India’s 5G Conundrum: Mass Adoption not seen till 2023-2024!

by Hetal Gandhi (edited by Alan J Weissberger)

The writer is a Director at CRISIL Research

As the noise around India’s upcoming 5G spectrum auction rise, one must remember that ecosystem development is crucial to the success of next-generation technology. India is yet to complete the transition from 2G and 3G to 4G-LTE.  But the march towards 5G is inexorable and necessitates giga-buck spending. Telcos have already invested more than Rs 3 lakh crore (India money) over the past three years, and a large portion of that money has been used to roll out 4G-LTE networks across the country, and we are still counting.

The implementation of any paradigm-shifting technology spawns manifold ecosystem changes such as spectrum usage, network infrastructure and devices. While newer bands will be made available for 5G services in India, the reserve price for the spectrum bands, recommended by the Telecom Regulatory Authority of India (TRAIat around $0.23/MHz/pop (for metros), is almost twice compared to $0.12/MHz/pop auctioned in the UK in June 2018.

At TRAI’s pricing, owning a block of 20 MHz spectrum across circles in the 3.3-3.6 GHz band will cost a staggering Rs 98,000 crore or so. Also, high-frequency bands such as these will require more investments in cell sites because of their low-propagation characteristics.  Even though a combination of sub-1 GHz and 3.3-3.6 GHz is ideal for the 5G rollout, prices in the 700 MHz band remain very high while the rest of the sub-1 GHz bands will be mostly utiliszd for 2G (voice) and 4G-LTE services.

The government seems ready to conduct the 5G auction towards the end of 2019, but it is imperative for telcos to check the readiness of their ecosystems before plonking down truckloads of money to buy spectrum. On the other hand, if the US and China successfully adopt 5G by 2020 as expected, subsequent adopters will have the benefit of lower network equipment and device costs, thus making the ecosystem transition smoother.

An important 5G ecosystem prerequisite, essential to building use cases, is optic fibre networks. But India lags far behind with lower than 30 per cent use of fibre as on date compared to more than 70 per cent in the US and China. CRISIL Research estimates that India needs to lay another 10 lakh fibre km to be 5G-ready. That will require an investment of over Rs 1 lakh crore.

Nearly three-fourths of this cost will occur to get right-of-way (RoW) approvals, which can be as high as Rs 1 crore per km in metros. We believe it will take three-four years for telcos to reach the required fibre levels, given delays in RoW and other permissions.

For telcos, getting RoW approvals has been as much an issue as making investments and RoW issues may delay fibre deployment. However, leasing of fibre can significantly reduce the investments required, depending on sharing modalities, and it will also make India 5G-ready sooner.

Furthermore, the Indian telecom industry is struggling under a massive debt load of Rs 4 lakh crore (as of March 31, 2018). In the recent past, a combination of asset and stake sales and sponsor support have helped telcos maintain their debt levels. But bundling of voice with data amid a price war, coupled with high investments, has resulted in low returns. We now see low single-digit returns on the capital employed in the industry compared to more than 15 per cent three-four years ago. So, telcos need to explore areas of revenue generation to make such investments viable.

While 5G-enabled devices are expected to enter India in late 2019 or early 2020, it may take another three-four years before mass adoption of affordable versions takes place. With the number of interconnected devices rising, the Internet of things will unfold newer revenue streams across domains such as healthcare, education and transportation. A lot is in store for Indian telcos, but things will not take a clear shape before fiscal 2023.

Copyright 2019. Living Media India Ltd

6 thoughts on “India’s 5G Conundrum: Mass Adoption not seen till 2023-2024!

  1. The India government expects a 5.8% increase in revenue at Rs41,519.76 crore in the fiscal year 2019-20 from the stressed telecom sector against the revised revenue estimate of Rs 39,245 crore for the current fiscal year ending March 31, according to the interim budget documents.

    The government earns revenue in the form of mainly licence fees and spectrum usage charges (SUC) from telecom operators, which is calculated based on the adjusted gross revenue (AGR) of telcos.

    Revenue from the sector though has been falling over the last two years due to severe financial pressures faced by India’s mobile phone operators owing to the ongoing price war, which has meant lower license fees and SUC for the government.

    Also, the price war has led to rapid consolidation of the industry which has now shrunk to three private sector players – India’s older telcos Bharti Airtel and Vodafone Idea, and latest entrant Reliance Jio – from over eight about two years back. As a result, the government had made a provision of Rs 48,661.42 crore revenue from telecom services in 2017-18, but has revised it downwards, as per the documents. The government had raised Rs32,065.90 crore in FY2017-18.

    Spectrum sales through auction has been main contributor to the government revenue. However, no auction was conducted in the current fiscal year and the latest estimates for the next fiscal year also don’t appear to factor in any auction proceeds.

