Steps to increase competition in the telecom sector to boost speed and reduce prices

Over the past 40 years, Malaysia’s telecommunications industry landscape has evolved from a Single Utility Operator system to a Multi Utility Operator system. This landscape shift was part of the neo-liberal economic policy shift which encouraged corporatisation, privatisation, and liberalisation executed under the National Privatisation Policy during Mahathir’s first regime.

However, the notion that the Multi Utility Operator landscape would ramp up competition to reduce prices and increase quality for the people never came to fruition. The competition rate for the telecommunication sector is determined by peoples’ power to change providers, in other words, consumer flexibility.

In fact, it was the former Minister for Communication, YB Gobind Singh Deo who had forced price reduction and speed increases through a federal executive order. The Federal Parliament through the Communication and Multimedia Act [Act 588] had granted authority to the responsible federal minister for communication to regulate fees and services offered by the telecommunication corporations.

Regulatory intervention is needed because of the low consumer flexibility to switch between telecommunication corporations. The telecommunication sector has two main regulations which reduce consumer flexibility. The two regulations are the minimum contract period and control over telephone numbers.

There have been minor reforms to improve consumer flexibility. However, the success rate was minimised due to certain obsolete bureaucratic rules showcasing the lack of political will. The lack of political will to improve the situation for the common people and consumers is linked to the lobbying power of private telecommunications corporations and protectionism by Khazanah towards Telekom Malaysia.

Minimum Lock-In Period

People will only realise the poor quality of their telecommunication provider after 1 month but cannot change the telecommunication provider due to the minimum contract period of up to 24 months. The minimum contract period “locks in” the consumer into paying for sub-standard services preventing competition.

The minimum period allows telecommunication corporations to impose exorbitant “exit fees”. The proper legal term is “exit fees” and not “fines/saman” as propagated by certain telecommunication corporations. Fines can only be imposed by the nation-state apparatus such as regulatory agencies, public tribunals, and judiciary courts onto the people.

Certain telecommunication corporations justify the minimum contract period by claiming the need to cover the cost of the telecom equipment such as modems, decoders, and home phones. Telecommunication corporations do not allow consumers to utilise their own telecommunication equipment. Certain telcos offer older model mobile phones for RM1 just to lock-in postpaid customers for 24 months.

Henceforth, telecom equipments are being forcefully pushed down the consumers’ throats with the minimum contract period. All form of necessary telecom equipment excluding mobile phones should be fully borne by the telecommunication corporations. The telecommunication corporation can be given the privilege to recollect the telecom equipments when the consumer terminates the service.

Flexibility Through Network Porting

In 2011, Suruhanjaya Komunikasi dan Multimedia Malaysia (SKMM) implemented mobile number porting (MNP) to allow consumers to switch telecommunication operators without losing their mobile phone number. In 2019, more than 4 million mobile phone consumers had applied to change their telecommunication providers. However, more than 50% of those requests were rejected. Unsurprisingly, 3 obsolete porting rules contribute to 60% of the total rejection cases.

Rules CodeMNP Business RulesProportion of Rejection
SP71Customer did not reply to the SMS validation,31%
SP52Overdue account with service provider15%
SP10Customer replied incorrect MyKad format and/or number14%
Total (%)60%

The validation SMS is often overlooked because Malaysians rarely utilise their SMS. Currently, the telecommunication corporations receiving consumers who switch from a different network must conduct identification checks at customer service centres. Thus, the SP10 and SP71 rules requiring the consumer to reply to the verification SMS are purely redundant and obsolete.

The recipient telecommunication corporations can collect the overdue amount from the postpaid consumers on behalf of the previous telecommunication provider. This will eliminate the need for clause SP52. The redundant and obsolete clauses under the MNP Business Rule need to be abolished to increase consumer flexibility.

SKMM will introduce fixed network porting (FNP) for fixed line consumers by the end of 2022. Thus, allowing business and homes to shop around for broadband and fixed line services without losing their home or office phone number. Currently, Telekom Malaysia (TM) has an effective monopoly over the fixed line network with a market of more than 82%.

On average, countries with high customer flexibility for fixed lines experience a 23% reduction of broadband prices. This price reduction benefits all consumers, not just porting consumers. Countries with high customer flexibility through FNP have at least four times higher broadband penetration compared to countries without FNP. SKMM must cancel all redundant and obsolete rules to maximise benefits of FNP through high consumer flexibility.

Moving Forward

Telecommunications is one of the most important forms of physical infrastructure for social advancement in our modern society. Empirically, consumer flexibility will increase competition which reduces prices and increases quality. The increase in quality can be measured in network stability, coverage, and average speed. The increase in coverage and reduction in prices will improve telecom accessibility especially for vulnerable communities.

State Secretary
Parti Sosialis Malaysia Negeri Melaka (PSM Melaka)

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