India’s way ahead
As other countries move ahead, the Indian government, too, has repeatedly stated its intention to ‘not miss the 5G bus’ and ensure roll-out by 2020, after having missed the ‘2G, 3G and 4G buses’. A closer look, however, is required with regard to the preparedness of the industry, especially given the financial health of the telecom sector, the hesitancy among domestic banks to lend to operators, and the current pressure on tariffs.
Indian spectrum is also rather expensive. The Indian telecom regulator has recommended auctioning 20MHZ blocks in the 3,300-3,600MHZ band for 5G services at a price of ₹ 492 crore per MHZ. In South Korea, the same band was priced at roughly ₹ 131 crore per MHZ in auctions held in June.
In order to set a road map for the roll-out of 5G, the government had in September last year set up a high-level forum, which, in its report, suggested early allocation of 5G spectrum, increasing the quantum of spectrum available, and lower spectrum pricing.
The panel has also suggested three initiatives—attract global 5G conference events to India, set up national 5G events, and the creation of a comprehensive programme to develop India-specific 5G applications.
As far as budgetary provisions are concerned, 5G applications and software will require some form of initial funding by the government. The committee has recommended a broad planning estimate of ₹ 300 crore in the first year, ₹ 400 crore in the second, ₹ 500 crore in the third and ₹ 400 crore in the fourth year.
By acting early on adoption, India can accelerate the 5G dividend and also become an innovator in applications, but it will also mean that the initial investment on equipment will be more expensive when trying to be ahead of the curve. The government has already started the process to invite global telecom gear makers to conduct trials in India.
The Cellular Operators Association of India or COAI, on its part, believes India should not rush to sell spectrum for 5G. “We think the auction should be held as close to 2020 as possible as there will be more clarity on the standards for 5G,” Rajan Mathews, director general of COAI, said. There is also uncertainty about the financial health of the industry, which ultimately has to bid for the spectrum on which 5G data will flow, since revenues of all the operators have declined after the entry of Reliance Jio in September 2016. After all, huge investments would be required to update the telecom backbone and airwaves to 5G.
“Timing is a crucial criterion (for 5G auction),” a senior Department of Telecom (DOT) official said, requesting anonymity. “Where is the money? Where is the ecosystem for the 3,300-3,600MHZ band? There is nothing to show that a spectrum auction is going to be successful. The operators won’t pay a single paisa over reserve price (suggested by the Telecom Regulatory Authority of India),” the official added.
Spectrum auction is a major source of revenue for the exchequer. There was no auction in 2017-18, while in 2016-17 the government had raised ₹ 65,789 crore through spectrum sale, a mere fraction of the ₹ 5.63 trillion worth of spectrum it had put up for sale.
“Moreover, operators invested huge amounts of money in 4G very recently. Banks are not willing to lend. Also, are we ready to use have 5G? What percentage of India’s population requires 5G?” the official cited above said.
Indian telecom operators don’t seem to be in a hurry to move to 5G when 4G deployments are still at a nascent stage. “If there were any spectrum auctions over the next two years, we believe participation will be restricted to Bharti (Airtel) and Jio only,” HSBC Global Research said in a note dated 31 August. “Vodafone India and Idea, in the next two years, are likely to focus more on working out spectrum synergies and unlikely to add more spectrum,” the note said. The government, as of now, is looking at auctions probably in the second half of 2019, telecom secretary Aruna Sundararajan had told on 23 September. However, before the auction, DOT wants to provide a oneyear window for trials to happen with experimental spectrum. 5G will also require a massive level of transformation and telecom operators need to develop that capability in the form of skills, competence and operating models beyond the investments which are required. “Telecom operators need cloud infrastructure, distributed network architecture, and an agile operating model to successfully operate a 5G network. As such, what is the rush for 5G when we lack the business case to justify investments and there is also a competing need to stabilize and enhance our 4G networks,” said Amresh Nandan, research vice-president, Gartner. While industry may not be ready to brace for 5G, India’s dependence on this technology is huge, given the set of promises made by the current government. “The government perspective is that 5G is going to be absolutely critical in India... For instance, if we look at JAM (Jan Dhan-aadhaar-mobile) programme, the formalization of large parts of the economy, transforming agriculture, getting healthcare—all these are priorities of the government,” another senior DOT official said, seeking anonymity. “If we are not able to get 5G out, we may not be able to deliver on a lot of these things (services), especially to the rural population,” the official added.
The good news, however, is that the latest entrant, Reliance Jio, already has an Ip-ready network. 5G will be relatively easy to roll out for Jio because the company has next-generation architecture already in place. Consequently, to stay in the game, rivals Vodafone Idea and Airtel will also need to invest significantly.
The bigger issue is whether the related ancillary industries are ready. Apart from the spectrum, a 5G-ready country needs a slew of players to provide a service platform, delivery model, logistics support, and several other niche services. From that standpoint, the conversation on 5G in India has not even begun.