Wholesale is a useful option in the communications business. Mobile virtual network operators build their whole businesses on it. Global communications and roaming depend on it. Capacity requirements often use wholesale mechanisms.
But wholesale is not the same thing as "monopoly."
Sanctioned monopolies--public or private--typically exist because there is some market barrier to sustaining multiple suppliers. Roads, airports, seaports, electricity and natural gas supply, water and sewage systems provide obvious examples. In the decades prior to 1980, telecommunications was widely believed to be such a case.
Virtually all telecom operations globally were official government monopolies, and often also operated directly by the government. All that began to change in the 1980s, gathered force globally in the 1990s and now competition is the common pattern in communications.
Still, some believe growing capital investment, low growth and challenged profit margins will lead to a lessening of competition, at best, and re-monopolization at worst. And that is the issue in Malaysia, as the Digital Nasional Berhad, a government entity, has been given a monopoly on 5G spectrum, something virtually unprecedented, and also is supposed to become the sole national provider of 5G infrastructure.
That presumably also means future generations of mobile network, such as 6G, also will supplied as a monopoly by the DNB.
There is an argument for such intervention when the markets are not working. That was believed to be the case for most of the history of global telecommunications.
And, to be certain, there are concerns in some quarters about the long-term viability of multiple facilities-based mobile service providers. This is more than the consolidation we already commonly see in the competitive telecom business.
In some regions, some suggest profitability is so difficult that future markets might only sustain one supplier. So, the industry would return to monopoly supply. Sustainable profits are the issue, in some cases, some argue.
It does not seem that facilities-based competition in Malaysia is so ruinous that private entities are unable to sustain private 5G, though.
A study produced by DT Economics and sponsored by the GSMA argues a 5G monopoly owned by the government points out that the mobile market in Malaysia is not broken.
“Malaysia has already achieved a competitive mobile market,” the report argues. “ It has four major Mobile Network Operators (MNOs), each having a market share of between 18 and 28 percent, with one additional smaller player (with a market share of less than 5 percent).”
“Malaysia also has a small, but a well-established, Mobile Virtual Network Operator (MVNO) market hosted by the largest four MNOs,” the authors say.
The market arguably has gotten more competitive with each mobile next generation network, to be sure. The issue is the degree to which the private entities are unable to sustain themselves based on competitive access to spectrum and facilities-based networks.
If if one accepts the thesis of higher capital investment in 5G or other future networks, it is not necessary to re-monopolize either spectrum or infrastructure. Mobile firms are capable of creating infrastructure sharing mechanisms that reduce costs, but on a voluntary basis.
One also can argue that mobile firm mergers accomplish many of the same objectives as infrastructure sharing or monopoly facilities: a reduction of cost, while arguably maintaining a higher rate of innovation.
Monopoly and wholesale are not synonymous, of course.
Wholesale is the norm for international communications, as in the case of data access, messaging or voice services. No single company has a network that reaches “everywhere,” so that is obvious. Domestic operations are far more complex.
In most markets, fixed network capacity has been a near-monopoly and wholesale underpins competition. In mobile markets, facilities-based competition is typical, though wholesale access remains important for mobile virtual network operators where MVNOs are lawful.
As a rule, movements toward wholesale have been gaining ground in the local access markets. Mobile operators divesting their cell tower assets and leasing access provide the best examples, but more recent actions have mobile operators outsourcing their information technology platforms for 5G to hyperscale cloud computing suppliers.
The broader strategic issues concern value: where can service providers create new value most effectively, and how does that drive capital investment decisions?
Some might argue DNB confuses wholesale with monopoly. The former almost always happens because it makes good business model sense. That latter almost always happens because there is a failure of business models.
Some would argue there is no evidence of market failure requiring re-monopolization.
No comments:
Post a Comment