Service Provider Licensing System in the Malaysian Communications
and Multimedia Industry
Safinaz Mohd. Hussein
Associate Professor, Faculty of Law, Universiti Kebangsaan Malaysia
In1998 the Malaysian government enacted the Communications and Multimedia Act 1998 (Act 588) (CMA) to cater for the convergence era of telecommunications, broadcasting and information technology. This CMA changed the definition of these three previously distinct industries into the communications and multimedia industry. One of the reasons behind this was the contention on the part of the government that to differentiate these three industries would do more harm than good due to the fact that technological advances no longer make it viable to draw the lines differentiating them.
One of the most important parts of the CMA is the licencing system it introduces. This paper is divided into two parts which will discuss the transitional provisions for existing licence holders and the new licencing system introduced.
Keywords: Communications and Multimedia Act 1998 (Act 588) (CMA), Malaysian Communications and Multimedia Commission (MCMC), licencing.
This is a refereed article published on: 15 December 2004.
Citation: Hussein, ' Service Provider Licensing System in the Malaysian Communications and Multimedia Industry’, 2004 (3) The Journal of Information, Law and Technology (JILT). <http://www2.warwick.ac.uk/fac/soc/law/elj/jilt/2004_3/hussein/>
Chapter 2 of Part XI of the CMA deals with transitional provisions for licences. Sections 276 and 278 provide that old licences shall only continue to have effect for a period of twelve months from the appointed date, unless they have been registered by the Commission within twelve months from the appointed date. This simply means that the old licences shall not cease to have effect by the coming into force of the Act. Nevertheless, old licence holders must register their old licences with the Malaysian Communications and Multimedia Commission (MCMC) within twelve months from the appointed date.
Section 280 further states that holders of old licences must indicate to the Minister whether or not to they intend to apply for a new licence under the new Act (CMA) or continue using the old licence. The rationale for migrating to the new regulatory regime can be found in section 279, where the section provides that an old licence holder will not receive the benefits or rights that are given by the CMA. Nevertheless, they still possess the benefits and rights conferred under the repealed Telecommunications Act 1950 and the Broadcasting Act 1988.  Therefore, it can be said that transition to the new licensing regime is optional but for the registration requirement under section 278. Failure to comply with section 278 will render the old licence inoperative after 1 April 2000. The transition provisions are summarised in the figure 1 below.
Figure 1 : Transitional Procedure for Old Licences
The CMA licencing regime provides an activity based licencing regime which is technology neutral. Part IV of the CMA 1998 contains provisions relating to licences. There are two types of licences within four categories of licensable activities under the CMA 1998. A licencee therefore, may choose to provide services between eight possible types of licences. Section 126 of the CMA prohibits any person from owning or providing any network facility, network service or applications service except with an individual or class licence. Under the CMA any person who owns a network facility, provision of network service or applications services that is solely on the customer side of the network boundary is exempted from the licensing requirements under the Act.
An individual licence is granted to a person who conducts an activity which requires a high degree of regulatory control. Section 6 of the CMA defines an individual licence as a licence for a specified person to conduct a specified activity and may include conditions to which the conduct of that activity shall be subject. Section 27(1) further provides that a person who wants to operate under an individual licence may apply in writing to the Malaysian Communications and Multimedia Commission (MCMC) and the MCMC shall make recommendations to the Minister within sixty days of receiving the application whether or not that person should be granted an individual licence. These provisions merely provide the procedures for an application of an individual licence. They do not however, differentiate between individual and class licences. Nevertheless, it could be said that an individual licence is similar to any type of licence whereby the applicant has to apply in writing to the regulator concerned. In other words, it is a licence to operate an activity where there is the highest degree of regulatory control. Examples of local companies holding an individual licences are Digi Telecommunications, Telekom Malaysia Bhd., Celcom (Malaysia) and Maxis International. These companies have each been granted three types of individual licences: a network facility individual licence, a network service individual licence and an applications service individual licence. They provide services like earth stations, fixed links and cables, public payphones facilities, radio communications transmitters and links, satellite hubs, towers, poles, ducts and distribution services, cellular mobile services and IP telephony.
