- Home
- About
- Globally Speaking
- Videos
- Podcast
- Geopolitics
- Industry
- SIGN UP
Exorbitant spectrum prices, $20-billion on account of SC judgment on AGR dues and the need to link thousands of telecom towers with fibre are issues Indian telcos will have to tackle before they can unleash the potential of the new 5G technology. In short, internet reliability is the immediate priority across the country.
The Covid-19 pandemic has put additional stress on India's internet network. Many more people going and staying online for longer periods of time has resulted in a sharp decline in mobile data as well as fixed broadband speeds. Data from Ookla Speedtest Global Index shows Indian mobile networks have, on average, recorded a decline in speeds during the period of the lockdown. Fixed broadband speeds have also shown a sharp decline. As a result, India ranked a poor 131st among 163 countries in mobile networks and a middling 70th in broadband speeds.
The quick adoption of 5G technology, which has been in the works for some time now, can facilitate a quick ramp up in internet speeds in this country.
This new technology backbone is smarter, more efficient and up to 100 times faster than the 2G, 3G and 4G networks currently in use in India and can open up economic potential of an unimaginable magnitude.
It can exponentially transform sectors such as communications, data management, analytics, fintech, healthcare, autonomous vehicles and entertainment facilitate smart cities, smart homes, and the IoT.
Analysts estimate that 5G-related investments in the global value chain will touch $3.5 trillion over the next 15 years and this will generate incremental output worth three-and-a-half times that amount.
More to read:
It could also open up pathways to disruptive new technologies that require high data-rate instantaneous communications, low latency and massive connectivity for new applications that can help India leapfrog up the global economic ladder by skipping several generations of technology in between.
But there are significant challenges that Indian policy planners and industry will have to overcome before they can fully unlock the potential of 5G technology.
The first issue is spectrum pricing. Indian telcos - Reliance Jio, Vodafone Idea and Bharti Airtel - are unanimous that the spectrum price being demanded by the Department of Telecommunications (DoT) is too high.
They have said several times on numerous platforms that the reserve price of $67 million per megahertz for 5G airwaves is far too high - and 30-40 per cent more expensive when compared to the US and South Korea.
“A majority of our operators have indicated that 5G spectrum is far too prohibitively expensive and that their balance sheets can't afford this,” said Rajan Mathews, Director General, Cellular Operators' Association of India (COAI) on the side lines of a workshop on 5G last year.
Still more to read:
Bharti Airtel has declared many times that it will not bid for 5G spectrum if the reserve price remains so high.
This view is backed by sections of the Indian government as well. A task force set up by the Ministry of Finance has said the 5G spectrum price being demanded by DoT is prohibitively high.
Experts have opined that the government should not view the sale of spectrum as a means of maximising revenues. Instead, they have said, the government should take a holistic view of the issue, take into account the health of the telecom industry and the potential that affordable 5G has for unleashing exponential expansion in multiple sectors of the economy.
Such as approach, they have averred, will ensure that 5G services remain affordable, thus, allowing common Indians to partake of the benefits that will flow from it.
The second challenge that has to be tackled is the paucity of fibre optic links. In India, only about 25-30 per cent of telecom towers are connected by fibre links; the rest are connected by radio waves. But universal adoption of 5G will require at least 50-60 per cent of towers to be connected by fibre - ideally, before the launch of the new technology. Just to put this figure in context, in the US and China, about 80 per cent of all telecom towers have fibre links.
Then, the Finance Minister task force report said: "With continued increase in demand for data, additional telecom towers need to be installed to increase coverage in rural or non-metros and to increase capacity in metros. Currently, India has around 550,000 towers and the industry believes the country will require additional around 100,000 towers per year over the next 2-3 years to meet the estimated demand."
These will entail massive investment running into several tens of billions of dollars, which the cash-strapped industry is ill-prepared to make. Leading brokerage house Motilal Oswal has estimated that telecom companies will need anywhere between $20 billion and $30 billion to invest in spectrum, sites, towers and fibre.
One way out of this problem would be follow an asset-lite model and go in for shared infrastructure. This model, which was pioneered by Indian telcos a decade ago when they sold most of their towers business to infrastructure funds and dedicated tower companies and leased space on them, can be replicated in the 5G business as well.
One major factor inhibiting the financial capacities of Indian telcos is the Supreme Court order directing them to pay almost $20 billion as their adjusted gross revenue (AGR) share plus interest.
Many analysts have questioned the basis of the calculation and the rationale of the judgment. It will help all the parties concerned - Vodafone Idea and Bharti Airtel, which have had to bear the brunt of the demand, the sector, subscribers as well as the government - of DoT were to try and find a way of reducing the financial burden that has severely impacted the financial viability of these companies and, consequently, their ability to invest in new technologies.
The potential benefits of 5G is huge but the challenges confronting the Indian telecom sector are also massive.
https://twitter.com/rsprasad/status/1211615414595121152 lang=en
Motilal Oswal has estimated that telecom companies will need anywhere between $20 billion and $30 billion to invest in spectrum, sites, towers and fibre.
As a first step to fully utilise the potential of this new technology, DoT will have to lower the reserve price for spectrum and the government will have to work with the telcos and the judiciary to find a way to resolve the AGR issue to the satisfaction of all stakeholders. This will help the Indian telecom sector get back to good health.
Only then will the country begin to see the transformational potential of 5G.