Wednesday 10 July 2013

The nation’s broadband monopoly : Good or bad?

A monopoly can be defined simply as a market with only one seller and no close substitutes for that seller's product. In this case TM, TM (formerly Telekom Malaysia) is one of the most prominent government listed companies in Malaysia. TM was appointed the main distributor and controller of broadband services by the government in 2009.

Now, why was TM granted control of the broadband business? Because it controls all the telephone lines in the country, resulting in the company having a monopoly.

TM started introducing a new service called ''UNIFI''. A super fast interest using optic fiber cables. Maxis opted to start using these cables as well. In order for Maxis to provide this service, Maxis has to obtain these cables from TM through a contract which is based on TM's terms; amount of cables, speed limit of their internet service and etc.  This is because TM is the monopoly for distributing optic fiber cables in Malaysia.

Being the main controller of telephone lines in Malaysia, it made it difficult for new entrants to the market, even ones with substantial resources such as Maxis to compete with TM.

The lack of competition has sparked a debate among people centered about the service being provided by TM in which, hasn’t been up to scratch. What are the methods to overcome the staleness of the lack of competition in the broadband business?

Now, there are two possible solutions that could have been applied instead of appointing TM as the main controller of broadband services. For starters, the government could have split TM into separate companies for different localities, simillar to how the American government broke up AT&T into several smaller companies. And for a change, the government could also regulate the industry as a whole without dictating how individual firms run their business.

The other would have been to declare TM's monopoly a natural monopoly, and regulate how TM conducts its business to ensure it provided a fair level of service at a reasonable price.

As we all know, competition is the key to driving prices down and increasing the quality and quantity of service provided. With TM established in its monopoly power, competition is effectively stifled.

In my opinion, a change has to be made in order for the nation to progress even further and with the unlimited potential of technology, become an economy giant in the eyes of the world.  

Written by : David Tan Jia Ming ( 0315300 )

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  1. If a new company were to enter the same competition as TM, what are the barriers the new company will face?

  2. Very very good post! Really widen up my knowledge about the telecommunication in malaysia. If i had 4 thumbs i would definitely give you 4 thumbs up. I got one question though. Why did Telekom Malaysia changed their name and when did they change it?

  3. @suetkeit IF a new company were to enter the same competition as TM, that company will have limited resources to work with. This is because TM, being the broadband and telephone line monopoly in Malaysia controls all the resources. New entrants will have to get the resources based on TM's terms; amount of cables, speed limit of internet and etc. Hope this helped enlightened you! :)

  4. @AaronLim Thanks for your kind words! :) Very inspired to write more! TM changed their name in 2009, after they were appointed as the broadband monopoly in Malaysia. Hope this helps! Once again, thank you!

  5. Nice explanation. Hope to see more.