    The debt-ridden incumbent carriers have opposed any early auction, while the government has indicated that the next spectrum sale could happen after August 2019.

  2. Samsung ready for 5G trials; says India will come up with local 5G use cases

    Korean telecom gear maker Samsung said India will come up with its own 5G specific use cases that could be applicable to other markets and it will ensure that those use cases are supported by the company.

    “Government as part of the 5G forum included many of other partners who are focusing on identifying specific use cases [for India]. We just want to make sure the technology is available to support any of these uses cases,” Srini Sundarajan, Samsung India Senior Vice President and Head (Network Business), told ET in a recent interaction.

    India has some different sets of needs and the focus of the government is to develop 5G use cases around farming, education and next-gen manufacturing.

    “Education is something we are working with Japan that will be very useful for India… there are many use cases which have a lot of societal value and that could also play a big part on the 5G rollout,” he said.

    Sundarajan said that the company is working with the telecom department to help devise the 5G roadmap for the country. “Our goal primarily is to work with the DoT and ensure that we are able to show the value of 5G to all relevant people in government and partners of the government,” he added.

    The Narendra Modi government aims to kickstart the deployment of ultra-high speed 5G networks in the country by 2020.

    The company said that it is ready for 5G field trials in India, and is awaiting clarity from the telecom department (DoT). “We agreed that we will do trials with the government. But the clarity has to come from the government on various things.”

    Samsung said that it is ready to support 5G services on both 3.5Ghz and 26-28Ghz in India. 5G services using the mid-band or 3.5GHz will power use cases such as surveillance, smart city, and smart factories among others. Fixed wireless access (FWA) could become one of the main use cases of 5G using the 28Ghz band, Sundarajan said. In India, Samsung is the sole 4G equipment provider for Jio’s pan-India network and is also a technology provider for the telco’s narrowband IoT network.

    “We are agnostic since we have commercial deployments on both sides. We are opening up and showing these use cases. Depending upon where the interest comes both from government and operators, we will drive those use cases,” Sundarajan said.

    The much-anticipated 5G field trials have hit the policy roadblock with the department of telecom (DoT) wireless planning and coordination wing (WPC) averse to allocating airwaves beyond 90 days, which according to industry, would not serve any purpose.

    On February 25, the department has formed a committee with representation from the academia, industry and the government, to make recommendations related to licensing for carrying out 5G pilots, and also asked for the quantum, size, price and other aspects for offering experimental spectrum.

    The telecom department had previously invited vendors like Ericsson, Samsung, Nokia, Huawei and Cisco to conduct 5G field trials in the country and test use cases. The department is expected to provide 100MHz of spectrum for these field trials in the country, along with the backhaul support.

  3. Telcos must bravely invest in 5G airwaves: Huawei India CEO

    Huawei India CEO Jay Chen says telcos must strongly invest in 5G spectrum once it’s available in India, failing which they run the risk of being left behind in a mobile broadband turf where the competition benchmark has shifted from affordability to network quality. Chen told ET’s Kalyan Parbat in Shenzhen that customers are no longer as price-sensitive as they were earlier, and are rapidly demanding an enhanced network experience with 4G services gaining mass traction and mobile video emerging as the new basic telecom service in India. Edited excerpts.

    Q: India’s older carriers have been averse to an early 5G spectrum sale and reluctant to spend big sums on 5G airwaves in the absence of a compatible ecosystem and relevant 5G use cases. Will such a strategy could prove counter-productive?

    A: Telecom operators must bravely invest in 5G airwaves (once available) as the 5G devices ecosystem will grow much faster than either 3G or 4G, coupled with the fact that spectrum utilisation efficiency levels will also be higher, which will make customer experience on 5G networks a superior one. These are important considerations, especially if they wish to enjoy sustainable leadership in terms of network quality and user experience in a competitive market.

    Q: But telcos say they are under immense financial stress in the sector…

    A: The Indian telecom industry is witnessing a gradual shift from affordability to quality. Customers are no longer as price-sensitive as they were before, and are increasingly demanding an enhanced network experience, especially with the mass popularity of mobile video and further development of 4G.

    Q: You mean the competition benchmark has shifted from low tariffs to one based on better network quality and user experience?

    A: Well, in metros and key cities, an operator’s core competitiveness will be defined by high quality networks offering a superior customer experience, and will no longer be determined by low tariffs. Operators having low quality networks will lose competitiveness and eventually their high-value users and markets.

    Q: Some operators blame the decline in overall quality of mobile services to heavy clogging in networks, amid explosive demand for data services. Your views.

    A: Operators have to a degree been compelled to compromise on network quality amid sustained financial stress caused by continuing price wars. But in an era where users are willing to pay for a superior mobile broadband network experience, any compromise on network quality and experience would automatically compromise the competitiveness of a telco.

