By Himanshu Kapania
India is at the doorstep of entering the 5G era. The country has one of the largest user bases for mobile and internet, and the 5G rollout is expected to be another revolutionary step for the country’s telecommunication sector. But, is India ready for the 5G rollout? What will be the impact of 5G technology in India? What are the challenges ahead?
In this digital era, the only constant is change & the pace of change is accelerating. Last 4 years, India has risen from amongst the lowest-ranked broadband penetration countries to become the Numero Uno nation globally, in terms of data consumption at over 12 GB per month. But the journey has just begun. The Rs 8 lac crore capital investment by the private sector Mobile operators has helped provide ubiquitous 4G high-speed broadband service pan India, the bedrock foundation to attract 700 million broadband users, second only to China.
While the consumer side of the digital story will continue to flourish, the emerging digital transformation in the enterprise domain will be the key development to watch out for, as converging exponential technologies like Artificial Intelligence, Cloud & Edge Computing, Robotics, Virtual & Augmented Reality, Internet of Things, Blockchain, Big Data, 3D printing, and many more innovations penetrate widely, disrupting all economic sectors.
5G is not just another generational upgrade but a technology that will revolutionize the lives of Indians and positively disrupt all economic sectors.
Just like electricity was the fuel behind the 2nd industrial revolution, Internet and wireless broadband connectivity will be the fuel to drive the adoption of these technologies, ushering us into the exciting new world of the 4th Industrial Revolution.
In the next decade, we will say goodbye to the old era of 2G and 3G networks and welcome the arrival of pathbreaking 5G services, unlocking amazing new possibilities. 5G is not just another generational upgrade but a technology that will revolutionize the lives of Indians and positively disrupt all economic sectors.
A $100 billion investment for establishing 5G network infrastructure could cumulatively add $1.21 trillion to India’s income per year over time.
~ ICRIER
It is widely acknowledged that the increase in mobile connectivity & higher internet penetration has a multiplier effect on economic growth. As per ICRIER – the next round of investment of $100 billion needed for establishing 5G network infrastructure could cumulatively add $1.21 trillion to India’s income per year over time.
The 5G connectivity will pin and drive the next level of exponential growth across every sector – whether it is automated manufacturing, remote healthcare, online education, smart retailing, driverless automobile, intelligent financial or immersive entertainment- making each sector smarter, delivering intelligent solutions to an economy no longer constrained by a digital divide.
India’s challenge in building ubiquitous nationwide 5G infrastructure.
While the benefits of the early 5G launch to the country’s economy are clear, India today faces a paradoxical situation where everyone including the government, media, and the public at large are looking forward to Indian mobile operators leading the way for 5G deployment. But the last 4 years’ brutal price competition and heavy taxation have led to unsustainable losses for the telecom sector. Several serious early strategic investors have already exited and there still looms an ‘existential crisis’ threatening the current ‘3+1’ market structure.
Let us carefully examine whether the Indian wireless sector in its current form is capable of leading the next phase of accelerated digital expansion on 5G technology by investing additional INR 8 lac crores for (a) 5G equipment, (b) Backhaul, and small cells and, (c) Additional Spectrum charges for (i) sub-GHz band, (ii) 3300-3600 MHz band, (iii) Millimetric Spectrum bands and (iv) E & V band.
This next phase of digital investment will not only help expand Indian broadband capacity from the current 400 petabytes per day to 2,500 petabytes per day but also improve latency to less than 1 millisecond thereby support widescale digital adoption for 1 million MSMEs & 1 billion broadband users.
India’s unique challenges for 5G roll out are:
1.) The current low Average Revenue Per Unit (ARPU) Unlimited Plan model is not capable of encouraging future investments.
2.) The private sector neither has the profit surplus pool to invest heavily in innovative greenfield transformative India specific use cases across various enterprise verticals nor do they have predefined linkages of revenue source from these evolving technologies of the 4th industrial revolution that will help to monetize their 5G fresh investments.
The additional $100 billion investment required to lay 5G infrastructure needs the certainty of revenue source either by pre-agreed sharing model with new technology suppliers or by differentially charging enterprise bandwidth at higher rates.
