Telecommunications in Malaysia

Malaysia is, potentially, a rich country with abundant natural resources and a reasonably well-educated workforce. It is a federation of 13 states and three Federal Territories. It aspires to be one of the region’s major economic powers, with the goal of being a fully developed country by 2020.

Geographically, it consists of two parts. Peninsular Malaysia is a long stretch of land extending southwards from Thailand to the Straits of Johore, which separate it from Singapore. Sabah and Sarawak, adjoining areas located on the island of Borneo, and a few offshore islands together make up East Malaysia. East Malaysia and Peninsular Malaysia are 600 km apart at their closest point.

Malaysia’s population is predominantly Malay, but about a quarter are Chinese and nearly 10% are of Indian extraction.

The country made remarkable economic progress in the decade up to the start of the Asian economic downturn in 1997. That downturn had a considerable impact on Malaysia, although not as great as on some of its neighbours. Since then, the country’s economy has been slowly recovering.

The telecom industry in Malaysia has always been one of contrasts and anomalies, and it continues in this vein. Also, the level of development in most areas is disappointing for a country with major ambitions.

For example, numerous fixed line licences were issued when liberalisation was introduced but even after more than a decade the incumbent operator still controls almost 100% of the local loop (and, therefore, dependent services such as fixed line broadband).

Local services in Malaysia have traditionally been seriously deficient. Today, the country’s teledensity is still below that of many other countries at a similar level of economic development, yet the number of fixed lines in service is growing only minimally..

The country is not an easy one in which to provide long distance services. Much of it is mountainous and forested. This is true for a large part of Peninsular Malaysia and even more so in the East Malaysian states of Sabah and Sarawak. The sparse population also discourages the provision of telecom infrastructure in these areas.

The international services market is, like the rest of the fixed line segment, dominated by the previous monopoly operator. Despite the government’s efforts to introduce competition, little has materialised, though a number of VoIP operators have appeared in recent years.

In January 1985, Malaysia distinguished itself by becoming one of the first countries in the Asia-Pacific region to introduce mobile telephony. Despite the early start, the country then became something of a laggard in mobile use, a situation that has only recently been corrected.

Broadband is another case in point. The government has been promoting broadband use for many years yet the incumbent operator, which still has the government as its largest shareholder, did not introduce the service until 2001 and failed to promote it at all aggressively for some time. Even today the uptake of broadband is still fairly low. Indeed, Malaysia has one of the lowest penetrations of broadband services throughout the Asia-Pacific region.

Broadband has a prominent place in the government’s plans. It is aiming at 75% household broadband penetration by the end of 2010.

Wireless Data services were first introduced in 2000 but, apart from Short Messaging Services (SMS), have yet to take off to any great extent. Two 3G licences were issued in March 2003, with the first service beginning in May 2005 in certain of the more densely populated parts of the country. The second licensee introduced its service a couple of months later. Both licensees plan to extend their coverage progressively across most of the country.

Four WiMAX licences have been issued and services have already begun.

Internet usage is currently quite low for a country at Malaysia’s stage of economic development. This is largely due to the slow uptake of broadband services. Another inhibiting factor has been the attempts by government to control the distribution of what it sees as objectionable material over the Internet.

Regarding e-Commerce, the government began to promote online business in 1998 through a number of initiatives, but the volume of online trading is still small. Most of the activity to date has been with B2B transactions; B2C transactions are still very limited.

For some years, paging promised to be very successful but, like a number of other telecom services in Malaysia, it never realised its potential. These services have now been discontinued.

Trunked Radio services appear to have reached something of a plateau. The rapidly growing coverage of cellular services has taken away much of the market for Trunked Radio, but the latter’s advantages in certain situations in the Malaysian environment remains.

The country is now reasonably well endowed with telecom infrastructure, at least in its populated areas. There are still a number of infrastructural deficiencies elsewhere, however. Services are lacking in much of the rural areas in the country, especially in East Malaysia.

Malaysia now has three Pay-TV operators, one employing direct-to-home (DTH) satellite transmission, a second using UHF cable and a third offering DSL services over the telecom network.

Overall, the telecom industry is showing significant progress in certain areas, but it continues to suffer from some serious problems. Specifically, competition is still limited (except in the mobile sector), while certain of the operators continue to experience financial difficulties.