforming to Internet Protocols) between customer equipment at a Customer’s premises and a POI at the Access Seeker’s premises, where:

(i) the customer equipment is directly connected to an Access Provider's network; (ii) the Access Seeker selects the bit rate for the HSBB Service; (iii) the Access Seeker selects the QoS Class for the HSBB Service;

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(iv) the Access Seeker selects the Contention Ratio for the HSBB Service; and (v) the Access Provider assigns the Customer with an IP address.

(b) The HSBB Service with QoS includes shared splitting services, interfaces to operational support systems and network information. Nothing in this service description is intended to limit the number of concurrent HSBB Services acquired by an Access Seeker from an Access Provider associated with a single Customer.

(c) The HSBB with QoS shall be supplied to the Access Seeker as follows :

(i) at pre-defined speeds which are capable of providing the bit rates specified below, as selected by the Access Seeker :

Bit rate Note Downstream Upstream Unconstrained Unconstrained Access Provider does not constrain the speed of the service itself but would provide a “raw” network service which the Access Seeker rate shapes (that is, determines the speed). This option is only available with QoS Class 5. 135 kbps 135 kbps VoIP service 1 Mbps 256 kbps Entry level broadband access service 6 Mbps 1 Mbps Mid level broadband access service 10 Mbps 1 Mbps Full high speed broadband access service

(ii) in accordance with the following classes (each a “QoS Class”), as selected by the Access Seeker:

QoS Latency Jitter Packet Loss Notes and example Class applications 0 ≤ 100 ms ≤ 50 ms ≤ 10 -3 Real-time, jitter sensitive, high interaction – VoIP 1 ≤ 400 ms ≤ 50 ms ≤ 10 Real-time, jitter sensitive, interactive – IPTV 2 ≤ 100 ms - ≤ 10 Transaction data, highly interactive – signalling 3 ≤ 400 ms - ≤ 10 Transaction data, interactive – business data 4 ≤ 1 s - ≤ 10 Low loss only (short transactions, bulk data) – video streaming

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QoS Latency Jitter Packet Loss Notes and example Class applications 5 - - - Best efforts – traditional applications of default IP networks

(iii) at the following contention ratios which correspond to the QoS Class selected by the Access Seeker in paragraph (ii) :

Contention Ratio Available with QoS Downstream Upstream Class 1:1 1:1 0, 1, 2 1:1 10:1 1 10:1 10:1 3, 4 20:1 20:1 3, 4, 5

(28) HSBB Service without QoS

The HSBB Service without QoS is an access Facility and/or Service (including transmission only to the POI) for the provision of Layer 2 connectivity for the carriage of certain communications (being data in digital form and conforming to Internet Protocols) on a best efforts basis with a pre-defined Contention Ratio and delivered to a POI which is co- located with an aggregation router or other aggregation device, and where the bit rate is controlled by the Access Seeker.

(29) Network Origination Service

(a) Network Origination Service is an Interconnection Service provided by means of a Fixed Network or a Mobile Network for the carriage of Call Communications from an ‘A’ party to a POI. The Network Origination Service comprises transmission and switching (whether packet or circuit) for outgoing calls insofar as they relate to freephone 1800 number services, toll free 1300 number services, and other similar services which require Any-to-Any Connectivity.

(b) The functionalities of the Network Origination Service include:

(i) transmission and switching (whether packet or circuit); and

(ii) the signalling required to support the Interconnection Service.

(c) Examples of technologies used in the provision of the Network Origination Service include PSTN, Global System for Mobile Communications (GSM), International Mobile Telecommunications 2000

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(IMT-2000), Worldwide Interoperability for Microwave Access (WiMAX), Integrated Services Digital Network (ISDN) and other IP based networks.

[Note: The alternative services to the rationalised Network Origination Service are found in paragraphs 6(1) and 6(4)]

(30) Network Termination Service

(a) Network Termination Service is an Interconnection Service provided by means of a Fixed Network or Mobile Network for the carriage of Call Communications from a POI to a ‘B’ party. The Network Termination Service comprises transmission and switching (whether packet or circuit) for incoming calls and messages to the Access Provider’s network including incoming international calls and messages which require Any-to-Any Connectivity.

(b) The functionalities of the Network Termination Service include:

(i) transmission and switching (whether packet or circuit); and (ii) the signalling required to support the Interconnection Service.

(c) Examples of technologies used in the provision of the Network Termination Service include PSTN, Global System for Mobile Communications (GSM), International Mobile Telecommunications 2000 (IMT-2000), Worldwide Interoperability for Microwave Access (WiMAX), Integrated Services Digital Network (ISDN) and other IP based networks.

