If Monopoly is the Problem, is a Monopoly You Partly Own Any Better?

After facing mobile operator opposition to a new monopoly wholesale 5G network framework, the Malaysian government now says it will offer up to a 70 percent equity stake in the state-owned 5G wholesale network Digital Nasional Berhad to mobile operators.  

It does raise a question. If the perceived downside was a monopoly, is the monopoly better because some industry participants own it? 

Axiata Group's Celcom, DiGi.com Berhad and Maxis Berhad have expressed concern about monopoly supply of 5G network infrastructure as it could affect wholesale pricing power. 

For starters, DNB has been given 100 percent control of all 5G spectrum, so the licenses cannot be gotten by the mobile operators themselves. 

Globally, mobile operators have generally agreed that ownership of cell towers does not confer business advantage great enough to make ownership of such sites necessary. But very few mobile operators would tend to agree that access to spectrum licenses is similarly optional. 

In fact, the opposite view prevails: spectrum assets are the foundation of business strategy. 

Up to this point, the mobile operators have been able to build their own networks, which might arguably be more important than ownership of towers, but less vital than the right to control  specific blocks of spectrum. 

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.

That presumably also means future generations of mobile networks, such as 6G, will also be supplied as a monopoly by the DNB, even if ownership extends to some of the mobile service providers. 

If viability really is an issue, then a wholesale framework is better than a single-retail-provider framework. But where viability is not an immediate and clear issue, facilities-based competition likely will provide better consumer outcomes, economic theory suggests. 

In the end, the monopoly on spectrum licenses is arguably the biggest stumbling block.