    Q: From a global network vendor’s perspective, what ought to be the immediate priorities of telcos to survive and grow in a market where network capacity requirements are huge, spectrum cost is high and there is a paucity of last-mile fiber?

    A : Operators must resolutely invest in solutions that improve spectrum efficiency to address capacity requirements in any given spectrum band. Besides speeding up VoLTE rollouts across the country and refarming 2G/3G airwaves for 4G services, telcos must also invest in large-capacity transmission and backhaul solutions and simultaneously in customer experience management.

    Q: How is Huawei partnering with telcos to help them realise such objectives?

    A: Operators and network gear suppliers are natural allies in chasing the twin goals of superior network quality and experience. But operators must adopt positive vendor strategies to leverage OEM (original equipment manufacturer) interest and investment in network quality and experience improvement by working hand-in-hand. Huawei has customised a spate of solutions such as Massive MIMO, CloudAIR and SuperBAND that improve spectrum efficiency and quality. Indian operators have welcomed Huawei’s solutions in large-capacity 5G microwave along with 200G/400G WDM (wavelength division multiplexing) transmission technologies that can complement fiber and reduce fiber-related concerns to a minimum.

    (The journalist was in Shenzhen on the invitation of Huawei)

  4. The Telecom Regulatory Authority of India (Trai) is planning to auction about 8,644 MHz of telecom frequencies, including the 3.3-3.6GHz band identified for 5G services, at an estimated total base price of Rs 4.9 lakh crore, which, the COAI members such as Vodafone Idea, Bharti Airtel and Reliance Jio, believe is too costly an affair.

    The upcoming 5G networks — expected to be around 20 times faster than 4G ones — are considered vital for emerging technologies like self-driving cars, cloud computing and artificial intelligence.

    Just one megahertz of 5G spectrum has been proposed with a base price of Rs 492 crore, which according to the industry body, is 6-7 times more than the current 5G airwaves available in other countries. Companies have to bid for blocks of at least 20 units, so securing pan-India 5G spectrum will cost a company at least $1.42 billion at base price levels.

    On the sidelines of the ‘Security Symposium and Awards 2019’ hosted by Infosec Foundation, Rajan said: “Around 10% Indian smartphone owners use antivirus or malware protector in their mobile phones. Our personal data is absolutely vulnerable to be used by third parties with the help of cookies. We do not read terms and conditions while downloading a mobile app and simply agree to it without knowing what all we are divulging.”

    Telecom experts have also warned about the risks involved in the ever-growing data usage in the cyber space, which has no boundaries. According to them, the prevalence of social media usage and the ability to interact anonymously are two of the biggest reasons why cybercrimes on social networking sites have gone wild.

    “The increasing propensity to experiment with various social apps sometimes prompts people upload photo with the intention of having fun. This has been the reason behind the popularity of ‘FaceApp’ and Stulish,” said Sushobhan Mukherjee, Chairman, Infosec Foundation.

  5. India is emerging as the testing and acquisition playground for global consumer technology companies, especially the so-called FAANGs, according to a veteran Internet analyst.

    RBC Capital Markets’ Mark Mahaney, who calls himself Wall Street’s “oldest Internet analyst” after covering the sector for more than two decades, said India is now more popular than markets like China because it has the same growth dynamics but with fewer regulations.

    As one of the largest economies and most populous countries in the world, India has turned into a testing ground for companies such as Facebook, which has used it to beta-test a payments feature for WhatsApp. Netflix rolled out a mobile plan in India at Rs 199 ($2.80), much cheaper than what it charges for a basic plan elsewhere, and has created original content to capture more market share.

    “India does have regulations but it doesn’t seem to be as protectionist as China,” said Mahaney. India has been considering a new law that would require personal data to be stored locally, which could impair the operations of the Internet giants but Mahaney remains confident they can still penetrate the market.

    Besides organic growth, acquisitions are another strategy for these companies in India, especially since they are facing more scrutiny back home and in western Europe. “There’s an opportunity to build growth” in Asia, particularly in India, Mahaney said.

    Amazon has already tried its hand at deals in the South Asian nation by attempting to acquire Indian ecommerce pioneer Flipkart, before it was snapped up by Walmart last year.

    Facebook, Netflix, Amazon and Alphabet can all win big in India, said Mahaney, who has a buy rating on the stocks. “India is less than 5% of Amazon’s total revenues but it has the potential” to get to that level within five years, Mahaney said.

  6. I’m impressed, I have to admit. Seldom do I come across a blog that’s both educational and engaging. Without a doubt, you’ve provided an accurate assessment of the difficulties 5G will have in India. I am very glad that I stumbled across your IEEE Techblog in my hunt for the status of 5G deployments in India.

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