Govt to regulate data centres, cloud services, ‘but framework lacks clarity’

KUALA LUMPUR – The government is seeking to regulate data centres and cloud service providers (CSPs) by next year, but industry players have expressed concern over the lack of details, people familiar with the matter told The Vibes.

It is understood that the Communications and Multimedia Ministry has decided to tentatively regulate that part of the tech sector on January 1 next year on the back of the government’s digitalisation push.

In an email response to The Vibes, the Malaysian Communications and Multimedia Commission (MCMC) said the Communications and Multimedia Act (CMA) 1998 provided an exemption for web hosting and client server providers from being licensed.

But the government’s policy stance towards digitalisation has spurred a need to regulate data centres and CSPs, MCMC argued, “to ensure they operate in a regulated environment to ensure quality and consumer protection in terms of privacy and security, as well as operational governance, hence the reinstating of the licensing requirement and not a change in licensing in itself”.

The commission said since all licensees under CMA are required to contribute to the Universal Service Provision Fund, the same will be required of data centres and CSPs.

“All licensees under CMA are required to contribute to the Universal Service Provision Fund. This will be applied to designated services.

“Licensees whose total net revenue for the previous calendar year derived from the designated services is less than the minimum revenue threshold will be exempted. The current minimum revenue threshold is RM2 million.”

But some market participants believe that more clarity is needed on the entire framework, raising concerns such as the agency bulldozing the policy without proper stakeholder engagement given the tight deadline and that oversight will not meet industry best practices, therefore turning off investors.

“One problem I’d like more clarity on is the search-and-seizure issue by the law enforcement agency, which means data centres and CSPs could possibly be required to disclose whatever MCMC wants when requested,” said a source.

“This might not go down well with industry players, especially international CSPs.”

The source said what MCMC should do is initiate a round of public consultancy sessions with each stakeholder.

On February 19, Prime Minister Tan Sri Muhyiddin Yassin launched the Malaysia Digital Economy Blueprint, which states, among others, that the government aims to migrate 80% of public data to a hybrid cloud environment by the end of next year.

Putrajaya is also expecting heightened demand for cloud solutions and services following pandemic-induced shutdowns of offices, schools, and enterprises.

Companies appointed as managed service providers to handle the government’s cloud services are Enfrasys Solution Sdn Bhd, Prestariang Systems Sdn Bhd, and Cloud Connect Sdn Bhd, while the CSPs are Amazon, Google, Microsoft and Telekom Malaysia Bhd, which have received conditional approvals from the government.

As for data centres, there are 17 nationwide, according to the Malaysia Digital Economy Corporation, comprising multinationals, such as Japan’s NTT MSC to local listed companies, such as TIME dotCom Bhd and REDtone Digital Bhd. – The Vibes, June 16, 2021