Class licence is a type of licence introduced into the industry by the CMA 1998 to cater for the needs of small operators. It has a lighter form of regulatory control and minimal procedural requirements. In class licence, the minister sets out the rights and obligations which apply generally to persons engaged in a particular activity. Section 6 defines a class licence as a licence for any or all persons to conduct a specified activity and may include conditions to which the conduct of that activity shall be subject. Section 131 further provides that a person shall not operate under a class licence in respect of any network facilities, network or applications service unless registered by the MCMC.
The Minister may grant a class licence in respect of any activity requiring a licence under the CMA and a person who falls within a class licence that has been granted by the Minister under section 44(1) may operate an activity by submitting a registration notice to the Commission. This simply means that a Minister will grant class licences and lists what services fall under these different types of class licences. An operator therefore needs to check whether the type of service he intends to provide falls under any of the services that are listed by the Minister. If the service is not listed in the determination then the operator needs to apply for an individual licence for that activity. The Communications and Multimedia (Licensing) Regulations 2000 restrict foreign individuals who are not a permanent residents and foreign companies (as defined under the Companies Act 1965) from registering a class licence. Examples of local companies who have registered as class licencees include Information Network Services, Time dotNet Bhd. and Maxis Mobile Sdn Bhd. These companies hold applications service class licences for Internet access, messaging and directory services.
Within the two-abovementioned licence types, there are four licensable activities. A person who wishes to provide a service to the industry must provide a service that falls within these four categories: network facility, network service, applications service and content applications service.
Services that fall under this category provide facilities or infrastructure to the industries upon which network, applications and content applications services depend. Examples include earth stations, broadband fibre optic cables, telecommunications lines and exchanges, radio communications transmission equipment, mobile communications base stations and broadcasting transmission towers and equipment. Additionally, section 130 provides that the Minister may determine that infrastructure ordinarily used by its owner for non-public purposes be used by a nominated network facilities provider to provide services to the public.
The services that fall under this category are services that provide basic connectivity and bandwidth to support a variety of applications services such as broadcasting distribution services, cellular mobile services, customer access services and mobile satellite services. In other words, network services enable connectivity or transport just like a car on a road. Most of the network service providers in Malaysia are also the owners of network facilities, however, a network service provider who does not own network facilities may provide network services using network facilities owned by another provider.
Applications services provide particular functions or capabilities delivered to end-users such as voice services, data services, electronic commerce and other transmission services. The Act also contains provisions on required applications service. Section 192 provides that the Minister may determine a list of required applications services which may include,
- emergency services;
- directory assistance services;
- operator assistance services; and
- services for disabled consumers.
Content Applications Service
Content applications services provide application services which contains content. Examples of content applications services include traditional broadcasting, online publishing and information services.
Section 205 prohibits a person from providing a content applications service unless he has an individual or class licence. This section does not limit other forms of regulatory control on content that are found in the CMA (for example, Chapter 2 of Part IX which provides for content requirement). Further, sections 207 and 209 contain provisions for closed content applications services and limited content applications services respectively. Section 207 exempts from licensing requirements any closed content applications service. In the absence of a determination made by the Minister, a closed content applications service is a closed content applications service confined to a single dwelling or a content applications service provided only to the employees or officers of a single corporate body. 
A limited content applications service provider is also exempted from holding an individual licence though he may be subject to a class licence. Lastly, section 208 provides that any content incidental to the service is exempted from licensing.
Matters to be Considered in Determining Licencing Requirement
The process and matters to be considered by a person wishing to apply for a licence under the CMA 1998 is twofold. Firstly, the person has to identify the activity that he is providing. In other words, he has to ensure that his service is one of the four categories of licensable activities discussed above. Secondly, he has to determine the type of licence required be it individual or class.
Identification of Licensable Activity
The identification of licensable activity involves the determination on the part of the prospective licencee to break down the services he intends to provide. He has to be able to distinguish the activity to match the type of service he intends to provide. If it involves providing infrastructure like cables, lines and exchanges, then the licensable activity is network facility. If it involves particular functions, it is applications service. After determining the activity, the prospective licencee needs to determine the type of licence required. This step in the process of licensing determines whether there is a need for licensing per se.