If India wishes to capture a significant economic value out of its $1 trillion Digital Opportunity and realize the Prime Minister’s vision of a $5 trillion economy by 2025, the country needs to have a well-articulated vision on ‘fair and equitable’ sharing across multiple stakeholders of this emerging business opportunity – Telecom operators, Digital intermediaries, Start-ups, Government & Corporate sector, etc.
In the USA, customer ARPU for telecom operators is over $50 against a global average of $10 & an Indian average of $2.
Digital Infrastructure Investments – Global models at play
Before determining option for attracting fresh investments on 5G in India, let us look at the global scenario:
USA model:
In the USA, mobile connectivity services generate a sufficient profit surplus for operators as customer ARPU is upwards of $50 against a global average of $10 & an Indian average of $2. This pool of surplus has permitted telecom operators to merge, acquire & build partnerships for developing new digital products and solutions.
With a surplus connectivity income, they are participating in spectrum auctions for 5G and investing aggressively in building 5G Infrastructure, and then create new sources of digital revenue e.g.– a) Acquire media companies b) Invest in R&D to build solutions in collaboration with key players, with a business model to share new digital revenue from innovative technologies beyond connectivity charges.
In China, the telecom operators have a customer ARPU of $12-15.
China model:
While Chinese operators are not able to charge customers as much as the USA, but still, they have a healthy customer ARPU of $12-15 with the additional benefit of scale at 5-6 times that of the USA. Chinese operators also get adequate support from the Government receiving an entire range of Broadband Spectrum for free.
Separately, China has a National planning department flushed with funds, with the vision of digital innovation and growth, that strives to harness local R&D. Focus in China is to lead in adoption of the latest technologies like Artificial Intelligence, Visual & voice recognition services, Blockchain, IoT & 4th Industrial technology services that will ride on upcoming 5G investments.
India’s telecom sector needs a definitive plan drawn out of global experience to ride this new wave of 5G
Recommendations & way forward:
India’s telecom sector needs a definitive plan drawn out of global experience to ride this new wave of 5G, where Enterprises and related Digital verticals are at the centre of the technology-led adoption. To solve complex problems, we need innovative and out of box thinking. The low investor interest in creating 5G infrastructure will probably not change until there is a reboot of the Indian telecom access policy framework that drives the entire digital ecosystem.
Few recommendations to help realize India’s dream of a $1 trillion digital economy by the year 2025, and expedite the introduction of 5G service include:
1.) Improve the current health of the Telecom Sector & ensure a ‘3+1’ competitive structure. This requires a series of actions apart from revenue-related market repair. Cost related actions for the government include – a) Bringing down applicable taxes as committed in the National Digital Communications Policy (NDCP 2018), b) Modifying the legacy Spectrum auction terms including installment amounts, interest rates, and applicable period c) Reasonable 5G & Millimetre Spectrum Band auction prices.
2.) Develop mechanisms to improve revenue realizations of operators through a) Floor pricing b) Revenue share or fixed per MB charge model between operators, OTT Players, and intermediate technology players in enterprise space, most of whom are currently riding free/deep discount on the expensive wireless broadband infrastructure.
3.) The government should allocate digital funds to a combination of teams drawn from companies across telecom, solution providers, and enterprise verticals like healthcare, manufacturing, automobile, education, etc., to build solutions and build a definite ‘fair charge mechanism’ like separate connectivity charge per MB at a higher rate different than applying for the consumer. This will be like the support provided by the Government to the fertilizer and petroleum Industry, where the manufacturers are guaranteed a minimum price or railway pricing where consumer tariffs are lower & freight charges at market price.
4.) Provide incentives and tax benefits to companies making investments in R&D on new digital technology for India-specific use-cases across multiple sectors.
To conclude, 5G can be the key enabler for achieving the Government’s digital agenda as it plays a pivotal role in strengthening our economy and empowering the Indian population. However, to derive sustainable long-term benefits of 5G adoption, we need a holistic approach and policies to nurture an ecosystem that supports collaboration and creates a win-win solution for all stakeholders.
Also Read: Is India really ready for the 5G rollout?
(Himanshu Kapania is Chair, FICCI Council on Telecom, Electronics and Digital Economy (TED Council) and Director Telecom-VIL & Vice Chairman-ABFRL and Former Managing Director- Idea Cellular Limited.)
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