[Note: The alternative services to the rationalised Network Termination Service are found in paragraphs 6(3) and 6(5)]

(31) Transmission Service

(a) Transmission Service is a Facility and/or Service for the carriage of communications between any two technically feasible network transmission points (not being Customer transmission points) via network interfaces at such transmission rates as may be agreed between the Access Provider and the Access Seeker on a permanent or virtual basis.

(b) Network interfaces may use any technology as may be agreed between the Access Provider and the Access Seeker.

(c) The functionalities of the Transmission Service include:

(i) transmission and switching (whether packet or circuit); (ii) the signalling required to support the technology or to provide a service; (iii) termination at either end by a port, router, network termination unit, switch, submarine cable landing centre or earth station; (iv) a digital protocol (including Internet Protocols).

(d) A technically feasible network transmission point in paragraph (a) includes submarine cable and satellite link between Sabah and Sarawak

Annexure 2, Page 17 and Peninsular Malaysia, submarine cable landing centre and an earth station.

(e) The Transmission Service may be for the carriage of communications which comprise of content applications service.

(f) An Access Seeker for the Transmission Service includes (but is not limited to) a network facilities provider or network service provider which is only authorised to provide limited (e.g. in the last mile) network facilities or network services, but wishes to acquire the Transmission Service in order to connect its limited network facilities or network services.

[Note: The alternative services to the rationalised Transmission Service are found in paragraphs 6(8), backhaul transmission in paragraph 6(13)(i) and 6(22)]

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ANNEXURE 3:

Draft Variation to Commission Determination on the Mandatory Standard on Access (Determination No. 2 of 2005)

Variation of paragraph 3

2. The Commission Determination on the Mandatory Standard on Access, Determination No. 2 of 2005 (“the principal Determination”) is varied in paragraph 3 as follows:

(a) by deleting the definition of “Carrier Selection Code” or “CSC”;

(b) by deleting the definition of “Fixed Access Lines”;

(c) by deleting the definition of “Line Activation”;

(d) by deleting the definition of “New Fixed Access Lines”;

(e) by substituting for the definition of “O&T Service” the following definition:

‘ “O&T Service” means an originating or terminating service in the Access List Determination, which at Effective Date includes:

(a) a Network Origination Service; and

(b) a Network Termination Service;’;

(f) by deleting the definition of “RPI March 2001”; and

(g) by inserting after the definition of “Transfer Request” the following definition:

‘ “Variation Determination” means the Variation to Commission Determination on Mandatory Standard on Access (Determination No. 2 of 2005), Determination No. xx of 2008.’.

Variation of paragraph 6

3. The principal Determination is varied in paragraph 6 as follows:

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(a) in paragraph 1.2.5(c), by deleting paragraph (viii);

(b) in paragraph 5.2.1(c), by deleting paragraph (vii);

(c) in subsection 5.3.4, by substituting for paragraph (d), the following paragraph:

”(d) be modular, so that details about the terms and conditions, including the rates, for each of the Facilities and Services are available individually and separately under an ARD;”;

(d) in subsection 5.4.11, by substituting for paragraph (d), the following paragraph:

“(d) subject to this Standard, the Access Provider has insufficient capacity or space to provide the requested Services or Facilities;”;

(e) in subsection 5.5.1, by deleting paragraph (h);

(f) in paragraph 5.6.10(d), by substituting for the words “subsection 5.4.20”, the words “subsection 5.4.18”;

(g) in paragraph 5.7.16(d), by substituting for the words “subsection 5.7.6(a)”, the words “subsection 5.7.16(a)”;

(h) in subsection 5.7.17 -

(i) in paragraph (a), by substituting for the words “subsection 5.4.19”, the words “subsection 5.4.17”; and

(ii) in paragraph (b), by substituting for the words “subsection 5.4.20”, the words “subsection 5.4.18”;

(i) in subsection 5.7.19, by substituting for the word “5.4.20”, the words “subsection 5.4.18”;

(j) in subsection 5.9.5, by substituting for the words “all Access Providers”, the words “all Access Seekers”;

(k) by deleting subsection 5.12;

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(l) in subsection 5.13.5, by substituting for the words “the Access Seeker’s property”, the words “the Access Provider’s property”;

(m) by substituting for subsection 5.14.6 the following subsection:

“5.14.6 Summarised Invoice and billing information: An Access Provider shall provide the Access Seeker on written request with an aggregated summary of billings for access to the Facilities and Services provided to the Access Seeker, in monthly tranches. “;

(n) in subsection 5.14.13, by inserting after paragraph (c) the following paragraph:

“(d) evidence in the form of the Invoiced Party’s outgoing report, indicating the relevant traffic data which is in dispute.“;

(o) in subsection 5.17.1, by inserting after the word “shall” the words “, unless otherwise required by the Access Seeker,”;

(p) in subsection 5.18.7, by substituting for the word “The”, the words “Unless otherwise specifically provided in this Standard, the”;