Determination of the Types of Licence Required
The determination of the type of licence requirement depends on whether the operator is either a significant provider or a minor provider. Significant service providers own facilities that have a significant economic impact (which is not defined by the CMA) and influence on the general public. Minor service providers are those that do not meet these criteria.  The Malaysian Communications and Multimedia Commission in its paper on licensing requirements notes that significant service providers are those that own or a part of:
1. A significant Network Facility...that:
- Forms a core part of a network used in the provision of communications services that are made available to the general public and are likely to be of broad appeal;
- Is likely to have a significant economic impact on the sector; and/ or
- The physical nature of the facility is likely to have a material environmental impact.
2. A significant network service...that:-
- Is made available to the general public and is likely to be of broad appeal; and/or
- Is a key input service in downstream markets or a “bottleneck” service; and
- Is used to provide basic connectivity services by means of commonly available consumer equipment; or
- Is used to provide basic connectivity services by means of which members of the general public acquire standard applications services.
3. A significant applications service...that:-
- Is made available to the general public and is likely to be of broad appeal;
- Is highly pervasive;
- Provides communications functionally by means of commonly available consumer equipment; and
- Is considered to be a standard communications applications service.
4. A significant content applications service is a content applications service that:-
- Is made available to the general public and is likely to be of broad appeal; and
- Provides content that is able to be received by commonly available consumer equipment; or
- Is likely to exert a high degree of influence in shaping community views in Malaysia.
After determining whether or not he is providing significant or minor service, a prospective licencee then applies for an individual licence if he is providing a significant service and a class licence in the case of a minor service.
The CMA 1998 is a very unique piece of legislation. It has not passed the period of child bearing, but for the past four years it has proven to be very promising. The transitional period it called for in its provisions has lapsed and those who wish to migrate into the new regulatory regime have indicated their intention to do so. The new regime's principal strength is that at its base is a recognition that when the technological environment is in a constant state of flux it is more viable to categorise the licences of service providers according to the types of activities they engage in rather than by the technologies they utlilise.
 The aim of the licencing system is to monitor the players in the industry.
 Old licences here refers to the licences granted under the previous regime namely the Telecommunications Act 1950 and the Broadcasting Act 1988.
 The appointed date here refers to the date of coming into force of the Act which was 1st April 1999.
 The Commission is the regulator for the industry specifically known as the Malaysian Communications and Multimedia Commission (MCMC).
 Section 276 provides, “Subject to section 278, licences issued under the repealed Acts (“old licences”) shall continue to have effect under this Act.”
 The Minister refers to the minister for Energy, Communications and Multimedia.
 Section 280 provides, “A holder of a licence granted under the repealed Acts shall indicate to the Minister in writing whether he intends to seek a licence under this Act within twelve months from the appointed date.”
 Section 279 provides, “This Act does not confer any new benefits or right on a registered licencee registered under section 278 except where that benefit or right was conferred under the old licence.”
 Section 128 provides that in the absence of a determination by the Minister, a network boundary shall be-
(a) the first equipment socket in a private residence;
(b) the main distribution frame in a building; or
(c) a point agreed to by the customer and the network facilities provider.
 Section 129.
 Malaysian Communications and Multimedia Commission (MCMC), Licensing Requirements Under the CMA 1998: An Information Paper, August 1999, p. 2.
 Section 27 and 29 of the CMA 1998.
 http://www.mcmc.gov.my/mcmc/registers/registers.asp (On line) 31st March 2003.
 Section 44(1) of the CMA 1998.
 Section 45(1) of the CMA 1998.
 Regulation 23, Communications and Multimedia (Licensing) Regulations 2000.
 http://www.mcmc.gov.my/mcmc/registers/registers.asp On-line 31st march 2003.
 Section 6 of the CMA 1998, MCMC, Licensing Requirement under the CMA 1998, p. 4.
 http://www.mcmc.gov.my/mcmc/what_we_do/licensing/cma/framework.asp. On-line 31st March 2003.
 Ibid, Section 6 of the CMA 1998.
 A discussion paper on “The Determination of a List of required applications services and the classes of network service providers who shall provide them under section 192 and 193 of the CMA 1998 is available at http://www.mcmc.gov.my.
 Section 207(2).
 Section 209
 MCMC, Licensing Requirement, p. 4.
 ibid, p.5.
 ibid, p.4.
 ibid, p.6.