(q) in subsection 5.19.10, by inserting after the word “imposed” the words “in relation to its subject matter”;

(r) by inserting after subsection 5.23.5 the following subsection:

“5.23.6 Technical standards: An Operator must comply with the Commission Determination on the Mandatory Standard for Free to Air Transmission of Digital Terrestrial Television Service Determination No. 2 of 2006 including such modification or variation and any other mandatory standards as may be determined by the Commission from time to time.”;

(s) in paragraph 5.24.2(g), by substituting for the words “subsection 5.24.4”, the words “subsection 5.24.3”;

(t) by inserting after subsection 5.24 the following subsection:

“5.25 WHOLESALE LINE RENTAL SERVICE

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5.25.1 Application: This subsection only applies to an Access Provider which provides or is required to provide a Wholesale Line Rental Service.

5.25.2 Sole relationship with Customer: The Access Seeker has the sole relationship with the Customer when providing a service to the Customer which uses the Wholesale Line Rental as an input to that service provision.

5.25.3 Prohibited use of Customer information: The Access Provider is expressly prohibited from using any Access Seeker’s Customer information to market its goods or services to that Customer, except where:

(a) information on the Customer is publicly available; or

(b) information on the Customer has been received or developed by the Access Provider from sources other than the Access Seeker.

This includes any use or intended use by the Access Provider to persuade that Customer from entering into a contractual relationship with the Access Seeker for retail services that use the Wholesale Line Rental Service as an input or to persuade that Customer to enter into a contractual relationship with the Access Provider for the Access Provider’s retail services.”;

(u) by inserting after subsection 5.25 the following subsection:

“5.26 HIGH SPEED BROADBAND (HSBB) SERVICES

5.26.1 Application: This subsection only applies to an Access Provider which provides or is required to provide HSBB Services.

5.26.2 Forms of HSBB Services: There are 2 forms of HSBB Services:

(a) HSBB with Quality of Service (QoS); and

(b) HSBB without QoS.

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5.26.3 Implementation and Migration Plan: The Access Provider shall, no later than 90 days from the date the Variation Determination comes into force, maintain and publish on a publicly accessible website a detailed up-to-date implementation plan that provides its procedures and timing for the HSBB Services that includes:

(a) the migration from copper to fibre at all existing nodes by location;

(b) the construction of new nodes by location;

(c) notification processes to Customers and Access Seekers for such migration and the minimum notice periods to be provided; and

(d) ordering and provisioning procedures for HSBB Services including the applicable terms and conditions.

The Access Provider shall manage the implementation plan in a non-discriminatory manner. This includes giving the same priority to Access Seekers who are similarly situated as it gives itself in the handling of the migration or orders for HSBB services.

5.26.4 Completion of work : The Access Provider shall maintain and publish on a publicly accessible website an up-to-date list of locations where HSBB Services are available. The list shall be published within two (2) Business Days from the date of completion of the work specified at paragraphs 5.26.3 (a) or (b) at each location.

5.26.5 Availability to Access Seeker : The Access Provider shall provide to the Access Seeker on request the Implementation and Migration Plan specified under subsection 5.26.3 and the list of locations specified under subsection 5.26.4.”;

(v) by substituting for subsection 6.2.4 the following subsection:

“6.2.4 Existing agreements: Parties to existing agreements executed prior to the Effective Date or the date the Variation Determination comes into force, whichever is applicable, must

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review such agreements to ensure compliance with this Standard. Such agreements should be amended according to the requirements of the Standard no later than 210 days after the Effective Date or after the date the Variation Determination comes into force, whichever is applicable, or by any other date as stipulated by the Commission.

If the Parties are unable to effect such amendments, the Parties shall first attempt to resolve the dispute in accordance with the Dispute Resolution Procedures. If the Parties to the disputes cannot or otherwise fail to reach an agreement, either Party may notify a dispute in accordance with Chapter 7 of Part V of the Act.”;

(w) by substituting for subsection 6.2.6 the following subsection:

“6.2.6 Timeline for Implementation: Each Access Provider shall prepare, maintain and/or modify an ARD in relation to Facilities or Services on the Access List Determination no later than 90 days after the Effective Date or after the date the Variation Determination comes into force, whichever is applicable, or by any other date as stipulated by the Commission.”;

(x) in subsection 6.5 of Annexure A, by substituting for the subsection, the following subsection:

”6.5 The Invoiced Party may withhold payment of amounts disputed in good faith in accordance with subsection 5.14.11 of the Standard. If the dispute is resolved against the Invoiced Party, that Party shall be required to pay interest at the rate specified in subsection 5.14.15 of the Standard on the amount payable.”; and

(y) in subsection 6.6 of Annexure A, by substituting for the words “in accordance with clause 5.14.15.”, the words “at the rate specified in subsection 5.14.15”.

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